The government bailout plan, if and when it happens, will come too late to save Washington Mutual, which Thursday collapsed under the weight...

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The government bailout plan, if and when it happens, will come too late to save Washington Mutual, which Thursday collapsed under the weight of losses on mortgage-backed securities.

Still, failures by depositary institutions since the credit crisis began last summer don’t come close to historic levels, notes Leuthold Group analyst Eric Bjorgen. “It’s not going to play out exactly as it has in the past, but financial markets create crisis and survive,” he says. “Each one is terrifying.”

More bank failures could be in store, even if the government does remove toxic assets from banks’ books. The Federal Deposit Insurance Corp.’s list of “problem banks,” which is not made public for fear of scaring depositors away, rose to 117 institutions at the end of the second quarter from 90 at the end of the first quarter. Institutional Risk Analytics expects another 110 bank failures by July 2009.

Global Insight economist Brian Bethune says the government could slow the tide, but says more failures are inevitable. He’s troubled that even well-managed, diversified institutions have failed.

The more banks that fail, the fewer choices consumers have, which could mean higher fees for mortgages and credit cards and other loans, Bethune says. “Maybe there is some short-term pain to deal with stabilization of the markets,” he says. “But if we don’t forestall the process that seems to now be out of control, you have this huge reconcentration of the industry and everybody will be paying more.”