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Japan’s exports to Asia fell in October for the first time since 2002, showing that the fallout from the credit crisis has spread to neighbors such as China and adding momentum to investors’ flight to the safety of cash.

Capital flight from emerging markets drove the currencies of South Korea and Indonesia to their lowest levels since the Asian financial crisis a decade ago. India’s rupee hit a record low.

Asian markets suffered the same battering that drove U.S. and European stocks to their lowest levels in 5- years on Wednesday. Japan’s Nikkei tumbled 6.9 percent, while the MSCI All-Country World Index hit its lowest level since May 2003, dragged down by Asian shares.

Shipments to Asia had previously cushioned the impact on Japanese exports of weakening demand from the United States and Europe. But data on Thursday showed they fell 4 percent in October from a year earlier.

The drop in Japanese exports contributed to mounting signs elsewhere that the global slowdown could get worse.

The Federal Reserve forecast that the U.S. economy would contract through the first half of next year and signaled it was ready to cut interest rates further, while U.S. consumer prices last month posted their biggest drop on record.

“The fall in exports to Asia reflects that their economies are also taking a blow from weakness in developed economies,” said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo.

Hopes that Asian economies, particularly China, could help prop up global growth have begun to fade as weaker demand in the United States and Europe has quickly translated into slowing factory output and job cuts cash in 1 hour.

Underlining the extent of Beijing’s concerns over its own slowdown, Minister of Human Resources and Social Security Yin Weimin said on Thursday that stabilizing employment is now the government’s top priority.

The worrisome outlook sent bonds surging. The yield on Japanese 10-year government bond futures fell to as low as 1.430 percent on Thursday, the lowest since early October, while the U.S. Treasury two-year yield hit a record low at one point.

Financial bookmakers expect worries over a lengthy economic downturn to send the leading European benchmark indexes as much as 2.4 percent in early trade on Thursday.

CHIP MAKERS HIT

Corporate news helped fuel the rush to safe havens.

Citigroup Inc shares tumbled 23 percent on Wednesday to a 13-year low, as investors questioned the survival prospects of the U.S. banking giant on concerns about mounting losses from credit cards, mortgages and toxic debt.

Friedman Billings Ramsey analyst Paul Miller said in a research note that the U.S. financial system still needs at least $1 trillion to $1.2 trillion of tangible common equity to firm up banks’ balance sheets and improve liquidity in credit markets. 

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The Federal Reserve continued its massive lending efforts to business in the past week, pumping $100 billion more into the credit stream through a new short-term funding program.

Fed numbers released Thursday showed that Fed lending in the so-called Commercial Paper Funding Facility increased to $243 billion from $144 billion a week earlier. The facility opened on Oct. 20.

The Fed’s program has helped lower borrowing rates and provided critical short-term financing to businesses and financial institutions in desperate need of cash. Businesses and financial institutions have turned to the Federal Reserve for funds, as the traditional source of lending from private banks dried up after the collapse of Lehman Brothers in mid-September.

As a result, the federal government has instituted several programs aimed at easing funding concerns for banks and encouraging lending between financial institutions. These include measures such as lowering interest rates, injecting capital into banks and providing insurance on all non-interest bearing accounts.

"The Fed is tapping all the keys on the keyboard, and it does seem to be helping," said Bill Bergman, senior equity analyst at Morningstar. "We have a financial market problem of historic proportion, and I think the Fed’s ability to liquefy is worth respect."

In another such program, the Federal Reserve’s emergency lending window, the Fed reported that commercial banks borrowed $110 billion a day, on average, over the past week. That’s down 1.7% from the $111.9 billion they borrowed from the discount window in the previous week.

For a long while before the credit crunch, the Fed has offered overnight funding for commercial banks at a rate slightly higher than its targeted funds rate. But after the collapse of Bear Stearns in March, the Fed for the first time opened its discount window to Wall Street firms like Goldman Sachs (GS, Fortune 500) and Morgan Stanley (MS, Fortune 500), which were in dire need of lending.

Investment banks borrowed $77 billion a day, on average, down 11.9% from $87.4 billion a week ago.

