According to the Federal Deposit Insurance Corporation (FDIC), there were
157 bank failures in 2010. Through January 21st of this year, 7 banks
have failed. The most recent failure is United Western Bank in Denver,
Colorado, whose deposits have been assumed by First Citizens Bank &
Trust Co. of Raleigh, N.C. The year 2009 saw 140 failures, while there
were only 25 failures in 2008, 3 in 2007 and none for 2006 and 2005. These
failures paint a stark picture of the condition of our economy and of
the banking system in particular, especially over the past two full years.
On the bright side, the deposits of most failed banks were assumed by
other banks in transactions that were basically seamless, with the assuming
banks opening for business either immediately or very shortly after the
closure of the failed bank. Depositors of insured accounts were not affected
by the transition. As most people are aware, checking and savings accounts
in banks and thrift institutions are insured by the FDIC up to $250,000
per depositor, per insured bank, for each account ownership category.
The FDIC, an independent agency of the federal government, began operating
on January 1, 1934, following the thousands of bank failures that occurred
in the 1920s and early 1930s. The agency was created for the purpose of
promoting confidence in the financial system. Today, the FDIC insures
more than $7 trillion of deposits in virtually every bank and thrift in
the U.S. No depositor of insured funds has lost a single cent since the
FDIC began operations.
Funding for the FDIC is not provided by taxpayer dollars. Rather, it is
funded by premiums that banks and thrift associations pay for deposit
insurance coverage and from earnings from investments in U.S. Treasury
securities. A five-person board of directors is appointed by the President
and confirmed by the Senate. No more than three directors can be from
the same political party.