Bank failures were down significantly in 2011, but that doesn't mean banks are getting healthier—it just means sick ones are taking longer to die, the Wall Street Journal finds. Some 92 banks failed last year, down from 157 in 2010. But many of 2011's casualties were in weaker shape than the banks that failed in 2010. There are still 844 banks on regulators' problem-bank list, and analysts expect many more undercapitalized banks to fail over the next two years.
Regulators say they aren't deliberately keeping troubled banks going for longer, but the slowly improving economy is giving the banks a little longer to attempt to raise capital. "If we believe there's a realistic chance we're more willing to let them get that capital raise," said an official at one of the main federal bank regulators. "This is a judgment that we have to make." The Government Accountability Office, however, accuses regulators of being "inconsistent," and often failing to step in quickly enough when a bank is falling apart.