AmTrust: not your normal bank failure as 2009 total hits 130

AmTrust BankSix more banks failed based on FDIC data on December 4, including Greater Atlantic Bank, Reston, Va., Benchmark Bank, Aurora, Ill., AmTrust Bank, Cleveland, The Tattnall Bank, Reidsville, Ga., First Security National Bank, Norcross, Ga., and The Buckhead Community Bank, Atlanta, Ga. The latest collapses bring the bank failure tally to 130 for the year.

One of these, AmTrust, was no normal bank failure. The bank, which had a total of 66 branches, was closed by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation as receiver. According toThe Wall Street Journal, "AmTrust is the fourth-largest U.S. bank or savings institution to fail so far this year." Its branches will be taken over by New York Community Bank.

Shuttering the firm is expected to cost the FDIC about $2.0 billion. The FDIC and NYCB entered into a loss-share transaction on approximately $6.0 billion of AmTrust Bank's assets, but it will likely not be enough to save the taxpayers a huge sum of money.

And the failure raises once again the issue of the adequacy of the size of FDIC funds. In early October, the agency ordered its bank members to prepay $45 billion in fees which covers the banks' premium obligations for three year. But, the FDIC has said the total cost of bank failures could hit $100 billion by the end of 2013. That begs the question of whether the FDIC will have to "tax" banks again to make up for another shortfall.

The FDIC has one other place it can turn for the capital--The Treasury Department which means indirectly the U.S. taxpayer. The credit crisis has already cost taxpayers a huge sum on bank bailouts and the jobs of millions of people. And, the FDIC says the misery may not be over for another four years.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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