FDIC

FDIC “Tells Banks” To Quit Cooking The Books! ROFL!

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Oh My God.

I write two Tickers on The FDIC and banks’ refusal to take their marks, and gee, you’d think someone over there might have read them!

SAN FRANCISCO (MarketWatch) — The Federal Deposit Insurance Corp. said late Monday that banks should recognize losses on home loans promptly and warned that failure to do so could delay efforts to mitigate the financial impact.

Institutions must analyze the collectibility of the loans they hold for investment at least every quarter, the FDIC said in a statement on its Web site.

Banks then have to keep an appropriate allowance for loan and lease losses, covering estimated credit losses on individually evaluated loans that are deemed to be impaired, and on groups of loans with similar risk characteristics, the regulator said.

kittylaugh

That’s just too much.

Let me put it in simple English, Ms. Bair.  Here ‘ya go, in formal letter format:

From: The Tickerguy
To: Ms. Sheila Bair, FDIC Chairwoman
Regarding: Your FDIC Statement Nonsense

Dear Ms. Bair;

You know full well that essentially every bank in the nation, including the largest ones that went through the so-called “Stress Tests”, have been intentionally mis-marking loans “held for investment” at or near par even when there is essentially no chance these loans will be satisfied in full, and that this practice has been going on since the housing crisis began.

These include defaulted loans; there are literally millions of Americans that are living rent-free, right now, because their lender has sent out a NOD and then done nothing else, despite never paying another penny toward their mortgage.

Why is the bank doing this?

That’s not hard to figure out.

If the banks foreclose and sell the property then the sale price becomes the indisputable mark to market on that paper, and avoiding that mark is absolutely critical or these banks would be forced to recognize their own insolvency.

Thus we have people who live in their houses for more than a year with nothing more than a NOD in the mailbox, we have people who have had their homes foreclosed upon and then the bank has refused to perfect title (leading to stories in the media of foreclosed owners being chased for neglected upkeep, code violations and similar) and we have banks that have made a practice of bidding themselves in the foreclosure auction for the full mortgage amount, which of course is dramatically more than anyone else will pay for it.  They wind up “owning” their own foreclosure but the paper remains marked at the full mortgage amount, since that’s what they bid, even though there’s not a snowball’s chance in Hell that any real buyer would pay anything close to that amount (evidenced by the lack of bids at or above that amount at the auction!)

I have repeatedly stated (and shown my work) that there was likely $3 trillion in total “bad paper” in the banking system in residential mortgages alone.

We know for a fact that recovery is running in the neighborhood of 40% (including both first and second lines) from those loans that have been followed through from default to recovery. We know for a fact that bid lists of defaulted second lines circulate all the time and trade literally at a few pennies on the dollar; thus, a second line behind a defaulted first loan is essentially worth zero.

We also know that about $1 trillion in bad loans have been written down thus far, which means there is two trillion more to go, and then we get to talk about commercial real estate where “extend and pretend” has even become part of the vernacular of the trade!

Ms. Bair, this sort of misdirection is the worst sort of tripe.  You have two banks with self-identified negative Tier Capital Ratios, a circumstance that is never supposed to happen, but it has.

You have a third identified bank that had its last real chance for a rescue evaporate Friday and it reported, at the same time, a quarterly loss of more than five times its market capitalization.

All three of these institutions should have been seized LAST FRIDAY, but there’s a problem with doing that, isn’t there Ms. Bair?  It’s this table here showing how much money you have left in your insurance fund, and the average loss for a seized institution:

The last line in particular shows a paltry $8.26 billion dollars left.  Now since the FDIC thinks its cute to be somewhat secret about exactly how much money it has (and what of that is committed) we don’t have hard numbers, but this was a “best guess” sent to me the other night – and it looks about right.

So exactly how do you intend to close those three (and the other few hundred similarly-situated) banks and make sure Granny gets her $20,000 life savings back?  With your good looks?  Yes, I know, you have a potential $500 billion credit line from Treasury, but that line isn’t funded and in order to do so Turbo Tax Timmy would have to go auction off another $500 billion in Treasuries, and there might be a tiny problem with doing that, given the insane rate of issuance already taking place.

Read moreFDIC “Tells Banks” To Quit Cooking The Books! ROFL!

Five More US Bank Failures Bring 2009 Tally to 69

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Aug. 1 (Bloomberg) — Banks in New Jersey, Ohio, Florida, Oklahoma and Illinois were shut, pushing the toll of failed U.S. lenders to 69 this year, amid a 26-year high in unemployment and the worst economic slump since the Great Depression.

The Federal Deposit Insurance Corp. was named the receiver of the five banks, the regulator said yesterday in e-mailed statements. The seized banks, with total assets of $2.69 billion and deposits of $2.56 billion, will cost the FDIC’s insurance fund about $911.7 million.

Mutual Bank of Harvey, Illinois, was the biggest of yesterday’s failures, with $1.6 billion in assets and the same amount in deposits. Peoples Community Bank in West Chester, Ohio, was second, with $705.8 million in assets and $598.2 million in deposits. Also shuttered were New Jersey’s First BankAmericano, Integrity Bank in Florida and First State Bank of Altus, Oklahoma.

Read moreFive More US Bank Failures Bring 2009 Tally to 69

Regulators seize North Carolina, Georgia and Kansas Bank; So far 40 bank failures this year

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June 21 (Bloomberg) — Banks in North Carolina, Georgia and Kansas with combined assets of $1.5 billion were seized by regulators last week, costing the U.S. insurance fund $363 million and pushing this year’s tally of failures to 40.

Southern Community Bank of Fayetteville, Georgia, and 111- year-old Cooperative Bank in Wilmington, North Carolina, were closed June 19 by state officials, and the Office of the Comptroller of the Currency shut First National Bank of Anthony, Kansas. The Federal Deposit Insurance Corp. was named receiver.

Southern Community’s $307 million in deposits were bought by United Community Bank of Blairsville, Georgia, and most of Cooperative’s $774 million in deposits went to First Bank in Troy, North Carolina, the FDIC said. Bank of Kansas in South Hutchinson acquired First Bank’s $142.5 million in deposits. The acquiring banks are assuming a combined $1.47 billion in assets, mostly loans, and signed agreements with the FDIC to share more than 80 percent losses with the government.

Read moreRegulators seize North Carolina, Georgia and Kansas Bank; So far 40 bank failures this year

On the Edge with Max Keiser (06/05/09)

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Related articles:
– Geithner tries to assure Chinese investors, draws laughter from the audience
– German Chancellor Angela Merkel Blasts ‘Powers of the Fed’

1 of 3:

Read moreOn the Edge with Max Keiser (06/05/09)

FDIC: Troubled Bank Loans Hit a Record High

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money-banks

OVERALL loan quality at American banks is the worst in at least a quarter century, and the quality of loans is deteriorating at the fastest pace ever, according to statistics released this week by the Federal Deposit Insurance Corporation.

The report highlighted that even as the government and major banks have scrambled to deal with the impaired securities the banks own, the institutions have been plagued by an unprecedented volume of old-fashioned loans going bad.

Of the entire book of loans and leases at all banks — totaling $7.7 trillion at the end of March — 7.75 percent were showing some sign of distress, the F.D.I.C. reported. That was up from 6.9 percent at the end of 2008 and from 4.1 percent a year earlier. It also exceeded the previous high of 7.26 percent set in 1990 and 1991, during the last crisis in American banking.

Read moreFDIC: Troubled Bank Loans Hit a Record High

Bill Seeks to Let FDIC Borrow up to $500 Billion

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WASHINGTON — Senate Banking Committee Chairman Christopher Dodd is moving to allow the Federal Deposit Insurance Corp. to temporarily borrow as much as $500 billion from the Treasury Department.

The Connecticut Democrat’s effort — which comes in response to urging from FDIC Chairman Sheila Bair, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner — would give the FDIC access to more money to rebuild its fund that insures consumers’ deposits, which have been hard hit by a string of bank failures.

Last week, the FDIC proposed raising fees on banks in order to build up its deposit insurance fund, which had just $19 billion at the end of 2008. That idea provoked protests from banks, which said such a burden would worsen their already shaken condition. The Dodd bill, if it becomes law, would represent an alternative source of funding.

Mr. Dodd’s bill could also give the FDIC more firepower to help address “systemic risks” in the economy, potentially creating another source of bailout funds in addition to the $700 billion already appropriated by Congress.

