… and the GFC is definitely over, also from the point of view of the failure of financial institutions (which – in these data – really means depository institutions, DI).

I’m pretty sure many have seen some (uglier) version of this plot before, but I started wondering what this graph actually captures…

usa-bank-failures

Data on the failure of financial institutions in the USA are available since 1934.  The picture is self-explanatory, notice that the biggest wave of failures was the Savings and Loans Crisis, and in fact these data include (using FDIC glossary):

  • N = commercial bank, national (federal) charter and Fed member, supervised by the Office of the Comptroller of the Currency (OCC)
  • SM = commercial or savings bank, state charter and Fed member, supervised by the Federal Reserve (FRB)
  • NM = commercial bank, state charter and Fed nonmember, supervised by the FDIC or OCC
  • SB = savings banks, state charter, supervised by the FDIC
  • SA = As of July 21, 2011, FDIC supervised state chartered thrifts and OCC supervised federally chartered thrifts. Prior to that date, state or federally chartered savings associations supervised by the Office of Thrift Supervision (OTS).

I obtained the time series from Fred (and you can update the series and graphs using my XL file, though hopefully it will just be additional zeros in the next few years), but I had to double-check with the FDIC website (here) what exactly this series means. As far as I can tell, the graph above captures the institutions described in the bullet points at the bottom of the page, so a) failures (but not just assistance) and b) all depository institutions (not just commercial banks).

So a little bit of digging and plotting brought me to the next two histograms. The first histogram plots both failures and assistance by year (not just failures as above). The second histogram splits DI that failed or received assistance by type of institution according to my own reclassification of the categories above. Unfortunately, one cannot split “failures only” by institution based on FDIC data.

usa-di_failures_and_assistance

usa-di_failures_and_assistance_by_type

Here‘s an excellent Economic Education piece from the Federal Reserve Bank of San  Francisco on the complexity of DI supervision in the USA. Though not up-to-date, unfortunately.

Here‘s an explanation of how this time series captures various types of “failures.”

Talking points for the classroom:

  • In terms of number of entities. the U.S. financial panorama is dominated by commercial banks (regulated by the Fed) and Savings and Loans (regulated by the OTS, and OTC depending on the time period and charter), and then of course there are community banks, credit unions, trust companies, etc.
  • If one just trusted the picture, (s)he would think that the S&L crisis was by far the biggest financial crisis but then one may not want to rely only on the count of financial institutions and focus instead on, say, the total value of assets of these banks and thrifts.
  • There are trends in the number of institutions in this and other countries over time (another post on this, soon), so it would be also interesting to look at the ratio of failed-to-total financial institutions.
  • As S&L are smaller, they are more likely to fail (TSNTF, Too small not to fail?), why?

Background file: 4-Contessi-PDU-Post4-USA-FIFailures.zip


Bullet points at the bottom of the page:

  • The US and Other Areas (I guess this is to include Puerto Rico);
  • summary by year, effective data;
  • all funds (Deposit Insurance Fund, Bank Insurance Fund, Saving Association Insurance Fund, Resolution and Trust Corporation, FDIC 193401989 (pre-FIRREA), Federal Saving and Loans Insurance Corporation);
  • All Commercial and Saving Institutions (Commercial Banks (N, NM), Banks and Savings Institutions (SM), Saving Banks (SB), Savings Associations (SA));
  • It took me a while to find the glossary but..
    • N = commercial bank, national (federal) charter and Fed member, supervised by the Office of the Comptroller of the Currency (OCC)
    • SM = commercial or savings bank, state charter and Fed member, supervised by the Federal Reserve (FRB)
    • NM = commercial bank, state charter and Fed nonmember, supervised by the FDIC or OCC
    • SB = savings banks, state charter, supervised by the FDIC
    • SA = As of July 21, 2011, FDIC supervised state chartered thrifts and OCC supervised federally chartered thrifts. Prior to that date, state or federally chartered savings associations supervised by the Office of Thrift Supervision (OTS).
    • OI = insured U.S. branch of a foreign chartered institution (IBA)
  • All Failures (the alternative of which is to consider separately a) Failures and b) Assistance Transactions).
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