A few months back, when we held our "Bankruptcy Cycle" conference call, I had plenty of feedback suggesting that I was wrong in concluding that we are early in the cycle. A good debate is what gets my feet on the floor in the morning, and on this front, the facts continue to play into our thesis' favor...
Integrity Bancshares filed for bankruptcy this week, taking the number of belly ups to 10 on the US banks chart. I have attached the old one below, and my analysts will have the new one on Tuesday, but the point here is that there is very little integrity in this US Financial banking system that you can hang your hat on right now. It all started at the top, with Bear, Citigroup and Lehman – now the avalanche is moving downhill.
This week, the Federal Deposit Insurance Corp (FDIC) told us that they were nervous – they’re definitely going to have to tap into ole uncle Hank (Paulson) for some of that liquidity he has at the US Treasury. They have identified 117 banks at risk. It was not too long ago that Sheila Blair's team (she's head of the FDIC) had an estimate that was under 10!
Times are a changin' out there folks. As cost of capital rises, globally, and access to capital continues to tighten, locally, there is plenty of tail risk remaining in the USA - don't forget that there are almost 8,500 banks in this clear and present danger line of fire.