Bank failures are on the horizon. According to USA Today, The FDIC is making plans for a rash of bank failures. They plan to raise their staffing levels by 60% to make sure they are prepared when the banks begin to topple. They plan to add 140 workers to their current staff of 220 to bring the total staff to 360 in the division that handles bank failures. Last month they put forth their plan to bring back 25 retirees to help with the new hires. There have been 5 bank failures since February 2007, but in the recession of 1990-1991, 502 banks failed in just a three years.
Gerard Cassidy, managing director of bank equity research at RBC Capital Markets, projects 150 bank failures over the next three years. In an interview for the Baltimore Sun, Billionaire Wilbur Ross said to expect bank failures: “I think there will be a lot of them. Remember the last time we had a big real estate crisis, a thousand depository institutions failed. We really haven’t had that this time. But I believe there are a number of the regional and medium-sized banks that are going to have a very, very difficult time getting through this process.”
Bernanke told Congress, “There will probably be some bank failures.” While no major banks have failed as a result of the current financial crisis, it seems unwise to think that big banks can’t fail. We’ll just have to wait and see. The FDIC says that around 6 banks fail per year, historically. How many banks do they expect to fail if they are adding 140 staff members to handle the potential failures? It sounds like they expect a lot of banks to go under.
Wade Young is a Colorado mortgage broker.
