The Drudge Report has a "red" headline story this afternoon, "775 Banks on 'Problem' List." This is a great many banks, and it sounds ominous. However, the headline is highly misleading.
As can be seen in the chart above, assets at these 775 banks are only about 3% of total bank assets. Compare this to 1990-1991 when 16% of total bank assets were held by "problem" banks.
Yes, there are a great many banks in trouble and hundreds will fail, but these failures represent only a very small fraction of assets. This means lending capacity, the banking system and the economy face a much smaller threat than the headline implies.
Sensational journalism is not helpful to investors that continue to remain skittish. However, if journalists continue to use sensational headlines and exaggeration to make a point they will become increasingly irrelevant.
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Posted on Friday, May 21, 2010 @ 2:38 PM
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