More than a year and a half ago I told you that the banks were in such trouble they would some day have to start putting more repossessed homes on the market, one way or the other. One way, would be that they started putting them on the market to try and keep from going broke and the other way would be the homes being put on the market as part of bankruptcy proceedings to pay off debtors after the banks went broke. I recently showed you that is exactly what is happening because more and more banks are repossessing homes and putting them on the market trying to save their butts because so many of those homes are under water losing the banks money anyway.
I have also been telling you that the economy is not recovering and is actually getting worse in spite of what the experts are telling you. This also explains why those banks are finally repossessing homes and putting them on the market. This economy is so bad that the banks are really hurting.
I just read at Bloomberg at http://www.bloomberg.com/news/ that the US banks plan on closing 5,000 branches within the next 18 months leaving 41 million people in the US without banking services. That will be an increase of better than 33% of the number of people who will not have banking services just 18 months from now, up from 30 million in 2009. They plan on laying off 80,000 bank employees during that time. That is really going to help the economy recover. The banks may also cut a total of 10,000 bank branches by 2015 and the number of banks going bust this year so far, by the second week in November, was 149 up from last year's total of 140 for the entire year.
Just like I told you, the banks are in serious financial trouble which is why they are now risking crashing the housing market again by repossessing so many homes and putting them on the market. I think they have come to the realization the housing market is going to crash soon whether they put those houses on the market or not and they are trying to get all the cash they can before it crashes to help them survive this next crash.
This is called damage control. When a product or service goes bad causing you to lose money on the deal, you just sell out of it and get what money you can to keep from losing more money by holding onto the product or service longer. At the same time they are scaling back the banks to decrease their overheads hoping they will get enough money from the repossessed homes to keep the much smaller banks functioning financially.
If the housing market crashes too fast and too hard, they will be closing a lot more than 10,000 bank branches and a lot sooner than in the next 5 years. But you have to understand this is a survival calculated risk hoping this combination of moves keeps them alive. The banks are literally fighting for their survival.
So, how is that recovery thing going?