The Recent History of Bank Failures
Tip It!Given last week’s announcement that IndyMac Bank was taken into FDIC receivership, I thought it would be interesting to take a look at the recent history of bank failures. Lo and behold, the FDIC has an entire page dedicated to this very topic. What follows is a graph of the number of bank failures by year since 2001.
As you can see, there was a spike during the bursting of the stock market bubble back in 2002, and it appears that things may once again be on the upswing. Note that 2008 numbers are based on year-to-date data. Assuming that things continue at the same pace, the total will climb into the neighborhood of nine failed banks. While this falls short of the 2002 numbers, it’s still pretty significant.
If you’re nervous, the best advice I can offer is to observe FDIC insurance limits ($100k per individual per institution). While you can’t control what happens in the banking industry, you can protect yourself. You might also want to check out my earlier rundown of the safest online banks, though the landscape is changing fast.
Published on July 17th, 2008 - 9 Comments
Filed under: Banking, Economy
About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!
Related articles...
» Bank Failures: Two More Just Bit the Dust» Two More Bank Failures… And Counting…
» Increased FDIC and NCUA Insurance Limits Have Been Made Permanent
» Mixed Banking News From the FDIC
» Banks at Risk of Failure
» Can You Trust Bankrate’s Bank Safety Ratings?
» Have the Rules Changed?
» Escape Your Mortgage Due to a Bank Failure?
Was this article useful? Please sign up to receive our content via e-mail:
9 Responses to “The Recent History of Bank Failures”
Leave a Reply
Top Cards by Category
Earn $200 Bonus Cash Back after you make $500 in purchases in your first 3 months. 5% Cash Back on up to $1,500 spent in bonus categories each quarter.
Receive 10,000 Membership Rewards bonus points when you spend $1,000 in 3 months of Card membership.
Earn 3X points on airfare, 2X points on gas and groceries, and 1X points on everything else.
No Balance Transfer Fee!* 0% Intro APR for up to 15 months on purchases and balance transfers. This card offers Blueprint, free and customizable account features that help you avoid unnecessary interest and pay your balances down faster.
Enjoy no balance transfer fee for a limited time. 0% introductory rate on Balance Transfers and Purchases. Earn up to 5% Cashback Bonus in categories that change like gas, restaurants, department stores and more. Limitations apply*
Enjoy no balance transfer fee for a limited time. 0% introductory rate on Balance Transfers and Purchases. Earn up to 5% Cashback Bonus in categories that change like gas, restaurants, department stores and more. Limitations apply*
Enjoy amenities for you and your business, like: complimentary airport club access, including American Airlines Admirals Club(R) lounges.
5% Cashback Bonus in categories that change like gas, restaurants, department stores and more. Limitations apply*. Up to 1% unlimited Cashback Bonus on everything else. No annual fee
Earn 3X points on airfare, 2X points on gas and groceries, and 1X points on everything else.
Reports to 3 major credit bureaus monthly and acceptance at millions of locations worldwide, including website purchases and reservations.
- How to Become a Millionaire
- How to Get Out of Debt
- The Best Dollars I've Ever Spent
- How Our Estate Plan is Structured
- How We Paid Our Mortgage In Less than 10 Years
- Money Making Ideas
- How to Manage Your Asset Allocation with Multiple Accounts
- Consumption Smoothing - Save While the Saving's Good
- How to Save on Groceries
- How Much Life Insurance Do You Need?
- Eleven Great Books About Money
- Dave Ramsey is Bad at Math
- Dish Network Customer Service SUCKS
- $8,000 Homebuyer Tax Credit
- Pay Off Mortgage Early or Invest?
- How to Claim the First-Time Homebuyer Tax Credit
- Reduced Credit Limits? Share Your Experience
- $15,000 Homebuyer Tax Credit
- Ethanol Blended Gas = Lower Mileage?
- Termite Control: Sentricon vs. Termidor
- How Much Should You Pay a Babysitter?
- Federal Income Tax Rates Went Down but Your Federal Tax Withholding Increased. Here's Why...
