More bank failures in Illinois
Another week, another Illinois bank put into FDIC receivership. Late last Friday, the Federal Deposit Insurance Corporation took over Palos Bank and Trust Co., in the southwest Chicago suburb of Palos Heights. The Associated Press reports that First Midwest Bank of Itasca, Illinois will take over the bank’s $467 million in assets and share losses with the FDIC on $343 million in debt. The FDIC takeover comes a week after the feds seized Chicago’s Ravenswood Bank and also arrives amid talk that prominent Chicago lender ShoreBank will fail. Nationally, the FDIC has taken control of 110 banks this year compared to 77 at this time last year. Illinois alone has seen 14 bank failures in 2010.
The AP has an interesting explanation for the increase in bank takeovers: losses on loans made for commercial property and development. In the recession, and a “recovery” that’s seen no rebound in consumer spending, companies vacate shopping malls and office buildings and then stop their mortgage payments for these properties. Bank failures were once viewed as a direct result of the subprime mortgage crisis. Now they’re part of the wider economic malaise and an increasing number of lenders require FDIC intervention.