Average of eight US banks go belly-up every month in 2009

 An average of eight US banks are collapsing every month, as the country’s economy continues to feel the tremors of financial turmoil.

With four more banks going belly up on July 17, the total failures this year has touched 57, more than double the number of such collapses in 2008.

According to the Federal Deposit Insurance Corp, the government agency often appointed as the caretaker of failed banks, the latest entities to collapse were First Piedmont Bank, BankFirst, Vineyard Bank and Temecula Valley Bank.

Last year, a total of 25 banks went belly up and most of them happened after the bankruptcy of financial services provider Lehman Brothers in September. Small and regional banks are the worst hit as rising unemployment has resulted in more number of defaults.

Present imperfect

So far in July, 12 banks have closed and seven entities collapsed on July 2. Recently, FDIC said the number of “problem banks” in the country have risen to a 15-year-high of 305 in the first quarter of 2009 against 252 in December quarter.  Since January 2008, a staggering 83 banks went bankrupt and the numbers are expected to rise before the economy stabilises. Last month, the authorities shut down nine banks.  On February 13 and April 24, four banks each collapsed.

Failed entities

Among the failed entities this year are Cooperative Bank, Southern Community Bank, Horizon Bank, MetroPacific Bank, Rock River Bank and Elizabeth State Bank.

Interestingly, the bigger banking players, including the likes of Citigroup and JPMorgan, have reported second quarter results and seems to be on the road to recovery.
The recession-hit US economy has shrunk over 5 per cent in the first quarter of 2009.

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