- Would the "Fair Tax" Gut the Economy?
How to save money on insurance
- Five Myths About Renter's Insurance
- Own Your Investments, Rent Your Fun
- Citibank to Issue Credit Cards in China
- Heartstrings and Pursestrings
- Saving Money at the Grocery Store: Store Brand Pricing on the Rise
- Missing Tax Paperwork?
- Is Your Investment Allocation Right?
- Chase Freedom Experimenting With Quarterly Rewards Auto-Enrollment
- Income-Based Repayment Plans for Student Loans
- Will the IRS Disallow Backdoor Roth Contributions?
July 17th, 2008 at 9:23 am
It is unfortunate that it cames to this for some lending institutions. However, lending is like any other business and requires strict controls, check and balances.
When banks start lending money like “cowboys” and forget the controls and lending criteria that have built and preserved their business for years then we are bound to have failures.
Of course, the American “consumerist” society is certainly to blame as well. Apparently there is no such thing as living within your means any longer. The phrase “delayed gratification” no longer has a definition in our society.
July 17th, 2008 at 11:07 am
If I’m not mistaken the limit on a joint account is $200k for FDIC insurance. This is per institution. I can’t imagine why anyone – even super rich – would have more than that in one bank. Even if I felt the need to have $1M in cash on hand that’s just 5 banks with joint accounts.
July 17th, 2008 at 12:58 pm
Remember when looking at this graph that bigger banks often absorb smaller banks. A larger bank can weather through losses. I suspect we have fewer small banks now than in 2002, so even if we don’t reach 12 bank failures in 1 year, it doesn’t mean that we are doing better off now.
It would be interesting to see a graph indicating bank mergers overlaid on this one
July 18th, 2008 at 4:34 pm
Just because a bank loans out $100.00 does not mean they have $100.00 in the safe or in liquid assets. Its more like $10.00 on the banks books in some form for every $100.00 loaned out.
So for all your money they are paying you 1, 2, maybe 3% interest on, they are turning around and charging 5 to 20% interest ten times over. Pretty slick deal for the banks, until the market turns against them and suddenly “poof” everybody’s money disappears.
July 18th, 2008 at 6:17 pm
Definitely don’t put more than 100k(200k for joint account) at a bank to be safe. I mean who would have thought Indymac was going to be taken over by the government? Apparently not a lot of the people who kept their money in there that were over the FDIC insurance limit.
- James
http://www.bankaround.com
July 19th, 2008 at 12:58 pm
Recent bank failures are down to greed, they were too eager to offer mortgages at high income multiples and loan to value ratios.
Banks are now more cautious and strengthening their balance sheets has become top priority and so the number of failures should decline.
The smaller, weaker banks will be taken over by their larger rivals rather than be allowed to go under.
July 19th, 2008 at 3:31 pm
The S&L crisis of the 80’s started out slow and then gained momentum over the course of 7 years, eventually costing the taxpayers to the tune 1.7 trillion dollars.
You would think that now the banks are trying to strengthen their balance sheets, and gather assets. Of course you would have thought the same thing of the approximately 750 banks that failed in the 80’s.
But since in truth the banks make imaginary money based on trust that the bank is solvent, once the appearance that the peoples trust is gone, no one will buy them out.
Our banking system is a confidence game, they loan out ten times more money than they have, if they lose the trust of the depositors, who then decide that they want their money back, the bank collapses. Leaving this big vortex of magic debt that has to be taken care of.
Who gets stuck with the bill? Good ole you and me, The Taxpayer by way of the politicians granting money to bail them out.
July 26th, 2008 at 10:45 am
The world financial problem has been precipitated by the over leaveraging of Hedge funds and thier buying of packaged deals with investment banks and mortgage institutions. The problem wont be fixed until the world sets limits on the leaverage that these groups can use for investments in addition to more strict requirements on the initiators of loans.
September 17th, 2008 at 8:46 pm
Question? What happened to the mortgage (house)I have with a bank that is going to belly-up? And also equity loans I have with the bank for that matter.