FDIC Lists 171 'Troubled' Banks

Total assets held by troubled institutions climbed from $78.3 billion to $115.6 billion -- a figure that suggests that the nation's top 20 banks aren't on the list, even though they also are getting slammed by the ongoing credit crisis. The FDIC does not reveal the names of institutions it deems troubled. Only approximately 13 percent of institutions on the FDIC's list end up failing. (See related story: Anatomy of a Bank Failure: What Happens when the FDIC Pulls the Plug?)

Nine banks failed during the third quarter, decreasing the FDIC's deposit insurance fund to $34.6 billion from $45.2 billion in the second quarter.

The FDIC also reported that insured banks and thrifts earned $1.7 billion in the third quarter, a 94 percent drop from what they earned at the same time last year, when they made $28.7 billion. "We've had profound problems in our financial markets that are taking a rising toll on the real economy," says FDIC Chairman Sheila Bair. In the same report, community banks were seen as facing increased stress similar to the rest of the industry. Community banks with total assets under $1 billion are encouraged by the FDIC to participate in the FDIC's temporary liquidity guarantee program.

Markets on Three-Day Upswing
The announcement by Treasury and the Federal Reserve of two new $800 billion government programs to bolster consumer credit and mortgage lending helped Wall Street stabilize and see its first triple-session advance in more than two months. The Dow was up nearly 900 points after a two-day rally, an indicator that investors are beginning to regain confidence in the markets and economy that has been hit with waves of bad economic news.

Unemployment Climbs to 25-Year High
The nation's current unemployment rate is 6.5 percent, a 14-year high, and is expected to climb before year's end. Employers have cut payrolls every month so far this year. The total number of unemployed in October was just over 10 million, the most in 25 years.

The specter of higher unemployment can trigger a downward spiral, as laid-off workers are less likely to pay their mortgages and other debt on time. Those who are still employed may reduce spending out of concern for their jobs. In the last week, companies announcing layoffs include Bank of New York Mellon Corp., Western Union Co. and the retail store giant, Dillards Inc.

Consumer Confidence Up
The news for retailers and investors going into the holiday shopping season was brightened with the Conference Board's Consumer Confidence Index, which rose unexpectedly to 44.9 in November. This was up from a revised 38.8 in October, which was the lowest since the research group began tracking consumer confidence in 1967. The index was expected to slip to 37.9.

Americans are still pessimistic about the economy, says the Conference Board. Consumer spending has taken on even great importance because if consumers aren't spending the economy won't expand. In the last months consumers have shown they are more reluctant to spend.

Volcker Heads Economic Recovery Board
Former chairman of the Federal Reserve, Paul Volcker, has been named by President-elect Barack Obama to head a new economic recovery board. Volcker served as chairman of the Fed from 1979 through 1987, and served Presidents Jimmy Carter and Ronald Reagan.

The new board will advise the new president on reviving the troubled economy. Those already named to Obama's economic team have begun work on an economic recovery plan.