The Federal Deposit Insurance Corporation (FDIC) yesterday closed down eight more banks. The banks which were shuttered down include four California-based banks, a community bank in Chicago, and banks in Florida and Virginia.
Notably, six of the eight failed banks, which were closed down by financial regulators, were included in TheStreet'sBank Watch List of undercapitalized institutions. The largest failure was Chicago’s ShoreBank with $2.16 billion in total assets. On August 5, Bloomberg reported that ShoreBank had been denied federal bailout funds that was necessary to raise $145 million in capital from an investor group that included Citigroup(C), Bank of America(BAC), JPMorgan Chase(JPM), Wells Fargo(WFC), Morgan Stanley(MS), Goldman Sachs(GS) and Northern Trust(NTRS).
The Wall Street Journal yesterday reported that the same investor group had agreed to support the new management team of ShoreBank. The bank lost $39.5 million in the second quarter in the wake of the mortgage loan crisis. ShoreBank was under "cease and desist" order from the FDIC for over a year. The bank, however, managed to raise more than $146 million in capital after taking loans from some Wall Street institutions. Notably, ShoreBank had indirect links with some senior Democrat leaders including presidential adviser Valerie Jarrett and former top federal banking regulators Ellen Seidman and Eugene Ludwig.
According to the FDIC estimates, the eight banks will cost the deposit insurance fund USD 479.4 million. The government set up a USD 700 billion relief program during the financial crisis in order to bailout the ailing financial centers. The Troubled Asset Relief Program launched by Obama administration has failed to put the country’s economic recovery on track.
