Corp. & City Bankruptcies May Surge; Bank Failures Deplete FDIC Coffers
After a banner year for company bankruptcies in 2008, a surge of new filings is now expected as the nation’s financial crisis continues. Meanwhile, a series of bank failures has depleted the coffers of the Federal Deposit Insurance Corporation.
Because of the credit shortage, a number of companies may be forced into liquidation rather than reorganization, reports the DealBook blog of the New York Times, relying on information from Jones Day. And some municipalities may be forced into Chapter 9 filings.
Last year, 136 public companies filed for bankruptcy protection, up 74 percent from 2007.
In a letter to bank chief executives imposing increased fees and a hefty emergency premium, FDIC Chairman Sheila Bair says the federal agency is out of money and “could become insolvent this year” without the extra money, reports the Associated Press. It also has the option of drawing on a $30 billion credit line with the U.S. Treasury Department—something that has never been done before.
