There was an increase in the number of banks failure in the USA during the year 2010 over that in 2009. Precisely it was 157 compared to 140 failures in 2009. The list of the banks included in the...

There was an increase in the number of banks failure in the USA during the year 2010 over that in 2009. Precisely it was 157 compared to 140 failures in 2009. The list of the banks included in the distressed list of the FDIC too got larger. Resultantly, the entire banking structure in the USA stood changed. Most of the distressed banks were found lending to the real estate sector or lending to other sectors that was secured by real estate. If one looks at the price of the real estate sector since 1996, it is evident that the prices were galloping upward for almost the entire decade. It was only beginning from the last quarter of 2005 that the prices tended to plummet. The decline in the prices was supplemented by increase in the unemployment rate as well as decrease in the commercial activities – ultimately leading to accumulation of the non-performing assets (NPAs) of the banks. The Draconian sword was hanging over the banks whether they would be able to meet their financial obligations.