100 and counting: Bank failures reach inglorious milestone

Well, it’s official. We’ve hit triple digits for the number of banks that have gone down the tubes in 2009.

The inglorious honor of being the 100th US bank to fail goes to Partners Bank in Naples, Florida. Regulators swooped in to shut down the bank last Friday. That same day six other banks went belly up including American United Bank in Lawrenceville, Georgia and Flagship National Bank in Bradenton, Florida. By the time you read this Partners Bank will be reopened as Stonegate Bank and American United Bank will be just a memory, opening its doors under the new name, Ameris Bank. Flagship National will be open under the First Federal Bank of Florida flag.

With 100 failed banks and counting we already have more than quadruple the amount of bank failures this year than there were in 2008.  However, we are nowhere close to the damage done in the late ’80s/early ’90s. More than 1,900 financial institutions failed from 1987-1991.

Most of 2009′s closures have been smaller, regional banks. While those “too big to fail” banks were saved by federal assistance early on in this economic mess and are now reporting massive profits, their kid brother banks seem to be ”too small to save.” They have been left to flounder until the FDIC decides its time to pull the plug. So far all of the failures have cost the FDIC’s deposit insurance fund some $25 billion this year.

But before you start stuffing cash under your mattress, the head of the FDIC, Sheila Bair, posted the following video message Friday to reassure everybody that everything is going to be all right and to explain how FDIC’s insured deposits system works. Good thing that we’ve got it, because more closures are expected and the system is once again being tested.

A Message from FDIC Chairman Sheila C. Bair

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Photo by David Reber used under a Creative Commons license.