FDIC Spokesman Disputes Sen. Bunning's Claims
According to Sen. Jim Bunning (R-Ky.), FDIC Chairman Sheila Bair confided to him in a recent meeting that "unless something dramatic happens, we could lose up to 500 more banks."
The comments were reportedly made during a hearing of the Senate Banking Committee on the foreclosure crisis.
These comments haven't really been picked up on by the media. According to Google News, only a handful of media outlets published a story regarding Bair's comments. I picked up the story here, on Bloomberg.com.
According to Andrew Gray, a spokesman for the FDIC, Bair "did not say that", and that the FDIC regretted any miscommunication.
Did Bair really utter those comments, and the FDIC is now trying its very best to pretend that she didn't?
Or was Bunning simply mistaken?
Many people are becoming increasingly alarmed about the pace at which banks are failing in the United States.
As of this past Friday, 57 banks had failed in the US in 2009. 25 banks failed in 2008, while just three banks failed in 2007.
Prior to that, only seven banks failed in the United States from 2003-2006.
Given that people are getting pretty anxious over 57 banks failing in just 6 1/2 months, it stands to reason that they would be in a near panic over reports of 500 more failures.
Again - maybe Bair didn't actually say these words, but at least one senator claims that she did.
Since the introduction of the FDIC in the '30s, the worst year on record for bank failures in the United States was 1989.
In '89, 534 banking institutions failed in the United States, up from 470 the year before.
1989 was also the year that the Resolution Trust Corporation was formed. The RTC was created to deal with the lingering S&L crisis in the United States. You can read more about the RTC here.
Prior to the formation of the FDIC, the single worst year for bank failures in the United States was 1930.
Approximately 1350 banks failed this year due to the onset of the "Great Depression".
In total, over 9,000 banks failed during the course of the "Great Depression".
Now, there is obviously a very good chance that we will have over 100 bank failures in the United States in 2009. The pace of closures seems to be accelerating, and there are no signs that the trend is about to reverse.
Now, what happens if the economy doesn't put in a strong recovery? What happens if we have a double-dip recession, as some are predicting? How many more bank failures would we see under those circumstances? With the "problem bank list" continuing to swell, it's clear that there could be many more bank failures on the way.
These are interesting times..
Filed under: The Economic Meltdown