On Bank Failure Friday (Nine Plus CIT)

The nine failed banks are subsidiaries of FBOP Corporation with total assets of $19.4 billion. The nine banks had 153 offices in Arizona, California, Illinois and Texas. All will open as branches of US Bancorp (USB) on Monday. This brings total failures for 2009 to 115 and to 141 since the beginning of “The Great Credit Crunch”, on the way to 500 to 800 by the end of 2012.

The cost to the Deposit Insurance Fund for nine banks is estimated at $2.5 billion, which makes the fund $7.9 billion in arrears unless assessments have been collected. But, the FDIC told me they do not keep track of their Deposit Insurance Fund on a daily basis.

All nine banks were overexposed to C&D and CRE loans, which I have been warning about since April 2006. I just wish someone would ask the Treasury, Federal Reserve and FDIC why they ignored these regulatory guidelines set in December 2006. Why is this part of the story being ignored by the media?

As an embarrassment to Treasury Secretary Geithner, the Chicago Tribune reported that one of the seized banks, Park National Bank was given $50 million by Geithner earlier in the day on Friday, which was intended to be used for low-income projects such as charter schools, health clinics and stores. OUCH.

From praise for their efforts in the community Friday morning to a padlock in the evening shows how our banking regulators don’t cooperate with each other. And Congress wants a Council of Regulators – How dumb is that?

At $19.4 billion in assets this FBOP would have been well above the systemic guideline of banks with assets above $10 billion. I wonder how Bair and Geithner would have resolved this one.

US Bancorp, the take-over bank has $265 billion in assets, rates a SELL according to ValuEngine and should be a consolidator during additional bank failures. This bank is “too big to fail.”

I am not alone – Stiglitz says US Recession “nowhere near” over

He agrees with me that the US job market is still “in very bad shape”. Americans want full time jobs, not part-time jobs, and if the hours worked component of the Payroll Report released on Friday still shows hours worked 33.0 to 33.2 there is no end to Recession.

Looking back to two columns I wrote for Equities Magazine covering small banks

In the summer of 2008 I wrote “The Great Credit Crunch” showing how overexposures to C&D loans could force the FDIC to close many community banks. I profiled six banks, and the table shows how community banks have fallen like dominoes with Corus Bankshares on the list of failed banks:

In December 2008 I wrote “The Dirty Dozen of Troubled Banks” again focusing on overexposures to C&D loans. In this column I estimated the cost to be at least $350 billion. This table shows where these banks traded in December and where they are trading now – Say sayonara to Colonial Bank:

Keep in mind that there are more than 3,000 banks overexposed to C&D and CRE loans.

Disclosure: I Hold No Positions in the Stocks I Cover.

Comments

[ryanclarke]

The author wrote ,"He agrees with me that the US job market is still “in very bad shape”. Americans want full time jobs, not part-time jobs" I WOULD LIKE TO ALTER sligthly by saying Americans want part time jobs that offer full time pay ... with benefits. I can't blame the fifty or sixty MILLION American citizen ... nevermind the illegals who want at Mr. Tim G's house ... for desiring as such and not wishing to work at the bottom of the pile ... in place of the TWENTY million Americans at the top of the pile who make all the money by collecting all the debt payments ... and whose time spent during those twenty hours of work per week is mostly spent collecting debt payments in one form or another.

2009 Nov 02 09:03 AM

[Graham and Dodd Investor]

CIT is just about "nine"--all by itself.

2009 Nov 02 09:52 AM

[greedcanbgood]

Though it was 9 seperate charters, it really was one holding company which I think is noteworthy given that most of the headlines say something to the effect of, "Nine More Banks Fail". I grow tired of the "too big to fail mantra". At least USB has weathered this storm well due to conservative, prudent strategies.

2009 Nov 02 10:00 AM