Failing Banks Could Cost FDIC Over $40 Billion

by Chris Sturr | February 08, 2009

Nine banks have failed so far in 2009, including three that went down on Friday. Twenty-five went under in 2008, equal to the entire number that failed in the previous seven years. The FDIC currently predicts that bank failures through the next four years may cost the deposit insurance fund more than $40 billion. The FDIC has classified 171 banks as “problem.”

From Bloomberg:

Three banks, two in California and one in Georgia, were seized by regulators, bringing this year’s tally of closings to nine as a recession and record foreclosures extend the biggest financial crisis in more than 70 years.

County Bank of Merced, California, with deposits of $1.3 billion and assets of $1.7 billion, was shut yesterday by the state’s Department of Financial Institutions, according to an e-mailed statement from the Federal Deposit Insurance Corp. Westamerica Bancorporation, holding company for Westamerica Bank, acquired all the assets and deposits.

The Georgia Department of Banking and Finance closed McDonough-based FirstBank Financial Services Inc., which had $337 million in assets and $279 million in deposits as of Dec. 31, the FDIC said in a statement. The California Department of Financial Institutions shut Culver City-based Alliance Bank, with assets of $1.14 billion and $951 million in deposits.

The FDIC was named receiver of the institutions, which will resume business as branches of the acquiring banks. Regulators seized six banks in January, the largest monthly toll since 1993, including Salt Lake City-based MagnetBank, which the FDIC closed Jan. 30 after being unable to find a buyer. The FDIC shuttered 25 banks last year, matching the total for 2001 through 2007.

The FDIC, other U.S. bank regulators and Congress are taking steps to help banks avoid losses as the administration of President Barack Obama readies a stimulus package that may include guarantees for toxic assets, according to people familiar with the plan.

Insurance Legislation

Legislation that would more than double deposit insurance coverage and offer safeguards for banks is being considered by Congress. The House Financial Services Committee unanimously approved a measure that would raise coverage to $250,000 per depositor per bank, from $100,000.

Congress also may extend the FDIC’s line of credit with the Treasury to $100 billion from $30 billion to replenish the deposit fund. The FDIC said bank failures through 2013 may cost the fund more than the $40 billion estimated in October.

Rest of story here.

Leave a comment

Leave a Reply

%d bloggers like this: