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The FDIC delivers desolate news in 2010.

Posted February 9, 2010 by Matthew Denton

More, More and More Banks in Trouble

Prospects that the slight uptick in real estate figures will be on a roll are made blighter by FDIC Chairwoman Sheila Bair as her office added 450 institutions to its list of troubled lenders in 2009 with a stern warning: the industry is most likely to remain under such depressing condition.

The New York Times writes, “Bad credit card, mortgage and corporate loans escalated in the final months of 2009 — the 12th consecutive quarterly increase — albeit at a slower pace. During the fourth quarter, the banking industry as a whole turned a mere $914 million profit… Officials estimate that bank failures would drain about $100 billion from the fund from 2009 through 2013. But of that amount, a total of roughly $80 billion in losses were recognized last year or projected for 2010. By that math, the agency is expecting an additional $20 billion of losses over the next three years.”

We must remember that the further the insurance fund of the FDIC slips, the greater risk for bank depositors to recover their money. The public may also lose their trust in our financial system and refuse to lend their money to banks. That means there’d be few loans available and homebuyers would find it more difficult to secure a mortgage.

A week before this, the Federal Reserve finally raised the rates it charges to banks for emergency loans from 0.5 percent to 0.75 percent. This may come as good news for some who believe that the economy is back on its feet. But mortgage holders, this has nothing to do with your situation. Wait until the federal funds rate becomes favorable to you. That remains in question however.

So now that banking and mortgage still have no guaranteed turnaround from its disappointing state, I guess it’ll take some more time before we can finally take a deep breath.

But if the setbacks won’t end, somebody please hand the oxygen tank to the economy.

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