On Friday, three banks failed and the FDIC took them over. Now this isn’t the big news necessarily. What it significant is that one of the banks taken over was Silverton Bank of Atlanta, Georgia. Silverton bank has $4.1 billion in assets and will cost the FDIC $1.3 billion from their dwindling insurance fund. This will be the costliest bank takeover since U.S. Bank took over Downey Savings and Loan in November of 2008 for a cost of $1.4 billion to the FDIC Insurance Fund. So how much is left in the fund? Not much. In fact, if we throw in Citigroup and Bank of America, two banks that have failed without government support and massive intervention, the fund would be broke. But let us set those two banks aside and start running the numbers.
As of December 31, 2008 the FDIC fund had $18.9 billion in it. Already in 2009 we have seen 32 bank failures, above the 25 bank failures for all of 2008. And with commercial real estate and residential real estate still facing record foreclosures, we can expect that more money will be drained from the fund. Now most of the times, you will get bank failures that cost a few million but every once in awhile you’ll get a moderate sized bank like Silverton that will cost the fund $1.3 billion. Let us first take a tally of the 2009 bank failures:
Looking at the list above, you can see that only 2 of 32 bank failures of 2009 actually cost the fund more than $500 million. [more]
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