This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Small Banks Bear Brunt of FDIC Crackdown

New York ( ) -- Regulators have ramped up efforts to seize troubled banks, yet unlike the two large failures recently, most banks that fail in the final months of this year will be small banks, observers say.

"The government's gotten to the point now where they're comfortable with allowing failure to be an option," says Frederick Cannon, Keefe Bruyette & Wood's co-director of research and chief equity strategist.

Regulators are saying, " 'It's time to address this problem and get this behind us,' " according to Cannon, who adds that the Federal Deposit Insurance Corp. has been adding staff to address the surging problem banks.

Of the more than 8,000 banks in the U.S., Cannon estimates that roughly 150 banks will fail this year.

Cannon says that while more bank failures could fall in the $10 billion to $20 billion asset range, "the vast majority of the failures will be small banks."

With record unemployment and more people defaulting on loans, more banks are having problems with capital. Banks also are starting to feel the pinch of small- to mid-size businesses and other commercial customers in crisis.

KBW said in its latest FDIC Bank Failure Update, published on Monday, that the acceleration of bank failures will continue through the end of 2009 and into 2010. Compared to the rest of the industry, the banks that failed last weekend had a significantly higher concentration of construction loans, according to KBW.

The FDIC on Friday seized four banks with $13.9 billion in assets and an estimated cost to the FDIC of $3.2 billion, or 23% of assets, according to KBW.

1 of 4

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs