Government Bails Out Banks But Not Consumers

When it comes to bankruptcy reform, the only type that the politicians and bankers like is changes which make it more difficult, more time consuming, and less efficient for borrowers and homeowners. The point is to push foreclosure victims into a difficult bankruptcy, while the banks themselves get bailed out by these same taxpayers to avoid the same fate.

Over the past year of the housing crisis, with foreclosure rates remaining at historic highs, one of the proposals to fix the problem was allowing bankruptcy judges to reduce the amount that homeowners owed on a first mortgage. This would have made it easier for the borrowers to pay back part of the loan in the event the property value had fallen.

Of course, the fact that this solution makes some sense and is perfectly acceptable in the case of second homes and other types of debt and other types of bankruptcies (Chapter 11, for instance) did not change the banking industry’s opposition to it. Although giant corporate-government bank Citigroup supported the bill, the Senate defeated legislation that would have allowed it.

Homeowners facing foreclosure, according to the politicians, should not be able to enter into a government bankruptcy court and have their mortgage balance reduced. Instead, they should be forced to enter into a government foreclosure relief program to have their mortgage balance reduced. The key difference is how much control the banks have over the reduction.

In most of the government programs to help homeowners qualify for mortgage modifications, the lenders participation in the plan is voluntary. And in practice, the lenders’ participation has been lukewarm at best or nonexistent at worst. Take, for example, the FHA Hope for Homeowners program, which has been given $320,000,000,000 in taxpayer money and has helped one single homeowner.

Thus, the government modification programs have been a disaster because they allow banks to work as hard as they want to help borrowers. The banks, in turn, give homeowners bad deals or fail to negotiate in good faith with borrowers. Instead, they rely on their bailouts and other free money programs to prevent them from having any motivation to assist borrowers in stopping foreclosure.

The banks know that, if homeowners could file bankruptcy and get their mortgages modified, there would be fewer reasons to go to the government for free handouts. Borrowers would be able to file a Chapter 13, have the mortgage balance reduced to the market value of the home, and be able to make payments to the lenders again. This would be a tragedy for the lobbyists and mortgage companies!

One of the objections to the legislation was that it would make mortgages more expensive. But during the real estate boom, mortgages were as expensive as they ever have been. Although this was not in terms of interest rates, once the bubble inflated to astronomical levels, the amount of a loan a borrower needed to take out just to qualify for a mortgage was extraordinarily high.

The Federal Reserve had lowered interest rates to historic lows. Banks reduced lending standards knowing they could get bailed out by the government if anything went wrong. Loans were given to people who could never afford to pay them back, inflating the demand and rising prices even further. Some of these loans reset at high interest rates after a few years on extremely overvalued properties. None of this was a good deal.

And now, the main objection to allowing bankruptcy judges to reduce mortgage balances is that it would make it more expensive to take out a mortgage? How could it be any more expensive than taking out a loan for 250% of its actual value at a teaser rate that would reset to 12% interest in a couple of years? The banks could not make the mortgage market any more expensive if they tried.

Regardless, the banks worked hard to lobby politicians to defeat the legislation, and now the mortgage banking industry is celebrating its victory. But what have they won? Nothing more than ability to force homeowners to keep paying for properties that are overvalued, while the banks themselves line up to receive more and more taxpayer money in order to avoid the same fate of a difficult bankruptcy.

Credit Crisis Persists

You knew things were bad in the credit department, but now there are some new numbers to back it up: We’re collectively about 27% riskier credit bets than we were a decade ago, according to the TransUnion credit bureau. The firm’s national Credit Risk Index for the first quarter of this year clocked in at 127.3 compared to the 1998 start-point of 100. The index is based on the average weighted probability of 90-day delinquencies on mortgages, auto loans and credit cards.

TransUnion’s global chief scientist Chet Wiermanski didn’t even try to position the latest reading as a green shoot. “ The index remains at an all-time historical high,” he commented, “indicating that delinquencies and foreclosures will continue to rise in the coming months.”

The five states that pose the biggest credit risk, according to TransUnion:

•    Mississippi (Credit Risk Index of 166.45)
•    Texas (162.59)
•    Nevada (158.97)
•    South Carolina (158.76)
•    Louisiana (153.84)

The least risky states:
•    North Dakota (82.02)
•    Minnesota (88.53)
•    Vermont (91.82)
•    South Dakota (94.75)
•    Iowa (95.26)

The high/low credit risk lists might suggest a new Weather Channel indicator: Is there something about cold-weather winter states that engenders better credit management? Okay, okay, what’s really at play is of course something more down to earth, like jobs. All five of the lowest-risk states have unemployment rates below the 9.5% national average.

