Despite New Profits, Banks Continue to Fail

by Matthew Glans on September 1, 2010

While the recent profits of many banks and the “growth” of the FDIC’s Deposit Insurance Fund (DIF) are seen by many observers as a sign of recovery of the nation’s financial system, 829 banks across the country still remain in danger of failure, a cascade that could cripple our economy.

The seizure of 118 banks since January continues to drain the DIF; despite recent increases, the fund the FDIC uses to cover the deposits of millions of Americans remains deeply in the red.

The questionable capacity of the FDIC to support multiple bank failures should weigh heavily on consumers’ minds. Consumers should seek banks that are well-capitalized and not overburdened by debt. The current focus of the federal government on large national banks over smaller, more responsible, regional banks appears to be rewarding poor behavior and warping competition. This must stop.

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