Some analysts have suggested that investment banks’ borrowing needs have not decreased, but they are borrowing less from the discount window due to the Treasury’s $250 billion capital injection into financial institutions and access to the Fed’s commercial paper facility american cash advance.

"We haven’t seen any sign of a turnaround in lending yet," said Bergman. "The question is whether or not the Titanic is unstoppably sinking."

The Fed also reported Thursday that troubled insurer American International Group (AIG, Fortune 500) paid back $2.3 billion of its emergency loan from the Federal Reserve.

AIG now owes $81.2 billion, down from $83.5 billion as of last week. That’s equal to about two-thirds of the $122.8 billion loan the federal government has offered to the company.

In mid-September, the government agreed to bail out the world’s largest insurance company, which was on the verge of collapse, with an $85 billion federal loan. In addition to the bailout, the New York Fed later made available an additional $37.8 billion to the corporation through a special lending facility. The facility, which opened three weeks ago, was designed to provide funding for AIG’s businesses after its securities lending division ran into trouble.

AIG announced last week that it will refinance a big chunk of its original loan. Through four of its subsidiaries, AIG said it will sell $20.9 billion of debt to the Fed and use the proceeds to pay back some of the $85 billion government bailout loan. The move allows AIG to pay down about a quarter of the loan - on which it is currently paying about 11% in interest - with money it has borrowed at 4% through the Fed’s commercial paper program.

AIG has said it plans to pay off the $85 billion bridge loan by spinning off divisions.

In addition, the company’s new managers, headed by government-installed CEO Edward Liddy, have agreed to withhold big payouts to former executives and curtail corporate trips in the face of criticism from Congress and other government officials. With taxpayer dollars on the line, New York Attorney General Andrew Cuomo has demanded the company halt all "unreasonable expenditures." 

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The number of people unemployed in Switzerland rose in October as a gloomy outlook for the world economy prompted companies to scale back their payrolls.

The seasonally adjusted number of people without jobs increased by 1,204 to 102,319 from September, the State Secretariat for Economic Affairs in Bern said today. The jobless rate held at 2.6 percent, in line with the median of 14 economists' forecasts in a Bloomberg News survey.

Swiss companies may pare their workforces further in coming months as the financial-market crisis pushes up lending costs and a global slowdown hits order books. Swiss leading indicators declined to the lowest in more than five years in October. The Swiss central bank yesterday unexpectedly trimmed borrowing costs to counter a deepening economic slowdown.

“The Swiss labor market is still rather robust, but of course that won't last,'' said Dirk Faltin, a senior economist at UBS Wealth Management Research in Zurich in an interview with Bloomberg Television. The Swiss National Bank's decision to lower the key rate “was the right signal in this situation.''

The SNB yesterday trimmed its three-month Libor target by 50 basis points to 2 percent, the biggest cut in more than five years, after the Bank of England lowered borrowing costs more than economists expected by 150 basis points bad credit payday loans. The European Central Bank yesterday cut its key rate by 50 basis points.

The Zurich-based SNB said that the economic outlook has “deteriorated more severely than anticipated'' and the Swiss economy may fail to grow in 2009. The International Monetary Fund yesterday predicted economic contracts in the U.S., Japan and the economy of the 15 euro nations next year.

Adding to signs of slowdown, Swiss manufacturing contracted for a second straight month in October and exports declined for the first time in almost four years in September.

Clariant AG, the world's biggest maker of chemicals, is cutting 2,200 jobs, or 10 percent of its workforce, through 2009 as it seeks to boost profitability. The Muttenz, Switzerland-based company said Nov. 4 it will need to cut costs further as slumping automotive and construction industries and slowing growth in China hurt revenue.

The unadjusted jobless rate rose to 2.5 percent in October from 2.4 percent in the previous month partly as weather-sensitive industries such as forestry and agriculture reduced their workforce. The number of open jobs increased by 369 to 14,132 from September, today's report showed.

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Bank of England Deputy Governor John Gieve said investors are still facing “acute'' stress as market declines force hedge funds to sell assets.

