1,000 Banks to Fail In Next Two Years: Bank CEO

The big banks are "too big to fail" and the smaller banks are "too small to bail". The small banks are paying the price for the crazy risk taking of the big banks. The FDIC will no doubt have to be bailed out by the government with printed dollars.-Lou

The US banking system will lose some 1,000 institutions over the next two years, said John Kanas, whose private equity firm bought BankUnited of Florida in May.

“We’ve already lost 81 this year,” Kanas told CNBC. “The numbers are climbing every day. Many of these institutions nobody’s ever heard of. They're smaller companies.” (See the accompanying video for the complete interview.)

Failed banks tend to be smaller and private, which exacerbates the problem for small business borrowers, said Kanas, who became CEO of BankUnited when his firm bought the bank and is the former chairman and CEO of North Fork bank.

“Government money has propped up the very large institutions as a result of the stimulus package,” he said. “There’s really very little lifeline available for the small institutions that are suffering.”

This comes at a time when the FDIC has established new rules on bank sales. Private equity, for instance, would have to hold double the capital of their competitors in order to buy such an institution, said Kanas.

“This will have somewhat of a chilling effect on our participation,” he said. “As a result of having to keep higher capital levels, we’ll see lower prices coming from that sector.”

Of the 81 failed banks this year, two have been successfully acquired by private equity, he said. Kanas’ private equity firm bought UnitedBank, the failed Florida-based bank, from the FDIC in May. Regulators also allowed the sale of IndyMac Bank of California earlier this year.

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