PPY's  Instablog

FDIC is the federal regulator for most of the smaller banks ( class NM), including three out of the four that failed today ( Gateway Bank, Prosperan Bank, and United Security Bank).  In fact, two out of the four banks that failed two weekends ago were also under its supervision ( Hillcrest Bank Florida and American United Bank). 
www2.fdic.gov/idasp/main.asp
fdic.gov/bank/individual/failed/banklist.html

Yet unlike the financial giants who received billions in government assistance, these smaller banks were offered very little help.  Regulatory agencies, callously oblivious to local needs, often manipulated rules and situations to account for the "least cost solution," with the FDIC taking on huge liabilities and sharing losses as the agency continued the massive transfer of wealth from little banks to the favored institutions.

Notice the similarities among San Joaquin Bank, FBOP, and First Bank of Idaho?

SAN JOAQUIN BANK/ COST TO FDIC: $103 MILLION
fdic.gov/news/news/press/2009/pr09185.html

" Bakersfield and Kern County have lost an excellent institution: San Joaquin Bank. As a community, we are left with numerous questions about this closure. The main question: ‘How could this happen?’

Shutting down a successful local business bank does not strike me as being in our community's best interest. It is all the more puzzling because the bank, in a heroic effort, raised the capital needed to meet the FDIC's formula for liquidity."
bakersfield.com/opinion/letters/x2990760...

" Elation over the last-minute rescue of San Joaquin Bank halted with the ring of a cell phone at 3:11 p.m. on Oct. 16... Even among those closest to the situation, the decision to shut down the bank came as something of a surprise. They had been told that the banking commissioner had extended a deadline that officially passed the night before, on Oct. 15, and that if the $27 million goal could be met by the end of the next business day, San Joaquin would be spared... New investments topped the $27 million mark that Friday afternoon.”
finreg21.com/news/san-joaquin-banks-fina...

“ San Joaquin Bank's failure is especially disappointing in light of suggestions that it need not have happened.  The bank was said to have secured the $27 million in capital that regulators demanded it nail down in order the stave off closure, only to face the axe anyway.”
bakersfield.com/opinion/editorials/x1675...


FBOP/ COST TO FDIC: $2.5 BILLION
fdic.gov/news/news/press/2009/pr09195.html

Nine banks, part of FBOP Corp, were seized and sold to U.S. Bancorp. Unlike most other troubled financial institutions, the banking operation failed not because of poor and reckless management but primarily because of its investments in FNM and FRE.  Due to rule changes it was no longer eligible for the TARP assistance originally promised.  Its plan to re-capitalize itself with private funding was not accepted.  The least cost solution for the FDIC at the time of seizure was probably sharing the $2.5 billion loss, but we would never know the "real least cost solution" if FBOP got more time or its re-capitalization proposal was accepted.

"The largest privately held banking group in the nation, the best community bank operation around, had been taken over... FBOP Corp. was felled by its investments in quasi-governmental Fannie Mae and Freddie Mac. The common banking industry practice of investing short-term assets, 30- or 60-day money in Fannie and Freddie, lost FBOP the majority of its capital base virtually overnight and allowed the government to claim the bank was seriously undercapitalized...

And why wouldn't the FDIC give the bank the extra week they requested to raise the funds... Why are taxpayer needs better served by putting us potentially on the hook for $2.5 billon, rather than by giving the bank another week?"
wednesdayjournalonline.com/main.asp

"Michael Kelly says bank holding company had been promised TARP funds, but rule change left it scrambling to raise private investments... FBOP was working with private investors to invest up to $750 million of new capital into the banks... we submitted a proposal to the regulators, but it has not been approved.  Regulators picked U.S. Bancorp to take over FBOP's banks."
chicagotribune.com/business/chi-tue-fbop...