Read moreBill Seeks to Let FDIC Borrow up to $500 Billion

Bair Says Insurance Fund Could Be Insolvent This Year

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March 4 (Bloomberg) — Federal Deposit Insurance Corp. Chairman Sheila Bair said the fund it uses to protect customer deposits at U.S. banks could dry up amid a surge in bank failures, as she responded to an industry outcry against new fees approved by the agency.

“Without these assessments, the deposit insurance fund could become insolvent this year,” Bair wrote in a March 2 letter to the industry. U.S. community banks plan to flood the FDIC with about 5,000 letters in protest of the fees, according to a trade group.

“A large number” of bank failures may occur through 2010 because of “rapidly deteriorating economic conditions,” Bair said in the letter. “Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative.”

Read moreBair Says Insurance Fund Could Be Insolvent This Year

U.S. Taxpayers Risk $9.7 Trillion on Bailout Programs

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Feb. 9 (Bloomberg) — The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages.

The Federal Reserve, Treasury Department and Federal Deposit Insurance Corporation have lent or spent almost $3 trillion over the past two years and pledged up to $5.7 trillion more. The Senate is to vote this week on an economic-stimulus measure of at least $780 billion. It would need to be reconciled with an $819 billion plan the House approved last month.

Only the stimulus bill to be approved this week, the $700 billion Troubled Asset Relief Program passed four months ago and $168 billion in tax cuts and rebates enacted in 2008 have been voted on by lawmakers. The remaining $8 trillion is in lending programs and guarantees, almost all under the Fed and FDIC. Recipients’ names have not been disclosed.

“We’ve seen money go out the back door of this government unlike any time in the history of our country,” Senator Byron Dorgan, a North Dakota Democrat, said on the Senate floor Feb. 3. “Nobody knows what went out of the Federal Reserve Board, to whom and for what purpose. How much from the FDIC? How much from TARP? When? Why?”

Related article:
Federal Reserve Refuses to Disclose Recipients of $2 Trillion (Bloomberg)

Financial Rescue

The pledges, amounting to almost two-thirds of the value of everything produced in the U.S. last year, are intended to rescue the financial system after the credit markets seized up about 18 months ago. The promises are composed of about $1 trillion in stimulus packages, around $3 trillion in lending and spending and $5.7 trillion in agreements to provide aid. The total already tapped has decreased about 1 percent since November, mostly because foreign central banks are using fewer dollars in currency-exchange agreements called swaps.

Federal Reserve lending to banks peaked at a record $2.3 trillion in December, dropping to $1.83 trillion by last week. The Fed balance sheet is still more than double the $880 billion it was in the week before Sept. 17 when it agreed to accept lower-quality collateral.

Read moreU.S. Taxpayers Risk $9.7 Trillion on Bailout Programs

Bank of America Receives $138 Billion of Rescue Funds

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– Paul Craig Roberts On The U.S. Leadership: “They Are Criminals” – The Potential Here Is Far Worse Than The Great Depression:
Paul Craig Roberts served as an Assistant Secretary of the Treasury in the Reagan Administration earning fame as the “Father of Reaganomics”. He is a former editor and columnist for the Wall Street Journal, Business Week, and Scripps Howard News Service. In 1992 he received the Warren Brookes Award for Excellence in Journalism. In 1993 the Forbes Media Guide ranked him as one of the top seven journalists in the United States.

– Paul Craig Roberts: Our Collapsing Economy:
According to the methodology used in 1980, the US unemployment rate in December 2008 reached 17.5 percent.
Yes, “our” government lies to us about economic statistics, just as it lies to us about “terrorists,” “weapons of mass destruction,” “building freedom and democracy in the Middle East,” and the Israeli-Palestinian conflict.
An objective person would be hard pressed to find any statement made by the US government that is reliable.

Jan. 16 (Bloomberg) — Bank of America Corp., the largest U.S. bank by assets, received a $138 billion emergency lifeline from the government to support its acquisition of Merrill Lynch & Co. and prevent the global financial crisis from deepening.

The U.S. will invest $20 billion in Bank of America and guarantee $118 billion of assets “as part of its commitment to support financial-market stability,” the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement shortly after midnight in Washington.

The bailout raises doubts about the future of Chief Executive Officer Kenneth D. Lewis, who engineered the takeovers of New York-based brokerage Merrill Lynch and mortgage lender Countrywide Financial Corp. during the worst market slump since the Great Depression. Bank of America has plummeted 75 percent in New York trading since the Merrill acquisition was announced in September, falling to the lowest level in almost two decades.

