U.S. Bank Failures Hit 105 in 2009

October 23, 2009 by · Leave a Comment
Filed under: Bank Failure 

We are not out of the woods yet.  We crossed the 100 bank failure mark this year.  A total of seven banks had their door shut this Friday according to the FDIC.  As of August, the FDIC still has 416 banks on their “watch list” so it is likely we will see more failures in 2009 and 2010 if not longer.  Here is a troubling statement made in this Bloomberg article that discusses the term “zombie bank” which refers to a bank that is basically insolvent but have still not been shut down.

The number of bank closings would likely be higher this year if the FDIC’s fund wasn’t depleted and if the agency had more bank examiners, RBC’s Cassidy said. The agency shrank under President George W. Bush before adding employees in the Obama administration. The FDIC has about 6,000 employees now, compared with 21,000 during the savings-and-loan crisis in 1991, he said. “We certainly know there are hundreds and hundreds of zombie banks out there,” Cassidy said. “The only alternative for them is to be seized and it’s only a matter of manpower and money before they get to it.”

Lately, the FDIC has had its deposit insurance stressed because of these numerous bank failures, they have raised the premiums they charged banks to securing part of their deposits.

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