Bank Failures

Friday the FDIC took over the OMNI Bank headquartered in Georgia. It was the 21st bank to fail in 2009. For comparison sake, 25 banks failed in 2008. That initially sounds like we are on a much faster pace of bank failures, but not really. The bank failures that took place in 2008 happened late in the year, mostly in the 4th quarter.

So the good news is that we are not drastically increasing the rate of bank failures that began six months ago. The bad news is that we are not slowing it down at all. The worst news is that banks are failing on a regular basis.

OMNI Bank was basically a $1 billion bank. The FDIC will insure the account holders, up to $250,000 each, with our tax money. This insurance of deposits stems from banking policy that was created at the end of the Great Depression to increase public confidence in the banking system, and for the most part it works very well. But it does involve taxpayers making up for the poor decisions made by banks that fail. In short, it creates more debt. This is one of the quietly growing categories of government expenditure that bothers me.

I don't want to change the FDIC policy, but I would like the insurance amounts added to the federal budget conversation. This money has to come from somewhere (our tax dollars).

Interestingly enough, one of the other major legacies of the Great Depression is the Federal Bureau of Investigations. That's right, the FBI. Poverty during that desperate time created a kidnapping industry, and in order to fight it we created the FBI. Curiously enough, the FBI is on a massive hiring campaign...