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US regulators shut down AmTrust, five other banks.

Byline: Daily Star Staff

Summary: Regulators on Friday shut down Ohio's AmTrust Bank, the fourth-largest American bank to fail this year. They also shut five others; 130 US banks have now been closed in 2009 by recession and mountains of bad debt.AaThe Federal Deposit Insurance Corp. took over AmTrust Bank, based in Cleveland, with about $12 billion in assets and $8 billion in deposits.

WASHINGTON: Regulators on Friday shut down Ohio's AmTrust Bank, the fourth-largest American bank to fail this year. They also shut five others; 130 US banks have now been closed in 2009 by recession and mountains of bad debt.AaThe Federal Deposit Insurance Corp. took over AmTrust Bank, based in Cleveland, with about $12 billion in assets and $8 billion in deposits. Its failure is expected to cost the federal deposit insurance fund an estimated $2 billion.Aa

Just last week, the federal Office of Thrift Supervision put restrictions on AmTrust because of concern that its reserves against losses were dangerously low. The regulators told the bank to limit new loans for land acquisition, development or speculative residential construction.Aa

New York Community Bank, based in Westbury, New York, agreed to assume the deposits of AmTrust Bank and about $9 billion of its assets. The FDIC will retain the rest for eventual sale. AmTrust's 66 branches will reopen starting Saturday as offices of New York Community Bank, the FDIC said.Aa

Also seized by the FDIC were three Georgia banks, and Benchmark Bank, based in Aurora, Illinois.Aa

As the economy has soured, with unemployment rising, home prices tumbling and loan defaults soaring, bank failures have accelerated and sapped billions out of the federal deposit insurance fund. It has fallen into the red.Aa

The FDIC expects the cost of bank failures to grow to $100 billion over the next four years.Aa

Depositors' money -- insured up to $250,000 per account -- is not at risk, with the FDIC backed by the government. The FDIC still has about $21 billion cash in loss reserves apart from the insurance fund. It can also tap a Treasury Department credit line of up to $500 billion.Aa

Banks have been hard-hit by failed real-estate loans. Banks that had lent to seemingly solid businesses are suffering losses as buildings sit vacant. Aa-- AP

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Publication:The Daily Star (Beirut, Lebanon)
Date:Dec 7, 2009
Words:399
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