Banks in Florida, Maryland and Utah were closed, bringing the total number of failed banks this month to six, the worst month for failures

Banks in Florida, Maryland and Utah were closed, bringing the total number of failed banks this month to six, the worst month for failures since the current crisis started. It's almost a quarter of the 25 that failed last year. None of the trio was large: the biggest asset pool in them was $360 million in the Florida failure.
Two were sold to other banks, but worryingly, the third in Utah, couldn't be sold by the close of business Friday and looks like being closed. The failures signal that the financial crisis is continuing to destroy financial institutions and the confidence the public has in them. So the talk over the weekend in the US and European papers of the Obama Administration revealing a so-called "big bang" announcement on a banking bailout, is timely, and much needed. The $US700 bailout fund set up by the Bush Administration is broken; it's wasted money and hasn't controlled bank excesses or forced them to lend more money, especially to housing.
A centrepiece of the new program will be to revamp the fund to ensure that taxpayer money is not used to fund excessive pay, bonuses and dividends to shareholders.
The media reports say the "big bang" approach is being driven by former New York Fed boss, Tim Geithner, now Treasury secretary, and Lawrence Summers, Obama's National Economic Council director. The Financial Times and Bloomberg both made it clear (from briefings of course) that Mr Geithner intends to present a comprehensive plan that policymakers hope will command market confidence. Details of the new approach have yet to be approved by President Obama, but it may include both the purchase of toxic assets by a so-called "bad bank" and insurance-style guarantees for problem assets remaining on bank balance sheets. That's a combination of approaches from the Savings and Loan clean up in the 1980s and the approach the UK government has taken to try and get bank lending back underway. But several media reports say that the plan is likely to refrain from imposing tougher restrictions on executive compensation at most firms receiving government aid but instead will keep the looser requirements (initially at least) included in the original $US700 billion program.
That will almost certainly guarantee it a rough ride in Congress, especially from Democrats after the Merrill Lynch $US4 billion bonus scam last month, the sacking of Merrill's former CEO, John Thain, for his part in those bonuses and spending $1.2 million on new office facilities, and the stupid move by Citigroup to spend $US50 million on a new corporate jet until it reserved the decision under pressure from the government and the media. This omission of tougher controls on pay, bonuses and management appears to be at odds with President Obama's criticism of the news that US bankers were paid bonuses of $US18 billion in 2008, according to an estimate published last week. "That is the height of irresponsibility," he was reported as having told the media. "It is shameful." Mr. Obama noted that US taxpayers have bailed out numerous failing financial institutions in recent months. He did not seem to be mollified by that fact that the report said bonuses actually fell 44% from 2007. The aim of the new program for helping banks will contain a range of initiatives to jump-start the consumer credit markets, provide aid to struggling homeowners, and motivate banks to increase lending. The plan will also offer banks more capital and buffer them against losses on portfolios of "toxic" assets, backed by failing mortgages and other troubled loans. A big part of the new approach will be a direct attempt to try and take the pressure off foreclosures. Anti-foreclosure efforts are likely to focus on subsidising programs that reduce unsustainable monthly mortgage payments, though there may also be support for schemes that subsidise the partial write-down of loans that exceed the value of the home. Treasury may also unveil new efforts to revitalise frozen securitisation markets to try and get some recycling of capital under way. Several major banks, including City, JPMorgan and Bank of America, plus the struggling Fannie Mae and Freddie Mac, have schemes in place to try and modify' mortgages to lessen the risk of foreclosure. It's costly and time-consuming, and it doesn't necessarily ease the burden in the end because the surge of job losses across the US is adding to the pressures on the financial position of struggling homeowners. Meanwhile, reports in London said the German government has rejected a single 'bad bank' approach for its troubled banks and instead will go for a series of individual structures for each institution aided. These will be like the so-called off balance sheet things called conduits or structured investment vehicles that featured in the first round of the credit crunch and housing bust. Now the structures will be used to house dodgy securities, loans, etc held by troubled German banks. These 'bad banks' would be issued with state guarantees by the government's existing bank rescue fund. Once rid of these assets, the banks could apply to the fund for fresh capital. The government's original 500 billion euro bank rescue package included 400 billion of credit guarantees for new bank debt as well as fresh capital for cash-strapped lenders. The package is distinct from the 50 billion euro fiscal stimulus package approved last week by the government for the economy as a whole. German's second biggest property lender, Hypo Real Estate (HRE), is likely to be one of the first banks in the new program. It's had over 40 billion euros of new capital from the bailout fund, but that hasn't stabilised the losses or the black hole. HRE has had three distinct capital injections and its problems are complicated by big losses reported in its Dublin based bank, Depfa