What is Causing Banks to Fail?

On most Friday afternoons it is common to read about more banks getting taken over by the FDIC and subsequently absorbed by a stronger bank or held in receivership. With a total of 149 banks closed by regulators year to date, an average of approximately three banks have been closed every week. In 2010 alone, 28 banks in Florida have closed, 18 in Georgia, 16 in Illinois and 11 in Washington. The problems that plague these bad banks are deteriorating market conditions, the banks’ lending practices, and/or capital investment decisions. Loans on their balance sheets have become increasingly stressed as the value of underlying collateral diminishes and property level cash flows have fallen short of expectations.
More...