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How Many Banks Have Gone Bankrupt Since the Current Credit Crisis Began?

By most accounts, the economy of the United States had fallen into recession by the end of 2007. The global financial crisis, which saw the closing of hundreds of retail and investment banks and destroyed trillions of dollars of privately-held wealth around the world, began in earnest a few months later with the collapse of investment bank Bear Stearns.

It reached a fever pitch in the fall of 2008 with the sudden collapse of Lehman Brothers, another major investment bank. Shortly thereafter, the U.S. government stepped in to prop up American International Group, a tottering conglomerate whose collapse would surely have paralyzed the global financial system.

Throughout 2009 and 2010, the acute phase of the global financial crisis subsided and left a crippled economy in its wake. While the general consensus among experts is that the situation could have been far worse, the millions of Americans who lost their jobs in the ensuing economic malaise would beg to differ. What's more, hundreds of local banks and credit unions collapsed or entered bankruptcy in the years following the crisis.

Since the acute phase of the crisis began in 2007, over 400 banks and credit unions have failed or entered receivership. Since the vast majority of American deposit institutions are now FDIC-insured, this has only rarely resulted in significant depositor losses. This is because failed banks' assets, including deposit accounts, are typically absorbed by healthier peer institutions. Depositors usually see no meaningful change in their status as customers and retain control over their funds up to the FDIC's limit of $250,000 per account.

Most recently-failed financial institutions were modest small-town concerns with just a few local branches. Many of them operated in states hit especially hard by the housing crisis, including Florida, Arizona and California. Florida alone accounts for nearly one in six recent American bank failures.

Industrial Midwestern states like Michigan, Indiana and Illinois were also particularly hard-hit. Owing to their prevalence and popularity within the region, credit unions accounted for many of the financial-institution failures in these states.

Although they were generally better-equipped to absorb losses associated with subprime mortgage loans, some large institutions were overtaken by the ongoing credit crisis. High-profile failures included Seattle's Washington Mutual, Charlotte's Wachovia Bank and Pasadena's IndyMac Bank. During the second half of 2008, the failures of these three banks sent shock waves through the national financial system and spooked many retail investors.


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