Analysts: 150 Banks May Fail In Next 12 To 18 Months

July 14, 2008 8:17 a.m. EST

New York, NY (AHN) - The continued rise in loan defaults and prolonged decline of house prices may lead to the closure of at least 150 of 7,500 U.S. banks in the next 12 to 18 months, analysts warned.

The dire forecast is an offshoot of the collapse on Friday of a large California-based mortgage lender. The negative outlook though is not as bad as the savings and loan bank crisis of the late 1980s and early 1990s when over 1,000 banks shut down.

IndyMac Bank closed on Friday after federal regulators took over its assets of $32 billion. It was the largest U.S. lender to close in over 20 years. Prior to its closure, IndyMac laid of thousands of employees and reduced its mortgage lending in the past few days.

The Federal Deposit Insurance Corporation estimated 1 percent or 90 banks it insures are problem accounts which have high risks of failing. In 2006, FDIC placed the figure at 50 banks only.

Although that list of at-risk banks is private, analysts are compiling their own registry of financial institutions on the verge of failure. However, FDIC Chair Sheila Bair told USA Today any closures can be handled by the government insurer.