In Which Zandar Answers Your Burning Questions

CalcRisk asks:

From the WSJ: Failed Banks Weighing on FDIC

For the 102 banks that have collapsed in the past two years, the FDIC's estimated cost averaged 34%. That is sharply higher than the 24% rate between 1989 and 1995, when 747 financial institutions were closed by regulators ... At three of the five banks that failed Friday, increasing the total to 77 so far this year, the financial hit to the agency's deposit-insurance fund is expected by the FDIC to be about 50% of their assets.

The numbers for the Community Bank of Nevada, Las Vegas, Nevada are amazing. From the FDIC on Friday:

As of June 30, 2009, Community Bank of Nevada had total assets of $1.52 billion ... The cost to the FDIC's Deposit Insurance Fund is estimated to be $781.5 million.

The question is: Why is the FDIC waiting so long on banks like Community Bank of Nevada?

The answer of course is politics. The FDIC jumping in when a bank was at a 25% hit rather than 50% would be a tacit admission that many, many banks are at that stage. Waiting until the near last minute is necessary to keep convincing people that the problem is only a couple of small banks each week, not the entire system.

If the FDIC went after any bank whose bad assets constituted just 25% of their total assets, why there would be hundreds of banks closing.

They're stalling as much as they can, clearly. That won't last too much longer when the FDIC will have no choice but to close banks at ten or twelve a week instead of five.