Takeo Hoshi's Research Cited in American Chronicle
Financial Reporting and Financial Crises: The Case for Measuring Financial Instruments at Fair Value in the Financial Statements
06/23/2011
Thomas J Linsmeier,
American Chronicle
Greeley, Colorado, is a working-class, ethnically diverse town of about 100,000 on the South Platte River roughly 50 miles north of Denver. In early 2009, a pillar of its financial community, the New Frontier Bank of Greeley ("Where Agriculture Means Business!"), seemed to be weathering the global banking crisis in fine form. Throughout 2008 and into 2009, New Frontier was characterized as "well capitalized" by banking regulatory standards-meaning its tier 1 risk-based capital ratio1 was theoretically a solid 6 percent plus.
On April 10, 2009-a mere three months after reporting its last clean bill of health-New Frontier collapsed into bankruptcy. It was the costliest bank failure in Colorado history, with the Federal Deposit Insurance Fund covering losses of $668.9 million.
New Frontier was not alone in its rapid reversal of fortune. Of the 140 U.S. banks that failed in 2009, virtually all of the 120 with publicly available data in commercial bank regulatory reporting forms showed substantial positive net worth on their balance sheets. Most were considered "adequately capitalized" by their regulators (Tier 1 ratios above 4 percent), and many even "well capitalized" just four to six months before they collapsed.
Click here to read the full article.
Related Links
Takeo Hoshi can provide commentary on Japan's financial system, bank regulation, macroeconomic conditions and macroeconomic policy.
