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Colonial Is Officially Under, FDIC Is $2.8 Billion Poorer
First casualty: Dwelling House Savings and Loan Association, Pittsburgh, Pennsylvania, to be acquired by PNC. $13.4 million in assets and $13.8 million in deposits (did they have $0.4 million in contra assets somewhere?). FDIC PR here.
Second casualty: Dwelling House Savings and Loan Association of Pittsburg, does not pass go: FDIC appointed receiver. "Dwelling House, which had total assets of $12.9 million, was in an
unsafe and unsound condition, was critically undercapitalized and had
no reasonable prospect of recovery." OTS PR here.
And as an observent reader points out, they are the same. Which makes one wonder how the same entity can have a $500,000 delta in assets when evaluated from two different organizations.
Third casualty: Colonial Bank, Montgomery, Alabama, with BB&T being the lucky winner. $25 billion in total assets, and $20 billion in total deposits. FDIC retains $3 billion of the total assets not purchased by BB&T ($23 Billion). The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $2.8 billion. The FDIC and BB&T entered into a loss-share transaction on approximately $15 billion of Colonial Bank's assets. FDIC PR here.
Fourth casualty: [leave space blank]
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Are these not the same bank?
TD hitting the white russians early today
lol...my fav is a black russian...why add cream/milk?? Just mix the booze together and get started...
Indeed... one wonders then how the same entity can have a different number of total assets at the same time per the FDIC and the OTS.
Different regulators probably have different examiners that show up to check out the books on different days. I mean, if they do stuff like that anymore...
It's only a $500,000 difference. The obvious answer is that someone in management wrote himself a check on the way out the door.
Mr. Durden,
Consider if you will, two regulatory agencies suspended in time. One tells you "that light is red." The other tells you "that light is yellow." You are in a dimension of sight and sound, a dimension of time and space. Next stop, the Twilight Zone.
Simple -- one's from Pittsburgh and one's from Pittsburg.
The FDIC would be able to borrow as much as $500 billion until the end of 2010 if the FDIC, Fed, Treasury secretary and White House agree such money is warranted. The bill would allow it to borrow $100 billion absent that approval. Currently, its line of credit with the Treasury is $30 billion.
http://online.wsj.com/article/SB123630125365247061.html
Why doesn't the Fed just put one of those money making terminals on Shiela's desk?
But, but, I thought that Jim Cramer and the rest of the CNBS clowns said that everything was A-OK?!good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
Yeah, they'll get the money they need, since we're talking about Grandma's savings account here. But that's another $500 billion on our tab.
They still need to sell the bonds for that tho....
My understanding is that bill didn't pass in the senate. Nevertheless, .gov will take care of deposits somehow. Can you imagine the chaos if they didn't?
Everybody I know said 500 billion credit line did not pass the Senate. I need to find out if this is true or not because the FDIC is out of money!
If there is no money in the bank and if there is no credit line to cover it it doesn't matter if the government cover it at a later date. By then it's too late. Missed payments and bank runs will destroy everyone in its path.
This is very serious and we need to get to the bottom of the mess.
Yeah, it's really simple, until it is not.
What makes anyone think $500B is enough?
Everything is fine until it isn't.
There are enormous reasons for the Giga Global Commitments of money that does not exist. It is because the financial / monetary system is a Chernobyl reactor going critical. The big question is "What's In Your Wallet?"
You need some green cash. You're not making anything on it anyway, so put it where you can have it if you need it. If you do not have it, get some.
Currently, its line of credit with the Treasury is $30 billion.
"Line of credit." Hillarious!
drip drip drip..
The song remains the same.
Again
"I had a dream, crazy dream."
As a taxpayer (yes, they take taxes out of my UI benefit), I just want to extend a warm thank you to the FDIC for throwing another straw on my back.
