Don’t Be Surprised To See More Bank Failures

Closures have been relatively slow, but FDIC is accelerating shutdowns

By most measures, the past year has been the worst financial crisis in a lifetime. But not by one significant measure: Bank failures.

The Federal Deposit Insurance Corp. has closed 92 banks so far in 2009, after seizing 25 ailing banks last year. By contrast, during the last banking crisis, 381 banks were seized in 1990, 268 in 1991, and 179 in 1992. Still, the pace of bank failures is accelerating. In recent days, three banks failed, including Illinois-based Corus Bank, doomed by $3.2 billion in construction loans, mostly to condominium developers.

The relatively slow pace of bank failures during the crisis is partly the result of government decisions to keep ailing banks open for as long as possible, says Louisiana State University banking professor Joseph Mason.

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