American Banks
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Many American banks have been victims of the recent financial crisis. The world has seen major US banks collapsing during 2008 and 2009. According to the IMF data that was published in May 2009, most American banks will not become insolvent. Industry analysts believe that the US has the financial power to support these banks at any cost.[br]
You need not to worry about your savings in American banks because they are insured by the Federal Deposit Insurance Corporation (FDIC). This means that your money will be safe even if these banks collapse.
American Banks Continue to Take Huge Risks
Although the panic regarding the financial crisis seems to have subsided, the structural issues remain. For example, more than 80% of the banking sector assets are in institutions where loan loss allowances are lower than non-performing loans. Banks have not been proactive about setting aside money for likely losses on non performing assets, since they believe that the US Fed will rescue them. Banks are making speculative investments that they cannot afford to lose, believing that the Fed will rescue them. The risks are not just for the banks, but for the Fed as well. If the Fed loses money by getting worthless assets, the ultimate sufferers will be the tax payers.
Some economists, however, believe that the PPT (Personal Property Taxes) will help the markets stay afloat. They also believe that the relative strength of the US dollar against the currencies of other countries will help the dollar recover. Despite all this, the US continues to be the most preferred destination for making substantial investments. The history of the US financial markets and the American banks shows that the government and the Fed will not let down their major banks.[br]
American Banks and the International Monetary Fund
According to Senior Administration officials in the US government, of the 19 US banks under their observation, none have been found to be insolvent. Interestingly, the International Monetary Fund (IMF) also believes this. According to the World Economic Outlook published in May 2009, the IMF has said that the global economy will shrink during 2009 and recover only slowly in 2010. According to the IMF, global banking losses due to the financial crisis have reached $4.1 trillion. Another interesting point is that the IMF has said that the American banks need only $275 billion to make them well capitalized and not just insolvent.
The key response of advanced countries that are witnessing financial crisis, including the US, is not about regulation, but about bringing these big financial institutions under government ownership. This means that the US government might consider converting preferred shares of American Banks into common equities.
