Friday, February 15, 2013

This Week in Bank Failures

A week later, Ireland is more confident in its refinancing deal that replaces unsustainable bank bonds with long-term sovereign bonds. It is not just politicians that are confident that the deal will pass European scrutiny. The country got a ratings upgrade this week, lowering its bond interest rate to about what it was before the banks started to go under. As big a victory this is for Ireland, people still have to be asking, “Now what?” The economic burden of Ireland’s real estate and banking collapse will now fall even more heavily on the generation born between about 1970 and 1985. Compounding the misfortune of buying houses at artificially high prices, in an era when jobs became all but impossible to get, they now will be paying taxes to cover the cost of the bank bailout for nearly the rest of their working lives. The uneven effects of the banking disaster in Ireland and the government’s bungled initial response to it are an obvious problem that will have to be solved next.

A bank failed tonight in Illinois. Covenant Bank, in Chicago, had $54 million in deposits. New Orleans-based Liberty Bank is taking over the deposits and purchasing the assets. The failed bank was founded in 2008, simply disastrous timing, by members of a megachurch. It never reported a profit.