Insurance fund for bank deposits turns red

Bank deposits are still insured, as much of the loss in the fund involves money set aside for future losses, but the account is now listed as a negative $8.2 billion, the first time it has been below zero since the savings and loan crisis in the early 1990s, The New York Times reported Tuesday.

The negative balance was expected. The Federal Deposit Insurance Corp. said in October the fund was in jeopardy.

Bad loans continue to plague the industry, with the FDIC placing 552 banks on its list of lenders at risk of failure, up from 416 in the second quarter.

Banks, however, earned $2.8 billion in the third quarter after losing $3.7 billion in the second quarter, the FDIC said.

FDIC Chairwoman Sheila Bair said, "the credit adversity we have been discussing for some time remains with us, and we expect it will be a couple of more quarters before we see a meaningful improvement."

She added, "I am optimistic that if we address these problems head on, we will see clear signs of improvement in bank earnings and lending in 2010."

Copyright 2009 by United Press International.