September 1, 2009 / 11:58 PM / 10 years ago

FDIC's Bair says commercial loans "looming problem"

WASHINGTON (Reuters) - The chairman of the Federal Deposit Insurance Corp said commercial real estate issues will increasingly drive U.S. bank failures.

FDIC head Sheila Bair told CNBC Tuesday evening that commercial real estate loans remain a “looming problem” for banks’ balance sheets and she expects the area to increasingly be a driver for bank failures during the remainder of this year and 2010.

So far, this year 84 U.S. banks have failed, compared to 25 last year and only three in 2008.

Bair said she would try to avoid tapping its line of credit with the Treasury Department.

“We’d like to try to avoid that,” Bair told CNBC in an interview.

The FDIC is coping with a rising tide of bank failures as the industry continues to grapple with deteriorating loans. The balance of the agency’s insurance fund that safeguards deposits dipped to $10.4 billion from $13 billion during the second quarter, but Bair said the agency had already set aside an additional $32 billion to cover the cost of bank failures over the next year.

Bair said the FDIC has not yet decided whether to charge the bank industry more special assessments to replenish the fund.

She defended the loss-share agreements that the FDIC has extended to acquirers of failed banks, saying the arrangements have saved the agency billions of dollars over the past two years.

Reporting by Karey Wutkowski, editing by Leslie Gevirtz

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