Re: "Conspiracy Theories on Low Failure Rate Don't Hold Water"

Correct and on point. No conspiracy here. The failure rate, and the loss-given-failure rate, have been steadily declining for over a year.

Banks can get blindsided when a recession hits, especially after a long period of prosperity. But after the recession hits and its effects are felt, the quality of new bank loans improves, even while it takes time for the bad loans to work their way through the process. Not surprisingly, the quality of banks' lending portfolio tends to be stronger on the back side of the recession than at the beginning. That means that bank failures naturally tend to decline as the cycle moves forward. As history shows, a lot more banks failed in the beginning of the Depression than did near the end.

It is clear that the FDIC's job of failed bank resolution is in decline, and we are all grateful for that. The FDIC's chief focus now should be how to get those 800-plus banks off of the problem bank list — where they languish and can do little to promote economic growth in their communities — and back to being prosperous partners in economic recovery. And acting Chairman Gruenberg may be just the man to make that recovery his legacy.

Wayne Abernathy
Executive vice President
American Bankers Association
Washington