“This thing is unraveling so fast Lewis may know his job is lost,” said Paul Miller, an analyst at Friedman Billings Ramsey Group Inc. in Arlington, Virginia, who has an “underperform” rating on Bank of America. The management team has “lost credibility” after spending more than $20 billion in the past year to buy unprofitable Merrill and ailing mortgage lender Countrywide Financial Corp. of Calabasas, California, he said.

(The Bank of America did not ‘want’ to buy Merrill. It had to buy Merrill. This is all part of a bigger plan to loot US taxpayers’, destroy the middle class, the dollar and the economy and create the greatest depression ever.)

Read moreBank of America Receives $138 Billion of Rescue Funds

Two More Banks Bite the Dust

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NEW YORK (AP) – Regulators on Friday closed Haven Trust Bank in Georgia and Sanderson State Bank in Texas, bringing to 25 the number of U.S. bank failures this year.

The Federal Deposit Insurance Corp. was appointed receiver of Haven Trust Bank, based in Duluth, Ga., and Sanderson State, with one office in Sanderson, Texas.

Haven Trust had assets of $572 million and deposits of $515 million as of Dec. 8. Sanderson State had assets of $37 million and deposits of $27.9 million as of Dec. 3.

Read moreTwo More Banks Bite the Dust

First Georgia Community Bank Closed, Boosting 2008 Toll to 23

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Dec. 6 (Bloomberg) — First Georgia Community Bank of Jackson, with four offices southeast of Atlanta, was closed by regulators, becoming the 23rd U.S. bank failure this year amid losses tied to record mortgage delinquencies and foreclosures.

First Georgia, with $237.5 million in assets and $197.4 million in deposits, was shut by the Georgia Department of Banking and Finance yesterday and the Federal Deposit Insurance Corp. was named receiver. United Bank of Zebulon, Georgia, will assume First Georgia’s deposits and open the failed bank’s offices today as United branches, the FDIC said.

“Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage,” the FDIC said in an e-mailed statement.

Regulators have closed the most banks in 15 years, with the collapses of Washington Mutual Inc. and IndyMac Bancorp Inc. among the biggest in history. November was the busiest month in more than a decade, with five institutions shut, matching the pace in July 1994, according to the FDIC.

Read moreFirst Georgia Community Bank Closed, Boosting 2008 Toll to 23

Colossal Financial Collapse: The Truth behind the Citigroup Bank “Nationalization”

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On Friday November 21, the world came within a hair’s breadth of the most colossal financial collapse in history according to bankers on the inside of events with whom we have contact. The trigger was the bank which only two years ago was America’s largest, Citigroup. The size of the US Government de facto nationalization of the $2 trillion banking institution is an indication of shocks yet to come in other major US and perhaps European banks thought to be ‘too big to fail.’

The clumsy way in which US Treasury Secretary Henry Paulson, himself not a banker but a Wall Street ‘investment banker’, whose experience has been in the quite different world of buying and selling stocks or bonds or underwriting and selling same, has handled the unfolding crisis has been worse than incompetent. It has made a grave situation into a globally alarming one.

‘Spitting into the wind’

A case in point is the secretive manner in which Paulson has used the $700 billion in taxpayer funds voted him by a labile Congress in September. Early on, Paulson put $125 billion in the nine largest banks, including $10 billion for his old firm, Goldman Sachs. However, if we compare the value of the equity share that $125 billion bought with the market price of those banks’ stock, US taxpayers have paid $125 billion for bank stock that a private investor could have bought for $62.5 billion, according to a detailed analysis from Ron W. Bloom, economist with the US United Steelworkers union, whose members as well as pension fund face devastating losses were GM to fail.

Read moreColossal Financial Collapse: The Truth behind the Citigroup Bank “Nationalization”

Fed Pledges Top $7.4 Trillion to Ease Frozen Credit

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We will see hyperinflation, the dollar will fail and then the US will fail.
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Henry Paulson, U.S. treasury secretary, left, and Ben S. Bernanke, chairman of the U.S. Federal Reserve, look through their notes before a hearing of the House Financial Services Committee in Washington, Nov. 18, 2008. Photographer: Jim Lo Scalzo/Bloomberg News

Nov. 24 (Bloomberg) — The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago.

The unprecedented pledge of funds includes $2.8 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the only plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.

