Ask The Money Coach

As of early 2010, both the American economy and the global economy appear to be stabilizing. But the U.S. banking sector nevertheless continues to struggle – and will likely do so for some time to come.

Bank Failures Surge in 2009

In 2009, 140 banks collapsed in the U.S. during the year. That compares to 25 bank failures in 2008 and just 3 bank collapses in 2007. The Federal Deposit Insurance Corp. maintains a “watch list” of problem banks, those with troubled finances. In the third quarter of 2009, that watch list contained 552 banks, the highest level in nearly 16 years; so experts predict that half or more of those banks could also fail.

Even if the economy were to miraculously bounce back to complete health overnight, it would not safeguard many financial institutions. “Banking industry performance is, as always, a lagging indicator,” FDIC Chairman Sheila Bair said in 2009, reminding the public that problems always take longer to work their way through the banking system.

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