Georgian Bank in Atlanta Georgia was the 95th institution to fall prey to bad loans and real estate woes and more failures are predicted in the months and years to come. What could be worse? Analysts believe that failures could result in an insufferable depletion of the FDIC's insurance fund for deposits, which has already reached its lowest point in nearly 20 years.
The FDIC is fully backed by the government; however, there is only so much money in the fund for deposits. In June, the FDIC's fund fell to $10.4 billion, which is extremely low, yet, it is expected to need to spend an additional $70 billion to support bank failures by 2013.
The FDIC's takeover of Georgian Bank alone is expected to cost $892 million as it has to cover each depositor's account for up to $250,000. Currently, there is $21.6 billion in cash, along with the insurance fund, which means the money to support banks is still insufficient as it tries to manage the multitude of banks closing their doors.
To try to keep up, the FDIC is considering a number of options, including borrowing from healthy banks, tapping its $500 billion credit line with the Treasury Dept., or imposing a special fee on the banking industry. In the meantime, the Treasury Dept and federal bank regulators are looking at new banks to see which ones might qualify for bailout funds that didn't in the original group receiving $700 billion. To date, there are a whopping 416 banks on the list.
Bernanke recently noted that the recession is "technically" over, but it certainly doesn't show in the seemingly continued weakening of the economy.
Have you been affected by any of the 95 bank closures? What was your experience?