FDIC: One in Four Banks in the Red

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The Federal Deposit Insurance Corporation announced today that the Deposit Insurance Fund has dipped to a low of $10.4 billion at the end of June — that’s a decrease of 77 percent from a year ago when the fund, which covers deposits in a bank failure, had $45.2 billion.

The FDIC report also found that one in four financial institutions are currently unprofitable.

Subsidyscope.com, a joint project between the Sunlight Foundation and the Pew Charitable Trusts, has been keeping track of failed banks as as well as its effect on the deposit insurance fund.

difSource: FDIC Quarterly Banking Profile

The fund is dangerously close to being depleted — it’s reserve ratio, a measurement of the fund against insured deposits, was .22 percent at the end of June. By law, the fund is supposed to remain within 1.15 percent and 1.5 percent of all insured deposits. If the ratio falls below the lower limit, the FDIC must raise assessment rates on covered financial institutions.

In May, Congress approved an increase in a line of credit at the Department of Treasury to the FDIC, should the fund be depleted. The line of credit was increased to $100 billion with temporary borrowing authority of $500 billion. FDIC Chairman Sheila Bair said today that they do not expect to tap that line of credit “at this point in time.”

The only time that the fund was depleted was during the savings and loan crisis in the 1980s, when the FDIC borrowed $15 billion from the Treasury Department.

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  • Hal

    I saw this on CNBC: 1,000 Banks to Fail In Next Two Years: Bank CEO http://www.cnbc.com/id/32581463

    This is indeed some scary info, Micah. This does not bode well when combined with the rising unemployment rate and amount of personal debt that people are underwater with.

    And looking at the precious metal markets with the spot price widget http://www.learcapital.com/exactprice this morning it looks like investors are hedging in gold and silver right now as a means to protect their wealth.

    We’ll see what next week’s numbers report but I am starting to be of the opinion that we have not seen the worst yet.

  • Micah Kilton

    This is scary information!

    Micah Kilton