When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. Now, as regulators commit far more money while refusing to disclose loan recipients or reveal the collateral they are taking in return, some Congress members are calling for the Fed to be reined in.

“Whether it’s lending or spending, it’s tax dollars that are going out the window and we end up holding collateral we don’t know anything about,” said Congressman Scott Garrett, a New Jersey Republican who serves on the House Financial Services Committee. “The time has come that we consider what sort of limitations we should be placing on the Fed so that authority returns to elected officials as opposed to appointed ones.”

Read moreFed Pledges Top $7.4 Trillion to Ease Frozen Credit

Downey Seized, Sold to U.S. Bancorp as Mortgage Fallout Spreads

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Nov. 22 (Bloomberg) — Seizure and sale of Downey Financial Corp. and two smaller lenders may cost the FDIC more than $2 billion as foreclosures rise and home prices extend declines in the worst housing slump since the Great Depression.

U.S. Bancorp acquired Downey and smaller PFF Bank & Trust, California thrifts crippled by bad mortgages, yesterday in a deal brokered by the Federal Deposit Insurance Corp. Community Bank of Loganville, Georgia, was also closed and its $611.4 million of deposits taken over by Bank of Essex in Tappahannock, Virginia.

Regulators this year have closed the most banks since 1993 as mortgage defaults and tightening credit froze markets. The collapse of IndyMac Bancorp Inc. was among the biggest in history, costing the FDIC $8.9 billion. The agency expects Downey’s demise to deplete its Deposit Insurance Fund by $1.4 billion, with PFF costing $700 million and Community $240 million.

Read moreDowney Seized, Sold to U.S. Bancorp as Mortgage Fallout Spreads

US will guarantee up to $1.4T in bank debt

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WASHINGTON: Federal regulators will guarantee as much as $1.4 trillion in U.S. banks’ debt in a bid to get the distressed financial system pumping again. They also took steps to make it easier for private investors to buy failed banks seized by the government.

Against a bleak economic backdrop, news that New York Federal Reserve President Timothy Geithner is President-elect Barack Obama’s choice for Treasury secretary gave battered Wall Street a shot in the arm Friday. The Dow Jones industrials zoomed nearly 500 points as stocks erased roughly half the losses racked up the prior two days. Investors have been seeking a clear message from Obama on who will lead his economic brain trust during the financial crisis.

Directors of the Federal Deposit Insurance Corp. voted to approve the bank-debt guarantee program, which is part of the government’s financial rescue package. The FDIC program is meant to break the crippling logjam in bank-to-bank lending by guaranteeing the new debt in the event of payment default by the borrowing bank.

Some analysts have said that freeing up bank-to-bank lending with the guarantees won’t necessarily translate into a thaw in broader lending as banks are still wary of making loans to businesses and consumers.

Read moreUS will guarantee up to $1.4T in bank debt

Freddie Mac says it is worth less than zero

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Freddie Mac, the US mortgage giant, yesterday admitted that it is so overwhelmed by its liabilities that without government backing, it would no longer be a viable business. The company said that it had lost $13.7 billion (£9.2 billion) in the third quarter of the year and begged for $13.8 billion from the US Treasury in rescue funds.

The plea for the multibillion-dollar cash injection came just days after Fannie Mae reported a record $29 billion loss for the period and gave warning that it was haemorrhaging cash so rapidly, it might need federal funds by the end of the year to survive.

The US Treasury has been overwhelmed by requests for federal aid in the past few weeks. In addition to setting up a $700 billion bailout fund to take equity stakes in troubled banks, the Treasury is being pressed by the car industry for a cash bailout. Yesterday, Neel Kashkari, the Assistant Treasury Secretary, said that he was under pressure to consider ways of using the $700 billion bailout to stem a surge in foreclosures across the US.

The Freddie Mac request for funds would see the drawing down of part of the $100 billion in emergency reserves that were committed by the Treasury in September.

