TNinety-eight US banks have failed this year
THREE more US banks have collapsed, pushing the total number of banking failures in the country so far this year to 98.
An average of ten US banks have failed in every month of this year – the highest tally since 1992, when 181 banks went under.
And the figure is nearly four times as high as 2008, when 25 banks collapsed, providing fresh evidence that the American economy is continuing to suffer.
The three latest banking failures – Warren Bank, Jennings State Bank and Southern Colorado National Bank – are expected to cost the Federal Deposit Insurance Corporation around $293m (£183m).
The FDIC insures customer accounts up to $250,000, but the hefty costs of providing compensation for customers at 98 failed banks has meant that its insurance fund has sunk to just $10.1bn from $45bn a year ago.
FDIC chair Sheila Bair yesterday said that she wanted to end the “too big to fail” doctrine and shrink the shadow banking system that operates outside the reach of regulators.
“We need to end ‘too big to fail’ and this needs to be an overarching policy that applies to everyone,” Bair said.
“In a properly functioning economy, there will be winners and losers,” she added, calling for an end to government bailouts. “When firms are no longer viable they should fail.”
Bair added that a proposal to create a body with authority to shut down failing systemically important financial firms may need to be extended to insurers and hedge funds.
According to FDIC, the number of troubled banks which are at risk of failing totalled 416 in the second quarter of 2009 as rising unemployment saw a jump in the number of customers defaulting.