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Could Your Bank Fail?
What IS going on is approximately 600 billion dollars’ worth of subprime adjustable rate mortgages (ARMs) will go through rate-resetting between now and the end of 2008. About 15% of these ARMs are predicted to default, representing $75 billion of mortgages that banks will have as non-performing loans on their books, which will be reflected in their quarterly earnings reports. The stock price of these banks will then tumble and depositors will run to withdraw their funds from checking and savings accounts. Since most banks have no more than 10% of their depositors' funds in cash (the rest has been loaned out), even a small run on the bank could leave a bank with no cash.
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