From the FDIC
"Today, after protecting almost $300 billion in deposits since the current financial crisis began, the FDIC's guarantee is as certain as ever. Our industry funded reserves have covered all losses to date. In fact, losses from today's failures are lower than had been projected. I commend our staff for their excellent work in assuring once again a smooth transition for bank customers with these resolutions. The FDIC continues to stand by the nation's insured deposits with the full faith and credit of the U.S. government. No depositor has ever lost a penny of their insured deposits."
Yep. Just as long at the Congress keeps on appropriating our tax money the FDIC needs since charging the banks the money needed to maintain the industry funded guarantee of all deposits is asking too much of the banks.
Again
thank you #37444. I'll still be withdrawing cash this week. :-)
and btw #37444, yup.
This is another greenshoot. The FDIC is beating expectations. Carry on.
Hey,
Let 'em do it agaaaaaain,
Yeah.
Anon, Great play at shortstop.
"Dwelling House" is one of the worst names for a company ever. Just saying.
dwelling house of cards would have been more suitable
2.8 billion is too low. It should be at least 8 billions. Something smell very fishy about it.
Think the $2.8 billion loss is just on the $3.0 Billion in assets that the FDIC is assuming.
They didn't disclose the details of the loss sharing arrangement on 15 billion that BBT is "buying." If its a 50/50 loss share, the FDIC will probably have to eat at least $4 Billion more.
And BBT will have eat $4 Billion themselves. This looks like a lousy deal for BBT shareholders. Don't think CNBs branch offices were worth $4 Billion and BBT might have to do another secondary offering (Run by GS of course)
Still the stock is up over $5 dollars this week and WOPR will probably drive it up another 10 per cent.
You're right about the $8 billion except they found $5.2 billion worth of brand new toasters and blenders in the back of one of their branches. I'm thinking the appliances can't be worth more than $4 billion though.
I thought that the FDIC reserves are tapped out just about...i see it is more of a 'blank check' type operation...
they are very low....the last figure i read
put them a little shy of 15b....today's losses
reduce that to nearly 13b....i do not know how the
shared lossed arrangement with bbt works -
the losses may only be recognized when they
actually occur upon liquidation....but i would
think this would require a loan loss provision
which i would think would include some cash....
The loss share agreement is the potential loss the FDIC would cover. The $3B is either nonperforming loans or broker sold CD's. Regardless, the FDIC needs to assume a total of $15B loss on the deal, it gets sorted out after the terms are met etc.
nothing to see here people .... move along ... move along ... everything is fine ...
There are going to be more than two failures this week. They must be out west here.
Yeah, they'll get the money they need, since we're talking about Grandma's savings account here. But that's another $500 billion on our tab.
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
will next week be corus, guaranty federal?
who's going first?
RF
Also remember FDIC lifted insured amount from 100k to 250k. Why do i bring this up? This rule expires dec 31 2009. Lets see if they continue the rule or go back to the old 100k which would mean less loss for FDIC and big loss for the fool who does not pay attention!
Never mind my bad insurance limit is extended to dec31 2013. New update on FDIC website.
A long extension to that expiration was authorized earlier this year and just waiting on the Banking Industry's signature to put it in place. I haven't followed up to see if they did yet or not.
Congress already made the change permanent
2013? No problem.
$250,000 of today's USD will be worth $0 by then. That'll be easy to cover.
One scandal that has gone totally uncommented upon is why on earth the FDIC thought that they did not need to collect premiums for years. Besides now needing the cash, is zero EVER the correct answer for an insurance contract? Talk about creating perverse incentives.
delete
The cumulative balance variance of $ 0.4 million is the result of rounding numerals derived by calculations taken to the billonth place. It is a non-number for control document purposes.
I wish people would stop pretending that the FDIC will (or even 'can') run out of money.
This game will keep going for so much longer than people think...
No, actually this game will stop on Sunday, October 11, after Tiger Woods wins the Presidential and Jeff Gordon wins Fontana- about 8:00 P.M.
At that time, President Obama will appear on television and say, My fellow Americans.....
