FDIC Fund Strained by Bank Failures

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The failure of IndyMac Bancorp Inc. and seven other banks this year may erase as much as 17 percent of a government insurance fund and raise premiums for all banks, from Franklin National of Minneapolis to Bank of America Corp.

The closing of IndyMac in July, the third-biggest U.S. bank failure, may cost the fund $4 billion to $8 billion, in addition to an estimated $1.16 billion for seven closures through Aug. 1. The FDIC’s “problem” bank list grew by 18 percent in the first quarter from the fourth, to 90 banks with combined assets of $26.3 billion. A revised list is due this month. The insurance fund had $52.8 billion as of March 31.

“It’s going to be a bloody, expensive mess for the banking industry,” said Bert Ely, president of Ely & Co. Inc., a bank consulting firm based in Alexandria, Virginia. “Healthy banks are paying for the mistakes made by failed banks.”


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