America’s banks lost $26.2 billion in the last three months of 2008, the first quarterly deficit in 18 years, as the housing and credit crises escalated.
The Federal Deposit Insurance Corp. said today that U.S. banks and thrifts also more than doubled the amount they set aside to cover potential loan losses, to $69.3 billion in the fourth quarter from $32.1 billion a year earlier.
Regulators said there were 252 banks in trouble at the end of 2008, up from 171 in the third quarter.
The FDIC also said that for all of last year, the banking industry earned $16.1 billion, the smallest annual profit since 1990.
Rising losses on loans and eroding values of assets “overwhelmed” banks’ revenues in the fourth quarter, the FDIC said. More than two-thirds of all banks and thrifts turned a profit in that period but their earnings were outstripped by large losses at a number of major banks.
FDIC Chairman Sheila Bair, reaching for a silver lining in the dismal picture, noted that total bank deposits increased in the October-December period by $307.9 billion, or 3.5 percent — the largest rise in 10 years. Deposits in domestic bank offices rose $274.1 billion, or 3.8 percent.
That showed confidence in the banking system and deposit insurance, Bair said. But she acknowledged that “the fourth quarter was a tough end to a tough year for the banking industry.”
The latest indications of financial distress came as the Obama administration proposed boosting the federal deficit by an additional $250 billion this year, enough to support as much as $750 billion in increased spending under the government’s rescue program for banks and other financial institutions. That would more than double the $700 billion bank bailout passed by Congress last October that has provided aid to Citigroup Inc., Bank of America Corp. and hundreds more financial institutions of all sizes.
The Office of Thrift Supervision, meanwhile, announced a loss of $3 billion in the fourth quarter and a record $13 billion annual loss for savings and loans last year.
The agency, part of the Treasury Department, also said it is launching a new unit to monitor thrifts with more than $10 billion in assets. The new “large bank unit” will be working onsite at about 25 savings institutions.
The OTS also will create new standards for reviewing enforcement actions on thrifts that do not meet minimum standards. (AP)