“The financial system remains under acute strain,'' Gieve said in a speech in London today. “The falls in equity markets, corporate bond prices and the prices for leveraged loans is hitting both long-term institutional investors and leveraged investors, including hedge funds.''

The Bank of England said in a semi-annual report that $2.8 trillion in banking losses and the threat of a global recession are increasing risks to financial stability. Meanwhile, Prime Minister Gordon Brown yesterday suggested he may scrap decade- old fiscal rules to prop up the banking system as the nation faces its first recession since 1991.

Investment losses at hedge funds and insurers pose further risks to the system, the central bank's report said, as insurers may fall short of capital requirements and face credit rating downgrades, while hedge funds may be forced to sell assets.

“Some are being forced to sell into a falling market in response to margin calls and redemptions,'' Gieve said. “And there are growing signs of stress in many emerging market economies.''

The International Monetary Fund predicts the world's advanced economies will next year grow at the slowest pace since 1982. Investors stung by losses from developed nations have sold riskier emerging-market assets, jeopardizing the position of those nations. The IMF has agreed to emergency loans for Ukraine and Hungary, while Belarus and Pakistan are seeking help one hour cash loan.

Repossessions

In the U.K., the economy recorded its first quarterly contraction in 16 years in the three months through June, while the central bank said a 15 percent drop in house prices may push 10 percent of mortgage-holders into negative equity. That happens when the value of a home falls below the amount owed on the mortgage.

Repossessions of British homes jumped by 71 percent in the second quarter, the U.K. financial regulator said today.

Brown this month unveiled a 50 billion-pound rescue plan, which included the government buying stakes of Royal Bank of Scotland Group Plc, HBOS Plc, and Lloyds TSB Group Plc after money-market tensions undermined investors' confidence in banks around the world.

“The package of measures introduced in the U.K. and elsewhere has improved the prospects significantly, especially for banks, but it is too soon to declare the crisis over, Gieve said. “We need to establish stronger restraints on the build up of risks in the financial system over the cycle with the dangers they bring to the wider economy.''

The Spanish system, which requires banks to build up loss reserves when the economy is booming, may serve as a lesson for others to follow, as it diminishes the need to raise capital in a downturn, Gieve said.

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SAN FRANCISCO — Gasoline prices may be falling fast from record highs, but travelers are still avoiding the highways and jumping on buses and trains at a record pace, according to a report from the U.S. Department of Transportation.

In fact, Americans drove 15 billion fewer miles in August than they did in the same month a year ago, according to federal data.

That represents a 5.6 percent decline from August 2007, marking the biggest year-over-year decline ever recorded, U.S. Secretary of Transportation Mary Peters said in a statement.

At the same time, public transit ridership jumped 6.2 percent across the country this summer compared with a year ago.

Peters pointed out that Texas, where she spoke during a visit to a light-rail station under construction in Dallas, saw an increase of 15 percent in its DART rail system.

All this with gas currently costing a national average $2 http://payday-z.com.78 for a gallon of regular unleaded, according to recent numbers from AAA. That’s down almost a dollar from a month ago and is more or less the same as it cost in October 2007.

The surprising trend, likely exacerbated by the dismal state of the economy, is making it difficult for the government to pick up the tab. Peters warned that the lower income from gas taxes will make it difficult for the federal agency to continue to fund future projects.

"We pay for transit the same way we pay for road and bridge projects — with federal gas taxes," she said. "Relying on the gas tax is like relying on cardboard to keep the rain out — the longer you use it the less it works."

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After easing the financial-market panic by committing trillions of dollars to shore up their banking systems, governments are broadening their focus to buffering its economic aftershocks.

U.S. lawmakers are moving toward the second fiscal stimulus bill this year and Japanese Prime Minister Taro Aso is set to cut income taxes. In Europe, Britain's Gordon Brown plans to spend more on schools, Italy's Silvio Berlusconi looks to enact tax breaks for manufacturers and Angela Merkel of Germany mulls tax rebates. French Prime Minister Nicolas Sarkozy today lifted a tax on business investment until the start of 2010

“Having taken action on the banking system, we must take action on the global recession,'' Prime Minister Brown told U.K. lawmakers yesterday. “No country can insulate itself.''

