Sheila Bair Doesn't Seem to Want This Banking Crisis to End

So now Sheila Bair wants to require private equity investors maintain a 15% Tier 1 ratio at banks they own (vs. 8% for non-PE investors) and hold their bank investments for at least three years before selling. Wilbur Ross is not happy:

Billionaire investor Wilbur Ross, whose investment firm was part of the private-equity consortium that acquired failed Florida bank BankUnited, said he was surprised by the restrictions in the FDIC proposal. The requirements are "harsh and discretionary," he said.

"I think it could guarantee that there will be no more private equity coming into banks," Mr. Ross added.m [Emph. added]

Ross is being circumspect. Bair’s rules will ensure PE investors stay away in droves. It’s not clear what makes private equity investors so different from other bank investors, by the way. Not lack of banking experience: Ross, recall, partnered with John Kanas as part of the BankUnited deal. Oh, and there‘s this:

Beyond the capital requirements, the proposal would prevent certain buyers operating under "complex and functionally opaque ownership structures" to buy a failed bank, and could require investors that own other banks to provide cross-guarantees, meaning the banks should rely on each other if one needed capital.

Great! So one bad bank investment could torpedo a whole portfolio. If Sheila Bair doesn’t want any more private equity money in the banking, she should just come out and say so. . . .

Comments

[PPY:]

Sheila Bair is out of control and follows no rules. Even if the PE firms come up with the 15% tier I capital ratio, how can they be sure FDIC won't seize them on her whim? Look at Wamu and Wachovia. Wamu had a tier I capital ratio of 8.4%. It also had a TCE ratio of 7.8%, above the 4% minimum for passing the stress test.

She says a lot of things but acts otherwise. Look at that credit line increase for FDIC even though she stated on Bloomberg she would not use our tax money. She also said she could not charge bigger banks higher fees because it was against FDIC statute. Yet soon after we saw HUGE HEADLINES about how Sheila Bair protected small banks by charging huge banks more fees.

I read article after article praising her efforts in loan modification and efficiency in bank seizures when in fact FDIC threatened farmers in Colorado with liquidation and forced foreclosures of bank branches in NY and CA.

Why is FDIC not being held accountable for its failure in supervision
but praised for its efficiency in shutting down banks? Why is FDIC
practically using our tax money to share losses and wiping out
shareholders because it failed its job to supervise properly?

"Regulators shut down the John Warner Bank of Clinton, Ill.; the First State Bank of Winchester in Winchester, Ill.; the Rock River Bank of Oregon, Ill.; the Elizabeth State Bank of Elizabeth, Ill.; the First National Bank of Danville in Danville, Ill.; the Founders Bank of
Worth, Ill.; and Millennium State Bank of Texas, based in Dallas."
www.nytimes.com/2009/0...

"The FDIC and The First National Bank of Beardstown entered into a loss-share transaction on approximately $20 million of The First State Bank of Winchester's assets."
www.istockanalyst.com/...

All these banks except for First National Bank fell under FDIC
supervision (Class NM)
*NM = commercial bank, state charter and Fed nonmember, supervised by
the FDIC*
www2.fdic.gov/idasp/ma...

This is the first page of the latest failed bank list on the FDIC
website; 11 out of 20 were under its supervision.
www.fdic.gov/bank/indi...

Mirae Bank (NM) June 26, 2009
MetroPacific Bank (NM)
Horizon Bank (NM)
Neighborhood Community Bank
Community Bank of West Georgia
First National Bank of Anthony
Cooperative Bank (NM)
Southern Community Bank (NM)
Bank of Lincolnwood (NM)
Citizens National Bank
Strategic Capital Bank (NM)
BankUnited, FSB
Westsound Bank (NM)
America West Bank (NM)
Citizens Community Bank (NM)
Silverton Bank, NA
First Bank of Idaho
First Bank of Beverly Hills (NM)
Michigan Heritage Bank
American Southern Bank (NM) April 24, 2009

*imho*

Jul 07 05:28 PM

[nmelendez:]

Gotta get rid of the competition so Big 5 can make Big Bucks for "Tio Sam".

Jul 07 07:13 PM

[nmelendez:]

Thank God they can't touch Santander...Spanish Bank :)

Jul 07 07:14 PM