Ten US banks bite the dust every month; 81 failures in '09

NEW YORK: Four more American banks went belly up last week, pushing the total failures to a staggering 81 entities so far this year, even as the country's economy is showing early signs of recovery.

In one of the biggest collapses this year, Guaranty Bank, which had assets worth USD 13 billion, was shut down by the regulators on August 21.

Reflecting the continuing financial turmoil, the count of failures so far in 2009 is more than three times that of just 25 bank collapses in 2008.

On an average, the total failures this year translates to 10 bank collapses every month.

Other entities that went out of business were eBank, First Coweta Bank and CapitalSouth Bank, according to the Federal Deposit Insurance Corporation (FDIC), which is often appointed as the caretaker of failed entities.

The collapse of the four banks would cost FDIC as much as USD 3.26 billion, with the shutting down of Guaranty Bank alone accounting for USD three billion.

On August 14, the authorities shut down Colonial Bank, the largest bank failure in 2009. The entity had assets worth USD 25 billion as on June 30.

So far this month, 12 banks went belly up and the numbers are expected to climb as higher unemployment could result in increased defaults.

Guaranty Bank had assets to the tune of USD 13 billion and total deposits worth USD 12 billion as on June 30, 2009. BBVA Compass would buy USD 12-billion assets of the entity, while the rest would be retained by the FDIC for later disposition.

A whopping 24 entities went out of business in July, the highest for any month in 2009.

Seven banks went out of business on July 2 and July 24. The authorities closed down nine banks in June and seven in May.

US Federal Reserve Chairman Ben S Bernanke last Friday said that after contracting sharply over the past year, economic activity appears to be leveling out, both in the US and abroad. He also noted that the prospects for a return to growth path in the near term appear good.

Moreover, the US economy shrank less than expected at one per cent in the second quarter of 2009.

Among the banks which have been shut down this year include Dwelling House Savings and Loan Association; Community Bank of Arizona; Union Bank, National Association; Waterford Village Bank and First State of Altus.