FDIC: Pace of bank seizures likely to increase

Those who believe happy days are almost here again might want to reflect on the condition of the banking industry, which is afraid to do business. With bank regulators "shuttering" banks in Florida, Maryland, Illinois, and Utah, the number of bank failures in 2010 has climbed to 26, with the pace of bank seizures likely to accelerate in coming months, according to the FDIC. The total for all of 2009 was 140. According to an AP report,

As the economy has weakened, with unemployment rising, home prices tumbling and loan defaults soaring, bank failures have mounted, sapping billions of dollars out of the deposit insurance fund. It fell into the red last year, hitting a $20.9 billion deficit as of Dec. 31.

Banks, meanwhile, have tightened their lending standards. U.S. bank lending last year posted its steepest drop since World War II, as the volume of loans fell $587.3 billion, or 7.5 percent, from 2008, the FDIC reported recently.