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First US Bank Failure of 2008


Last Friday, Douglass National Bank in Kansas City, MO was closed by the Office of the Comptroller of the Currency. The FDIC was named Receiver. The official information is described at this FDIC page. It was a small bank with only 3 offices and $53.8 million in deposits. As has been typical with bank failures, the FDIC arranged for another bank to acquire the accounts. In this case Liberty Bank and Trust Company was the assuming institution. The Douglass Bank offices opened yesterday under the new bank.

One thing atypical that happened in this closure is that all deposit accounts were transfered to the new bank including accounts with balances over $100K (see FDIC FAQ). So no depositors lost any money. As we learned in the NetBank closure last year (see post), you shouldn't expect that to happen.

According to the OCC press release on Douglass Bank, the OCC found "that the bank had experienced substantial dissipation of assets and earnings due to unsafe and unsound practices."

We have yet to see a spike in bank failures. It seems like the credit problems have been making headlines for a while now. So perhaps it's not going to be as bad as some had predicted. Or perhaps when some big ones start failing, many more will follow. This Calculated Risk blog post has some interesting stats on bank failures during the S&L crisis of the '80s and during the Great Depression. We are still a long way from those numbers of closures.

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