Government regulators closed four more banks Friday, which makes the total failures in 2010 to 143. It is the most in a single year since the savings-and-loan crisis. There were only three bank failures in 2007, twenty-five in 2008, before 2009 exploded with 140 closings.
The increasing number of failed banks is causing an already bleeding FDIC to go deeper into the red. Last year the deficit for the FDIC stood at $15.2 billion as of June 30, while the FDIC predicts the cost of bank fails from 2010 through 2014 to be around $52 billion. However, the deposit insurance fund may suffer a milder loss in 2010, which has reached about $21 billion so far this year, compared with $36 billion in 2009.
What’s more, the FDIC’s secret list of “problem” banking institutions leaped from 775 in the first quarter to 829 in the second quarter, indicating more failures will occur before the end of 2010. Despite the implosion of small independent banks, the industry reported its best quarter since 2007.
Net income for the banking industry rose to $21.6 billion for the quarter with the “too big to fail” mega-banks accounting for $19.9 billion of that income. In other words, these behemoths represent only 1.3% of the banking industry, yet they now enjoy over 92% of industry profits.
With foreclosure rates soaring, smaller banks are expected to continue to sputter. The FDIC’s increased vulnerability is leading some experts to predict bank holidays in our future. The wave of closings will only put more responsibility for industry failures onto the taxpayer, while the mega-banks continue to consolidate further by gobbling up their discounted assets. And while the recession relentlessly punishes main street, banksters continue to run away with record bonuses.
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