Huge Bank Failure
A followup to a post from yesterday. As predicted by Bloomberg, Colonial BancGroup has failed, the largest bank failure in 2009. The FDIC seized that bank plus four others late Friday, bringing the 2009 total to 77 – more than triple the 2008 total of 25. And it is only August.
Troubled Colonial BancGroup will be bought by rival BB&T Friday, the government said after state regulators closed the bank whose assets had been frozen by a federal judge.
The Montgomery, Ala., bank, which has 346 branches spread across Florida, Alabama, Georgia, Nevada, and Texas, is the sixth largest bank failure in U.S. history and by far the largest failure of 2009.
With $25 billion in assets and $20 billion in deposits, Colonial is 100 times larger than the typical bank to have failed this year.
The FDIC fund to cover bank failures had only $13 billion as of the end of March. How does this affect you? As the article points out, mortgage rates are very likely to climb as competition is eliminated. The FDIC will also be demanding special funding from member banks next month, sucking all that money out of the pool of cash normally available for loans to consumers.
In other words, these failures matter to you even if you did not do business with the failed bank.
As I said yesterday, we have not seen the bottom of this crisis yet – not even close.
By feeblemind, August 15, 2009 @ 8:26 am
I read that this failure will likely wipe out FDIC’s reserves and two more large banks are teetering on the brink. Re FDIC touching banks for more money. The small town bank I do business with was “touched” for 70 grand late last year. That means borrowers like me are chrged higher interest to pay off that 70 grand.