Analyst Richard Bove of Rochdale Securities gave an interview to FOX Business Network today where he predicted that 150 to 200 more U.S. banks will fail in the current banking crisis, and the industry’s payments to keep the FDIC afloat could eat up 25% of pretax income in 2010 to take care of the rapidly depleting FDIC deposit funds.
Mr. Bove during his interview pointed out he’s worried about the FDIC this time, as opposed to how the agency handled the bank failures during the S&L crisis in the 1980s. He said that during that period the FDIC “had to go to Congress and ask for $500 billion and wound up spending $150 to $200 billion of taxpayer money in order to take care of those failures. This time around” he said, “the failures will be less… but the money this time is going to come from the healthy banks. The more important problem is about 25% of the banking industry’s profits are going to be given to the FDIC to pay for these failures.”
Bove also said that besides the fact the FDIC needs more money to complete its tasks, another critical problem the agency currently faces is finding enough healthy banks to buy the failing banks.
“We don’t have enough banks in the United States among the big ones that really want to step up and buy,” said Bove. “U.S. Bank Corp. I think would be a buyer, but just about every other major bank in the country does not want to buy these failed banks which means we’ve got to go overseas and find buyers and maybe private equity firms…..We’re nowhere near having the money necessary to take care of these bank failures unless we hit the banks big.”
In a somewhat contradictory note, Bove, when asked whether he would sell bank stocks, said he would still be a buyer of the big banks, but he wouldn’t touch the regional ones.