That has such an eerie ring of truth to it, it makes me very nervous...
huh?
Monday, October 12th is Columbus Day and a bank holiday. D.O.D., nice make-over. Very apropos.
That's not true. Anyone who tells you that anything involving human endeavors is unlimited is lying. Can they print money forever yes. Can people stop giving a crap. Most definitely.
Congressmen sat there and yapped on and on about how debts dont matter it can go on forever and then a few years later bailouts. If you are confused by limits than you got sucker written on your forehead because I can tell you that I can kick your butt all day every day and never get tired.
I have pondered that same question, and I disagree. They cannot print eternally. Printed money does not flow evenly throughout the economy. Namely it goes first to banks who horde it and invest it in risky speculative assets (commodities, real estate and stocks). It does not go into the general economy or the general population. However, the general economy does have to bare the cost of higher commodities, thus it is not sustainable. They will HAVE to turn off the juice. Problem is taht BB just does not know it.
I am obviating another issue which is whether at some point individuals lose faith in a currency that is printed out of thin air. (currency is a mental construct / accounting unit for human labor - if there is no buy-in then there is no currency)
Exactly. The unlimited thing is just a pyschological ploy to try to get you to not fight and defeat yourself before you even start. The fed has the power to turn us into zimbabwe. Woot. You go fool. Betcha lose your job. Betcha you lose your authority. Betcha you lose your faith.
regarding currency you are mistaken....gold is an
accounting unit for labor / time....fiat currency is
an accounting unit for debt...
gold and currency differ with respect to their
orientation to time with the latter being an
amortization of debt and / or implicitly backed by
items of non uniform substance and often of
depreciating quality....
fiat currency is a medium of exchange but not
money....fiat currency loses its utility as
its quantity is increased and has negatively
sloping marginal utility with no practical
or theoretical limit since it requires no material
labor to produce....but it is more than merely
a mental construct....
please understand that i abhor fiat currency
and its producer....
gold is money because it represents a unit of
labor and time - thus it will never lose its value
as money across either time or space....
Yes, some of the students will be allowed to
front run; we'll see if they win the game.
good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
Simply; gold is a store of value, fiat currency is a medium of exchange. When the latter is in question, the former increases in relative value. Turtle and the hare sort of thing.
Even though Dwelling House was weak, it was a minority owned bank serving a minority community and was hit hard when hackers stole $3 million from them late last year.
Oh, well in that case. PNC probably offered them an Alt-A negative amortization buyout.
I'm an amateur, but my nalysis says that PNC looks like they're on *very* shaky ground as well. I don't expect them to last another 12 months.
PNC is safe, too big to fail, any extra capital can be raise one way or another.
CUs don't usually "go under" - although Eastern Financial Florida CU in April 2009 was a notable exception in my neck of the woods.
Here's one from this past Wednesday if you want to count 'em. I don't think it impacts the FDIC does it?!
http://bankimplode.com/blog/2009/08/12/community-one-fcu-las-vegas-nv/
Pete
Need an update. There are 5 banks on the FDIC site now.
Community Bank of Nevada, Las Vegas, NV
Community Bank of Arizona, Phoenix, AZ
Union Bank, National Association, Gilbert, AZ
Colonial Bank, Montgomery AL
Dwelling House Savings and Loan Association, Pittsburgh, PA
Agree with the above commented. The loss agreement with Colonial should be about 50% as loans are not written down; write them up for $7B in unrecognized losses? That would mean next week FDIC is broke.
Have a nice weekend
----------Edit--------
Community Bank of Nevada is a biggy - $781.5M in assumed losses.
Will FDIC even make it to the end of next week? If I was Bair I would be calling Congress just about yesterday. They cannot get caught another Friday without tapping that nice $500B line. Consumer sentiment is just about to get much "better"
Colonial was as easy as playing T-ball. 1 down, 3 to go.
Then about 30-40 more regionals and the system MIGHT get cleared up.
