The Detroit branch of the Wall Street bailout is effectively over after six years with the Fed cashing out its last shares in Ally Financial. The bank changed beyond recognition during its years on government support. Summing up the Wall Street bailout as a whole, it roughly broke even for the government in an accounting sense, but was a big loser if you consider related effects such as the lost tax revenue.
The currency collapse in Russia is a likely sign that the country spent too much this year trying to stabilize its banking system. This week more of the transaction clearing network was shut down because of wild currency fluctuations, leading to panic buying of imported goods such as vegetables and furniture. Ikea, Apple, and Audi are among foreign companies temporarily shutting off product orders in Russia because of a rush of purchases amid the currency instability. The Russian ruble at its lowest points this week was down by about half from the beginning of the year. Besides the reduced purchasing power, Russians’ income is at risk because of the pension funds used to finance one phase of the bank bailouts this fall. Interest rates were raised to 17 percent at the start of the week, possibly stabilizing the currency but adding to fears of a widespread banking collapse.
The NCUA says it does not expect to need any more money to stabilize the corporate credit unions. These are the large regional credit unions that are owned by retail credit unions. The corporate credit unions collapsed because of the mortgage-backed securities they owned.
There was another small bank failure in Minnesota on the periphery of the Minneapolis metro area, this time to the southwest in Mankato. The failed bank is Northern Star Bank, closed by state banking regulators. The successor, BankVista, is purchasing the bank’s assets ($19 million) and taking over the deposits ($18 million). The failed bank had been under regulatory scrutiny for years because of troubled assets.
This is likely the last U.S. bank failure of the year. The year ends up with a tally of 18 FDIC-insured bank failures, along with 11 credit union liquidations. These are numbers that, after the previous five years, may be described as near normal.