logo
  Join        Login             Stock Quote

Why Does The FDIC Wait Until Friday To Close Banks

 April 26, 2010 12:07 PM


The FDIC shut down 7 more banks on Friday. The seven banks in question were all Illinois banks 140 banks closed their doors last year due to the financial crisis. 16 banks have failed this April bringing the total to 57 bank failures for the year. At the current rate, more than 185 banks will fail this year. That's a remarkable number considering that unemployment is dropping and the economy is deemed stable. Apparently the banking sector is still feeling the after effects of the worst recession in US history. So, if the FDIC knows a banking institution is set to fail, why does the FDIC wait until Friday evening to announce it?

The FDIC places weak banks on watch lists months in advance and then speaks with potential bank suitors. Many individuals believe that bank failures are announced Friday evening to limit paranoia and a mass exodus of deposits from the bank. Since most people are not paying attention to financial markets over the weekend, bank closures can go largely unnoticed. This could help to prevent a run on deposits. Although this theory makes perfectly logical sense; it is not correct according to FDIC chairwoman Sheila Bair.

[Related -Glu Mobile Inc. (GLUU) Q2 Earnings Preview: Going For Three Consecutive 10%+ EPS Pops]

According to Bair, "The FDIC and the bank are putting together the merger of financial institutions in the matter of a weekend." The goal is to open for business by Monday with new management in place. The three day weekend gives the FDIC the best chance to ensure an orderly sale of assets and a smooth transition. This involves transferring assets, communicating with employees, and merging operations. The FDIC's goal is to have the financial insitution open for business the next business day. The fact that this process can take place in just 3 days is pretty remarkable. So, as you can see the best time for the FDIC to announce these banking failures is on Fridays after the close of business.

iOnTheMarket Premium
Advertisement

Advertisement


Comments Closed


rss feed

Latest Stories

article imageIntegrated Device Technology Inc. (IDTI) Q1 Earnings Preview: Another Beat and Pop?

Integrated Device Technology Inc. (NASDAQ:IDTI) will issue first quarter 2015 financial results on July 28, read on...

article imageHerbalife Ltd. (NYSE:HLF) Q2 Earnings Preview: The Potential To Shock?

Herbalife Ltd. (NYSE:HLF) will release its second quarter 2014 financial results after the close of trading read on...

article imageHealth Net, Inc. (HNT): Potential to Be Huge Winners Says Bank of America

As of this keystroke, Health Net, Inc. (NYSE: HNT) shares are up around 4% on the day. The managed health read on...

article imageHomeAway, Inc. (AWAY) Q2 Earnings Preview: Top and Bottom Line Bullish Surprise?

HomeAway, Inc. (NASDAQ:AWAY) will report its financial results for the second quarter ended June 30, 2014 read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.