Friday, July 25, 2008

Friday bank seizures must mean something

What does it mean that U.S. regulators were forced Friday to seize two more banks and sell them? Well, probably not that the nation's banking system is as "sound" as U.S. Treasury Secretary Henry Paulson told the country it was last week. The takeovers of First National Bank of Nevada and First Heritage Bank NA of Pasadena, Calif., were the sixth and seventh bank failures this year, and the first since the Federal Deposit Insurance Corp. seized IndyMac Bancorp. Inc. two weeks ago in the third largest such failure in U.S. history. The banks seized Friday, which were on the FDIC's list of 90 troubled U.S. financial institutions, were sold to Mutual of Omaha Bank, a division of the giant insurance company, according to the Rueters international news service. The combined 28 branches are scheduled to open Monday as branches of Mutual of Omaha bank. Paulson may indeed be correct in his contention that this year's bank failures are minor in respect to the entire banking system, but even he thinks there will be even more failures this year. There were only 32 bank failures between 2000 and 2007, according to FDIC data.

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