Unofficial Problem Bank list declines to 496 Institutions

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for May 30, 2014.

Changes and comments from surferdude808:
As expected, the FDIC provided an update on its enforcement actions through April 2014 and released industry results for 1q2014. Unexpectedly, there was a bank failure for the third consecutive week, which last occurred in October/November 2012. For the week, there were six removals and three additions that leave the Unofficial Problem Bank List at 496 institutions with assets of $154.1 billion. Asset figures were updated through 1q2014. For the first time since the list has been published, updated quarterly asset figures led to an increase in assets of $794 million. Usually, problem banks shrink their balance sheet as a tactic to increase their capital ratios. A year ago, the list held 761 institutions with assets of $277.2 billion. During May 2014, the list declined by 17 institutions after 16 action terminations, three failures, one merger and three additions.

Actions were terminated against Macon Bank, Inc., Franklin, NC ($789 million); State Bank of Countryside, Countryside, IL ($589 million); Freedom Bank, Inc., Belington, WV ($150 million); Savoy Bank, New York, NY ($103 million); and First Security Trust Bank, Inc., Florence, KY ($82 million).

Slavie Federal Savings Bank, Bel Air, MD ($140 million) was the ninth institution to fail this year. Also, Slavie Federal was the ninth institution to fail in Maryland since the on-set of the Great Recession.

Added this week were GSL Savings Bank, Guttenberg, NJ ($100 million); Grant County Deposit Bank, Williamstown, KY ($79 million); and Columbus Junction State Bank, Columbus Junction, IA ($56 million). The last time three institutions were added during a week was back on October 4, 2013. The FDIC also issued a Prompt Correction Action order against State Bank of Herscher, Herscher, IL ($149 million) and Highland Community Bank, Chicago, IL ($64 million).

The FDIC told us there are now officially 411 problem institutions with assets of $126 billion. The spread between the official and unofficial count narrowed to 85 from 99 last quarter and assets to $28 billion from $29 billion. Next week will likely be quiet nor do we think there will be a failure for a fourth consecutive week.
CR Note: The first unofficial problem bank list was published in August 2009 with 389 institutions. The list peaked at 1,002 institutions on June 10, 2011, and is now down to 496.

Clash of the Pundits: Morgan Housel Interviews Josh Brown

Hey now:


Morgan speaks with Josh about Clash of the Financial Pundits: How the Media Influences Your Investment Decisions for Better or Worse.

There are a lot of smart investors. There are a lot of entertaining people. There are few of both. Josh Brown, The Reformed Broker blogger is one of them. He is as insightful as he is hilarious, which, after bursting onto the scenes a few years ago, made him almost overnight one of the biggest names in the financial media.

Josh’s new book, Clash of the Financial Pundits, co-written with Jeff Macke, digs deep into the financial punditry business to show why pundits talk and investors listen. It’s a incredibly good read.

Josh sat down with Morgan earlier this week.

Have a look:





Suresh Naidu: Eight Theses on Thomas Piketty from His Jacobin Review, „Capital Eats the World“

(1) Suresh Naidu: Capital Eats the World: "Piketty oscillates between paying homage to fundamental forces...

of technology, tastes, and supply and demand, and then backtracking to say that politics and institutions are important...

(2) Suresh Naidu: Capital Eats the World: "For Piketty... one-off redistributions of assets won’t stay equal for long... some kind of permanent capital tax is needed.... The question about how to tax capital becomes less about the trade-off between savings and consumption, and more about how to implement global taxes to keep capitalists from taking their money offshore.

(3) Suresh Naidu: Capital Eats the World: "[In] Piketty... the taste for savings at the top...

looks little like the frugal ant saving in order to consume for the future... the forces that drive the wealthy to accumulate might not just be the realization of future consumption, but instead an insatiable drive for security, sociological pressures, psychological fantasies of future empires, or other structural imperatives. When you start thinking of savings this way, the case for taxing capital becomes much clearer. If the supply of capital is more like immobile real estate and less like footloose cash, basic economics suggests that we can tax it, because it won’t disappear, and you might even be doing some social good....

(4) Suresh Naidu: Capital Eats the World: "Piketty makes the argument that [the rate of profit] r is likely to stay higher than [the rate of growth] g...

...because capital and labor are becoming more substitutable... robot capitalism... trade with labor-intensive countries.... The rate of profit will not fall much because we can keep substituting out workers with it.... But we have heard this before.... Somehow new desires and demands sprung up for new kinds of manufactured goods, many of pure entertainment value, and people stayed employed and real wages kept rising. I do not think there is anything inevitable about how capital-labor substitution could evolve in the future. It is quite possible that future technological and organizational changes are labor-augmenting rather than labor-saving...

