The FDIC closed down two more banks yesterday. This puts the U.S. on pace for almost 100 bank failures this year (16 so far in 2009 x 6 = 96). And of course, the FDIC is severely undercapitalized and is going to be charging an emergency fee increase to its member banks to make up the difference.
The two banks that failed Friday?
- Heritage Community Bank of Glenwood, Ill. -- With $232.9 million in assets and deposits of $218.6 million, MB Financial Bank of Chicago will assume its deposits and take over its four offices.
- Security Savings Bank of Henderson, Nev. -- Security Savings had $238.3 million in assets and $175.2 million in deposits. Bank of Nevada in Las Vegas will assume its deposits and operate its two offices.
Meanwhile, the FDIC lacks the money to handle what could be 100 bank failures this year. The FDIC insures deposits on accounts worth up to $250,000 and estimates it will lose $65 billion through 2013 as a result of bank failures. It has 252 banks on its watch list and will increase its fees from banks by $27 billion to bolster its current low level of reserves -- $19 billion.
When you consider what would happen if people lost confidence in bank deposits, the increase is a small price to pay.Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and is the author of You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing.
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Reader Comments (Page 1 of 1)
2-28-2009 @ 1:52PM
rwfarrell7 said...
Banks are your best friend, who else will lend you hundreds of thousands of dollars and ask for it back a little at a time with a reasonable interest. I wonder how many people struggling to make their mortgage payment are spending $400-$500 a month on cigarettes, beer and Starbucks coffee!
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2-28-2009 @ 3:46PM
william lindblad said...
Can they? They have to. Just another government related problem.
Of note however, is that time has proven both of us wrong. I think that around 1-1/2 years ago you posted the speculation that this economic fiasco was going to run around 6-7 trillion? I figured around three. Current guesstimates put the figure over 11 and it's still truckin.