Writing Off the Rednecks: Another Cluster Fluster

Bernanke: U.S. Banks Solid, Some Small Ones May Fail
February 28, 2008 11:16 AM ET

WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke said on Thursday that some small U.S. banks might go under during the current stress prompted by housing market problems, but the U.S. bank system overall remained solid.

"I expect there will be some failures," Bernanke told the Senate Banking Committee, referring to smaller regional banks who became heavily invested in real estate. [But most of those will be in Montana and other similar places that don't count!]


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According to recent research, in the last depression banks failed in “clusters.” Approximately 21 bank-failure clusters have been identified, almost all of them involving state banks. The average time between one cluster of failures and the onset of the next cluster of failures was about four to five months. (“Failures” include both banks that shut their doors permanently and banks that suspended operations for months or years. Of those banks that suspended operations, when they finally did reopen, they paid off depositors at a rate of 20 to 30 cents on the dollar.)