Insurance News

Bank failures since 2000

Posted on: July 14, 2009

In the past few years discussion of failed banks has become a very popular topic and concern both in regional areas and on Capitol Hill. It?s also turned the Federal Deposit Insurance Company (FDIC) and its Chairman Shelia Bair into household names.

The FDIC was established on June 16, 1933 as part of the 1933 Banking Act and began January 1, 1934 as a response to thousands of banks failing in the 1920?s and in the early 1930?s. All of the funding for the FDIC is derived from premium payments made by bank and thrift institutions. In 1948 the FDIC fully repaid to the government start up funding to initiate the FDIC.

The mission of the FDIC is to 1) insure deposits, 2) examine and supervise banks and thrifts and 3) manage receiverships of failed banks. According to the FDIC, ?Since the start of FDIC insurance on January 1, 1934, no depositor has lost a single cent of insured funds as a result of a failure?. The FDIC insures every bank and thrift in the country. For banks that are state chartered and do not join the Federal Reserve System, the FDIC is the primary federal regulator. The FDIC is the secondary regulator for the remaining banks and thrift institutions. The FDIC is run by a five member board appointed by the President and confirmed by Senate. No more than three board members can be of the same political party.

Even in today’s high rate of bank failures, 1989 experienced 206 failures of banking and thrift institutions, the largest yearly failures in the FDIC?s history. June 2004 to February 2007 is the longest period in the FDIC history without any failures. 2009 will probably go down in the history books as one of the largest years of failed banks since 1934.

After analyzing FDIC data of bank failures from October 1, 2000 to July 10, 2009 below is a summary of the data.

During this period 106 banks failed in 32 states.

Top 5 states with bank failures: IL = 16, GA = 16, CA = 12, FL = 8, NV = 5.

These five states equate to 54% of the bank failures during this time period. 75% of the failures occurred in 2008 & 2009.

From October 1, 2000 to July 10, 2009, IL had 81% of their failures in 2008 & 2009. GA had 88% of their failures in 2008 & 2009. CA had 92% of their failures in 2008 and 2009. FL had 63% of their failures in 2008 and 2009. NV had 100% of their failures in 2008 and 2009.

Number of bank failures by year:
2000: 2 (from 10/1/00)
2001: 4
2002: 11
2003: 3
2004: 4
2005 & 2006 = 0
2007: 3
2009: 53 (to 7/10/09)

During this time period CT had one bank failure in 2002, NY had one bank failure in 2004 and NJ had one bank failure in 2004 and one bank failure in 2009.

2009 All rights reserved.

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