by Mandatory Marcus

Created on: July 03, 2009

I just logged on to CNN.com and found a Breaking News headline that read: "Regulators shut six more banks; closures for 2009 reach 51, more than twice as many as all of last year."

And for good measure this headline was in a big bright red box at the top of the page to make sure I noticed it...and noticed that it was probably bad news.

It certainly isn't good news. So I guess that makes it bad news. Of course that begs the question of just exactly how bad this news really is. The way this headline reads one would assume it is catastrophically bad news.

If I was a lawyer and this information was introduced by opposing council I would object to it on the grounds that it is "leading the witness". (For the record, I'm not a lawyer; but I've watched so many episodes of Boston Legal that I think I could be.)

All of this got me to wondering how many people read that headline, swallowed it whole and are now sitting depressed in their homes awaiting some impending doom. And further, how many of us actually stop to think deeply and critically about the information that is fed to us in today's 24/7 non-stop news cycle?

So in the interest of trying to preserve everyone's sanity...what do you say we actually put this headline into broader perspective and see what happens?

By the way...since I first saw this "Breaking News" announcement, the number was corrected upwards to a total of 52 failed banks in what is essentially the first half of 2009 vs. a total of 25 bank failures in all of 2008.

That's not good.

How "not good" is it? To have any understanding of that we need to ask a few questions...

Question one: what does the number 52 represent relative to all banks? Is that a big number? Is that a small number? Is it half? With no perspective it doesn't really mean anything.

So let's get some perspective.

There are approximately 8,300 FDIC insured banks today. Thus, 52 banks represent a failure rate of 0.0063%.

That doesn't sound so scary.

But the media is fond of ensuring that nobody forgets that we are in the worst economic crisis since the great depression and absolutely the worst recession in the past 25 years.

That sounds scary; and it leads us to our next question...

Question 2: how does today's number of bank failures compare to bank failures during the great depression? And how does it compare to bank failures during the recession that started in the 1980's?

Have a look at these two charts:

This one

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