The US banking sector looks gloomy in 2009 too, as the year has begun with the closure of two banks, taking the toll to 17 since September last year
The US banking sector looks gloomy in 2009 too, as the year has begun with the closure of two banks, taking the toll to 17 since September last year.
The latest entities to collapse are National Bank of Commerce in Berkeley and Bank of Clark County, Vancouver. In 2008, the world's largest economy saw the failure of 25 banks, with an average of two entities going under each month.
The Federal Deposit Insurance Corporation, an independent agency which is often appointed as receiver of failed banks, on Friday, said it has closed National Bank of Commerce and Bank of Clark County.
Interestingly, FDIC data shows that in the past eight years, only 52 banks went belly up. And over half of such failures happened in the ongoing financial turmoil, which turned acute with the collapse of Lehman Brothers in September last year.
Among the 17 banks which failed since September, the most prominent one was that of Washington Mutual better known as WaMu, US's largest savings and loan entity. It was later acquired by JPMorgan for nearly two billion dollars.
The ones that failed have been mostly small and regional banks, primarily due to the falling housing market.
Despite the Federal government pumping in billions of dollars, the nation's financial system continues to be fragile, as revealed in the latest 138-billion dollar lifeline given to Bank of America.
President-elect Barack Obama, who will assume office on Tuesday, is widely expected to come up with a new stimulus package worth more than 800-billion dollars.
Prior to 2008, the largest number of bank failures took place in 2002, when 11 entities went belly up.
On the other hand, the US economy officially entered into recession in December 2007.
Moreover, official statistics reveal that the number of banks in America have steadily been declining since 1990. FDIC data show that the number of commercial banks in America has come down by over 5,000 in the past 18 years.
Recent collapses include First Georgia Community Bank, Sanderson State Bank, Haven Trust Bank, PFF Bank and Trust, Downey Savings and Loan, The Community Bank, Franklin Bank SSB and Security Pacific Bank.
In yet another reflection of the deteriorating financial situation, banking behemoth Citigroup has decided to split itself into two separate businesses.
The company posted a whopping 8.29 billion-dollar loss for the fourth quarter mainly hit by escalating credit costs and massive writedowns.
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