The worst year-over-year Credit Risk Index changes occurred in poster-child states for mortgage duress: Arizona (up 14.8%), Nevada (up 14.4%) and California (up 13.8%).

You can check out your state’s delinquency rate for auto loans, credit cards and mortgage at TransUnion’s website Even if your personal FICO credit score is sterling, merely being in a state with a high delinquency rate could expose you to more scrutiny if you plan on applying for any credit in the near future.

Cue up the chief scientist one more time:

“It is apparent that many of the states experiencing the highest increases in credit risk are the same when looking at the Credit Risk Index statistic on both a quarterly and yearly basis,” said Wiermanski in the release that accompanied the data. “This leads TransUnion to believe that consumers in these states will experience prolonged systemic difficulties in both their ability to satisfactorily repay their existing credit obligations and in their ability to acquire new credit.”

Ouch. Good luck with your mortgages and credit cards, everybody.

US Trade Gap Declines

WASHINGTON (Reuters) — The U.S. trade gap narrowed unexpectedly to $26 billion in May to the lowest reading since November 1999, as exports rose and imports shrank, government data on Friday showed. The Commerce Department said exports increased 1.6% to $123.3 billion, while imports declined by 0.6% to $149.3 billion. Analysts polled by Reuters had expected the trade deficit to widen to $30.2 billion in May.

The trade gap in April was revised to $28.8 billion from a previously reported $29.2 billion deficit. May’s import level was the lowest since July 2004 and the 10th straight monthly decline, providing further evidence that the recession-mired United States has diminished as a source of demand for the rest of the world. The auto sector has been hard hit in the economic slowdown and May imports of automotive vehicles and parts slipped to $10.2 billion, the lowest level since March 1996, while auto exports were the lowest since July 1998.

The monthly deficit on goods trade with China grew to $17.5 billion from $16.8 billion in April and was the largest with any single country. But the U.S. trade deficit with other big trading partners declined, falling to $2.8 billion with the European Union in May, for the lowest reading since March 1999, and retreating to $1.9 billion with Japan, which was the lowest since February 1984.

Imported oil cost $51.21 a barrel in May, up from $46.60 in April. The value of crude oil imports in May declined only slightly to $13.4 billion, despite a sharper decline in the quantity of oil actually imported, to 262 million barrels from 293 million in April, the Commerce Department said.

US Consumer Debt Worsens

NEW YORK (Reuters) – Soaring U.S. unemployment and a shrinking economy drove delinquencies on credit card debt and home equity loans to all-time highs in the first quarter as a record number of cash-strapped consumers fell behind on their bills.

Delinquencies on the value of all card debt soared to a record 6.60 percent from 5.52 percent in the fourth quarter as more cardholders relied on plastic to meet day-to-day expenses, the American Bankers Association said.

Late payments on home equity loans rose to 3.52 percent from 3.03 percent, and on home equity lines of credit climbed to 1.89 percent from 1.46 percent.

A broader gauge showing late payments on eight categories of loans rose for a fourth straight quarter to a new record, edging up to 3.23 percent from 3.22 percent. That rate actually understates consumer pain because it excludes credit cards. The ABA tracks loan payments that are at least 30 days late.

“The biggest driver is job losses,” ABA Chief Economist James Chessen said in an interview. “When people lose their jobs or work fewer hours, it makes it that much harder to meet their obligations. Unfortunately, we’re going to see higher job losses in the next year, and I expect elevated delinquencies.”

The ABA represents most large U.S. banks and credit card companies. Tuesday’s data are a bad sign for them as they prepare to report second-quarter results starting next week.

While improved capital markets may boost the bottom lines of some, analysts expect lenders such as Bank of America Corp, JPMorgan Chase & Co, Citigroup Inc, Capital One Financial Corp and American Express Co to suffer higher credit losses, especially in cards.

BRIDGE TO EMPLOYMENT

Borrowers are struggling as the nation’s jobless rate sits at a 26-year high of 9.5 percent, with 6.5 million jobs having disappeared since the recession began in December 2007. The Obama administration expects the unemployment rate to hit double digits before declining.

U.S. consumers ended March with $939.6 billion of revolving credit outstanding, a rough approximation of credit card debt, according to Federal Reserve data.

