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As economy steadies, bank closings slow
Failures » Lenders’ rebound sustaining economy but not driving recovery.

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Experts caution that government examiners have let some smaller banks make their balance sheets appear stronger than they are.

"There’s a lot of stuff hidden under the hood," such as soured loans that haven’t been adequately written down, warns Daniel Alpert, managing partner at the investment bank Westwood Capital Partners. Those risks could surface if the economy suffers another shock, Alpert says.

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U.S. bank failures consist of both federally chartered and smaller, state-chartered banks. The federal government insures both and guarantees deposits of up to $250,000 per account.

Overhanging the banks’ future is the health of the U.S. economy. That, in turn, hinges on whether employers step up hiring and sectors like manufacturing and construction improve. Europe’s debt crisis poses a big threat, too.

U.S. banks have reduced their exposure to Europe. But a collapse of the 17-country euro alliance would likely weaken the U.S. banking system. Export markets for U.S. manufacturers could shrink. The U.S. economy would slow. Businesses and consumers whose loans drive banks’ revenue would find it harder to repay their loans. And banks would be squeezed.

Copyright 2014 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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