U.S. bank failures hit 18-year high in '10

WASHINGTON, Dec. 28 (UPI) -- The number of U.S. bank failures hit an 18-year high in 2010 and 2011 could be another bad year, figures from federal regulators indicate.

The Federal Deposit Insurance Corp. reported 157 banks failed this year, up from 140 in 2009 -- and the largest number since 1992, when the economy was straining under a crisis precipitated by a series of savings and loan scandals, The Washington Post reported Tuesday.

As of Sept. 30, there were 860 banks on the FDIC list of so-called problem banks -- which face threats to "continued financial viability." That's the largest number since 1993, the Post reported. Typically, about 20 percent of problem banks can be expected to fail.

The U.S. Treasury said it has begun to keep a close watch on boards of banks that have repeatedly failed to make dividend payments on bailout loans. The loans made through the $700 billion Troubled Asset Relief Program, begun in 2008 during the waning months of the George W. Bush administration, include the stipulation that the Treasury Department can appoint board members to banks that miss six or more dividend payments, the Post reported Tuesday.

The number of so-called deadbeat banks in the third quarter rose to 19, the Treasury said.

As the nation's largest banks have mostly repaid their TARP loans, the list of deadbeat banks is made up of smaller, community banks.

The chief investment officer for TARP, David Miller, said the Treasury could begin nominating new bank board members in 2011.

While the potential losses from delinquent TARP loans is small compared with the overall size of the program, about 20 percent of the banks given loans have missed deadlines for dividend payments.

"It just shows the weakness of the government's selection process and the weakness of the banking sector in general," said Linus Wilson, an assistant professor of finance at the University of Louisiana, who has studied TARP data.