According to CNNMoney.com writer Catherine Clifford, the number of failed banks in 2009 jumped to 52 as the FDIC took over seven more banks on Thursday. The total cost to the FDIC has been $12.3 billion this year. In 2008 there were a total of 25 bank failures at a cost of $17.6 billion, the article states. In other words, we are on pace to see the number of bank failures quadruple year over year.
While the escalation of bank failures in 2009 has yet to reach the blistering pace that we saw in 1989 when there were over 500 due to the savings & loan fiasco, it may be pre-mature to start patting ourselves on the back yet. With asset values plummeting and a fleet of commercial balloon loans coming due over the next couple of years, things are likely to get worse before they get better for the banking system.
The answer is to stop the decline in asset values, both residential and commercial. The solution to this crisis is coincidentally the same piece of legislation that was partly responsible for igniting the previous banking crisis, the Tax Reform Act of 1986.