US Banks are in ICU

The US economy may be entering into a good zone, but their banks are still in intensive care. Banking in the US is about to get a whole lot more expensive for consumers as the government pick and choose who gets to live and who is allowed to fail? The number of “problems” banks has swelled to 416, up from 305 at the end of March, helping drain the country’s deposit insurance fund to its lowest level in 16 years, according to a quarterly status report yesterday from the US Federal Deposit Insurance Corp. (FDIC).

Now the question which will rise from the people “is their savings will remain safe?”The grim tally prompted FDIC chairwoman Sheila Bair to reassure Americans that their savings remain safe. “No matter how challenging the environment, the FDIC has ample resources to continue protecting depositors as we have for the last 75 years.” Ms. Bair said firmly. “No insured depositor has ever lost a penny of insured deposits, and no one ever will.” She acknowledged that the slow painful process of cleaning up bad banks, which has sapped the FDIC’s resources, could drag on for more than a year after the economy recovers.

Banking crisis is impacting badly and draining the FDIC’s resources as banks fail at a faster rate than it can readily handle. The insurance fund, which protects deposits of up to $250,000 (US) at roughly 8,200 US banks and savings institutions, has dwindled to just $10.4-billion. That’s down from more than $45-billion a year ago, as the FDIC has been forced to set aside funds to handle looming failures. So far, 81 banks have closed their doors this year, including 45 since the end of March. So, these are some very big challenges for the government to resolve and drive their country successfully!

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