THE BASIS POINT

Why 96 Bank Failures (and counting) Are Bonanza For Healthy Banks

The FDIC has closed 96 banks so far in 2010, including 6 on Friday. Here’s the FDIC Failed Bank List which shows which banks failed outright, depleting bank-funded FDIC reserves, and which were fully or partially taken over by other banks. When WAMU became the biggest-ever bank failure in the heat of the crisis, the FDIC realized their fund would disappear quickly so they and other bank regulators have become investment bankers of sorts, brokering deals for healthy banks to take over assets (loans) and/or deposits of the failing banks—in that case, the FDIC let JP Morgan Chase take over WAMU for a mere $2b. The Failed Bank List details all of these deals. For healthy banks, this is a golden era to cherry pick healthy loan books and/or pre-existing branch networks at deep discounts.

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