Regulators like to raid and close banks on Friday afternoons, so today, they closed down Atlanta-based Georgian Bank, making it the 95th bank closure this year.
The failure of this bank will cost the FDIC $892 million, which is quite a lot since the agency’s deposit insurance fund was down to 10.4 billion as of June 30th. Since then, 50 more banks have been closed. It won’t take many more failures like Georgian for the FDIC to end up completely out of money. Of course, they can tap the Treasury’s line of credit to make up for the shortfall, which sounds dangerously close to being something like a bailout.
When it was closed two weeks ago, Corus Bank of Chicago cost the FDIC $1.7 billion. Corus had assets of $7 billion.
Back when it was closed in April, New Frontier Bank of Greeley, Colorado was noted as the largest failure of the year, with assets of $2 billion. It cost the FDIC $670 million. New Frontier has since been left in the dust by the parade of recent closings like Corus and the Irwin Union banks that were closed last week and cost the FDIC $850 million.
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If the FDIC starts tapping in to the excess money printed by the Fed should we expect the start of hyperinflation. I read in a few places that it is banks holding their bailout had staved it off so far won’t this get the ball rolling in a very bad way?
@Euthyphro: It will take a whole lot more than a few billion to start hyperinflation. These bank bailouts, costly as they are, are still just a budgetary drop in the bucket. What we really need to be concerned about are multi-trillion-dollar deficits, and gov’t expenditures which will also run in the many trillions of dollars (universal healthcare, war spending, Medicare/Medicaid, Social Security, payments on the national debt, etc.).
I don’t think we have to worry about hyperinflation, or even severe normal inflation, in the immediate future. A few years, or a decade down the road, though….
It is my understanding that the FDIC does not have enough staff to close down all the banks that are currently insolvent. The hope is that as the economy improves, (“the recession is over”!), some of these banks will move back into solvency and will not need to be closed down. (This was the case in the 1990′s when the RTC took over failed Saving and Loans.) IMHO, this is wishful thinking. Commercial real estate is in trouble and this will hurt small local banks. Also as more people become unemployed, credit card defaults will continue to increase. The actual defaults depend on the actual number of people who are unemployed or marginally employed –not the government statistics that magically assume that everyone whose unemployment benefits have expired have gone back to work
Just a slight correction…..ALL banks close on Friday, it’s just that some don’t open on Monday.
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