Number of Problem Banks Grows While FDIC Insurance Fund Dwindles

The Federal Deposit Insurance Fund, which insures the bulk of deposits in American banks, is now at a 16-year low, having declined 20 percent in the second quarter of 2009. So says an F.D.I.C. accounting report released Thursday.

Bank failures have continued at a rapid pace this year -- 81 so far -- as years of deregulated lending practices and risky investment strategies come home to roost. In part, credit remains hard to obtain because of how easily it was offered before last fall's financial crash.

Just how many more banks will fail this year is a question that remains to be answered. But the more that do, the less stable the F.D.I.C. insurance fund becomes. The New York Times explains:

"So far, 81 banks have failed this year, including 45 in the second quarter. That, in turn, has put enormous stress on the government's deposit insurance fund, which is supported by fees charged to the banks regulated by the F.D.I.C. Its second-quarter reserve of $10.4 billion compares with $45.2 billion a year earlier."

No one in the banking industry is suggesting that deposits to the nation's bank are at risk, and barring massive, simultaneous failure of large-scale banks, the F.D.I.C. still possesses many tools to make sure that it can continue to insure the money U.S. citizens place into its financial institutions. Still, hundreds more small and medium-sized banks are predicted to fold this year, and there are now 416 listed as "problem banks."