“Consumers tend to rely on credit cards as a bridge to cover their daily needs until they find new jobs,” Chessen said. “It’s taking longer to find those jobs.”

Meanwhile, home prices are down 32.6 percent from their peak in 2006, according to the Standard & Poor’s/Case-Shiller Home Price Indices of 20 large metropolitan areas.

The ABA in June said it expects the recession to end this quarter, despite rising unemployment.

The overall ABA delinquency rate includes direct auto, indirect auto, closed-end home equity, home improvement, marine, mobile home, personal, and recreational vehicle loans.

Delinquencies rose to 3.01 percent from 2.03 percent on direct auto loans, to 3.70 percent from 2.96 percent on mobile home loans, to 3.47 percent from 2.88 percent on personal loans, and to 1.52 percent from 1.38 percent on recreational vehicle loans.

Swiss Bank Secrecy Under Fire

ZURICH (Reuters) – Switzerland has vowed to prevent UBS from handing over client information to U.S. authorities, in an attempt to defend bank secrecy, saying a tax case targeting its main bank is souring diplomatic ties.

Wealth management giant UBS is facing a court hearing in Miami next week after refusing to disclose data on 52,000 Americans holders of secret Swiss bank accounts to U.S. tax authorities.

The Swiss Justice Ministry said on Wednesday that Swiss law prevents UBS from handing over client information and the government would seize UBS client data, if necessary, to stop that happening.

The case, which comes amid a global fight against tax cheats supported by the U.S. administration, has damaged the UBS brand and could result in an expensive settlement for the bank at a time when the bank needs to focus on restructuring.

“Switzerland will use its legal authority to ensure that the bank cannot be pressured to transmit the information illegally, including if necessary by issuing an order taking effective control of the data at UBS,” the Swiss government said in a response to U.S. authorities filed in Miami on Tuesday.

The tax litigation is also crucial for the future of the multi-billion dollar wealth management industry and is pushing several offshore banks to force clients to come clean.

A court hearing that will lead to a ruling on the UBS data issue is due to start on July 13. Washington has accused UBS of hiding nearly $15 billion in assets in secret accounts.

The Swiss statement came in response to a filing by the U.S. Justice Department last week asking the Miami court to enforce tax compliance with the full weight of U.S. law.

Although Swiss criminal law prohibits banks passing on client information to foreign authorities, UBS and Switzerland have already made concessions on their treasured bank secrecy.

UBS agreed to pay in February $780 million, admitted wrongdoing and disclosed about 250 client names to avert tax fraud criminal charges the Swiss government said threatened the bank’s survival.

And faced with the threat of possible sanctions from the G20, Switzerland — along with other tax havens — vowed in March to redraft its tax treaties with the United States and other countries and cooperate more on tax evasion.

“INTERNATIONAL CONFLICT”

Switzerland said in its latest court filing it hoped it would not have to take the “extraordinary action” of issuing an order to seize the UBS client data.

“The IRS (Internal Revenue Service) now inappropriately seeks to provoke international conflict through this civil proceeding,” the statement read.

In its brief last week, the Justice Department said that UBS had already acknowledged that its bankers committed “very serious crimes on U.S. soil” and had therefore subjected the bank to the full jurisdiction of U.S. law. “Swiss banking secrecy is not an impenetrable wall,” it said.

Google Challenges Microsoft

NEW YORK (CNNMoney.com) — Google Inc. is planning to hit Microsoft Corp. where it hurts by challenging the software giant’s dominance in the world of computer operating systems.

The search firm said late Tuesday that it will begin offering its own operating system, called Chrome, in the second half of 2010.

While Google already offers a host of products that compete with Microsoft, the new operating system is a direct challenge to Microsoft Windows, which is the most widely used operating system in the world.

“Google really can challenge Microsoft, because the proliferation of Web-based applications makes the operating system much less important,” said Zeus Kerravala, analyst at Yankee Group. “As we pave the way towards real Web 2.0, there will be less of a real tie-in to Windows.”

The new system will initially be targeted at netbooks, the company said. Netbooks are small, inexpensive laptop computers used mostly for Internet access.

Google said the new operating system will make use of open source programming, which allows third-party developers to design compatible add-ons. (Think of the applications created for the iPhone or Facebook.)

“We hear a lot from our users, and their message is clear: computers need to get better,” Google said in a statement. Chrome is “our attempt to re-think what operating systems should be.”

The new operating system comes after Google launched its Chrome Internet browser late last year.

