The Treasury Department has launched a program in which financial firms will buy as much as $40 billion worth of banks' soured, mortgage-linked investments. That amount is far below the potential $1 trillion in assets that the government originally hoped to take off the banks' books through the program and another that would have targeted bad loans.
The problem assets helped spark the financial crisis as they lost value and banks became unable to sell them. They have been weighing down banks' balance sheets — one reason the industry has had trouble providing the credit necessary to support an economic recovery.
The number of banks on the FDIC's list of problem institutions leaped to 305 in the first quarter — the highest number since 1994 during the savings and loan crisis — from 252 in the fourth quarter. The FDIC expects U.S. bank failures to cost the insurance fund around $70 billion through 2013.
The May closing of struggling Florida thrift BankUnited FSB is expected to cost the insurance fund $4.9 billion, the second-largest hit since the financial crisis began. The costliest was the July 2008 seizure of big California lender IndyMac Bank, on which the insurance fund is estimated to have lost $10.7 billion.
The largest U.S. bank failure ever also came last year: Seattle-based thrift Washington Mutual Inc. fell in September, with about $307 billion in assets. It was acquired by JPMorgan Chase & Co. for $1.9 billion in a deal brokered by the FDIC.