BankUnited Fails, Will Cost FDIC $4.9 BILLION

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After several tense days, during which Florida bank BankUnited scrambled to raise capital or sell itself, it has been shut down, put into receivership and sold to investors that include Wilbur Ross and the Carlyle Group.

It is the biggest bank failure of 2009 and it will cost the stretched FDIC $4.9 billion.

The FDIC’s full announcement is here.

So how does the biggest bank failure since IndyMac square with what’s putatively a stabilizing or “healing” banking sector, with a LIBOR rate that’s returned to pre-crisis levels? Easy. The government is backing the entire thing up, and even with this failure (which the FDIC calls the “least costly” approach), bank investors are being ring-fenced and backstopped to all get out.

When the training wheels come off the sector, then we can get some clue about what’s stabilizing, but in the meantime, events like these aren’t very promising.

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