Analysts predict that as many as 150 U.S. banks could fail in the next 12 to 18 months. The news comes as federal regulators seized California lender IndyMac after the bank’s collapse on July 11.
IndyMac’s failure is the largest since the late 1980s, when 1,000 federally insured banks failed, costing taxpayers $125 billion.
Small and midsize banks are at the greatest risk, while large institutions like Citigroup and Merrill Lynch are well-protected. To avoid collapse, many at-risk lenders are attempting to sell their riskiest loans to Wall Street firms.
The Federal Deposit Insurance Corporation has $53 billion to reimburse consumers for lost deposits from failed banks; IndyMac alone will use between $4 and $8 billion of those assets.
“Everybody is drawing up lists, trying to figure out who the next bank is, No. 1, and No. 2, how many of them are there,” said Richard X. Bove, a banking analyst with Ladenburg Thalmann. (New York Times, July 14)
