Silver Falls Bank becomes 14th U.S. bank to be seized

Oregon state regulators seized the bank, which had US$116.3 million in deposits, or liabilities, and US$131.4 million in assets, usually in the form of outstanding loans to businesses and consumers.

The Federal Deposit Insurance Corporation was named as the receiver. The FDIC said Friday that another local bank, Citizens Bank of Corvallis, Oregon, would take over the deposits and hang its shingle on the Silver Falls branches by Monday.

For all of 2008, the FDIC shut down 25 banks.

Earlier this month, U.S. President Barack Obama warned that more U.S. banks were likely to fail as the full extent of losses amidst the credit crunch becomes clear.

“Some banks won't make it,” Obama told NBC news.

Since taking office January 20, Obama's administration and Congress have moved swiftly to stem the economic hemorrhage with the US$787-billion stimulus plan, a commitment by the Treasury department to inject up to US$2 trillion into the financial system and a US$275-billion lifeline to up to 9 million homeowners threatened by foreclosure.

But bank stocks continued to weigh down the stock markets, with the Dow Jones Industrial Average ending its worst week in three months on Friday.

Much of the week's sell-off was driven by investors' concerns that a new wave of bank nationalizations could soon strike Wall Street, spurred by comments by Senate Banking Committee Chairman Chistopher Dodd to Bloomberg News that it was “possible that (nationalization) may happen” to some banks.

The FDIC in third quarter 2008 classified at least 171 banks as “problem,” 46 percent more than in the second quarter. Its reserves as of the third quarter were US$34.6 billion, and it projects it could face another US$40 billion in outlays by 2013, prompting it to double the premiums it charges banks.

Obama has lashed out at banks for their “mismanagement, because of huge risk-taking” and announced tough restrictions on the salaries of Wall Street executives seeking government aid, putting a cap of US$500,000 on some annual salaries.

“We all need to take responsibility,” Obama said at the White House in early February. “This includes executives at major financial firms who turned to the American people, hat in hand, when they were in trouble, even as they paid themselves customary lavish bonuses.”

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