(5) Suresh Naidu: Capital Eats the World: "In [Piketty's] model, capital increases as a [multiple] of [annual] income...

the rate of profit doesn’t fall very much (because capital and labor are very easily substituted for each other), and the distribution of capital is very unequal (because persistently high r allows capital shocks to be amplified over time).... [In this] conventional liberal economist’s interpretation... whether capital will eat the world boils down to the degree of substitutability between labor and a single aggregate capital... [and] labor market reforms are taken off the table, as firms would just replace workers with machines... minimum wages would kill... jobs... unions... induce firms to close. But... the increasing elasticity of substitution... may be as much determined by institutions and property rights as by technology.... Capital is a set of property rights entitling bearers to politically protected rights of control, exclusion, transfer, and derived cash flow... the ability to call on the government to evict trespassers, be they burglars, sit-down strikers, or delinquent tenants.... Capital... [is] a right to exclude and appropriate... blurs the line between supermanagers and rentiers. Supermanagers happen to have labor market contracts... [but own] a form of capital that requires you to run meetings and wear a power suit...

(6) Suresh Naidu: Capital Eats the World: "Inequality of income and wealth means that some people... off unjustly earned income, but it also means a lot more people are on the short-end of an asymmetric exchange, toiling away as personal assistants and Mechanical Turks. This is where Piketty’s Walrasian conventions dampen his contribution: he discusses the first, but not the second. It’s like saying slavery is an inequality of assets between slaves and slaveholders without describing the plantation....

(7) Suresh Naidu: Capital Eats the World: "In a thoroughly marketized world...

...the wealthy can purchase educational reform, the charity of their choice, think-tanks, legislative language, and faceless TaskRabbiters willing to work for a pittance.... There is an important and nasty complementarity between massive inequality in income and wealth and a commodified, “fully-incentivized” world. When every action can have pecuniary rewards attached to it, and every source of well-being can be priced at exactly a person’s willingness to pay, the social power commanded by the rich is magnified in a way that is difficult to see when comparing a dollar in 1920 with a dollar today.... [Piketty's] focus on taxes is again a straightjacket imposed by the equality-versus-efficiency lens.... The preferred policy instruments are always taxes and transfers, when it is not at all clear that these alone are the best tools... the same technocratic spirit that makes American liberals love the Earned Income Tax Credit as the only redistributive arrow in the state’s quiver.... >The collapse in the capital and top income shares... came along with radical transformations... institutions... millions of dead, sui generis geopolitics... newly mobilized popular forces. The obligations enshrined in balance sheets were destroyed by financial collapse and war, and kept in check by social democracy and postwar growth. Little in the way of clever policy advice mattered for any of this...

(8) Suresh Naidu: Capital Eats the World: "A first step [toward a deeper analysis] could be a multisector model...

...with both a productive sector and an extractive, rent-seeking outlet for investment, so that the rate of return on capital has the potential to be unanchored from the growth of the economy. This model could potentially do a better job of explaining r > g in a world where capital has highly profitable opportunities in rent-seeking rather than production, and it would generally disassociate the growth of the productive economy from the growth of abstract wealth. When people say neoliberalism was good for growth, they tend to be looking at the stock market, not GDP or wages. More fundamentally, a model that started with the financial and firm-level institutions... rather than blackboxing them in production and utility functions... illuminate complementarities among the host of other political demands that would claw back the share taken by capital... putting meat on what Brad Delong calls the “wedge” between the actual and warranted rate of profit.... We need even more and even better economics to figure out which of these may get undone via market responses and which won’t, and to think about them jointly with the politics that make each feasible or not...

Afternoon Must-Read: Jason Furman and James Stock: On Energy, ‘All of the Above’ Is Working

Jason Furman and James Stock: On Energy, ‘All of the Above’ Is Working: "U.S. gasoline consumption has fallen by 5.5 percent since 2007...

...or half a million barrels per day... gasoline consumption is now on a path to plateau, then decline after 2019.... Production of renewable energy has increased rapidly... electricity generation from wind has tripled while solar generation is up more than tenfold....Much of this energy revolution has been driven by technological advances and entrepreneurial risk-taking by a dynamic private sector. These trends have been supported and advanced by President Obama’s 'all-of-the-above' energy strategy... responsible development of oil and natural gas resources... accelerated the development and deployment of low-carbon wind, solar and nuclear projects... advanced energy efficiency... light-duty vehicles... appliances... buildings through the president’s Better Buildings partnership..."

Are Banks Too Large?

At Vox EU:

Are banks too large?, by Lev Ratnovski, Luc Laeven, and Hui Tong: Summary: Large banks have grown and become more involved in market-based activities since the late 1990s. This column presents evidence that large banks receive too-big-to-fail subsidies and create systemic risk, whereas economies of scale in banking are modest. Hence, some large banks may be ‘too large’ from a social perspective. Since the optimal bank size is unknown, the best policies are capital surcharges and better bank resolution and governance.

Wine Country Conference II Videos: Stephanie Pomboy „Confessions of Ben Bernanke“, Mebane Faber “Global Stock Valuations”

A second set of Wine Country Conference Speaker Presentation videos is now available.

This set features Stephanie Pomboy on the "Confessions of Ben Bernanke", Mebane Faber on "Global Stock Valuations", and a panel discussion with John Hussman, Mebane Faber, Stephanie Pomboy. The final set will be out next week.

This Year's Charity

As with last year, Wine Country Conference II was for charity. This year's cause was Autism. Many of the speakers donated all or part of their expense honorarium to the cause. I did as well, losing money, to put this event on.

Once again, John Hussman and the Hussman Foundation was amazingly generous. The foundation will match donations dollar for dollar, up to $50,000!

If you enjoy the videos (or even if you don't) please Make a Donation to the Autism Society.

Stephanie Pomboy "Confessions of Ben Bernanke"

Mebane Faber “Global Stock Valuations”

John Hussman, Mebane Faber, Stephanie Pomboy Panel Discussion

Here is a link to the first set of videos: Wine Country Conference II Videos: Introduction and Hussman on "A Very Mean Reversion"

Mike "Mish" Shedlock


1. Sales count.

They’re almost as irrelevant as the old billboards on the Sunset Strip, they’re a way to stroke the egos of the players involved. It’s no longer whether someone buys your album, but whether they listen to it, that’s the relevant metric that everybody seems to ignore as they trumpet the anemic, irrelevant SoundScan numbers. Want to know if an act is truly happening, check their TICKET COUNTS!

2. Social media builds careers.

This would be like saying a baseball player’s interviews make him a star. No, it’s his statistics, what he does on the field. Social media is the penumbra, a way for fans to stay in touch with their musical heroes. Music always has been and always will be the epicenter of any career. In other words, if you’re good enough, you don’t have to tweet, you don’t have to maintain a Facebook page, your fans will spread the word and keep you alive. But you must have your music on YouTube and streaming services, you’ve got to make it easy for people to access/listen to it.

3. Publicity sells tickets.

If this was so, Miley Cyrus would sell out. But she doesn’t. And she’s gotten more ink than anybody. It’d be like expecting Kim Kardashian to fill arenas.

4. Terrestrial radio is forever.

It is the dominant listening format, it’s still the best way to break a record. But if it’s so big and powerful, why can you not name the number one record?

5. Record companies care about art.

They only care about money, it’s a business, and if anybody tells you different, they’re lying.

6. Google Glass is the future.

It breaks the number one rule of fashion, it’s dorky! Wearables will play a part in the future, but they’ll be relatively hidden, accessories. Only the geeks at Google could miss this. In other words, give a nerd a billion dollars and he’s still a nerd.

7. The horse race matters.

We’re not only seeing coverage of the 2014 election, but 2016 and 2018 too. But the truth is very few people care, media outlets are marginalizing themselves, not realizing when we know movie hype is irrelevant, that we can wait until opening day to know whether we’ve got to go, we don’t need to read endless reports stoking the fire of an interest that we don’t have. America is still about the hype, but the hype means less than ever before.

8. Selling out is cool.

No, credibility is cool, it’s why people are writing about the marginal new Neil Young album, because they believe Neil himself is calling the shots, he’s beholden to no one.

9. Raising a ton of money on Kickstarter means anything other than the money.

It’s not about money, but how many pledgers there are. And in most cases, especially music, the number of people ponying up is miniscule. They’ll support the artist, but they won’t help grow the artist’s reach/career.

10. Sound quality counts.

If it did, no one would be wearing the execrable Beats headphones. They sell because they’re a fashion item. This is what is scary about Apple buying Beats. Sure, Apple products always looked cool, but they were also the best, that’s why the company often charged more. But by aligning with a laughable enterprise built on momentary hype they’re squandering brand equity just like Sony, which continued to charge premium prices for me-too products. If you don’t know who you are, how do you plan to succeed in the future? Apple doesn’t have to invent everything, but they ultimately have to do it better than everybody else. So they’re selling mediocre, overpriced headphones and a me-too streaming service that has problems scaling and it shows that the company is creatively bankrupt. Steve Jobs was all about breakthroughs, where’s the breakthrough here?


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Cutting Spending to the Bone Might Not Be Enough for Cliffs Natural Resources

On news of further cuts to capital spending, it appears that Cliffs Natural Resources (NYSE: CLF  ) is finally giving up on a turnaround in the primary markets of iron ore and metallurgical coal. Such a capitulation from a market leader is an important step toward reaching a bottom for any commodity. Cliffs Natural Resources has had nothing but negative news lately, with a weak first
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