Seven more U.S. banks fail going into the holiday weekend, brings total to 52 for 2009
The market does not like this news. The Dow down over 2.5% at the time of this writing. This does seem to be accelerating and that does not bode well as a sign for future events to pass. We are going to see more regional and local banks go bust as the loans on their books go into default and that make their capital reserve inadequate for what regulators are requiring. This also is putting a severe strain on the FDIC and its funds. It already has had raise rates this year to cover the number of banks that went bust in 2008.
Six banks in Illinois and one in Texas were seized by regulators as the deepening financial crisis pushed the toll of failed U.S. lenders this year to 52, the most since 1992.
Twelve banks have failed this year in Illinois, the most of any state. The seven lenders seized yesterday, with total assets of $1.49 billion and deposits of $1.34 billion, were closed by state or federal regulators and the Federal Deposit Insurance Corp. was named receiver, according to statements from the FDIC. Buyers were named for each of the closed institutions.
The Illinois banks are affiliates of Peotone Bank & Trust Co., in Peotone, Illinois, about 45 miles (72 kilometers) south of Chicago. The failures resulted primarily because of soured loans and losses on investments in collateralized debt obligations, the FDIC said. Illinois, with an unemployment rate above the national average, was one of seven states to begin the fiscal year without a spending plan.
“The six failed Illinois banks are all controlled by one family and followed a similar business model that created concentrated exposure in each institution,” the FDIC said. CDOs, which packaged bonds and loans into notes of varying risk and yield, lost money as real estate defaults soared.