FDIC Shuts 7 Banks in One Day

Bank failure Fraday came a day earlier as even government bank regulators like hamburgers and hotdogs too. In what is the largest number of bank closures in one day since crisis started, the FDIC shut 6 banks in Illinois and one bank in texas. This brings the total this year to 52. It is becoming evident that the problems with smaller banks is getting worse not better. The number of banks being closed each week is accelarating. The next waves of debt failure will be credit cards which right now are at all time delinquency rates (10% and climbing) and commercial real estate loans. Massive job losses and rising unemployment will only add to the banks woes. Yesterday's stock market action indicates that the historic stock market rally off the March lows may have run it's course and the next leg down in the bear market may be ready to commence this summer.-Lou

Seven banks bring 2009 U.S. failures total to 52
Six Illinois banks go under; day's tally on insurance fund more than $300 million

SAN FRANCISCO (MarketWatch) -- Seven banks were closed by regulators on Thursday, including six in Illinois, bringing the total for 2009 to 52 as the U.S. banking system remains under pressure from rising unemployment and record foreclosures.

The John Warner Bank, in Clinton, Ill., was closed by the Illinois Department of Financial and Professional Regulation and the Federal Deposit Insurance Corp. was appointed receiver. The FDIC then sold the bank's deposits and most of its assets to State Bank of Lincoln, in Lincoln, Ill.
The same Illinois regulator also shut the First State Bank of Winchester, in Winchester, Ill., and appointed the FDIC receiver. The federal agency said it then sold the bank's deposits and most of its assets to the First National Bank of Beardstown, in Beardstown, Ill.

Rock River Bank, in Oregon, Ill., was also closed and the FDIC appointed receiver. The regulator sold the bank's deposits and most of its assets to the Harvard State Bank, in Harvard, Ill.
Elizabeth, Ill.-based Elizabeth State Bank was also later closed, with Galena, Ill.-based Galena State Bank and Trust assuming the failed bank's deposits, the FDIC said. Rounding out the list of Illinois bank failures on Thursday were Danville-based First National Bank, and Worth-based Founders Bank.

The lone bank failure for the day not located in Illinois was Dallas-based Millennium State Bank, the federal regulator said. Irving, Tex.-based State Bank of Texas has agreed to assume the failed bank's deposits.

The U.S. banking system has been straining under the weight of a slumping house prices and surging foreclosures since 2007. Last year, U.S. housing woes spread into a global financial crisis that felled investment bank Lehman Brothers and thrift Washington Mutual, and almost brought American International Group to its knees.

This year, panic has been replaced by a withering recession characterized by surging unemployment -- bringing more pressure on banks.

More than 1,000 banks may fail in the next three to five years as the recession intensifies and loan losses climb, RBC Capital Markets estimated in February. See Full Story

Bank failures on such a scale will deplete some of the money the FDIC has stored to pay depositors. On Thursday, the FDIC estimated that the seven bank failures will cost its deposit-insurance fund a total of roughly $314.3 million.

To keep costs down, the regulator is trying to encourage private investors to buy failed and struggling banks. However, it's also wary of some types of investors, such as private-equity firms.