Read moreFreddie Mac says it is worth less than zero

Jobless ranks hit 10 million, most in 25 years; unemployment hits 14-year high

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Sunny Yang, left, a masters degree student from Shanghai and employed banker in New York City, speaks with World Bank representative Roberto Amorosino about opportunities for unemployed friends of his during a career fair at Columbia Univeristy Friday, Nov. 7, 2008 in New York. The U.S. unemployment rate bolted to a 14-year high of 6.5 percent in October as another 240,000 jobs were cut, far worse than economists expected and stark proof the economy is deteriorating at an alarmingly rapid pace. (AP Photo/Julie Jacobson)

WASHINGTON (AP) — The nation’s jobless ranks zoomed past 10 million last month, the most in a quarter-century, as piles of pink slips shut factory gates and office doors to 240,000 more Americans with the holidays nearing. Politicians and economists agreed on a painful bottom line: It’s only going to get worse.

The unemployment rate soared to a 14-year high of 6.5 percent, the government said Friday, up from 6.1 percent just a month earlier. And there was more grim news from U.S. automakers: Ford Motor Co. and General Motors Corp., American giants struggling to survive, each reported big losses and figured to be announcing even more job cuts before long.

Regulators, meanwhile, shut down Houston-based Franklin Bank and Security Pacific Bank in Los Angeles on Friday, bringing the number of failures of federally insured banks this year to 19.

The Federal Deposit Insurance Corp. was appointed receiver of Franklin Bank, which had $5.1 billion in assets and $3.7 billion in deposits as of Sept. 30, and of Security Pacific Bank, with $561.1 million in assets and $450.1 million in deposits as of Oct. 17.

Read moreJobless ranks hit 10 million, most in 25 years; unemployment hits 14-year high

Bank Failure: Security Pacific Bank seized by FDIC

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SAN FRANCISCO (MarketWatch) — The Federal Deposit Insurance Corp. and state regulators seized Los Angeles-based Security Pacific Bank late Friday — one of two banks to fail that day and the 19th to fail so far this year.

Pacific Western Bank, also based in Los Angeles, will assume all of the deposits of Security Pacific, the FDIC said in a statement. Also on Friday, Houston-based Franklin Bank SSB (FBTX:Franklin Bank Corporation was closed by regulators. See full story.

The four branches of Security Pacific will reopen on Monday as branches of Pacific Western. Depositors of the failed bank will automatically become depositors of Pacific Western.

Deposits will continue to be insured by the FDIC. As of Oct. 17, Security Pacific had total assets of $561.1 million and total deposits of $450.1 million.

Read moreBank Failure: Security Pacific Bank seized by FDIC

Florida’s Freedom Bank Is 17th in U.S. to Be Closed This Year

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Nov. 1 (Bloomberg) — Freedom Bank of Bradenton, Florida, became the 17th U.S. bank seized by regulators this year as the deepest housing slump since the Great Depression triggers record foreclosures and mounting losses.

Freedom, with $287 million in assets and $254 million in deposits, was shut yesterday by the Florida Office of Financial Regulation and the Federal Deposit Insurance Corp. was named receiver. Fifth Third Bancorp of Cincinnati will assume the deposits and buy $36 million of assets, the FIDC said. Freedom’s four offices will open Nov. 3 as Fifth Third branches.

Read moreFlorida’s Freedom Bank Is 17th in U.S. to Be Closed This Year

Georgia’s Alpha Bank & Trust Seized as U.S. Closings Rise to 16

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Oct. 25 (Bloomberg) — Alpha Bank & Trust in Alpharetta, Georgia, with $346 million in deposits, was seized by regulators and closed as the collapse of the housing market and loan defaults claimed a 16th U.S. bank this year.

Alpha, with $354 million in assets, was shut by the Georgia Department of Banking and Finance, and the Federal Deposit Insurance Corp. sold the deposits to Stearns Bank N.A., of St. Cloud, Minnesota. Alpha’s two offices north of Atlanta will open on Oct. 27 as branches of Stearns Bank, the FDIC said yesterday.

Regulators have closed the most banks in 15 years, and the collapses of Washington Mutual Inc. and IndyMac Bancorp Inc. were among the biggest in history. About 4.4 percent of Alpha’s assets were defaulted real-estate loans it took back on its balance sheet, quadruple the total for most U.S. banks, based on data compiled by Charlottesville, Virginia-based SNL Financial.

Read moreGeorgia’s Alpha Bank & Trust Seized as U.S. Closings Rise to 16

Merrill Chief Thain Expects Thousands of Job Cuts

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Oct. 20 (Bloomberg) — Merrill Lynch & Co. Chief Executive Officer John Thain said he expects “thousands” of job losses from the bank’s $50 billion takeover by Bank of America Corp.

