Friday, May 22, 2009

FDIC Bank Failures: By the Numbers

by Bill McBride on 5/22/2009 10:40:00 PM

Three banks were closed by the FDIC this week, for a total of 36 banks so far in 2009. The largest was BankUnited in Florida with $12.8 billion in assets.

To put those failures into perspective, here are three graphs: the first shows the number of bank failures by year since the FDIC was founded, and the second graph includes bank failures during the Depression. The third graph shows the size of the assets and deposits (in current dollars).

FDIC Bank Failures Click on graph for larger image in new window.

Back in the '80s, there was some minor multiple counting ... as an example, when First City of Texas failed on Oct 30, 1992 there were 18 different banks closed by the FDIC. This multiple counting was minor, and there were far more bank failures in the late '80s and early '90s than this year.

Note: there are approximately 8,300 FDIC insured banks currently.

pre-FDIC Bank Failures The second graph includes the 1920s and shows that failures during the S&L crisis were far less than during the '20s and early '30s (before the FDIC was enacted).

Note how small the S&L crisis appears on this graph! The number of bank failures soared to 4000 (estimated) in 1933.

During the Roaring '20s, 500 bank failures per year was common - even with a booming economy - with depositors typically losing 30% to 40% of their bank deposits in the failed institutions. No wonder even the rumor of a problem caused a run on the bank!

FDIC Bank Losses The third graph shows the bank failures by total assets and deposits per year in current dollars adjusted with CPI. This data is from the FDIC (1) and starts in 1934.

WaMu accounted for a vast majority of the assets and deposits of failed banks in 2008, and it is important to remember that WaMu was closed by the FDIC, and sold to JPMorgan Chase Bank, at no cost to the Deposit Insurance Fund (DIF).

There are many more bank failures to come over the next couple of years, mostly because of losses related to Construction & Development (C&D) and Commercial Real Estate (CRE) loans, but so far, especially excluding WaMu, the total assets and deposits of failed FDIC insured banks is much smaller than in the '80s and early '90s.

Of course this is FDIC insured bank failures only. An investment bank like Lehman isn't included. Nor is the support for AIG, Citigroup and all the other "too big to fail" institutions ...

(1) The FDIC assets and deposit data is here. Click on Failures & Assistance Transactions.