Thousands of banks may disappear: Wall Street-Obama's 2nd term will be death knell for small banks

CNN Money ^ | November 9, 2012 | Stephen Gandel, senior editor

[2ndDivisionVet]

Do we need to worry about Too Small to Survive?

Now that President Obama has been re-elected, analysts, consultants and dealmakers have turned from whether Dodd-Frank will be repealed to what it means for banks now that it's likely here to stay. The overwhelming conclusion: Thousands of small banks will soon disappear.

Emmett Daly, a Sandler O'Neill dealmaker who specializes in small banks, predicted at an industry conference put on by Mergermarket on Thursday that the number of banks in the U.S. would shrink to a few hundred. There are currently more than 7,000. Bill Egan, head of financial institutions investment banking at Bank of America Merrill Lynch, agreed, but said the weeding out process was likely to take more than a decade.

Indeed, the deal this week to buy bank adviser KBW by larger rival Stifel Financial appeared to be motivated by the belief that more banks would have to make deals. Says Rochdale Securities bank analyst Dick Bove, "It's fairly clear that 50% of the banks in the U.S. need to be recapitalized."

Kamal Mustafa, who heads up bank consulting firm Invictus and is a former Wall Street M&A banker, says it's not just Dodd-Frank. Low interest rates and the Fed's annual stress tests are making it tough for small banks to survive as well. His firm looked at bank profits and capital rules and came to this conclusion: Nearly 2,000 banks need to sell...

[radioone]

There are a TON of banks in trouble. The FDIC just hasn’t been shutting them down.....yet. They are letting banks stay open that have No Capital Left. Two and three times as many bad loans as Capital.

Pick a bank:

http://banktracker.investigativereportingworkshop.org/banks/

[rbg81]

Getting rid of all those small banks will do wonders for the unemployment rate. [/s]

[ridesthemiles]

How about this:

Small milling company serves wheat growers in Idaho, Wyoming, Nevada, Washington. They mill the flour for the wheat growers.

Last year, Feds clsed down the local small bank with no warning. They cancelled all lines of credit.

Milling company could not meet payroll in their mid-season. Now the Feds are prosecuting the mill for not meeting payroll.

City people who are only politicians just don’t get it.
They have not run a business. They don’t understand anything being seasonal.

[Terry Mross]

Where are you?

[wiggen]

A state as well as national authority (FINRA,SEC) can both have requirements that need to be met.