Our current FDIC chairwoman, Ms. Sheila Bair, got even better with this one, invoking an old rule to gift USB 2 extra banks that didn't even fail. I wonder why WMBfsb, with allegedly $17 billion in cash, was not allowed to help its sister bank Wamu remain operative until TARP passed.
messages.finance.yahoo.com/Stocks_(A_to_Z)/Stocks_W/threadview
www.mediafire.com/

"Park National Bank didn't fail. It was ambushed... Park National Bank - days from closing on the $600 million in private capital that the FDIC demanded be raised - is dead. Simultaneously, the FDIC is handing over to another bank a reported $2.5 billion to take on Park National's assets."
wednesdayjournalonline.com/main.asp

"When Bad Banks Sink Good Ones... The Federal Deposit Insurance Corp. is allowed under a 1989 law to assess the costs of disposing of a failed bank that is part of a holding company to other banks with the same owner. The agency has used the mechanism just six times."
online.wsj.com/article/SB125720151735123867.html


FIRST BANK OF IDAHO/ COST TO FDIC: $191.2 MILLION
www.fdic.gov/news/news/press/2009/pr0906...

First Bank of Idaho had a June 30, 2009 deadline to raise its capital level but on April 24 OTS appointed FDIC as the receiver.  On the same day FDIC seized the bank and sold it to U.S. Bancorp.  Apparently FDIC had already found a buyer in secret just like it did with Wamu, therefore ignoring the deadline and the quick transaction.  On May 4 a bank board member Nancy Schauer argued against this action as being the least cost solution for FDIC and on May 9 Idaho state lawmakers demanded answers to such broken promises and reckless actions.

April 24, 2009
"First Bank of Idaho in Ketchum was closed by the Office of Thrift Supervision. The Federal Deposit Insurance Corp. was named receiver... U.S. Bancorp... [assumes] First Bank of Idaho's deposits, excluding $112.8 million in brokered deposits.  U.S. Bank agreed to buy $17.8 million of the failed bank's assets, or less than 4 percent."
bloomberg.com/apps...

May 4, 2009
"'The FDIC says they will lose $191 million because of what has happened but if they'd waited a few weeks it never had to happen, ' said Schauer... Now the losses are incalculable."
newwest.net/city/a...

May 9, 2009
"U.S. Reps. Mike Simpson and Walt Minnick sent letters Friday to the heads of the Federal Deposit Insurance Corp. and the Office of Thrift Supervision, asking for information about the decision to close the First Bank of Idaho... OTS gave the bank until June 30 to raise $10 million and bring its capital level to 12 percent.  But regulators moved to shut down the bank before that June deadline, shocking bank executives who contend they had investors lined up to give the bank a cash infusion and clear millions in bad loans... On April 24, the OTS appointed the FDIC receiver of the bank, and more than 60 FDIC officials seized it.  US Bank officials moved in that same day."
idahostatesman.com...


What happened to First Bank of Idaho was a travesty of justice, condoned by those who had the power to intervene but chose not do so, as well as by the lack of mainstream media coverage.

Then it happened again to FBOP, and to San Joaquin Bank.

What was the justification for OTS/FDIC to ignore their own deadline and seize First Bank of Idaho, with private funding already in place, earlier than promised?  Why did they then refuse to ignore another deadline and grant a short extension to Park National (FBOP), also with private funding in place, for the completion of necessary paperwork?

Why bother giving banks deadlines to raise capital or find a buyer when the FDIC already picked the winner?

Why charge assessment fees that hurt these banks even more to solve its insolvency, because the insurance corporation underestimated the magnitude of the current crisis and failed to build up its reserve fund?

FDIC's main mission was deposit protection, not TLGP or PPIP financing. Why didn't Ms. Bair ask for money from TARP or the Stimulus bill to help raise the DIF ratio that already fell below the mandatory Congressional minimum since June 2008 and turned negative last month?

Worse, TLGP was created to improve lending but Ms. Bair used this bond guarantee program to help non-lending banks such as Goldman Sachs raise billions of dollars without any restriction on how this money must be used.

Why were these regulators not held accountable for their inconsistent and unfair actions, especially when the Fed, OCC, OTS, and FDIC have all been criticized for their poor, slow, and weak supervisory efforts in many reports released by the Office of Inspector General?
www.bloomberg.com/apps/news

*imho*