Money Facts Archive Get the real facts that will shape your future by having them delivered to your Inbox!

By Carrie Bay at DSNews.com on December 7, 2009:

"Regulators Close Amtrust Bank and Five Others, Pushing Failed Tally to 130"

http://www.dsnews.com/articles/regulators-close-amtrust-bank-and-five-others-pushing-failed-tally-to-130-2009-12-07

"...Cleveland, Ohio's Amtrust Bank was seized by regulators Friday, making it the fourth largest institution to go under in 2009. Five smaller institutions - three in Georgia and one each in Illinois and Virginia - were also shuttered over the weekend. These latest six closings bring the total number of failed banks for the year to 130, and are expected to cost the FDIC's already-depleted insurance fund a combined $2.4 billion. As DSNews.com previously reported, the agency's reserve used to protect consumers' deposits has slipped into the red - $8.2 billion in the hole at the end of the third quarter..."

Mathias Rieker of the Wall Street Journal had this to say in his article, "Buyers Take a Pass on Some Failed Banks" on November 30, 2009:

"...People's United Financial Inc. wanted to buy failed banks on the cheap. Instead, it struck a deal to buy a healthy equipment-leasing company. Last Monday's change of plans by the Bridgeport, Conn., bank-holding company underscores a problem with the growing pile of terminally ill U.S. banks being wrestled with by the Federal Deposit Insurance Corp. Some are in such bad shape that potential buyers won't touch them at any price, even if the government agrees to eat losses on the failed bank's bad loans. In addition to their depleted capital, many seized banks operate in areas with sluggish growth prospects, are puny and are loaded with expensive deposits gathered through brokers that are likely to leave when the acquiring bank reins in interest rates, some bankers complain..."

So....let's get this straight: The FDIC doesn't have any money left to protect consumers' deposits because their reserve fund was $8.2 billion in the hole at the end of the third quarter" - and some of the failed banks "are in such bad shape that potential buyers won't touch them at any price, even if the government agrees to eat losses on the failed bank's bad loans."

This doesn't sound to me like the prelude for the "recovery" being bantered around in Washington. It sounds more like a warning that things could get worse.

Much worse.

- Ed Smith, Publisher
The EHS Letter Manual