US Bank Closures
The current economic crisis has rocked Wall Street, not a day goes by where there doesn't seem to be further news regarding the dismal state of the US banking system.
And while plenty has been reported regarding the $700 billion Troubled Asset Relief Program (TARP), the recipients have largely been massive financial services institutions. This means that while we now all know what state major players like Citgroup and Bank of America are in, its often the case that smaller institutions are left floundering.
In fact, while many critics of the financial crisis suggested TARP came about because banks had simply become too important to fail, the Federal Depost Insurance Corporation (FDIC) has actually closed a total of 89 banks since the beginning of 2009 - all of them smaller, and therefore more vulnerable, to the impacts of the financial crisis.
The latest casualties came on Friday of last week, when regulators shut down banks across Missouri, Illinois, Iowa and Arizona. These included First Bank of Kansas City with $16 million in assets and $15 million in deposits and Iowa-based Vantus Bank with $458 million in assets and $368 million in deposits. Two banks followed in Illinois: InBank and Platinum Community Bank; and the hit list was rounded off with First State Bank in Flagstaff, Arizona, which had $105 million in assets and deposits totaling $95 million.
The reasons for the recent closures were varied, with some banks seeing their assets being acquired by other banks (First Bank of Kansas City's deposits, for instance, will be assumed by Great American Bank based in De Soto, Kansas and its sole branch will re-open next Saturday as a branch of Great American Bank)
While in the case of Platinum Community Bank, the FDIC revealed that another bank could not be found to take over either branches or deposits and instead the FDIC will pay out insured deposits at Platinum Community Bank, while government direct deposits will be handled by a Palatine, Illinois-based branch of MB Financial Bank.
The news for smaller banks gets worse, however, given that, while the irrepressible might of Wall Street's giants is set to continue, hundreds more banks are expected to fail in the next few years because of unsteady loans for commercial real estate. In fact, according to the FDIC's confidential "problem list" of banks, the number of entrants jumped to 416 at the end of June from just 305 in the first quarter of the year, worryingly marking the highest number since 1994, at the height of the savings-and-loan crisis.
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