This Week's Busted Banks

Another Saturday morning, another check of the FDIC's Failed Bank List. We've got five casualties to report from Friday, including the largest single bank failure of 2009, Alabama's second largest bank in Colonial Bank. Yesterday I mentioned North Carolina-based BB&T was buying the assets and branches and leaving the toxic mess to the FDIC, the FDIC has now confirmed the transaction. But there's a larger domino effect problem with Colonial going under:

The collapse of Colonial BancGroup poses another hazard to the still-shaky housing market: Mortgages could become even harder to get.

The Southern regional bank, based in Montgomery, Ala., was the largest remaining player in warehouse lending, which provides short-term financing to independent mortgage bankers. At one time, these mortgage bankers originated half of all U.S. home loans using these funds.

Today, the warehouse lending market is decimated. In 2007 it was worth an estimated $200 billion; now there is just $25 billion available -- 25% of which belongs to Colonial. With Colonial's failure, those funds could become even more scarce.

"It's like if they shut down half the concession stands at the baseball game," said Scott Stern, CEO of the Lenders One mortgage bankers group in St. Louis. "It means the guy who's last in line is going to have to wait a lot longer to get a hot dog, and in this market who knows what the price is going to be when he gets there?"

In other words the independent mortgage broker market is all but dead before this happened, now? That's bad, bad news for the mortgage market. What it means is the big boys are getting a larger and larger chunk of the mortgage game, the same big 19 banks that were deemed "Too Big To Fail" by the government. The rest of the financial industry is being consumed. A total of 77 banks have gone under in 2009. Many, many more will follow as competition is eliminated by consolidation.

The era of the local bank is coming to an end, folks. Over the next several years you will see larger and larger bank failures and consolidation buyouts. Those banks that the government saved with our money will flourish. Those not so lucky will eventually be squeezed out and bought out, or will go under as the commercial real estate market continues to disintegrate.

U.S. commercial real estate market values fell by more than 17 percent in the first half of the year, outstripping their decline for all of 2008, according to the Investment Property Databank (IPD).

Last year, values fell 12.2 percent, according to the report released Friday.

U.S. commercial real estate values in the first half of 2009 fell more steeply than UK values, said IPD, which analyzes commercial real estate data in global major markets.

"For global real estate investors this may come as a surprise, given that Britain was the most significant real estate market to suffer in 2008," IPD Managing Director Simon Fairchild said in a statement.

U.S. values in the second quarter declined by 6.9 percent, easing somewhat from the 10.8 percent drop in the first quarter, IPD said.

Less competition, higher fees, rates, and charges for you. After all, in some places I expect there to soon not be any competition, or just two or three megabanks controlling all the branches in one area. Credit unions will still be an option, but only if you meet the union's requirements. Most Americans will have little choice soon.

The consolidation of the industry continues.