The slow death of American banks continues as another major regional US bank is on the verge of collapse following a nasty bout of closures on Friday night.

Late last week seven US regional or small local banks failed, six of them in Georgia. That’s the second time in a month that seven banks have been closed in one go; the last was at the start of July and most of the failures were in one linked group of Illinois banking companies. This time the six in Georgia were all in the one group; another worrying example of the domino effect in some areas of the US. So far 64 banks have failed in 2009.

Guaranty Financial Group, the second largest listed bank in Texas, is the latest casualty; warning that it didn’t have enough capital due to huge losses. It has around 150 branches in Texas and California and had assets of $US16 billion at the end of March. If it fails it would make it the largest US bank to collapse so far this year, but less than half the size of the IndyMac, which was the second largest to go under last year.

In its SEC filing, Guaranty said it has been unable to obtain new capital from shareholders, and believes it will be ineligible for help from US regulators. The company has not filed official results since the third quarter of 2008. It has estimated it lost $US444 million in all of 2008 and another $US256 million in the first quarter of 2009.

Guaranty also revealed possible impairment charges to assets and goodwill totalling more than $US1.55 billion for the March quarter. No June quarter figures were given. It said it does not expect to raise enough capital to comply with an April cease-and-desist order from the federal Office of Thrift Supervision (OTS). That has stopped it writing new business.

It said losses and write-downs have left it “critically undercapitalized,” with negative capital ratios and has agreed to an OTS demand for the appointment of the Federal Deposit Insurance Corp as a receiver or conservator. That appointment has not yet happened, but the OTS is exercising “a significant degree of control” over what had been functions of the board of directors, Guaranty said. That’s a step away from being closed.

If Guaranty goes under this week, it will take the number of failures so far in July to 24, which is almost equal to the 25 for all of 2008.

Meanwhile another basketcase, Citigroup Inc, is about to get a significant new shareholder in the US Government and a new look board that includes former Westpac CEO Bob Joss.

Citi, which has split itself up into a good bank and a bad bank (with assets and businesses that it wants to sell), said on Friday it has named three new outside directors and established more risk-oversight measures, continuing a management revamp on the heels of completing the $US12.5 billion convertible stock transaction with the US Government.

The move is the bank’s latest attempt to address the fallout from billion of dollars of losses and several government rescues. Following the conversion of the stock, the American taxpayer is now the largest shareholder in Citigroup owning a stake of around 34%. We know Citi is on a list of “about 25 banks and financial groups deemed too big to fail by American regulators, according to US Federal Reserve Chairman Ben Bernanke; the Government wouldn’t have bailed it out if it wasn’t.

He told Congress on Friday that about 25 financial companies may be deemed too big to fail and are being subjected to additional oversight by the central bank under the Obama administration’s proposed regulatory plan.

During a House Financial Services Committee hearing yesterday Bernanke said that the exact number of 25 banks is a “very rough guess” and “virtually all of those firms” are already subject to umbrella supervision by the central bank. Bernanke didn’t identify any of the companies.

However thousands of small regional and local banks that are still under pressure would not be on the Federal Reserve’s “protected” list.