Politicians are acknowledging the worst still lies ahead for their economies and their own electoral fortunes unless they act to cushion growth. World leaders will meet in the U.S. on Nov. 15 to review progress in combating the financial crisis and how to avoid a repeat of it.

The cost of borrowing money among banks has fallen after authorities in the U.S. and Europe acted to take stakes in their biggest banks as global stocks plunged and lending seized up. The euro interbank offered rate, or Euribor, that banks charge each other for three-month loans fell 2 basis points to 4.92 percent today, the lowest level since June 5, according to the European Banking Federation.

`Meltdown' Averted

“A global meltdown has been averted and governments, while implementing their respective rescue plans, should now turn their attention to the economy and limit the effects of a global recession,'' said Geoffrey Yu, a London-based currency strategist at UBS AG.

Tensions are easing too late to prevent companies and consumers from retrenching. Economists at Deutsche Bank AG expect the Group of Seven economies to contract 1.1 percent next year, the worst since the Great Depression. Even with emerging markets lending support, they predict the weakest global growth since the 1980s.

“As growth slumps, fiscal policy should turn sharply expansionary,'' said Thomas Mayer, Deutsche Bank's co-chief economist in London.

U.S. lawmakers are devising new spending plans after Federal Reserve Chairman Ben S. Bernanke endorsed the idea on Oct. 20 and the Bush administration dropped its opposition. The new push will aim to extend jobless benefits, fund infrastructure projects and help cash-strapped regional governments, according to House Budget Committee Chairman John Spratt.

Fading Fillip

The effect of measures totaling $168 billion that U.S. lawmakers passed in February has faded after they gave the economy a fillip in the second quarter.

Aso, with an election nearing, will next week unveil the government's second stimulus program since August. The plan will probably include income-tax cuts, deductions for people with home loans and an extension of breaks on capital gains, say economists.

European governments may bend their own rules that cap budget deficits in a bid to save their economies.

Brown's U cash advance in one hour.K. government will next month step up spending on housing, energy and small businesses, while bringing forward construction projects on schools and hospitals, say ministers including U.K. Chancellor of the Exchequer Alistair Darling.

German Budget Balance

Italian Prime Minister Berlusconi's government is indicating it will enact tax breaks for carmakers and appliance manufacturers. German Chancellor Merkel, who had focused on returning her budget to balance, is considering a 15 billion- euro ($19.3 billion) package of tax rebates. Sarkozy said from today “any new investment made by companies'' in France will be tax-free.

Emerging markets, the growth engines of the global economy, are also looking for remedies to fading expansions.

China's State Council on Oct. 21 cut taxes for exporters and approved construction programs including new expressways and hydro-electric power stations. Thailand's Deputy Prime Minister Olarn Chaipravat and Jun Kwang Woo, chairman of South Korea's Financial Services Committee, said in separate interviews on Oct. 21 that their governments may ease fiscal policy.

Governments may prove more powerful than central bankers in the current environment, said Julian Jessop, chief international economist at Capital Economics Ltd. Lower interest rates are less effective when the financial system is frozen and have a lagging effect at the best of times, he said.

Fewer Obstacles

Governments also have fewer obstacles than usual, Jessop said. Public borrowing is unlikely to “crowd out'' other spending given that consumers and companies are cutting back, while the inflationary byproduct of budget deficits will offset deflationary forces such as cheaper fuel and rising unemployment, he said.

“The greater use of discretionary fiscal policy will be an increasingly important global theme over the coming year,'' said Jessop, a former U.K. Treasury economist.

There are some barriers to how far governments can go, and in the longer term investors may punish those running the largest budget deficits, said Robert Lind, chief economist at ABN Amro NV. He calculates that among rich countries Finland, Sweden, Luxembourg and New Zealand have the greatest capacity to spend, while the U.S., U.K. and Japan have the least.

Biggest Post-War Deficit

The U.K. this week posted its biggest six-month budget deficit since World War II, while the annual deficit in the U.S. could exceed $1 trillion for the first time. In contrast, economies which have enjoyed commodity booms such as Australia or China have budget surpluses and currency reserves to tap.

