Four Banks Seized by Feds This Week; 2009 Failures Already Outstrip 2008
Friday’s Failures to tap FDIC fund for nearly $700 million
Federal Deposit Insurance Corp. regulators seized four more banks Friday night bringing the total number of 2009 bank failures to 28.
In all of 2008, during the first year of the recession, 25 U.S. banks failed.
Joining the FDIC’s Failed Banks List on Friday night were:
- First Bank of Idaho, Ketchum, ID
- First Bank of Beverly Hills, Calabasas, CA
- Heritage Bank, Farmington Hills, MI
- American Southern Bank, Kennesaw, GA
The First Bank of Idaho will be acquired by U.S. Bank. The cost to the FDIC’s Deposit Insurance Fund will be $191.2 million. All First Bank branches will reopen by Monday as U.S. Bank branches.
The First Bank of Beverly Hills will not be acquired. The FDIC will mail checks covering insured deposits to bank customers. First Bank of Beverly Hills will cost the Deposit Insurance Fund $394 million.
Heritage Bank branches will reopen on Monday as branches of Level One Bank. FDIC cost for Heritage’s failure is estimated at $71.3 million.
American Southern Bank will be acquired by Bank of North Georgia. The FDIC says American Southern’s failure will cost the Deposit Insurance Fund $41.9 million.
According to the FDIC’s website, its total funding for “receivership management” (i.e. bailing out banks) is $1 billion for 2009. This article says $656.4 million of that (about 65% of the budgeted funds) was spent just now, on 4 banks. That means 24 others have failed so far this year (no data on how much each of those cost the FDIC), it’s only April and the outlook for banks isn’t getting better. I have three questions:
#1: Will the FDIC have funds to insure retail deposits (bank accounts for you and me) if a bank goes under and a buyer for the bank cannot be found?
#2: Is the FDIC still solvent?
#3: If not, who bails out the FDIC?
Paul – Quick reply off the top of my head, you can fact check by looking in the newsroom area of the FDIC, but here’s what I understand. The FDIC’s Deposit Insurance Fund is in fact in trouble. The FDIC administrator, earlier this year, announced that the premiums banks pay to the Deposit Insurance Fund would increase in 2009 because of the heavier than normal drawdowns on the fund. Since the fund is financed through FDIC member institution payments, I don’t believe the FDIC will need to be bailed out – unless there are a tremendous number of bank seizures. The FDIC is solvent and I personally would not worry a bit about a dime I have on deposit in an FDIC-insured bank.