The FDIC reported today that its Deposit Insurance Fund has a balance of -$8.2 billion.
The fund's value declined $18.6 billion during the third quarter, in part because of having to set aside $21.7 billion for loan loss failures. This is the first time the fund has dropped to a negative level since the third quarter of 1992, when the nation was just coming out of a recession.
In September, the agency predicted that the fund's value to drop below zero and has taken several steps to increase its holdings, including requiring banks to pay their premiums earlier than usual.
The FDIC also reported that 552 banks are on its "problem list," compared to 416 as of June 30. It is the highest number since the fourth quarter of 2003, when there were 575 such banks.
Financial institutions insured by the FDIC had an aggregate income of $2.6 billion in the third quarter. During the second quarter, those institutions reported a $4.3 billion net loss and in the third quarter of 2008 they had a net income of $879 million.
The institutions continued to report losses in loans, including: a 2.8% decline in loans and leases, a 6.5% decline in loans to commercial and industrial borrowers, a 4.2% decline in residential mortgage balances and an 8% decline in real estate construction and development loans.
"Today's report shows that, while bank and thrift earnings have improved, the effects of the recession continue to be reflected in their financial performance," FDIC Chairman Sheila Bair said in statement.
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