In the midst of our economic crisis it is no surprise why many banks on the verge of collapse. On Tuesday, the Federal Deposit Insurance Corp (FDIC) reported that there is 702 banks that are at risk of being shut down. This is the highest number of at risk banks since mid 1993
This problem is causing many banks to cut down on lending, and limit credit to consumers and businesses alike. In 2009, banks lowered their lending by about $587 billion, or 7.5%, said FDIC chairwomen Sheila Bair. She pointed out some of the major lenders because of their part they contributed to the losses.
Despite the amount of banks that are seriously at risk of failure, only about thirteen percent of them have been seized so far. The FDIC does a good job keeping the names of banks at risk away from the general public. This is done because regulators fear that consumers will stop doing business with these banks, and this will cause an absolute mess as the number of bank failures will most likely sky rocket.
Last year, more than one third of all US lenders (greater than 8,000) reported a loss for the year. These banks are trying to juggle losses while customers continue to default on their loans, a sign of slow recovery for the economy.
During the fourth quarter of last year banks reported a small profit around $910 million. This is much higher than the fourth quarter of 2008 when banks reported a total loss of $32 billion. But, this does not mean that the industry will recovering anytime soon.
This year there have already been twenty banks seized by the FDIC. Many believe that the total number of banks to fail this year will top last years total of 140. Bank failures are said to increase at a faster pace this year as some lending institutions can no longer handle their losses.