Official: More banks will fail

ShareThis

The housing bust will put more banks out of business, but all but a handful of institutions will weather the crisis, one of the nation's top financial regulators said this week."There will be more bank failures, but nothing compared with previous cycles, such as the savings-and-loans days," Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., said in an interview Tuesday.So far this year, five banks have failed and been taken over by the FDIC, a number that Bair said, "should not be alarming.""Banks went into this with very strong capital and are overwhelmingly safe and sound," Bair said.The question of bank failures came to the fore in the last two weeks after the FDIC seized IndyMac Bancorp, a big lender from Pasadena, Calif., that booked hundreds of millions of dollars in losses on risky mortgages.The FDIC chairwoman stressed that her agency offers consumers complete protection for deposits up to $100,000. She said she was frustrated by reports of a run on IndyMac, with customers lining up to withdraw money. She said that no one has ever lost anything on deposits under $100,000 at FDIC-guaranteed institutions.Housing-related losses are putting increasing stress on bank finances. Ninety institutions were on the FDIC's troubled bank list at the end of March, marking them for intensive supervision by regulators."That number will go up" when the FDIC issues its second-quarter report next month, Bair said. "We're in an increasingly challenging credit environment and banks that made higher-risk mortgages are supervisory concerns."Bair has been warning about bank problems for months, as the extent of housing losses became known. "We've known this has been coming for a while," she said.E-mail Sam Zuckerman at szuckerman(at)sfchronicle.com.