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Foreclosures Fall

NEW YORK (CNNMoney.com) — Lenders filed fewer foreclosure notices in May, but the total number of filings was still the third-highest monthly total on record.

One of every 398 households in the United States received some kind of filing, including notices of default, scheduled auctions or bank repossession, during May. That was a decline of 6% from April but an increase of 18% compared with May 2008.

And the ultimate type of foreclosure filing – bank repossessions – increased during the month, according to RealtyTrac CEO James Saccacio.

“While defaults and scheduled foreclosure auctions were both down from the previous month, bank repossessions, or REOs, were up 2%” he said, in a prepared statement. “We expect REO activity to spike in the coming months as foreclosure delays and moratoria implemented by various state laws come to an end.”

But overall, the May statistics underscore what may be a slight improvement. The number of filings trailed off toward the end of the month, according to RealtyTrac spokesman, Rick Sharga.

“We’re still coming through a three-month period like nothing we’ve ever seen before,” he said, “with nearly a million filings in all.”

The month saw big increases of repossessed homes in several states, including Michigan, Arizona, Washington, Nevada, Oregon and New York. In Michigan alone bank repossessions went to 6,246 from 3,560 in April, a 75% increase.

And it could have been worse. Sharga said he’s been hearing anecdotal reports of banks taking homes all the way through the foreclosure process and then suspending further action.

“We hear the servicers are pulling back from the brink,” he said. “They want someone in the house.”

Vacant homes are subject to vandalism and looting and often quickly lose whatever value they have. Thieves crash through plaster walls to get at copper wiring and plumbing or strip aluminum siding from exteriors, in many cases eliminating any chance of salvaging the property.

States of foreclosure

The foreclosure problem is widespread but reaches plague proportions in 10 states; those hardest-hit areas account for 77% of all foreclosure filings. California had more than any other state with with 92,249 – nearly 29% of all U.S. filings.

Florida posted the nation’s second highest number at 58,931, up 50% from May 2008. Other top 10 states were Nevada (17,157), Arizona (16,865), Michigan (13,891), Ohio (11,360), Illinois (10,942), Georgia (10,516), Texas (9,813) and Virginia (5,385).

Nevada had the highest foreclosure rate with one filing for every 64 households. California, with one for every 144, and Florida, with one for every 148, were second and third respectively.

Working through the problem

The foreclosure boom has depressed home prices and that has brought homebuyers back into some markets. In fact, sales volume is much stronger in many states compared with 2008, and affordability has improved to levels not seen in many years.

“In some of the ‘ground-zero’ places, like Stockton, parts of Phoenix, San Diego and some others, buyers are bidding bank-owned homes up, way, way over the the asking prices” said Sharga.

What could slow down this market revival, however, is the recent bump in mortgage interest rates.

Rates for a 30-year, fixed-rate loan have jumped to about 5.5% from about 4.8% five weeks ago. That adds about 12% to monthly mortgage payments, almost as if the house increased that much in price.

If the higher rates cause demand for foreclosures to slacken, the nation could see further addition to its supply of repossessed homes. That could send more home prices plummeting, pushing more mortgage borrowers underwater (owing more than their properties are worth) and closer to foreclosure.

Job Losses Ease But Unemployment Higher

NEW YORK (CNNMoney.com) — The unemployment rate hit a 25-year high in April, but there were signs of hope as the monthly job loss total fell to the lowest level in six months.

The Labor Department reported Friday that employers cut 539,000 jobs from payrolls in the month. That’s an improvement from the revised reading of 699,000 that were lost in March, and the best reading since October, when the economy shed 380,000 jobs.

Still, that brings job losses since the start of 2008 to 5.7 million. And even some economists who believe that economic growth and an end to the recession are close at hand project that job losses could continue through the end of the year or into 2010.

Economists had forecast a loss of 600,000 in April, but there had been signs in recent days that the job losses might not be as bad as expected. A reading on private sector employment by payroll services firm ADP showed a big drop in job losses in April, and there has been a steady decline in recent weeks in people filing for first-time unemployment benefits.

There was a 72,000 increase in government jobs, many of them workers hired to conduct the 2010 census. The health services and education sector added 15,000 jobs.

But 72% of private industry sectors reported job losses in the month, although that was an improvement from the nearly 80% that shed jobs in March.

Construction lost another 110,000 jobs while manufacturing shed 149,000 workers and retailers cut staff by 47,000. Business and professional services, a catch-all sector that includes accountants and lawyers that is seen as a sign of overall business hiring, shed 122,000 jobs.

