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Five Fingered Failure Friday

Five banks failed on Friday, pushing the total number of failures for the year to 69. Together the five failures cost the FDIC about $911.7 million.

Regulators haven't closed banks at anywhere near this blistering pace since the tail end of the savings and loan crisis in 1992, when 120 institutions failed. Bank failures have eaten an estimated $14.4 billion out of the FDIC's deposit fund in 2009, according to Bloomberg.

The biggest casualty of the day was Mutual Bank, located in Harvey, Ill., a suburb of Chicago. The bank's failure cost the FDIC $696 million. The agency entered into an agreement with United Central Bank of Garland, Texas, to assume all the deposits of Mutual.

Mutual had its share of enforcement orders prior to its untimely end. In recent months, both the FDIC and the Federal Reserve demanded it increase its capital reserves and deal with its growing loan losses. The Chicago Sun-Times offers this tidbit of local color from a troubled past:

The bank’s president, Amrish Mahajan, was a top fundraiser for ex-governor Rod Blagojevich and an original [Mayor Richard M.] Daley appointee to the Chicago Plan Commission. Mahajan's wife, Anita, was indicted in 2007 on charges that she bilked the state for more than $2 million in services that her now-defunct Chicago drug-testing company never performed.

This is the 13th bank failure in Illinois in 2009. At about 650, and falling, Illinois has the largest concentration of banks in the nation.

Along with Mutual, the roll call of the deceased includes Oklahoma's First State Bank of Altus (deposits assumed by Herring Bank of Amarillo, Texas); Integrity Bank of Jupiter, Fla. (deposits assumed by Stonegate Bank of Fort Lauderdale, Fla.); Peoples Community Bank of West Chester, Ohio (deposits assumed by First Financial Bank of Hamilton, Ohio); and First BankAmericano of Elizabeth, N.J. (deposits assumed by Crown Bank of Brick, N.J.).

 


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