Six US banks failed in Jan, highest for a month in 8 years

The number of banks collapsing in the US with each day refuses to decline, with six shutting down in January, the highest toll in a month in the last eight years.

In yet another reflection of how deep is the recession that is rattling the country's banking sector, three banks were closed down by authorities last Friday alone.

Salt Lake City-based MagnetBank, Suburban Federal Savings Bank in Crofton, and Ocala National Bank in Ocala are the latest casualties, taking the total to six banks so far in 2009, according to the latest data with the Federal Deposit Insurance Corporation (FDIC).

Three other entities — National Bank of Commerce, Bank of Clark County, and 1st Centennial Bank — also collapsed in January.

Going by figures from the FDIC, an independent agency which is often appointed as the receiver of failed banks, the six failures is the highest for any month since 2000.

Earlier, the maximum collapses were in November 2008, when five banks went belly-up as the financial crisis became intense after Lehman Brothers fell in September.

Since September 2008, the world's largest economy has seen the failure of 21 banks, despite billions of dollars of taxpayers' money being pumped into the financial system.

In 2008 alone, 25 banks were shut by the authorities — an average of two going under a month — making it the highest rate since 2002, when 11 entities went belly up.

Among the recent collapses, the most prominent was the failure of Washington Mutual, the country's largest savings and loan entity. Better known as WaMu, the bank was closed on September 25. It was later snapped up by JPMorgan for nearly $2 billion.

By contrast, the ones that have failed in January have been mostly small and regional banks.

On the other hand, official statistics show that the number of banks in America has been steadily declining since 1990. As per the FDIC data, the number of commercial banks in America has come down by over 5,000 in the past 18 years.

Recent collapses include First Georgia Community Bank, Sanderson State Bank, Haven Trust Bank, PFF Bank and Trust, Downey Savings and Loan, The Community Bank, Meridian Bank, Franklin Bank SSB, and Security Pacific Bank.

Even financial majors like Citigroup and Bank of America are reeling from the economic turmoil. The federal government last month had thrown lifelines to the two entities by injecting $40 billion as fresh capital into them, apart from guaranteeing assets worth billions of dollars.

President Barack Obama is expected to unveil a mammoth $819 billion stimulus package to bolster the nation's recession-hit economy. The plan has already received the green signal from the House of Representatives and will be voted on by the Senate this week.

Meanwhile, advanced estimates from the Bureau of Economic Analysis have said that the American economy contracted 3.8% in the fourth quarter of 2008. The GDP had shrunk 0.5% in the third quarter of last year.