- Mutual Bank (Harvey,IL)
- First BankAmericano (Elizabeth, NJ)
- Peoples Community Bank (West Chester, OH)
- Integrity Bank (Jupiter,FL)
- First State Bank of Altus (Altus,OK)

Month-# of Bank FailuresIt's immediately apparent that July's number of failures represents a severe departure from normal. The question is, did we just experience a run of the mill anomaly that occurred independently of economic conditions, or do the numbers indicate something more troublesome? To say that 24 bank failures in one month alone is NOT an indication of economic deterioration, one would have to suppose that there is an element of randomness to the number of failures that occur each month. If that is so, we should be able to apply some elementary statistics to the situation to discern just how probable it is that July would randomly produce 24 Bank Failings.

July '08: 3

August '08: 3

September '08: 4

October '08: 4

November '08: 5

December '08: 3

January '09: 6

February '09: 10

March '09: 5

April '09: 8

May '09: 7

June '09: 9

July '09: 24

Running the numbers on the 12 months ended June 2009, we calculate that the mean number of bank failures for a single month is 5.58, and the population standard deviation is 2.33. For the uninitiated, this means that - assuming the Failures are distributed normally - the number of financial institutions collapsing in a single month will be between 3.2 and 7.9, approximately 68% of the time. Taking the exercise a step further, we can state that 97.5% of the time, a given month will produce 10.23 or fewer Friday night FDIC raids. To calculate the probability of the 13th month in the series (July 2009) bearing witness to a full 24 FDIC seizures, one must first arm himself with spreadsheet software capable of displaying results to the Quadrillionth (Google's spreadsheet program is just barely able to do so). The probability-value associated with such an event is 1.18755X10^-15, or 0.0000000000000018755.

Based upon the monthly rate of bank closings during the most recent 13 periods, it's apparent that the random forces of nature are, in all likelihood, not responsible for the FDIC's hectic July schedule. We must then conclude that the responsible party is none other than a deteriorating economy. To be more specific, the recent spike in bank failures is a reflection of the rapidly deteriorating economy on Main Street a.k.a those who did not receive a bailout and continue to either fear or experience job losses; consequently, straining the ability of these individuals to honor the obligations made to many smaller, community oriented banks.

*no positions Sphere: Related Content

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