How Bad Are "Bad" Banks? Very.

Commercial banks and thrifts insured by the U.S. government as a whole lost $26.2 billion in the fourth quarter of 2008 -- a rate of $288 million each day, or $12 million per hour -- even though most of them were actually profitable.

Figures out today from the Federal Deposit Insurance Corp. show a chilling change from the same three months a year earlier, when the same institutions posted a collective profit of $575 million.

The abysmal end of 2008 was the first quarterly loss for the industry as a whole since 1990, but it's unlikely to end soon. Banks are still warning that more big losses are coming as the housing market continues to deflate.

The FDIC said its "Problem List" of weak banks and thrifts grew by nearly 50 percent in the fourth quarter, rising to 252 from 171. The legion of weak institutions is now the largest it's been in almost 14 years. Total assets of these troubled banks and thrifts were $159 billion, an increase of 38 percent.

Bear in mind that the industry's decline came even though the FDIC said that more than two-thirds of all insured institutions were profitable in the fourth quarter. It's just that their earnings fell as a number of the biggest banks were hemorrhaging tens of billions of dollars in losses.

Still, FDIC chairwoman Sheila Bair did manage to find a pony buried in all that muck: Total deposits at insured banks and thrifts rose 3.5 percent in the quarter, to their highest level in a decade.

"Public confidence in the banking system and deposit insurance is demonstrated by the increase in domestic deposits during the fourth quarter," she said. "Clearly, people see an FDIC-insured account as a safe haven for their money in difficult times."

by Mark Stein