The Federal Deposit Insurance Corp got invigorated game Friday, closing Los Angeles-based Security Pacific Bank and Franklin Bank, Houston, which was controlled by the renowned Salomon Bros mortgage securitization warhorse Lew Ranieri.
The FDIC estimates that the cost of [the Franklin Bank] transaction to its Deposit Insurance Fund will be between $1.4 billion and $1.6 billion.
Excellent work, Lew. Not exactly WaMu or IndyMac but they had a head start — Franklin (not to be confused with Franklin National) was only founded in 2002 — and not bad at all for a shop with “assets” (Ho, ho, ho, who said Sheila doesn’t have a sense of humor?) of just $5.1 billion, and total deposits of $3.7 billion. Congratulations.
Now, wipe that smirk off your face and get back to the mailroom. You’re giving the white-hair-and-a-beard crowd a bad rep.
Related reading, including the most hilarious Bloomberg headline in years, below. With a side of Failure Friday™ ketchup.
Ranieri Becomes Victim of Crisis as Franklin Seized
by Ari Levy
Bloomberg Nov. 8 2008
Security Pacific Bank, Los Angeles, Calif.
FDIC press release Nov. 7 2008
Freedom Bank, Bradenton, Fla
FDIC press release Oct. 31 2008
Alpha Bank & Trust, Alpharetta, Ga
FDIC press release Oct. 24 2008
Main Street Bank, Northville, Mich.
FDIC press release Oct. 10 2008
Washington Mutual, Seattle, Wash.
FDIC press release Sep. 25 2008
Ameribank, Inc, Northfork, W.Va
FDIC press release Sep. 19 2008
Silver State Bank, Henderson, Nev.
FDIC press release Sep. 5 2008
Integrity Bank, Alpharetta, Ga
FDIC press release Aug. 29 2008
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But Ranieri also recognized that "mortgages are math." He hired PhDs who developed the "collateralized mortgage obligation," which turns pools of 30-year mortgages into collections of 2-, 5-, and 10-year bonds that could appeal to a wide range of investors. The homeowner in Albuquerque could now tap funds from New York, Chicago, or Tokyo, a change that Ranieri figures cuts mortgage rates by two percentage points. Soon everything from credit-card balances to auto loans was being repackaged.
No one person can claim to have lit the fuse for this revolution -- but Lewis S. Ranieri was holding the match. Joining Salomon Brothers' new mortgage-trading desk in the late 1970s, the college dropout became the father of "securitization," a word he coined for converting home loans into bonds that could be sold anywhere in the world. What Ranieri calls "the alchemy" lifted financial constraints on the American dream, created a template for cutting costs on everything from credit cards to Third World debt -- and launched a multibillion-dollar industry.
NOVEMBER 29, 2004
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