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FDIC Losing Money as Many More Banks Face Collapse

The FDIC reported that its insurance fund shrank 20 percent in the second quarter. Jeffrey Brown speaks with a reporter and analyst about troubled banks.

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  • JEFFREY BROWN:

    And still to come on the NewsHour tonight: finding the truth on health care reform; talking to the leaders in Myanmar; and remembering a fabled political family.

    That follows our update on the nation's troubled banks. Today, the FDIC, which guarantees bank deposits, said banks lost more than $3.5 billion in the second quarter. The agency also reported that its insurance fund shrank another 20 percent, down to $10.4 billion. That's the fund's lowest level since the savings and loan crisis in the early '90s.

    So far this year, 81 banks have failed. Another 416 are on the FDIC'S so-called "problem list."

    Here to parse some of those numbers are Karen Shaw Petrou, managing partner of Federal Financial Analytics, a consulting firm to the financial services industry, and Binyamin Appelbaum, banks and banking reporter for the Washington Post.

    Welcome back to both of you.

    Karen Petrou, the first thing this tells us, the banking sector is still struggling, right?

    KAREN SHAW PETROU, managing partner, Federal Financial Analytics: That's right.

  • JEFFREY BROWN:

    What's the biggest problem for the banks right now?

  • KAREN SHAW PETROU:

    Bad loans, and lots of them. Bad loans they wrote in the lead-up to the crisis and loans that are going bad now because of unemployment and ongoing economic problems.

  • JEFFREY BROWN:

    So, Binyamin, I mean, we were hearing about all these sort of fancy investments. We talked about those for many months. But this is simpler stuff, not less bad, but simpler stuff, right?

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