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[RT] market goes up after bank fail



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look at past history when ban failed what happen later to sp500
see  charts bellow
 

 

Well, it may be astonishing to anyone not following the travails of the U.S. financial system over the past six months.  IndyMac bank, one of the most well-known mortgage specialists in the country, was placed into federal hands this evening.

 

The firm will now take the inglorious honor of being the 2nd-largest bank failure in American history (depending on who's figures you're using).

 

It's still very early in the discovery process of what this may mean, but I thought it important to go back and look at the other largest and/or most-publicized failures in modern banking history.

 

The red arrows on the charts of the S&P 500 below show the date the firm was taken over by Federal authorities or declared officially insolvent.  The dates can vary depending on the source, so I tried to use the best one as determined by the FDIC and records posted in the New York Times.

 

 

 

 

 

 

Despite proclamations of doom at the time, these failures tended to be climactic events.

 

The average return in the S&P 500 six months after these five failures was +19.5%.  The maximum loss during those half-years averaged only -2.0% compared to an average maximum gain of +22.6%, more than ten times as large.

 

Again, it's early in the process with IndyMac and we're still not sure of what some of the reverberations may mean.  Plus, we have to deal with Fannie Mae and Freddie Mac, which may be facing similar fates and which would likely be more of a climax.  But based on the history of some of the past large bank failures, we could be very close to seeing the kind of washout that we've needed to see for months.

 
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