NEW YORK - August 11, 2008 - The failure of IndyMac Bancorp, Inc. and seven other banks this year may erase as much as 17 percent of a government insurance fund and raise premiums for all banks, from Franklin National of Minneapolis to Bank of America Corp.

The closing of IndyMac in July, the third-biggest U.S. bank failure, may cost the fund $4 billion to $8 billion, in addition to an estimated $1.16 billion for seven closures through Aug. 1. Premiums for deposit insurance will likely rise, said FDIC Chairman Sheila Bair in a July 30 interview. A decision on the increase is due by the fourth quarter.

“It's going to be a bloody, expensive mess for the banking industry,” said Bert Ely, president of Ely & Co. Inc., a bank consulting firm based in Alexandria, Virginia. “Healthy banks are paying for the mistakes made by failed banks.”