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Linus Wilson
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Dr. Linus Wilson is an associate professor of finance at the University of Louisiana at Lafayette. He received his doctor of philosophy in financial economics from the University of Oxford in England in 2007. He has conducted extensive research into the Troubled Asset Relief Program (TARP). He... More
My company:
Oxriver Capital
My blog:
Academic Research
  • FDIC Hands Taxpayers a $299 million TARP Loss 0 comments
    Nov 9, 2009 4:00 PM | about stocks: EWBC, CIT, XLF, UCBH

    According to the Los Angeles Times, San Francisco's United Commercial Bank (UCBH) became the first bailed out bank to enter the Federal Deposit Insurance (FDIC)'s receivership.  After being seized by regulators on Friday, November 6, 2009, its deposits were assumed by East West Bancorp (NASDAQ:EWBC).  Unfortunately, for taxpayers who bought $299 million of preferred stock and warrants in November 2008, common stockholders and preferred stockholders were wiped out in the transaction. 

    United Commercial Bank had convertible preferred stock that yielded about 9 percent when the US Treasury agreed in late October 2008 to buy preferred stock that paid a below market 5 percent dividend.  (Convertible preferred stock has lower yields than non-convertible preferred stock because of the valuable conversion option attached.)  This investment, when made, seems to be typically bad as opposed to the CIT Group, $2.33 billion TARP investment, which was outrageously bad.  CIT Group entered Chapter 11 bankruptcy last week.  This puts gross losses from the bank bailouts at over $2.6 billion and climbing.

    As losses from the TARP investments mount, any returns taxpayers get from banks repaying TARP seem well deserved. 

    Disclosure:  I only have long positions in broad-based index funds.  This is not investment advice.

    Stocks: EWBC, CIT, XLF, UCBH
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