Most of the cuts will fall in information technology, operations and “corporate functions,” Thain, 53, said in a Bloomberg Television interview in Dubai today. Jobs in the fixed income and commodities divisions won’t be eliminated after the deal, he said.

“We haven’t mapped it out in terms of actual number of people, but we are committed to saving $7 billion across the combined platforms, and that will be a challenge,” Thain said. “Between our two companies it will be clearly thousands of jobs.”

Read moreMerrill Chief Thain Expects Thousands of Job Cuts

Feds investigate Washington Mutual failure

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A sign at a Washington Mutual Bank (WaMu) branch is shown in San Francisco, California September 26, 2008. REUTERS/Robert Galbraith

NEW YORK (Reuters) – Federal investigators have opened an investigation into the collapse of Washington Mutual Inc, the largest U.S. banking failure.

Jeffrey Sullivan, U.S. attorney for the western district of Washington, said in a statement on Wednesday that he has set up a task force that includes investigators from the FBI, the U.S. Securities and Exchange Commission, the Federal Deposit Insurance Corp and the Internal Revenue Service’s criminal investigations unit.

“Given the significant losses to investors, employees and our community, it is fully appropriate that we scrutinize the activities of the bank, its leaders and others to determine if any federal laws were violated,” Sullivan said in a statement. He said the probe comes on the heels of “intense public interest in the failure of Washington Mutual.”

Read moreFeds investigate Washington Mutual failure

Smaller Banks Resist Federal Cash Infusions

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Community banking executives around the country responded with anger yesterday to the Bush administration’s strategy of investing $250 billion in financial firms, saying they don’t need the money, resent the intrusion and feel it’s unfair to rescue companies from their own mistakes.

But regulators said some banks will be pressed to take the taxpayer dollars anyway. Others banks judged too sick to save will be allowed to fail.

The government also said yesterday that it will guarantee up to $1.4 trillion of private investment in banks. The combination of public and private investment is intended to refill coffers emptied by losses on real estate lending. With the additional money, the government expects, banks would be able to start making additional loans, boosting the economy.

Read moreSmaller Banks Resist Federal Cash Infusions

U.S. Is Investing $250 Billion in Banks

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Treasury Chief Says Banks Must Deploy New Capital


Treasury Secretary Henry M. Paulson Jr., speaking in Washington on Tuesday morning, described the government’s bailout as “extensive, powerful and transformative.” The Federal Reserve chairman, Ben S. Bernanke, is at right.

WASHINGTON – Describing the government’s financial bailout plan as “extensive, powerful and transformative,” Treasury Secretary Henry M. Paulson Jr. said on Tuesday that the injection of $250 billion into the nation’s banks was needed to restore confidence and avoid a collapse of the financial system.

Speaking shortly after President Bush used similar terms to describe the proposal, Mr. Paulson said the Treasury would make $250 billion available to banks to help recapitalize those banks and to get them lending again, among themselves and to businesses and consumers.

“The needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it,” Mr. Paulson said, who offered some details of the plan along with the Federal Reserve chairman, Ben S. Bernanke, and the chairman of the Federal Deposit Insurance Corporation, Sheila C. Bair.

With the proposal, the United States follows similar plans announced Monday across Europe – almost all intended to inject money into the banks and unfreeze the credit markets. Markets around the world have rebounded on news of the coordinated efforts. The Dow Jones industrial average gained 936 points, or 11 percent on Monday, the largest single-day gain in the American stock market since the 1930s, and gained more than 300 points more in the opening minutes of trading on Tuesday. European markets were up at least 5 percent on Tuesday after rising nearing 10 percent Monday.

Read moreU.S. Is Investing $250 Billion in Banks

Two banks fold, bringing total to 15 failures this year

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SAN FRANCISCO (MarketWatch) — Northville, Mich.-based Main Street Bank and Eldred, Ill.-based Meridian Bank became the latest victims of the ongoing financial crisis on Friday, when they folded and their deposits were transferred by the Federal Deposit Insurance Corp.

The closures are the 14th and 15th bank failures so far this year.

The FDIC said in a prepared statement that Main Street Bank had $98 million in total assets and $86 million in total deposits as of Tuesday. All of Main Street’s deposits were assumed by Monroe, Mich.-based Monroe Bank & Trust, the FDIC said.

Read moreTwo banks fold, bringing total to 15 failures this year