Two more banks failed yesterday, Northville, Mich.-based Main Street Bank and Eldred, Ill.-based Meridian Bank bringing the total number of failed banks in 2008 to 15. Both were relatively small banks in terms of assets and deposits. Main Street Bank had $98 million in total assets and $86 million in total deposits as of Tuesday and Meridian had $39.2 million in assets and $36.8 million in deposts as of Sept. 25.

Main Street Bank

All of Main Street's deposits were assumed by Monroe, Mich.-based Monroe Bank & Trust, the FDIC said. All depositors of Main Street Bank, including any with deposits in excess of the FDIC's insurance limits, will automatically become depositors of Monroe Bank & Trust, and they will continue to have uninterrupted access to their money. Therefore, there is no need for customers to change their banking relationship to retain deposit insurance. Depositors who already have accounts at Monroe Bank will have their Main Street deposits seperately insured for 6 months. That means if you had $250,000 at Main Street and $250,000 at Monroe, for six months you'll have $500,000 of insurance coverage.

The FDIC estimates that the cost to its Deposit Insurance Fund will be between $33 million and $39 million.

Meridian Bank

According to the FDIC press release, Meridian Bank had total assets of $ 39.18 million in total assets and $ 36.88 million in total deposits as of September 25, 2008. National Bank will purchase approximately $7.55 million of Meridian's assets. All depositors of Meridian Bank, including any with deposits in excess of the FDIC's insurance limits, will automatically become depositors of National Bank, and they will continue to have uninterrupted access to their money. Depositors will still be insured with the new institution. Therefore, there is no need for customers to change their banking relationship to retain deposit insurance.

The FDIC estimates that the cost to its Deposit Insurance Fund will be between $13 million and $14.5 million.

Things to Note About These Bank Failures

There are several points to note about these failures:

• The takeover was done on a Friday, as usual and was done quickly and efficiently.
• Customers still have access to their money via ATMs and the banks will be open for business on Monday under their new ownership.
• All deposits, even those in excess of the FDIC insurance limits of $250,000 were protected.

The FDIC is doing everything it can to reassure the public and it stands behind the banks. Policy makers in Washington have been talking about insuring all deposits and with these smaller banks, it appears the FDIC has already taken that approach. If the size and number of failures mount (as is expected to happen), the FDIC will not be able to continue extending coverage to all deposits without formal authority and funding from Congress.

Here is Morgan Stanley's 52 week stock chart:

This is what happens when massive leverage goes in the wrong direction. It is like a freight train barreling out of control down the tracks. Marketwatch is reporting that creditors are already running from Morgan.

Marketwatch reports:

"Shares are now down 77% to a 10-year low. The bank is under pressure from counterparties many of whom are calling in their loans. Financing has dried up."

Bloomberg has the following quote:

"The analogy is a snowball rolling down a mountain; the mass needed to stop that negative momentum increases as that snowball picks up speed and size,'' Egan-Jones's Sean Egan said in a phone interview today. ``Perception trumps reality. They need a massive injection to stop the slide and hopefully they don't commit the Bear Stearns or Lehman mistake.''

Morgan Stanley is supposed to be receiving $9 billion in capital on Tuesday from Japan's Mitsubishi UFJ Financial Group Inc. in exchange for 20% of the company. Many are now wondering if Morgan Stanley will make it to Tuesday and whether the $9 billion will be enough.

Let's hope it does.

DollarSavingsDirect raised the rate on their online savings account from 3.75% APY to 4% APY, putting them into a tie for first as the top savings rate on the BestCashCow rate tables. We originally covered DollarSavingsDirect in late August when they first launched seperate from the bank's existing online division EmigrantDirect.com. It's becoming clear that DollarSavingsDirect is the brand that Emigrant wants to use to raise new deposit money.

• Compare DollarDirect to the top savings and money market rates.