CNBC had a great interview with Billionaire Wilbur Ross, CEO of WL Ross and Co. In the interview Mr Ross the question I have been asking; With all of these bad loans going on, why haven't we seen more bank closings?
His answer: a very simple, "We Will." "I think that's going to be the next wave, and coupled with problems in the commercial real estate market; I think they'll be the next bubbles that burst."
He was also asked about risk to big banks. ""I think that the big banks won't fail in the sense that they will go to zero and depositors would lose money," Ross replied. "I think the Fed and other regulators will make things happen. I think it's the medium-sized banks, and particularly some of those that got overextended with the subprime and other kind of mortgage debt. I think those are the ones that had the serious mismatch, making 20- and 30-year loans based on 90-day deposits."
This matched what the Federal Reserve Chair Bernanke told a Senate committee in late February. He believe those small banks that took flyers on higher returns on medium and high risk loans are at risk.
There are more and more reports about people walking away from their mortgages and in a report last night it was said that 28% of those in default aren't even talking to their banks. Given that the banks need another house like a hole in their head, this is the best time to work with your mortgage company if you are having issues.
The bigger problem is that that consumers aren't there to bail out the economy this time, and even those in good or better shape are spending less to prep for harsher conditions instead.