It was the 34th bank failure of the year but the LARGEST one so far this year. Today BankUnited has been seized. BankUnited Federal Savings Bank had $13 billion in assets as of May 2. BankUnited was based in Florida and is Florida's largest bank.
Under the FDIC insurance program, deposits are covered up to $250,000. This bank failure is expected to cost the already depleted fund $4.9 billion. My longtime blog readers may remember I wrote a previous post about this topic and I cited that the FDIC Fund only had $18.9 billion at the end of 2008. After the 34 bank failures - I wonder how much is left? The FDIC has raised the fee banks pay for FDIC insurance in an attempt to raise money for the fund. In addition, Legislation passed by Congress just this week allows for the FDIC to borrow up to $100 billion from the Treasury Department "if needed" to replenish the fund.
BankUnited was bought by an investor group for $900 million and will re-open Friday (that's today) as a newly chartered Federal Savings Bank called -- BankUnited - sounds familiar doesn't it? Customers of BankUnited FSB will still be able to write checks and uses their credit/debt cards with the new bank.
Let's put things in perspective for a moment. 34 bank failures through this year and we are not even halfway through the year. Last year there were only 25 failures all year and only 3 in 2007! The FDIC insurance fund was not designed for the amount of claims it is receiving. In addition when they increased the insurance to cover deposits up to 250,000 temporarily in 2008 (remember it use to be only 100,000) - that has exacerbated the claims being filed this year.
How long do you think it will be before the FDIC needs to get a bailout of its own?