Banking Crisis No End

For a chart showing how bad the trouble is for banks click here.
A major bank in Houston has failed. Houston's Franklin Bank closed, the 18th failure this year
"Houston, Texas-based Franklin Bank S.S.B. was closed by regulators Friday, the 18th bank failure this year amid the ongoing credit crisis. The Federal Deposit Insurance Corporation said in a statement that Franklin Bank 0.26, -0.13, -33.3%) had total assets of $5.1 billion as of
Sep. 30, and $3.7 billion in total deposits. El Campo, Texas-based Prosperity Bank will assume Franklin Bank's deposits, and Franklin's 46 offices will reopen as Prosperity branches, the FDIC said." (MarketWatch)

According to Bank Investment Daily it is expected that 500 banks nationwide will fail in 2009 and 2010. The implications are significant with law firms, because we are responsible for our clients money and cannot charge for the risk involved. (See the prior article on this blog about how IOLTA accounts compound this risk and how to avoid it.) Although the limit on FDIC insurance has been raised to $250,000, there is still substantial risk for sums over that amount. Since IOLTA accounts were created in the late 80's there has not been this sort of banking failures. Some lawyers will continue to deposit large amounts of cash in their IOLTA account until someone they know is burned. Why take that risk when it can be avoided?