The deflating credit bubble could hurt more than just the banks
Another week, another wave of worry about American regional banks. Thankfully, the level of panic has dropped somewhat since the Federal Deposit Insurance Corporation appears to be backstopping the system — by precedent, if not by law. But the problem now is one of attrition: weakling banks are losing deposits, watching funding costs rise while their loans to commercial real estate and risky companies turn sour.
That means more consolidation looms. And while that is welcome in the longer term (since it is crazy that America has 4,000 plus banks), this could create bumps in the short run.
This story originally appeared on: Financial Times - Author:Gillian Tett
