Last week, the Government Accountability Office (GAO) and the Inspector General of the Federal Deposit Insurance Company (FDIC) released their findings on a study of the causes of recent bank failures in ten states across the country and whether the practices and policies of the FDIC contributed to those failures. The studies were done in compliance with legislation drafted by Congressman Westmoreland and signed into law in December 2011 (Pub. L. No. 112-88).
"I would like to thank the GAO and the FDIC IG for their hard work on this study," stated Westmoreland. "Studies like these are helpful when looking at vast problems like the large number of bank failures we have seen since 2008. While they don't provide the complete answer to solving these problems and preventing them in the future, they help to provide one small piece of the puzzle."
The study asked the GAO and the FDIC IG to look into fair value accounting and the use of shared loss agreements and whether they contributed to bank failures, and what impact bank failures had on local communities. The states in the study included Georgia, Arizona, California, Florida, Illinois, Michigan, Minnesota, Missouri, Nevada, and Washington. All states have had at least 10 bank failures since 2008. Georgia leads the nation in bank failures, with 84 failures since 2008.
"Georgia has been very hard hit by the large number of bank failures we have had in our state," stated Westmoreland. "Community banks are the economic engine of many of our towns and cities. When they fail, we often see economic investment dry up -- an unmistakable reality proven by the fact that states with the highest number of failures also have some of the highest foreclosure rates and highest unemployment rates in the country. Like I said before, this is not a problem one study will be able to solve and I will continue to look into the issues behind the vast number of bank failures in Georgia and around the country."
The results of the GAO study can be found at http://www.gao.gov/assets/660/651155.pdf. The results of the FDIC study can be found at http://www.fdicoig.gov/reports13%5C13-002EV.pdf.