Why So Many Banks Go Belly Up

Misconduct, mismanagement lead to a near record failure rate

A financial thunderbolt struck the tiny farm community of Danvers (pop. 920) in west-central Illinois one Friday this month. The First National Bank of Danvers, the only bank in town, with 2,560 accounts and about $11 million in deposits, was declared insolvent by federal authorities and shut down until new owners could reopen it under another name. That same day 2,000 miles away, the Oregon Mutual Savings Bank in Portland also closed its doors before being taken over by an Idaho holding company. The bank had seen its net worth fall nearly 20%...

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