Despite the favorable stress test results generated by the Treasury Department, banks are containing to fail. This latest request for more FDIC funds is not reassuring.
August 21, 2009
Faced with a growing wave of bank failures, the Federal Deposit Insurance Corporation is taking extraordinary steps to attract buyers for troubled institutions to keep the fund that makes depositors whole from being drained.
For the F.D.I.C., led by Sheila C. Bair, it is critically important to keep the insurance fund full because confidence in the banking system depends in part on depositors knowing they will get their money back. But the fund, which is also used to cover losses at insolvent banks, has fallen to just $13 billion at the end of March, the latest month for which figures are available, down from $52.8 billon a year ago, as the number of bank failures accelerates.
So far this year, 77 lenders have been closed, compared with 25 in 2008. Of those, the F.D.I.C. has found buyers for 69. Analysts are bracing for dozens of additional failures, especially among small and medium-size banks that have made huge numbers of real estate loans that are not being paid back.
...the F.D.I.C. has struck so-called loss-sharing agreements in nearly two-thirds of the banks it has sold this year, which typically call for the government to bear the bulk of the losses of a pool of risky loans.
Pressured by Bank Failures, F.D.I.C. Wants to Bolster Fund