Banking industry a 'mess'

The failure of IndyMac Bancorp Inc and seven other banks this year may erase as much as 17 percent of a government insurance fund and raise premiums for all banks, from Franklin National of Minneapolis to Bank of America Corp.

The closing of IndyMac in July, the third-biggest US bank failure, may cost the fund $4 billion to $8 billion, in addition to an estimated $1.16 billion for seven closures through Aug 1. Premiums for deposit insurance will likely rise, FDIC Chairman Sheila Bair said in a July 30 interview. A decision on the increase is due by the fourth quarter.

"It's going to be a bloody, expensive mess for the banking industry," said Bert Ely, president of Ely & Co Inc, a bank consulting firm based in Alexandria, Virginia.