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Bank Failure Friday in the Land of Lincoln

Bank failures 35 and 36 for the year came yesterday in Illinois. Combined, the two failures will cost the FDIC insurance fund about $279 million, a small sum in comparison to the reported $4.9-billion loss to the FDIC from BankUnited's failure Thursday.

Also yesterday, the FDIC's board of directors voted to levy a special assessment on insured bank assets to raise more money for the fund. FDIC Chairwoman Sheila Bair left open the possibility that more such assessments could be coming. Comptroller of the Currency John Dugan was the only FDIC board member to vote against the assessment. Dugan said that it would unfairly penalize large banks when most of the failures have involved smaller institutions. Furthermore, Congress has already agreed to allow the FDIC to borrow additional funds from the Treasury Department.

The special fee to be collected in the third quarter is expected to cost JPMorgan Chase Bank about $740 million, Bank of America about $801 million, Citibank about $318 million, and Wells Fargo about $629 million, according to Reuters.

Dugan's OCC was the primary regulator for one of the Illinois banks that failed yesterday, Citizens National Bank of Macomb. As of May 13, Citizens National Bank had assets of about $437 million, according to the FDIC. Morton Community Bank of Morton, Illinois agreed to purchase about $240 million of those assets with the remaining amount left to the FDIC to sell.

The other Illinois bank to fail, Strategic Capital Bank of Champaign, was regulated by the state and the FDIC. Midland States Bank of Effingham, Illinois will pick of the assets of Strategic Capital, according to the FDIC.

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