Bank Failures

The number of U.S. bank failures in 1987 should not fall sharply from this year, in which there has been near-record closings already, L. William Seidman, chairman of the Federal Deposit Insurance Corp., said. The FDIC's problem bank list now totals 1,456 and is continuing to grow, he added. So far this year, 117 banks have failed or needed federal assistance to stay afloat, compared to a record 120 for all of last year. Seidman said he expected another 30 or more cases by the end of 1986.

The Federal Deposit Insurance Corp. fell short in correcting deficiencies at four U.S. banks before they were seized last year at a cost of almost $1 billion to the deposit insurance fund, the agency's inspector general said. The regulator didn't sufficiently help the lenders avoid risks before they collapsed in August and September, the agency's watchdog said in separate reports posted on the FDIC website. The four banks seized in Florida, Georgia, Kansas and Nevada cost the FDIC's insurance fund $933.

Finance Minister Dilson Funaro said the Brazilian government will not guarantee repayment of the $455 million borrowed from U.S. and European banks by three failed Brazilian institutions. The lending banks were not identified. Foreign bankers said default on the loans could jeopardize Brazil's efforts to renegotiate its $103-billion foreign debt. Meanwhile, Banco do Brazil, the nation's largest private bank, said it had acquired the U.S.

In testimony before the Senate Banking Committee, Federal Deposit Insurance Corp. Chairman, L. William Seidman called on Congress to pass legislation empowering the Federal Deposit Insurance Corp. "to own and operate a bank for a limited period of time" while a buyer is being sought. Testifying at a hearing on deposit insurance reform, Seidman said such legislation would make it easier for the FDIC to allow a big bank to fail without triggering a banking industry crisis.

First National Bank of White City, Kan., became the nation's first bank failure of 1986, pulled down by what the closing manager called liberal lending and lax collections. A spokesman for the Federal Deposit Insurance Corp. said Herington Bancshares of Herington, Kan., will take over First National's deposits. The FBI is investigating the failure of First State Bank in Cache, Okla., which was closed under allegations of "insider abuse," Oklahoma banking officials said.

The fund that insures depositors at defunct banks rose to its highest level in a decade in the first quarter, as bank failures halted for the first time in 16 years, regulators said Tuesday. The Federal Deposit Insurance Corp. said its bank insurance fund had a balance of $15.2 billion at the end of March, up from $13.1 billion at the end of 1993 and the highest level since $15.4 billion at the end of 1983.

Jake Butcher, who climbed to success as a financier and chairman of the 1982 World's Fair, was sentenced today to the maximum 20 years in prison for thefts that helped topple his $790-million banking empire. "Your offense is one of the highest severity," U.S. District Court Judge William K. Thomas told Butcher before ruling that he must serve at least six years and eight months.

For the third year in a row, Texas set a national record for bank failures, exceeding last year's total of 26 with six months left to go. Federal regulators, citing poor management and bad loans, closed Texas National Bank-Westheimer of Houston late last week. It was the 27th bank in the state to be closed this year. The 1986 toll also set a national record. In 1985, Texas set the national pace with 12 failures.

Federal regulators now believe that U.S. bank failures will cost the deposit insurance fund more than $40 billion over the next four years as the economy weakens, a government official said. John Bovenzi, Federal Deposit Insurance Corp. chief operating officer, said the agency's estimate last fall of $40 billion in losses through 2013 probably would be surpassed.

Despite earlier predictions that bank failures would decline this year, Federal Deposit Insurance Corp. officials now believe that 1985 will set a new record for bank collapses, a survey by the FDIC has found. The FDIC, which oversees the federal bank deposit insurance system, logged 79 failures in 1984--the most in any year since the federal insurance program was begun in 1933.