U.S. Bank Failure Costs Exceed FDIC's Initial Estimate By $2 Billion

CHARLOTTE, North Carolina - U.S. bank failures in 2010 cost the Federal Deposit Insurance Corp $2 billion, or 9 percent, more than initially forecast, according to a new analysis by SNL Financial.

The rise exceeds in the increase seen in 2009, and highlights the higher-than-expected costs related to the failure of three Puerto Rico-based banks.

The FDIC's 2010 loss estimate for bank failures rose to $24.18 billion at year's end, up from initial estimates of $22.17 billion.

The bank regulator increased the loss estimate for 102 out of 157 banks that failed in 2010, according to SNL Financial.

In contrast, the FDIC's estimate for fund losses in 2009 increased by $600 million by year's end.

The largest increase in FDIC's 2010 loss estimates was for Mayaguez, Puerto Rico-based Westernbank Puerto Rico.

The lender was shuttered on August 31, 2010. At the time, the FDIC estimated the closure would create a loss of $3.31 billion for the regulator's deposit insurance fund.

That estimate was raised at year-end by nearly a billion dollars to $4.25 billion, SNL's research showed.

(Reporting by Joe Rauch; Editing by Steve Orlofsky)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[Andy49]

02:12 PM on 05/14/2011

The FDIC does not draw funds from the government, it is funded by the banks themselves. There should be a legal angle to all of this but it will take time and in this nation of the 24 hour new cycle it will be forgotten before the government attorneys have even been assigned to cases. In most cases it will not even make the major news outlets.

[kamact]

10:59 PM on 05/13/2011

John Paulson has agreed to pay the difference

[Peanut Santiago]

10:33 PM on 05/13/2011

It cost a lot more than that.

We may never know the real cost.

I would say in the hundreds of billions of dollars.....(trillions?)

I can't even imagine numbers that high.

But what they are telling us is ridiculous.
Each bank that fails could cost tens and hundreds of millions....

And don't forget Freddie Mac and Fannie Mae and all the rest of it.
AND all that toxic waste (real estate loans) that have NOT blown up YET.

*****And I don't want to hear cranking from the Repugs.
This was a two political party job of destroying the financial stability of the U.S.
One party does NOT get all the credit....er blame!

I lay much of the blame on one word: deregulation.

[Main Street Blues]

08:28 PM on 05/13/2011

Two words to fix the housing crisis...Principal Reduction. Without it...we continue to spiral down down down...no bottom in sight.

[LogicalMathMan]

01:05 PM on 05/13/2011

In other words, between this crisis, the cost of the wars and the 700K loss of NAFTA-related jobs, we would be in good straits.

[Peanut Santiago]

10:37 PM on 05/13/2011

This is a combination of factors....

Everything from deregulation....to tax cuts....to corporate welfare....to politicians who are bought and paid for....to unfunded wars....to social programs passed without considering the cost....to free trade agreements and globalization....to excessive outsourcing.........

However, it is obvious that the flow of money is going upward.
Yes, there IS money around...but the ordinary people are getting less and less of it.
And the ordinary people are getting restless and this will probably bring on social unrest.

[mek0123]

12:48 PM on 05/13/2011

Sounds like it's time to do what their late great President Reagan did during the S & L scandal. He sent the thugs to jail. According to Thom Hartmann, over 1200 folks did jail time. Special Prosecuters were appointed etc. This is what this Administration needs/must/should have been doing all along. Perhaps, because of Citizens United, it will happen after the 2012 elections, if Democrats hold the Executive Branch of Government.

[CPAwADD]

08:05 PM on 05/13/2011

Reagan actually did a credible job, of course his signing of the Garn-St. Germain act was a big part of the problem.

[Betty L Montgomery]

12:08 PM on 05/13/2011

Ahh, The Bail out and its aftermath! But, will it mean the banks left will be better managed?
And, are the rules now in place any assurance that more banks will not fail?

http://www.smartaboutmoney.org/Community/tabid/939/Default.aspx

[Peanut Santiago]

10:40 PM on 05/13/2011

The government bailed them out AND did NOT impose any real change in how they do business.

Simply put, the banks got the money to use as they please and nothing was really asked of them in return.
They were given some suggestions (they didn't do) but no requirements for that money.