Bank Failures

So far the FDIC has closed 57 banks this year, including four just this past Friday. At this pace there will close to 100 bank failures this year. If compared to the S&P crisis back in the 1980’s where there were 28 weeks when regulators closed ten or more banks, 100 banks failing this year is almost a non-event. First, because these are relatively small banks, and the proportion of their deposits compared to the bigger banks have less impact. Secondly because of the FDIC guarantees. We don’t see runs on banks anymore. During the 1920s 500 banks failed per year with depositors losing 30% to 40% of their bank deposits. If all depositors went to large failing banks today and removed their deposits the FDIC’s reserve amount would plummet, and I’d be singing a different tone.