After seeing the number of bank failures tick up to 140 last year, there's some slight comfort in seeing the annual total only reach four. The feeling of relief disappears, of course, when you realize that we're only two weeks into 2010. The effects of the late 2008 financial crisis are still with us, as three small banks learned this week -- in Illinois, Minnesota and Utah. As expected, the 2009 trend continues. The Federal Deposit Insurance Corporation's takeover of the banks follows the closure of the much larger Horizon Bank in Bellingham, Wash., the week before.

U.S. banking regulators took over six more banks on Friday, bringing the 2009 bank failure tally to 130. So, even with the post-financial crisis situation stabilizing a year later, the continued stream of bank failures serves as a stark reminder that we aren't out of the woods yet. Smaller banks are expected to continue to fail at an higher rate through next year, due in large part to the pressures of deteriorating loans.

Of course, unemployment will continue to be a problem, as it impairs the abilities of borrowers to repay their debts. The squeeze appears to be lightening, as job cuts slowed considerably in November, but the unemployment rate is nonetheless expected to peak next year.

The future investment stars are already with us. The NYSE Financial Future Challenge, operated by the NYSE Foundation, By Kids for Kids, K12 Inc. and the United Investors Association, is in full swing, with five finalists just identified. To reach this level, the participants had to develop a new product, idea or process that would "excite, educate and motivate their peers" to become interested in the financial marketplace. The eventual winner lurks within this subset and will receive a $2,500 prize -- a great way to get that portfolio started. And, he or she will be feted at a closing bell ceremony at the NYSE (NYX) on January 11, 2010.

The finalists presented a variety of ideas which are sure to generate some buzz. Kelsey Foss, a 12-year-old from Mountainville, NY, proposed a new television show, "Stock Market Tycoon Idol," which would harness the popularity of reality TV while amping up the content. The program would involve the journeys of 10 kids as they seek to make money or lose it, with the possibility of becoming virtual millionaires along the way. The show would be set at a mock NYSE studio on Wall Street, and exports would be brought out to mentor the contestants. The reality TV reach would help engage a younger audience.

Deutsche Bank (NYSE: DB) expects almost half of all U.S. homeowners to be underwater -- figuratively, of course -- by 2011.

Declines in home prices and the fact that some of those difficult mortgages just aren't going away put 26% of homeowners in this situation by the end of last March, and it seems the situation is only going to get worse. Unlike the early stages of the credit crisis, which were driven by subprime mortgages, the next iteration will have a greater effect on prime mortgage borrowers, which comprise two-thirds of the loans outstanding.

This post is part of our Big Company, Small Town series, featuring large companies and the small towns in which they are headquartered.

State Farm is the world's largest mutual property and casualty company, which means its owned by its policy holders. In 2007, State Farm Mutual Automobile Insurance Company paid $1.25 billion in dividends to its mutual auto insurance policy holders. (In the interest of full disclosure, I did get one of those checks.)

The corporate headquarters are based in Bloomington, Illinois, where State Farm was founded in 1922 by George J. Mecherle. He thought farmers were being charged too much for car insurance because they don't drive as much as city folk and didn't incur as many loses. Well, the insurance companies available at the time didn't agree with him, so he started his own car insurance company for farmers.

Today, State Farm has grown into the largest insurer of cars and homes in the United States, as well as the leading insurer of watercraft. State Farm is also a leader in insuring Canadian cars and homes. State Farm serves a total of 77 million auto, fire, life, and health policies in the U.S. and Canada with 67,000 employees and 17,000 agents. About half of its employees are involved in claims processing in one of its more than 390 claims offices.

MOST NOTEWORTHY:

• JP Morgan assumed coverage of 5 machinery stocks: The firm assumed Eaton (NYSE: ETN) and Illinois Tool Works (NYSE: ITW) with Overweight ratings and Ingersoll-Rand (NYSE: IR), Parker Hannifin (NYSE: PH) and Kennametal (NYSE: KMT) with Neutral ratings. JP Morgan's top picks in the group are Illinois Tool Works and Eaton.

• Pali initiated Sohu.com (NASDAQ: SOHU) with a Buy rating and $41 target and believes the Olympic Games represent the biggest growth catalyst for the company.

• Jefferies started shares of Intuit (NASDAQ: INTU) with a Buy rating and $34 target, likes the momentum in TurboTax and QuickBooks and sees potential upside fo FY08 expectations.

• Banc of America initiated Priceline.com (NASDAQ: PCLN) with a Buy rating and $96 target and is positive on the company's European positioning given expectations for top line growth and margin expansion. The firm also started shares of Expedia (NASDAQ: EXPE) with a Buy rating and $35 target, positive on the company's strong management, solid competitive positioning and improving fundamentals.

• First Albany assumed coverage of Cougar Biotechnology (OTC: CGRB) with a Buy rating and $29 target.

• Oppenheimer started shares of Virginia Commerce (NASDAQ: VCBI) with a Neutral rating.

• Omega Financial (NASDAQ: OMEF) was initiated at Keefe Bruyette with a Market Perform rating and $25 target.

• Merrill Lynch initiated shares of Insulet (NASDAQ: PODD) with a Buy rating.

I can understand that the good Governor wants to plump the state coffers. We all know that's what Governors do. However, this attempted move by Blagojevich smacks of kicking a man when he's down. I guess that's par for the course in Illinois government. I'll file this story with my other "Gary's Governmental Economic Theory" pieces. That file is called: Governments don't run economies, they strangle them. ...and so it goes.

Source:Illinois Association of REALTORS