Hats off to my friend Mark Perry over at Carpe Diem for his great blog on the health of the US banking system.
The University of Michigan economics professor is running two charts (plus commentary) on loan charge-off rates and loan delinquency rates. He says, ‘The U.S. banking system is probably stronger and more stable than most people give it credit for. Empirical data on bank charge-off rates and delinquency rates, at least through the third quarter 2007, suggest that banks are probably doing better than most people think.’
Incidentally, current FDIC chair Shelia Bair, and former FDIC chairs Bill Seidman and Bill Isaac told me on Kudlow & Company earlier this month that today’s subprime loan problem is nothing compared to the credit crunch and banking failures of the early 1990s.
Also, don’t miss Mark’s chart on gasoline costs as a low percent of disposable income. The ratio is up a bit in recent years, but it’s still nowhere near the problem back in 1980. He says $5 per gallon would be as expensive as gas in the early 1980s. And he concludes by saying, ‘Goldilocks can handle $3 gas, no problem.’