A recent report cites that there could be up to 200 more US bank failures during the current banking crisis. The Federal Deposit Insurance Corp.'s deposit insurance fund is responsible for handling these cases and could be at risk of needing more capital (is anyone really surprised?).
From today's Associated Press:
Among the 81 banks closed so far this year -- compared with 25 last year and three in all of 2007 -- were a stream of smaller institutions, many ruined by losses on ordinary loans amid the souring economy, tumbling home prices and spiking unemployment.
The FDIC expects bank failures will cost the insurance deposit fund around $70 billion through 2013. The fund stood at $13 billion -- its lowest level since 1993 -- at the end of March. It has slipped to 0.27 percent of total insured deposits, below the minimum of 1.15 percent mandated by Congress.
Banks' payments to keep the FDIC afloat could eat up 25 percent of their pretax income in 2010, according to Bove.
The FDIC is fantastic at doing its job with these banks to absorb them and then sell off all their assets. The process is like clockwork and although there are many big zombie banks still being propped up by the government atleast these smaller ones are being handled appropriately.
The FDIC's latest bank seized was Colonial Bank with its $22 billion in assets being sold to BB&T Corp.
Analyst: Up to 200 more banks may fail in crisis
Associated Press, Monday August 24, 2009, 1:27 pm EDT