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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.
Going forward, commercial real estate loans are expected to be the problem, as they take longer to unravel. Smaller banks have a disproportionately large exposure to this piece of the real estate market because it was an easier space for them to compete against larger commercial banks during the boom.
According to the FDIC, regulators closed three banks in Georgia on Friday, along with a bank each in Virginia, Illinois and Ohio. This year, 24 banks have failed in Georgia alone. The latest to fall, however, was in Cleveland. AmTrust had assets of $12 billion and deposits of $8 billion. The New York Community Bank of Westbury, N.Y., has assumed AmTrust's deposits. The other five banks had assets of less than $1 billion.
These six failures could cost the FDIC's insurance fund $2.3 billion or more. Through 2013, the aggregate impact of bank failures on this fund could reach $100 billion (from a start in 2009). Because of this, the FDIC has required that banks prepay three years of industry assessments, which is good for around $45 billion.
Only three months ago, the tally had yet to reach 90 closures, said Richard Booth, vice chairman of Guy Carpenter, in a September podcast. In 2008, only 25 banks failed, with only three doing so in 2007. The last time the banking sector suffered this severely was in 1992.
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Reader Comments (Page 1 of 1)
12-06-2009 @ 1:24PM
NotKiddin said...
We should construct a "Wall of Shame" to display the names of the pig-headed criminals who have robbed our country, our natural descendants, of sovereignty and a future. We should display the names of greedy Americans who hid excessive wealth gleaned from our government and hidden in foreign banks -- while they were robbing ours to have it. The were hiding from the IRS, willing to be criminal to have money hidden from the government. They should be banned from politics and culture. If they held public office they should be executed as the spies who destroyed the U.S. government. Benedict Arnold committed a minor offense compared to a group of Americans and what they did to themselves. I predict that most of these people die as paupers enslaved to China in not yet constructed military prisons, internment camps for fraud, embezzlement, and tax evasion,where the human rights laws built and enforced under the U.S. will be a casualty of their crimes. I predict they are poisoned every third meal, in their rich dining halls while the rest of us get a few grains of rice.
Now, what were your values worth, guys??????????????