Market Ticker Denniger wonders how FDIC is solvent after today....me too
#37603 Treasury just prints more money and the Fed buys another bond,problemo solvoed.
go get your deposits while you can.
in September they will be closing more than 10 banks per week, and then you'll see a huge line to your local bank. but the doors will be closed.
BB says it's 150 banks, Calculated Risks - 370 banks. I guess the Senator was right and it's more than 500 insolvent banks already.
for total 8300+ banks in the country, my prediction would be 2000+ to go under.
they all are in ResRE and CRE business. CRE prices down 50-60% and will be at that level for a very very long time.
welcome to Japan.
And BBT will have eat $4 Billion themselves. This looks like a lousy deal for BBT shareholders. Don't think CNBs branch offices were worth $4 Billion and BBT might have to do another secondary offering (Run by GS of course)
good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
This may have relevance to some here. The best part is for Auburn Football. They finally get rid of Louder (CNB's CEO and former owner/bigwig). That dude and CNB gave millions to the school and without him around (Kind of like having Paulson on the sidelines) should improve the school and football program tremendously. We here in the south saw this one coming a mile away and could not believe CNB made it this long. When the CEO gets ousted and then their offices in Orlado get raided, the end was an easy call. IMO, BBT may still go down in the future as any bank here with exposure to the rapidly declining RE/CRE on the gulf coast is in deep shit.
Is there any significance to the fact that the FDIC had to create a bank for the Community Bank of Nevada's assets?
Did no other bank want to buy them?
Is there data of bank failures for the past several decades? I am new to all this...77 bank failures and a 50% stock market rally seems....odd.
How many banks failed in...2006?
Incase it was not clear...compare the headlines:
-"FDIC Creates a Deposit Insurance National Bank to Facilitate the Resolution of Community Bank of Nevada, Las Vegas, Nevada"
-"MidFirst Bank, Oklahoma City, Oklahoma, Assumes All of the Deposits of Community Bank of Arizona, Phoenix, Arizona"
-"MidFirst Bank, Oklahoma City, Oklahoma, Assumes All of the Deposits of Union Bank, National Association, Gilbert, Arizona"
-"BB&T, Winston-Salem, North Carolina, Assumes All of the Deposits of Colonial Bank, Montgomery, Alabama"
You are correct. Community Bank of Nevada was so screwed up that nobody wanted to assume their "assets'. The FDIC had to take possession of all of Community's assets themselves (probably through a subcontractor) and will take an estimated 50% loss to dispose of these assets (probably by bundling them into lots and selling the lots to hedge funds that specialize in distressed debt)
The FDIC also had to pay another bank to liquidate Community's deposits. The liquidator processes checks drawn on Community's checking accounts for 30 days. At the end of 30 days, the accounts are closed and checks are mailed to the depositor's last known address for any remaining balance. Any outstanding checks that aren't processed within 30 days bounce.
For those interested, Mish just posted this:
http://globaleconomicanalysis.blogspot.com/2009/08/as-of-friday-august-14-2009-fdic-is.html
Happy thoughts!
Good article. Liked the "Sheila the Fool" designation.
A little math help please. FDIC took this over and assumed $3b in 'assets'. Then they announce that this is going to cost $2.8. That means that the assets acquired by the FDIC are worth 7 cents on the dollar.
That is some very crappy loans. What were these folks lending to and how come it took this long to figure out that that this bank had no value at all.
Talk about a zombie. The boss at Colonial, Mr. Lowden was not such a hot banker. But he loved his football. From the WSJ:
"As a trustee there since 1983, appointed by Gov. George Wallace, he wielded considerable clout, particularly in the university's vaunted football program. In the mid-1990s, he won a fierce legal and political campaign against Alabama's governor and state lawmakers to retain his seat on Auburn's board. He used Colonial's corporate jet to recruit for the Auburn Tigers football team, according to an Auburn spokesman. ESPN named him in 2006 the most powerful booster in college sports."