Treasury man Henry Paulson reassured investors and bank depositors in a speech this morning in New York that the U.S. banking system is okay. Mr. Paulson noted the failure of IndyMac bank, the third largest in history.
But he said it represents only two-tenths of 1 percent of total banking industry assets and that depositors are insured up to $100,000 per account. The FDIC took over the bank two Fridays ago and reopened it the next Monday with business as usual and no one losing a penny of insured deposits.
Mr. Paulson went on to say that of the 8,500 insured banks and thrifts in the U.S., 99 percent are well capitalized. While one thrift and four commercial banks have failed this year, this doesn’t even remotely compare with the 1980s savings-and-loan crisis, where there was an average of 255 failures per year. What’s more, Paulson noted that U.S. financial companies have raised more than $150 billion of new capital.
So I think the Treasury man was basically trying to say that we’re gonna be alright, media pessimism notwithstanding.