For now, Lind said governments are rightly invoking the spirit of economist John Maynard Keynes, who died in 1946 after a career advocating activist government as the best solution to slumps such as the Great Depression.

“More government intervention should help to contain the severity of the economic downturn,'' said Lind. “We are all Keynesians now.''

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Sarah Palin gets a lot of credit for standing up to Big Oil in Alaska, but if she and John McCain win the White House, don’t expect some of her more populist policies to survive the move to Washington.

In her two years as Alaska’s governor, Palin is credited with being tough on big oil, to the benefits of her constituents and bucking her own party.

In late 2007 Palin succeeded in raising the tax on oil companies from 22.5 to 25% of net profits. Alaska also added a clause increasing the tax for each dollar oil goes above $52 a barrel - essentially, a windfall profits tax.

Palin also killed a deal struck between Exxon Mobil, BP, and ConocoPhillips and Alaska’s previous governor to build a natural gas pipeline across the state and into Canada.

Analysts said corruption tainted that deal.

Palin renegotiated a new deal with a Canadian company, TransCanada, to build the $26 billion pipeline, which analysts say - if completed - is better financially for the state.

But analysts - and the McCain campaign itself - are quick to note that Palin will toe the line on the energy policies of her potential boss, who unlike Barack Obama does not favor a windfall profits tax.

Christopher Ruppel, an energy analyst at Execution LLC, a broker and research firm for institutional investors like hedge and mutual funds is more concerned with McCain’s energy policy than Palin’s past spats with the oil industry. "We don’t think she will represent a big change from that."

The McCain campaign, which speaks for Palin, confirmed that stance.

"’The governor supports the campaign’s positions," said Doug Holtz-Eakin, a McCain senior advisor.

Palin certainly has experience in dealing with energy issues in Alaska. But despite her drill baby comments, it’s hard to tell if the oil industry will see her as an ally - a la Dick Cheney who ran Haliburton, an oil services company - or whether her previous tax and pipeline decisions will label her a threat (instant payday loans).

‘It’s mixed, I haven’t picked up a consensus view," said Amy Myers Jaffe, a fellow in energy studies at the James A. Baker III Institute for Public Policy.

Exxon Mobil, which currently has an $800 million lawsuit filed against the state over the revoking of a gas field permit, declined to comment on Palin. Calls to Conoco and BP were not returned. The American Petroleum Institute also declined comment.

Jaffe said Palin shouldn’t get too much credit for raising the oil tax, noting that everyone from Hugo Chavez to the Canadian government hiked taxes as oil prices skyrocketed.

"Even the Bush administration raised royalty fees," she said. "She didn’t do anything everyone else didn’t do."

Other analysts echoed that sentiment.

"When people say ‘I stuck it to the oil companies,’ that is misleading," said Fadel Gheit, a senior energy analyst at Oppenheimer. "She is basically doing what is popular."

The tax may have been popular with Alaska’s voters, but it was not popular within Palin’s own party - many Republican state senators voted against the tax.

Holtz-Eakin, the McCain campaign spokesman, also said Palin’s decision to scrap the pipeline deal highlighted her ability to clean up Washington.

"She threw out the whole thing and redid it, which made sense," he said.

As to whether Palin can bring more experience in energy issues to the White House than her rival Joe Biden can, most analysts didn’t see it that way.

"Biden has extensive experience in dealing with energy and geopolitical issues due to his long record in the Senate," said Execution’s Ruppel. 

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Japan's government said the world's second-largest economy is “weakening,'' language it introduced last month for the first time since the country was in a recession seven years ago.

“The economy has been weakening recently,'' the Cabinet Office said in a statement in Tokyo today. The government cut its assessment of capital spending and imports and said it's watching how global financial-market turmoil might affect Japan.

The economy's longest postwar expansion may be over as rising commodity costs discourage spending at home and the world slowdown reduces demand for exports. The Bank of Japan and central banks in North America and Europe yesterday agreed to pump $180 billion into the global financial system to revive confidence in markets battered by the U.S. banking crisis.

