bank run blog

The California Department of Financial Institutions closed the doors of County Bank in Merced California today and the Federal Deposit Insurance Corporation was appointed receiver. The FDIC has arranged for the Westamerica Bank of San Rafael, California to assume the deposits of the failed bank. The FDIC said that 39 of County Bank’s locations re-opened this weekend and the remainder will open on Monday. County Bank depositors will automatically become customers of Westamerica Bank.

The FDIC advised County Bank customers;

“Over the weekend, depositors of County Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.”

The FDIC reports that County Bank had total assets of $1.7 billion and total deposits of $1.3 billion. The agency estimates that the cost to the Deposit Insurance Fund to cover lost County Bank assets and deposits will be $135 million. County Bank is the ninth bank to fail so far in 2009 and the third to fail in California this year.

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FDIC : Westamerica Bank, San Rafael, California, Acquires All the Deposits of County Bank, Merced, California

Married couples who work in the same companies are facing the daunting prospect of company lay-offs where both spouses could lose their jobs simultaneously. The Associated Press reports;

“As layoffs mount across the country and in all sectors, couples who are co-workers are increasingly vulnerable to losing their families’ twin sources of income at once. The lack of variety in job skills can also make it difficult to bounce back, especially in a struggling industry.”

Demographics have changed over the past decades, and the vast majority of families with children have two full time working parents. Although both parents are full time workers in most modern American families, having two incomes has not been too great a buffer from stagnant wages and increased cost for necessities such as health care. These factors and Americans’ lust for consumption has led to a situation where two income families are simply making ends meet. The AP writes;

“Before the 1970s, families weathered economic downturns by sending the non-working spouse, typically wives, into the work force. But today roughly 53 percent of all married couples, and 64 percent of married couples with children under age 18, rely on two incomes, according to the U.S. Census Bureau…

In theory that should have increased financial security. Instead, couples often use the extra income to buy bigger homes, nicer cars and other luxuries, said Rick Harper, director of the University of West Florida’s Haas Center for Business Research.

‘In the 1980s, both spouses worked and the savings rate for families went from 12 and 14 percent to essentially zero,” Harper said. “In this decade, households smoothed over the rough spots by taking equity out of their homes. Now there is no equity left to take.’”

The AP adds;

“There are no statistics on the number of couples who have both lost jobs. Nearly 3 million jobs were eliminated last year alone. On Friday, the Labor Department said 11.6 million were unemployed in January.”

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Associated Press : More co-worker couples losing both incomes at once

Worried Americans spent less in December. The Commerce Department reported a sixth straight month of declines in consumer spending. Reuters reports;

“U.S. consumers cut spending for a sixth straight month in December and their incomes shrank, according to a government report on Monday that underscored the rapid deterioration in the economy.

The Commerce Department said spending decreased by 1.0 percent after falling by a revised 0.8 percent in November. That figure was previously reported as a 0.6 percent drop. Incomes fell by 0.2 percent after November’s 0.4 percent decline, previously reported as a 0.2 percent decline.

Analysts polled by Reuters had forecast spending falling by 0.9 percent and incomes slipping 0.4 percent.”

And, in a stagnating symbiosis, as consumer spending slows, so does the overall economy. The economy shrank at its fastest pace in nearly 27 years in the fourth quarter “led down by steep contractions in consumer and business spending.” Reuters writes;

“For the whole of 2008, spending rose 3.6 percent, the smallest increase since 1961. Incomes increased 3.7 percent, the smallest advance since 2003…

Data last week showed the economy shrank at its fastest pace in nearly 27 years in the fourth quarter, led down by steep contractions in consumer and business spending.”

On the up side, but perhaps also refelecting Americans level of insecurity about the economy, households are actually saving money- personal savings increased in December to 3.6 percent of consumer’s disposable income.

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Reuters : Consumer spending falls, savings jump

Americans are making the move from retail to resale as the economy continues to wither. The Orange County Register writes;

“As some of the nation’s major retail centers have been advertising big discounts to stay in business, thrift store sales have gone up – serving as a major relief for families who have been hit by the economic crisis.”

A recent study found that customers who would have never considered shopping in thrift stores are now becoming resale store patrons. CNN writes;

“Sales are flourishing at secondhand shops as a new echelon of shoppers finds its way into resale stores. Of the store owners who responded to a recent survey from the National Association of Resale and Thrift Shops (NARTs), 74% said that September and October sales increased over the prior year, by an average of 35%. Goodwill Industries, a nonprofit that operates 2,200 thrift stories, says that same-store revenue have increased by an average of 7% compared to last year. The Salvation Army, with 1,370 nonprofit secondhand shops nationwide, also reports significant gains.

“We’re up about 20 to 25% over last year,” says Major George Hood, the national community relations secretary for the Salvation Army.”

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CNN News : Secondhand stores shine in weak retail market
KORE TV News : Bad Economy Good News For Thrift Stores
Orange County Register : O.C. thrift store sales are up in down economy

In this segment, CBS News reports on the wave of investor, hedge fund manager and financier suicides, that has resulted in the coinage of the term, “econocide.”