While the markets keep chugging along, bank failures continue to accelerate (all FDIC recorded bank failures listed here). Two banks in California (County Bank of Merced, and Alliance Bank) and one in Georgia (FirstBank Financial Services) were shut down by the FDIC this week, bringing 2009's total to nine. Indicatively, in 2008, it took until August to hit 9 failed banks. The three banks had $2.5 billion in assets and $2.9 billion in deposits. The three failed banks will see their deposits assumed by Westamerica Bank, California Bank and Trust of San Diego, and Regions Financial Bank, and acquire assets at a substantial discount.
“We do expect there to be more stress on banks, which could result in an increase in commercial bank failures,” said Comptroller of the Currency John Dugan in a Feb. 2 interview. A deepening recession that adds stress may lead to “significantly more losses,” said Dugan, regulator of national banks.
The FDIC is expecting an unprecedented rise in bank failures this year, recently requesting a tripling in its borrowing power to $100 billion which may or may not be sufficient to guarantee deposits. Additionally, as we reported, the FDIC has hired Joe Perella to advise on "stabilization" strategies, and we still believe it is the taxpayers' utmost privilege to understand just how Perella Weinberg is compensated as the company proceeds to recommend ongoing bank closures.