Are we about to see the pace of small bank failures intensify? The FDIC (FDIC news) has more than 700 banks on its 'problem' list, up from 552 at the end of the third quarter. Of course 26 banks have already failed this year. Some think we may get to 300 by year's end.

Bloomberg reports the FDIC will auction more than $1 billion in assets that were seized from on-the-brink banks soon. That may trigger some writedown activity at many banks. The issue is that the loans may be sold--and subsequently traded--at a huge markdown, forcing banks to write down their holdings.

There's a lot of anger being directed at the FDIC. Almost half of the loans to be auctioned were originated by Silverton Bank, a small Georgia bank, which collapsed last year. Commercial real estate looms as the bane of the community banking industry, which, unlike their big bank brethren, are still in the throes of a meltdown. Many overextended themselves in commercial real estate, which was booming just four to five years ago.

For more:
- here's the Bloomberg article

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