Bank Failures Coming Closer to Home

Houston County, we have a problem.

Yesterday, this article jumped out of the headlines, as Spring Grove is a town I spent a good chunk of my school years in or around.  Jennings State Bank was the 95th bank to fail in the United States in 2009 and the first local one. It may not be the last.  The FDIC has warned Security State Bank of Lewiston to correct their lending practices and their Hokah branch is in Houston County.  Until recently, Houston County had been unaffected, not a surprise for a small county.  It is a temptation to say we are too small to fail, but realistically that is not the case.

It is clear we are not done with bank failures, whether they be local or national. Today brought another round of gloomy news, with a report from the special inspector general appointed to look into the banking stress tests conducted a year ago.  The biggest banks were said to be financially sound when Treasury Secretary Paulson knew otherwise.  To wit, he lied about it. Citigroup and Bank of America are singled out in the article, but there have been rumblings that Wells Fargo is not in good shape as well. Apparently, the "too big to fail" argument won out over honesty with Bernanke and Paulson.

None of this inspires confidence at any level.  When cover ups begin, they are usually due to one of two things: the desire to protect oneself from trouble or blame and the other being paralyzed fear of large consequences too horrific to contemplate.  My suspicion is that the latter is the case. In the end, no amount of running from reality will make bad things go away.

Time to prepare for reality on an individual basis, as the current crop of politicians and bureaucrats have no desire to face it.

UPDATED:

Looks like the national level isn't as big as it gets, the question now being posed is whether the World Bank is going to fail.