FDIC Shuts Seven More Banks at a Cost of Over $7 Billion
According to the FDIC website, the banks were Frontier Bank (Everett, Wash.), National Banks (Butler, Mo.), Champion Bank, (Creve Coeur, Mo.), CF Bancorp (Port Huron, Mich.), Westernbank Puerto Rico (Mayaquez, Puerto Rico), R-G Premier Bank of Puerto Rico (Hato Rey, Puerto Rico), and Eurobank (San Juan, Puerto Rico).
Frontier Bank's shuttering will be particularly expensive, costing the insurance fund that protects bank depositors $1.37 billion.
FDIC's Shaky Finances
The health of the FDIC's funds depend on the pace of bank closures, which will certainly top 200 this year. If the agency runs out of money, it has nowhere to turn to but the U.S. Treasury -- another way of saying taxpayers will be on the hook. Last November, the agency brought in $45 billion by having the banks under its umbrella pay their fees through 2012. At that time, the FDIC said it was about to run out of money -- the $50 billion it had before the crisis began was gone.
The bank closures are a repercussion of the wave of losses that hit large banks, which were aided by the Troubled Asset Relief Program fund. Most of the banks being closed now are medium-size or small banks that have exposure to commercial and residential mortgages. Many of the properties they made loans for are going into default, and this damaging process is expected to continue.
The $45 billion seemed like a lot when the FDIC raised it. It doesn't seem very much now.