Clipped From The Daily Herald
Bank closings top 100 BY MARCV GORDON Associated Press , WASHINGTON — The cascade of bank failures this year surpassed 100 ^on Friday, the most in nearly two'decades. And the trouble in the banking system from bad loans and the recession goes even deeper than the number suggests. The bank failures, 106 in all, are the most in any year since 181 collapsed collapsed in 1992, at the end of the savings-and-Ioan savings-and-Ioan crisis. On Friday, regulators regulators took over three small Florida banks — Partners Bank and Hillcrest Hillcrest Bank Florida, both of Naples, and Flagship National Bank in Bradenton — along with American American United Bank of Lawrenceville, Ga., Bank of Elmwood in Racine, Wis., Riverview Community Bank in Otsego, Minn., and Ffrst Dupage Bank in Westmont, 111. Ffrst Dupage Bank, witli total assets of $279 million and deposits of $254 million, will be taken over by Itasca-based First Midwest Bank. Dozens, perhaps hundreds, of other banks remain open even though they are as weak as many that have been shuttered. Regulators Regulators are seizing banks slowly and selectively — partiy to avoid inciting janic and partly because buyers for jad banks are hard to find. Going slow buys time. An economic economic recovery could save some banks that would otherwise go under. But if the recovery is slow and smaller banks' finances get even worse, it could wind up costing costing even more. When a bank fails, the Federal Deposit Insurance Corp. swoops in, usually on a Friday afternoon. It tries to sell off the bank's assets to buyers and cover its liabilities, primarily primarily customer deposits. It taps the insurance fund to cover the rest. Bank failures have cost the FDIC's fund that insures deposits an estimated $25 billion this year and are expected to cost $100 billion billion through 2013. To replenish tiie fund, the agency wants banks to pay in advance $45 billion in premiums that would have been due over the next tiiree yeai-s. The FDIC won't say how deep a hole its deposit insurance fund is in. It can tap a credit line from the Treasury of up to a half-ti-Ulion dollars dollars to cover the gap. The list of banks in trouble is getting getting longer. At the end of June, the FDIC had flagged 416 as being at risk of failure, up from 305 at the end of March and 252 at the beginning beginning of the year. Yet the pace of actual bank failures failures appears to be slowing. The FDIC seized 24 banks in July, 11 in September and 11 in October. If any bank poses an immediate danger to customers or the broader financial system, regulators close it immediately, bank supervisors said. The issue is murkier for ti^oubled banks that might qualify to close but whose closings might still be postponed postponed or even prevented. Tlie FDIC's first priority, spokesman spokesman Andiew Gray said, is to maintain maintain public confidence in tire banking banking system. "As evidenced by the stability of insured deposits throughout last year, this mission has been a success," he said. He said public confidence isn't reason enough to delay a bank closing, closing, because legally tiie decision to close rests witii whoever chai'- tered the bank — a state or federal agency. But more than a dozen experts, including current and former regulators, regulators, bankers and lawyers, say tlie FDIC's mission to maintain public public confidence in tiie banking system system contiibutes to the go-slow approach. "The FDIC was set up to create create confidence and prevent bank runs," says Maik Williams, a former former bank examiner for the Federal Resei^ve. Being too aggressive about bank closings "can be counter to tiie mission." Sarah Bloom Raskin, Maiyland's top banking regulator, said: "Technically "Technically it's the states who decide, but in reality it's tiie FDIC calling you to say" when the bank will be closed. Last fall, the financial turmoil was rooted in bad bets tiiat the nation's biggest banks, like Citigioup Inc. and Bank of America Corp., had made on complicated, high-risk mortgage investments. Smaller banks have been undone by sometiiing more conventional — real estate, constiuction and indus- ti-ial loans tiiat have soured as the recession has deepened. Defaults are up as developers developers abandon failing projects and landlords can't meet tiieir loan payments.