Only one small Georgia bank was closed by regulators on Friday bringing the total of bank failures to 12 for 2012 in comparison to 23 at this time in 2011. The reduction in bank failures alone states some improvement in the banking system in 2012, and the FDIC did affirm overall improvement in the banking sector in the recent release of the fourth quarter report. The report did show a broad improvement in the banking sector over 2011 including aggregate profits, reduction in number of banks troubled bank list, Deposit Insurance Fund continues to increase after going into the negative in 2010, and deposits did increase in the fourth quarter of 2011. The overall report does show a substantial improvement, but a collective sense of optimism will not be found to the dominant attitude. The FDIC did report improvement in the system, but one bank did fail on Friday to remind of the current economic frailty of the global economy. The global reminder of the precarious nature of the global economic system is one country, and the country is Greece. The release of the FDIC report was almost in coordination with the latest events unfolding in Greece with potential ramifications back to the banking institutions here in Washington, DC. The Greek variable is uncertain and almost unmanageable as any America economic or banking system recovery is uncertain with the Greek Variable unresolved.
At the end of last week, Greece debt swap proposal was waiting on agreement of the terms by the associated banking institutions to reduce the principal on Greece’s debt by up to 70%. The debt swap is the best option according to the IMF for Greece to avoid any further deterioration or possible insolvency. Moody‘s did not agree as the ratings agency cut the credit rating on Greece to the lowest possible level in direct vote of no confidence in the debt swap deal. Moody’s states that major risk to the future solvency of Greece remains even with a successful debt swap. The Greek variable comes into play as the reality of the matter is that default is the only option of resolution in Greece, but Europe’s will is to kick the can for the foreseeable future. The unresolved Greek variable is the grave danger to Europe and America if implosion occurs. Until Greece is brought to an acceptable resolution. All bets for the future are off.
- Chips down as Greece rallies (smh.com.au)
- Money Market Risk Concerns over European Debt Crisis (donny-wise.com)
- Ratings agency Moody’s downgrades Greece (sfgate.com)
- Ratings agency Moody’s downgrades Greece (news.smh.com.au)
- Moody’s downgrades Greece to lowest rating (ctv.ca)
- What is FDIC? (christianpf.com)
- Ratings agency Moody’s downgrades Greece (seattletimes.nwsource.com)