Gallup: Record-High Percentage of Americans Lack Confidence in Banks

A recent Gallup poll conducted over the telephone shows that a record-high 36% of Americans have "very little" or "no" confidence in U.S. banks. This is a 6% increase from last year; it marks the third consecutive year that more Americans say they have little or no confidence in banks, as compared with those who say they have "a great deal" or "quite a lot."

Historically, this has not been the case: "Prior to 2009, the percentage of Americans expressing very little or no confidence in U.S. banks was generally far less than the percentage expressing a great deal or quite a lot of confidence." Even "as recently as June 2007, before the recession began...more Americans had confidence in U.S. banks than had little or no confidence." Gallup has been measuring Americans' confidence in banks since 1979.Although confidence in banks is down in all regions since 2007, it has increased in the Midwest (+7%) and West (+6%) since last year. According to Gallup, "These improvements may be at least in part a result of the strengthening of the manufacturing sector, as it has been of particular benefit to the economy and companies in these regions."

Confidence in U.S. banks clearly remains low; Gallup writes that this poll's results indicate "that the banking industry, banking regulators, and other policymakers need to do more to improve the confidence Americans have in banking institutions."

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Foreclosed Homes Threaten to Further Weaken Housing Market

An article in the New York Times centered on the concern among some economists that the large number of foreclosed homes owned by banks and mortgage lenders will "deepen the housing slump and create a further drag on the economic recovery." The fear is that "the rise in lender-owned homes could create another vicious circle, in which the growing inventory of distressed property further depresses home values and leads to even more distressed sales."

Currently, big banks and mortgage lenders own over 872,000 homes around the country, are foreclosing on an additional million, and are expected to take control of another several million in the next few years. The impact is already being seen today, as "real estate prices have been declining across the country in recent months."

Lenders are having difficulty selling their properties quickly and at good prices, and in many areas they are repossessing more homes than they are selling. In Atlanta, lenders are repossessing eight homes for every one distressed home they sell; before the housing market's collapse, the ratio was typically one-to-one. According to the Times, "The reasons for the backlog [of unsold distressed properties] include inadequate staffs and delays imposed by the lenders because of investigations into foreclosure practices."

Concerns about the large foreclosed home inventories are real: economists predict that it would "take about three years for lenders to sell their backlog of foreclosed homes." Writes the Times: "As a result, home values nationally could fall 5 percent by the end of 2011, according to Moody’s, and rise only modestly over the following year. Regions that were hardest hit by the housing collapse and recession could take even longer to recover — dealing yet another blow to a still-struggling economy."

Says Mark Zandi, chief economist at Moody's Analytics, in the article: “Housing prices are falling, and they are going to fall some more.”

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The Long Road Back from Financial Crises

Writing in the New York Times's Economix blog, Catherine Rampell reviews a paper presented two years ago from Carmen Reinhart and Kenneth Rogoff, documenting the road to recovery that followed twelve different financial crises from the American Great Depression to the Argentinian crash in 2001. What they found should have shed doubt on the optimistic projections of rapid recovery in 2009 and 2010 and reminds us that recovery remains far from certain, even as most have written off disappointing GDP growth numbers from the first quarter as the results of transitory factors like excessive snowstorms.

The chart above shows that for unemployment -- a lagging indicator to be sure, but one with profoundly important impacts on people's everyday lives -- the aftermath of financial crises increases unemployment by an average of 7% over an average of 4.8 years. By those metrics at least, America's Great Recession could have been far worse.