Saturday, March 21, 2009

More Banks Fail

By: Li Bin Chen

Banks in Kansas, Colorado, and Georgia were seized, pushing this year’s tally of failed U.S. lenders to 20. This accounts for the highest unemployment in a quarter century as foreclosures surged amid a recession. FirstCity Bank of Stockbridge, Georgia, was closed on Friday, amid the economic crisis. It was closed by the Georgia Department of Banking and Finance, and the Federal Deposit Insurance Corp. (FDIC) was named receiver of the failed bank.

The FirstCity Bank had $297 million in assets and $278 million in deposits as of March 18 but it still cannot survive the economic downfall. Any direct deposits from the federal government that it currently hold will be transferred to the SunTrust Bank. At the end of 2008, a total of 25 banks collapsed throughout the nation and among all Washington Mutual was the biggest bank to fail in the U.S history and 252 banks were listed by the FDIC as troubled institutions. If any banks fail, the FDIC will provide insurance for $100,000 per depositor. The FDIC will fulfill its obligation to insured depositors by mailing checks for their insured amounts.

The FDIC-insured bans lost $32.1 billion from October through December, the first quarterly loss since 1990. The agency’s deposit insurance fund, used to reimburse customers of closed banks, tumbled 45% to $18.9 billion in the quarter from $34.6 in the preceding period, which reflected the closing of numerous banks. This was the most difficult periods the FDIC had to deal with since it was created 75 years ago. FDIC is considering calculating the levy based on a bank’s assets, rather than domestic deposits, so large lenders will bear more of the cost.

The U.S economy has shed 4.4 million jobs since the recession began in December 2007. Unemployment rate had jumped to 8.1% in February, the highest in more than 25 years.


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