FDIC Girds For Bank Failures

Shaky loan portfolios continue to darken the landscape for the nation's banks, as federal regulators prepare for the possibility of an uptick in failures of financial institutions, according to recent government reports.

A record-high $31.3 billion set aside by banks for loan losses, record trading losses and goodwill expenses dragged down fourth-quarter net incomes of insured banks to a 16-year low, according to the Federal Deposit Insurance Corp.'s quarterly banking profile released Tuesday. The cumulative increase to loan-loss provisions was the largest increase in 20 years.

The FDIC report comes on the heels of study from the Government Accountability Office made public last week, which found the FDIC recorded an estimated liability of $124 million at the end of 2007 for the anticipated failure of some insured institutions and also identified potential losses of $1.7 billion should vulnerable insured institutions also fail. ...