Bank Failure Day and Wall Street Paranoia
It’s Friday, which means the government is likely to announce the latest round of bank failures in the late afternoon. Calculated Risk expects commercial real estate to implode in 2009, meaning lots of small and regional banks may go under. So there’s something to look forward to.
But not all bank fears may be justified. The once-obscure Federal Home Loan Bank system — which consists of 12 regional banks that are a privately owned, government-chartered cooperative, consisting of 8,000 member financial firms — is under scrutiny now because of potential losses on toxic mortgage-backed securities, as we reported Thursday. However, not all of the regional banks are the same. The New York Federal Home Loan Bank today pointed us to a statement on its Website noting that it isn’t expecting any losses.
The worry for the Federal Home Loan Bank system is that some investors are engaging in rumormongering, in an effort to short the stock of member banks.
As the financial crisis intensifies, so does the fear on Wall Street, whether it’s justified or not.