Banks Shut Down in Nevada and Illinois | Total Closures This Year 16

Nevada Security Savings Bank shuttered

Only two months into the year, already 16 banks in the United States have been shut down. Nevada Security Savings Bank closed its doors Friday.

Regulators shut down the bank and turned deposits over to the Bank of Nevada, based in Las Vegas. Security Savings Bank had $175.2 million in deposits as of Dec. 31, the FDIC said.

Ailing in Illinois

Since the credit crisis began, a total of 41 banks in the U.S. have been shut down. Another bank closed down along with Nevada Security Savings Bank on Friday. Heritage Community Bank of Glenwood, Ill., also shut its doors Friday. Illinois banking regulators shut down the operation and turned it over to the FDIC.

The FDIC says Chicago bank MB Financial has agreed to purchase the bank’s assets at a discount and take over deposits.

An interesting contrast

Many small banks that didn’t receive federal aid have already shut down. However, it appears that some other banks that were in no danger of failing at all have gotten bailout money from TARP funds.

Louisiana bank IBERIA said Friday that it will give back the $90 million in federal aid it received because of new regulations that apply to banks that take TARP funds. Because the bank is doing well on its own and didn’t need the aid in the first place, it is returning the funds so it can resume business as usual.

Eventful spending

Another bank has also made it clear that it did not need the federal aid it took. Northern Trust banks threw a lavish party last weekend in Los Angeles. It had previously accepted $1.6 billion in federal aid. Congress angrily demanded that the bank repay the money it had spent on the party, which included a golf tournament, performances by high-profile musicians and Tiffany gift bags.

The bank says it should not have to pay back the money because it used its own funds, not the bailout money, to pay for the yearly marketing event. Furthermore, a spokesman for the bank says they never needed or wanted federal aid in the first place, but the company accepted it because of the government’s encouragement for participation.

No explanation

Ultimately it is the banks themselves that decide whether they will accept federal aid or not. But apparently the government has encouraged lucrative banks who don’t need aid to take bailout money. At the same time, the Illinois and Nevada banks were allowed to fail.

The failed banks were small community banks that don’t have much of an effect on the overall economy. But the Louisiana bank that says it will return federal money is also small. So who’s job is it to decide who needs and gets federal funding?

Biden, Geithner at the helm

Vice President Joe Biden has been appointed the point man for economic stimulus package, which includes additional aid for bailing out banks and greasing the credit wheel. Treasury Secretary Timothy Geithner is in charge of how TARP funding is distributed.

However, it is likely that these men are not the ones making the actual decisions about who gets what. There are so many banks in the country it would be virtually impossible to keep track of who is doing well and who’s not.