The Wall Street Journal today reports that some 98 U.S. banks, all of which have been previously bailed out by the government, are still on the ‘brink of bankruptcy’. The report is based on third-quarter earning reports, specifically those indicating a Tier 1 Capital ratio of below 6%, having a risk-based capital ratio of less than 10% or having more than 10% of their loans in a non-performing status. These 98 banks had received some $4.2 Billion dollars in TARP funds already. The analysis of these banking conditions is an on-going one. The same criteria indicated after the second-quarter earnings that 86 banks were at risk of failing.

NEW YORK, NY - NOVEMBER 30: People walk down Wall Street on November 30, 2010 in New York City. U.S. Attorney General Eric Holder announced yesterday that the Justice Department is conducting a criminal investigation of Wall Street. In a further blow to the financial district, WikiLeaks founder Julian Assange has told Forbes that he plans to release documents early next year related to a large U.S. bank. (Photo by Spencer Platt/Getty Images)

Bailing out banks does not guarantee success. Seven banks, which received $2.7 Billion dollars in TARP funds, have already failed. In addition, according to the Federal Deposit Insurance Corporation (FDIC), about 10% of the nation’s 7,760 banks are currently undercapitalized. This is up from 9% during the second quarter financial statements.

The banks in question are generally small ones. The average holdings for each is about $439 million dollars. The average amount of TARP funds each bank had received is about $10 million dollars.

The short, pardon the pun, of it is that many U.S. banks are still holding far too much in the way of ‘toxic assets’. While most of these assets are still related to the mortgage-backed securities which led to the financial meltdown of 2008, a new wave of toxic assets is beginning to appear. This time, coming from state governments, like the State of Illinois, attempting to refinance their debts. Even many of the larger banks, which received the bulk of the TARP bailouts, are still on shaky ground.

Add to this the news that banks in Europe will be facing another round of ‘stress tests’ come February. At issue there is whether or not the stress tests given in the summer of this year were valid? Reports that the previous tests did not adequately gauge bank liquidity and risks are still being argued, leaving European financial ministers and bank regulators to try the process again.

Meanwhile, back here in the United States, banking regulators are facing new concerns over the implementation of the Basel III accords agreed to during the last G-20 conference. Some analysts estimate that U.S. banks may need an additional $770 Billion dollars in extra liquidity to meet the new standards. With the Wall Street Journal’s report on 98 banks already at the ‘brink of bankruptcy’, the rosy picture being painted by some economists may be somewhat premature.

NEW YORK, NY - DECEMBER 21: Traders work on the floor of the New York Stock Exchange on December 21, 2010 in New York City. While U.S. stocks only rose modestly Tuesday, they hit their highest levels in more than two years with the Dow Jones industrial average rising 55 points to close at 11,533.16. (Photo by Spencer Platt/Getty Images)

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