“This uncertainty in financial markets will naturally have an impact on the Japanese economy, which depends on foreign demand,'' Economic and Fiscal Policy Minister Kaoru Yosano told reporters in Tokyo. “The economy will remain weak for a while.''

The Bank of Japan agreed to swap currencies with the Federal Reserve, supplying dollars for the first time after the cost of borrowing in the currency soared to a seven-year high following Lehman Brothers Holdings Inc.'s bankruptcy and the U.S quick payday loans. government's takeover of American International Group Inc.

Central bank Governor Masaaki Shirakawa today said there's no end in sight to the market tumult, even as global shares rallied after the U.S. government said it's planning new laws to halt the credit-market meltdown. Shirakawa this week said risks for Japan's economy have intensified since the crisis deepened.

“Attention should be given to further downside risks that stem from growing financial uncertainty in the U.S. and movement of the stock and foreign-exchange markets,'' the government said in today's report.

The Cabinet Office removed the word “recovery'' from its evaluation of the global economy for the first time since June 2002 and downgraded its view of Europe.

Last month was the first time since May 2001 that the government described Japan's economy as weakening.

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Prices surged by as much as 20 cents a gallon at some Houston-area gas stations as Hurricane Ike bore down on the Gulf coast.

"There are clearly some service stations in the Houston area that have hiked prices by 15 to 20 cents a gallon, there’s no question about that," said AAA spokesman Dan Ronan. "But I think there are a lot of service stations that are being very responsible."

The majority of gas stations in Texas showed only moderate increases, or even decreases, according to the AAA fuel gauge, which bases its data on credit card swipes at some 100,000 gas stations nationwide.

Gasoline prices rose Friday for the third straight day, according to the nationwide survey, as Hurricane Ike’s approach to the Texas Gulf Coast shut oil drilling and refining in the region. The average price of regular unleaded gasoline edged up 0.4 cent to $3.675 a gallon from $3.671 a day earlier, AAA said.

In Texas, where the storm is expected to make landfall late Friday or early Saturday, the average price rose 0.9 cent to $3.546 a gallon.

In three coastal areas that could be affected by the storm, the average price rose 4.4 cents in the Houston area, but was only up 0.2 cent in Galveston and down 0.5 cent in Corpus Christi.

Ronan, who is based in Irving near Dallas, said that Houston-based AAA staffers have reported the 20 cent increases at some gas stations, but they’re in the minority. Likewise, he said the reports of stations running low on gas in coastal Texas are scattered and isolated.

"There have been anecdotal reports about service stations running low on fuel and that’s to be expected," said Ronan guaranteed approval cash advance loans. "The good thing is that it seems as though the state and delivery systems have gotten a lot better since Katrina."

Prices have trended higher in the Midwest and Southeast partly due to production delays caused by Hurricane Gustav, said Tom Kloza from Oil Price Information Service, which provides the data for AAA. He noted that prices are expected to continue rising as Hurricane Ike churns through the Gulf of Mexico.

Nationwide, Alaska and Hawaii remained the two states with gas prices still tracking above $4 a gallon; Alaska at $4.393 and Hawaii at $4.336, AAA said. The cheapest gas continues to be found in New Jersey, where prices averaged $3.40 a gallon.

Gas remains about 10.7%, or 43.9 cents, below the record high average of $4.114 that AAA reported July 17. It’s down 11.2 cents in the past month, but up 86.7 cents from a year ago.

Going forward, Kloza said Friday would be a "wild day" for gas prices, since some refineries - not just in coastal Texas but also inland Louisiana - have shut down in preparation for Hurricane Ike.

He said the nationwide average for gas prices could break the July 17 record as a result of the hurricane, but even if that happens, they would stabilize by October.

Oil prices rose Friday on concern about the storm. Thursday’s $100.87 settlement was the lowest since March 24. 

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Regulators on Friday shut down Silver State Bank, saying the Nevada bank failed because of losses on soured loans, mainly in commercial real estate and land development.

It was the 11th failure this year of a federally insured bank.

