98 TARP-Funded Banks Risk Failure

Some 98 US banks that received government bailout cash may be at risk of failing under the weight of bad loans and eroding capital, a Wall Street Journal analysis of third-quarter data finds. That's up from 86 in the second quarter. The 98 at-risk institutions received $4.2 billion in TARP funds, which were supposed to go only to healthy banks. To date, seven TARP recipients have failed, resulting in $2.7 billion in lost funds.

The Journal also finds that an additional 814 of 7,760 US banks are troubled, up from 729 in the second quarter. “We certainly understand and recognize that some of the smaller institutions are experiencing stress,” said a Treasury rep, noting a good performance overall for the TARP investment. Smaller banks are facing more trouble than larger ones because bigger banks received extra aid, said a banking expert; the small ones are “turning around slowly.” Click to read about the standards the Journal used in its analysis.
(More Treasury Department stories.)