The unemployment rate, based on a separate survey, rose to 8.9% from 8.5% in March, the worst reading since September 1983. Economists surveyed by Briefing.com had forecast the rate would rise to 8.9%.

But the unemployment rate, as bad as it was, doesn’t indicate the extent of the pain being felt by job seekers. The report showed 27% of the 13.7 million unemployed Americans have been out of work for more than six months, the highest percentage of long-term unemployed among the overall pool of jobless in the 61 years that reading has been tracked.

Almost one out of six members of the labor force are either unemployed, working part-time when they would prefer to work full-time, or are out of work and have become so discouraged that they did not look for work and thus not counted in the unemployed total. That’s the highest reading in that measure that goes back to 1994.

The Outrage Of BPO’s In Real Estate

A new income opportunity has appeared on the horizon recently for down-and-out real estate agents who are in desperate need of income and this has led to one of the biggest scams in the real estate industry today. A broker price opinion (BPO) is ordered by the bank or mortgage lender who is looking at doing a short sale on a property where the borrower is upside-down on their mortgage and they cannot qualify for (or the bank is not prepared to do) a loan modification. The BPO is done by the Realtor for $40 – $60 (almost doesn’t cover their gas and car expenses) and is used as the basis (for the bank) to negotiate with potential new buyers.

These Realtors are obviously not making money selling real estate and are often some of the most inexperienced individuals in their profession trying to make a buck or two. They sometimes are hoping to create a connection with the bank so that the can get their REO listings for themselves, which are really the only deals being closed right now. So from the getgo they are trying to please the bank which results more often than not in the BPO coming in at a much higher price than the real market value of the property.

The Realtor marketing the property for the owner then gets offers based on the real market price , which in almost all cases is much lower than the infamous BPO. They try and negotiate with the bank, get nowhere, there is no short sale, the bank then forecloses on the property, thinking they can get more than the offer. These important financial decisions being based on a $40 BPO done by someone that is inexperienced.

The property value declines even further as the banks don’t maintain the properties at all after the foreclosure or the original owner, angered by the bank’s posture regarding the short sale, strips the property of all it appliances, the pool pump, the ceiling fans, the water heater and even sometimes the air conditioning unit and wall cabinets, so the house is no longer marketable as no lender will finance properties in this condition.

Can you blame the homeowner? Maybe, but they are going to have to fight for the next 10 years with a foreclosure on their record even though the bank got offers at the real market price. A price calculated by a very experienced professional – the buyer’s Realtor – and often backed up by a real appraisal performed again by a professional appraiser at a cost of around $350. But the bank blindly looks at the $40 BPO!

Here is an example of how such a transaction looks financially:

BPO Value $200,000
Buyer’s Realtor Estimate $165,000 – $175,000
Highest offer submitted $172,000
REO Price 6 months later $125,000
REO sale $115,000

So the bank gets $57,000 less than the original offer six months later. They have the costs of foreclosure (at least $15,000) and then the upkeep of the home they now own (HOA fees, taxes, general maintenance etc.). So all in all they lose approximately $75,000 compared to the original offer all based upon their faith in the unprofessional BPO. Everyone I know in the industry, Realtors, loan officers and appraisers,  are all shaking their heads in disbelief. They are also losing money as the deals they are working with fall through and  don’t pay them a dime but they still have invested their costs.

And yet the government is pumping billions of dollars into these financial institutions, which is coming from the taxpayers who are in turn being screwed and put out on the street by the same banks. HELLO, ANYONE HOME? To make things worse the REO homes that are now in terrible shape are being bought for cash from wealthy investors and not the poor homeowners who now have a foreclosure on their record and cannot get a loan (from the same bank that just screwed them!).

Some of my more savvy clients are looking at some form of recourse against the bank that hardballed them on the sale of their property based upon a $40 BPO. In my view, the government should impose a substantial fine on the banks, which can be based on the difference between the highest original offer the bank chose to decline and the REO price the bank finally receives. At least, the bank should be forced to remove the foreclosure filing with the credit agencies and give some sort of restitution to the original homeowner.

Or the owners of the banks should fire the management that manage this mess and put in people that at least have some semblance of a brain in their head. Oh, yes, but the bank owners are now the government. So should we fire the government?

Author – Colin Buckingham
Global Internet Entrepreneur

Two More Banks Fail

NEW YORK (CNNMoney.com) — Two more banks shut their doors Friday, according to the federal government, bringing the total number of failures up to 31 in 2009.