Nevada regulators closed Silver State and the Federal Deposit Insurance Corp. was appointed receiver of the bank, based in Henderson, Nev. It had $2 billion in assets and $1.7 billion in deposits as of June 30.

Andrew K. McCain, a son of Republican presidential nominee John McCain, sat on the boards of Silver State Bank and of its parent, Silver State Bancorp, starting in February but resigned in July citing "personal reasons," corporate filings with the Securities and Exchange Commission show. Andrew McCain also was a member of the bank’s audit committee, responsible for oversight of the company’s accounting.

The younger McCain, who is the chief financial officer of Hensley & Co., the beer distributorship of which Cindy McCain is chairwoman, is the Arizona senator’s adopted son from his first marriage.

Andrew McCain’s position on the Silver State board and departure were first reported Friday by The Wall Street Journal online.

Silver State Bank ran into difficulty because of a substantial amount of "poor-quality loans primarily related to real estate development" in southern Nevada and other distressed markets, FDIC spokesman David Barr said.

"When the housing market slowed down, people who bought raw land to build new homes didn’t need that land so they couldn’t do anything with it and repay their loans. So those loans went bad," Barr said.

Silver State Bancorp recently reported a net loss for the second quarter of $73.2 million, or $4.84 a share, compared with net profit of $6.2 million, or 44 cents a share, in the same period last year.

Construction and development loans have been the fastest-growing category of troubled loans for U.S. banks, and many banks have heavy concentrations of them in their lending portfolios, according to the FDIC. Some small banks are considered especially vulnerable. Delinquent loan payments and defaults by commercial and residential developers have surged to the highest levels since the early 1990s - the latter part of the savings and loan crisis.

The FDIC said Silver State Bank’s insured deposits will be assumed by Nevada State Bank of Las Vegas. Its branches will reopen Monday as offices of Nevada State Bank in Nevada and National Bank of Arizona in Arizona.

The agency said depositors of Silver State Bank will continue to have full access to their deposits.

The 11 failures so far this year compare with three for all of 2007, and federal banking officials have said that more banks are in danger of collapse.

Silver State Bank has operated 13 branches in the greater Las Vegas area and four in the greater Phoenix-Scottsdale area of Arizona as well as loan offices in Nevada, Utah, Colorado, Washington, Oregon, California and Florida.

The FDIC estimated its resolution will cost the deposit insurance fund between $450 million and $550 million.

Regular deposit accounts are insured up to $100,000.

There were about $20 million in uninsured deposits held in roughly 500 accounts at Silver State that potentially exceeded the insurance limit, the FDIC said.

Concern has been growing over the solvency of some banks amid the housing slump and the steep slide in the mortgage market cash till payday. The pressures of tighter credit, tumbling home prices and rising foreclosures have been battering many banks, large and small, across the nation.

The largest bank failure by far this year has been that of savings and loan IndyMac Bank, which was seized by regulators on July 11 with about $32 billion in assets and deposits of $19 billion.

The seizure of Pasadena, Calif.-based IndyMac, which was the largest regulated thrift to fail in the United States, prompted hundreds of angry customers to line up for hours in Southern California to demand their money. IndyMac also was the second-largest financial institution to close in U.S. history, after Continental Illinois National Bank in 1984.

The FDIC has been operating the bank, now called IndyMac Federal Bank, under a conservatorship.

The FDIC plans to raise insurance premiums paid by banks and thrifts to replenish its reserve fund after paying out billions of dollars to depositors at IndyMac. The fund, currently at $45 billion, is expected to take a hit from IndyMac of $4 billion to $8 billion.

Federal officials expect turbulence in the banking industry to continue well into next year, and more banks to appear on the FDIC’s internal list of troubled institutions.

Of the 8,500 or so FDIC-insured banks in the country, 117 were considered to be in trouble in the second quarter — the highest level in about five years and up from 90 in the first quarter. The agency doesn’t disclose the banks’ names.

——

Silver State Bank customers with accounts exceeding $100,000 can contact the FDIC at 1-800-523-8177 to set up an appointment to discuss their deposits. 

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