Regulators have shut down Ohio's AmTrust Bank, the fourth-largest American bank to fail this year. They also closed five others, bringing to 130 the number of US banks to be brought down so far in 2009 by recession and mountains of bad debt.
The Federal Deposit Insurance Corp took over AmTrust Bank, based in Cleveland, with about $12 billion in assets and $8 billion in deposits. Its failure is expected to cost the federal deposit insurance fund an estimated $2 billion.
Just last week, the federal Office of Thrift Supervision put restrictions on AmTrust because of concern that its reserves against losses were dangerously low. The regulators told the bank to limit new loans for land acquisition, development or speculative residential construction.
New York Community Bank, based in Westbury, New York, agreed to assume the deposits of AmTrust Bank and about $9 billion of its assets. The FDIC will retain the rest for eventual sale. AmTrust's 66 branches will reopen starting today as offices of New York Community Bank, the FDIC said.
Also seized by the FDIC were three Georgia banks, and Benchmark Bank, based in Aurora, Illinois.
As the economy has soured, with unemployment rising, home prices tumbling and loan defaults soaring, bank failures have accelerated and sapped billions out of the federal deposit insurance fund. It has fallen into the red.