Deficits, Dollar, Federal Reserve, Individual v. Collective, Live and Learn, Taxes

Intoxicating Visuals for the Dollar, Credit Cards & Bank Failures

How’s the dollar been doing since March, during the stock market boom? Well, not so great. This could have something to do with unprecedented government spending and debt issuance. Who knows, it could be just a coincidence.

Click on graph for a larger, viewable version

<em>Source: Federal Reserve Bank</em>

Source: Federal Reserve Bank

The drop in the trade-weighted dollar index was led by the dollar’s 16% depreciation against the Canadian dollar, and a 12% decline against the euro. So watch for traveling Canadians towards the end of the summer; it’s getting nice and cheap for them to come visit.

Credit cards, one of the lesser publicized lines of credit under fire, is an industry just as scared as real estate lending. There’s a reason companies like American Express rushed to change their classification to “bank holding company” early this year: to gain access to the Troubled Asset Relief Program (TARP) cash. Credit cards often serve as the last lifeline for people struggling financially. This graph shows charge-off rates (when credit card companies write-off a percentage of uncollected balances as a loss) and delinquency rates.

Sources: S&P and Haver Analytics; Note: Dotted lines are Moody’s and Bloomberg

Source: Federal Reserve Bank of Atlanta

Bank failures are still happening, and more are sure to come with real estate making up a nice portion of the typical bank’s balance sheet. 69 FDIC-insured banks have failed in 2009, through August 1st. This graph shows the asset sizes of the first 64 failed banks.

Source: Federal Reserve Bank of Atlanta

Source: Federal Reserve Bank of Atlanta

Other banks are facing extinction; those with billions of dollars of assets including Florida’s sixth-largest bank, Colonial BancGroup, with roughly $25.5 billion in assets. Colonial also has branches in Alabama, Texas, Georgia and Nevada. Troubled banks are assessing their options swiftly, in a mad scramble to gain access to TARP money, sell off branches and raise private capital.


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