Financial Crisis

FDIC's Money Drain

Nearly 100 banks have failed this year, straining the Federal Deposit Insurance Corporation, which has had to seize their assets. Worsening commercial real-estate loans are crippling small banks, whose balance sheets are not improving at the same rate as large institutions like Goldman Sachs, JPMorgan Chase and U.S. Bancorp. Almost every Friday, the FDIC has swooped in to handle troubled lenders, causing its fund, which had $50 billion just two years ago, to fall into the red. The FDIC has sought new ways to replenish the fund by asking for higher and earlier payments from healthy banks. Its chairman, Sheila Bair, defends the high amount of bank closures, saying that although bank failures are painful in the short term, a bank on the edge of collapse is unlikely to lend, and “that’s not good for the economy.”