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Daily Pulse

Bank failures down but not done

Joel Patterson Jan 3, 2012

The Pulse is up today on news that only 92 banks failed in 2011. That’s 65 fewer than in 2010.

The Wall Street Journal reported today that patience on the part of the Federal Deposit Insurance Corporation, whose job it is to determine the viability of banks, is, in part, responsible for the decline in the number of failures by more than a third from 2010 to 2011.

“Regulators say they don’t want to seize a bank too quickly if it is potentially viable, and have to give troubled banks a fair chance to save themselves.” -Michael Rapoport , WSJ.com

An improving U.S. economy is certainly a component in the decrease in bank failures, though the banking sector is far from “healthy” at the moment. The Journal found that 844 institutions remain on the “problem-bank” list and warn that it could be years before we know their fate.

This could be a story of banking imitating life. It’s certainly the case that some larger U.S. banks’ profits are nearly back to pre-recession levels while the majority of the banks on the FDIC’s troubled list are smaller institutions with only a fraction of the assets of the banking behemoths.

Is the divide between the haves and have-nots of lending mimicking that of wealthy and poor Americans? At this point, would it surprise anyone if that was the case?

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