The first failure was a wholesale banking operator that served 1,400 other lenders across the country and was the fifth biggest bank failure during the current recession in terms of assets.

Georgia “bankers’ bank”

The Federal Deposit Insurance Corp. said in a statement that it created a bridge bank to take over the operations of Silverton Bank, National Bank, headquartered in Atlanta.

Unlike the other 30 banks that have failed so far in 2009, Silverton Bank did not take deposits directly from the general public or make loans to consumers. Instead, it was a “bankers’ bank,” offering a wide variety of services, such as foreign wire transfers, as well as clearing and cash management, to other banks.

Silverton was cooperatively owned by community banks throughout the Southeast and was heavily invested in loans to real estate developments in Florida, Georgia, and other parts of the Southeast, according to Christopher Marinac, managing principal of financial firm FIG Partners LLC based out of Atlanta, Ga.

When real estate values sank in the current downturn, the assets backing those properties also lost their value. The Southeast has seen numerous regional banks topple as the housing bubble burst.

At the time of its closing, Silverton Bank had approximately $4.1 billion in assets and $3.3 billion in deposits, all of which are expected to be within the FDIC’s insurance limits.

The FDIC estimates that the cost to the Deposit Insurance Fund will be $1.3 billion, making it the fourth costliest bank failure since the start of the recession. “It is a bigger hit to the insurance fund than they have seen in the last couple weeks,” Marinac said. “This is a bigger issue than we have seen in awhile.”

Silverton served banks in 44 states and operated six regional offices. The FDIC created a bridge bank to take over the assets of the institution and has contracted The Independent Bankers Bank, out of Irving, Texas, to assist. The FDIC does not expect to see any significant impact to the bank’s clients, at least in the near term.

However, the bridge bank only plans to be operational for 60 days, with a possible 30-day extension. When the bridge bank services terminate, the banks that were serviced by the cooperatively owned bank will have to go out and find another institution to take care of those services.

“There is no clear cut answer on a situation like this,” said Marinac. “This is a little bit more complex and therefore there are more uncertainties about how this will unfold.”

Thus far, the FDIC has not been able to find another wholesale bank to agree to take over Silverton’s operations. The FDIC will attempt to sell off the assets, but it could pose a challenge to find a buyer for risky commercial loans. However, the FDIC could try to find a buyer by discounting the debt. “Everything has a price,” said Marinac.

New Jersey bank shuts

State regulators shut down Citizens Community Bank Friday night, and named the FDIC as the receiver. The Ridgewood, N.J.- based bank had total assets of approximately $45.1 million and total deposits of $43.7 million as of December 31.

North Jersey Community Bank, of Englewood Cliffs, N.J., has agreed to assume all of the deposits of the failed bank. The failed bank’s single office will reopen Monday as the North Jersey Community Bank.

North Jersey Community Bank paid a premium of 0.67% to acquire all of the deposits of the failed bank and has agreed to purchase approximately $11.5 million in assets. The FDIC will hold onto the rest of the assets to dispose of later.

Through the weekend, depositors of Citizens Community Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the failed bank will continue to be processed, and the FDIC said loan customers should continue to make their payments as usual.

The FDIC will continue to fully insure individual accounts up to $250,000 through the end of 2009.

Stress tests awaited

Local banks have been shutting down in droves as the recession has made it harder for customers and businesses to pay their loans. Nearly every Friday so far this year, at least one bank has failed. Last week, four regional banks were shuttered.

Even as the government has committed unprecedented amounts of money to increase liquidity and jumpstart the economy, the pace of bank failures has accelerated. In all of 2008, 25 banks failed, compared with 2009’s 31 banks.

It is not only smaller, regional banks that have felt the pressure of the recession. The nation’s largest banks have also been hit by rising default rates and a decline in business spending.

Among the big banks that have received government aid, Citigroup and Bank of America have each received $45 billion in funds from the government’s Troubled Asset Relief Program, or TARP.

In order to assess the health of the nation’s financial industry, the Obama administration has unveiled details of its plan to conduct “stress tests” on 19 of the nation’s largest banks.

The assessment of the bank’s health was expected to be made public May 4, but an announcement from the Treasury Department Friday indicated that results would be delayed until May 7.

Market watchers are anxiously awaiting the results of the stress tests, which have been designed to assess the banks’ preparedness to weather further downturns in the economy, including further increases in unemployment and decreases in home prices.