United Liberty

Another sign that the banking crisis isn’t necessarily over:

WASHINGTON (AP) — With bank failures rising, the government’s deposit insurance fund fell 20 percent to $10.4 billion in the second quarter, the Federal Deposit Insurance Corporation said Thursday. United States banks also lost $3.7 billion in the quarter.

The F.D.I.C. said Thursday that surging levels of soured loans at banks dragged down profits in quarter. The $3.7 billion loss for all banks compared with profits of $7.6 billion in the first quarter, and $4.7 billion in the period a year ago.

The F.D.I.C. also said the number of banks deemed to be in trouble jumped to 416 from 305 at the end of the first quarter. That was the highest number since June 1994 during the savings and loan crisis. Total assets of troubled institutions surged to $299.8 billion from $220 billion in the first quarter.

Eighty-one banks have failed so far this year, and hundreds more are expected to fall in coming years because of souring loans for commercial real estate. That threatens to deplete the F.D.I.C.’s fund, which guarantees deposits of up to $250,000 per account. The new level of the insurance fund puts the ratio at 0.22 percent, compared with the congressionally mandated minimum of 1.15 percent.

This is going to continue to get worse and, if we end up with a double dip recession as some have forecast, it could get much, much worse.