Bear Market Investing » bank failures

FDIC Ramps Up for More Bank Failures

Big Bear — Fri, 29 Aug 2008 19:17:22 +0000

The FDIC (Federal Deposit Insurance Corp.) is visably ramping up to handle more bank failures in the coming weeks and months. It will soon sign a 5-year lease to add five floors to its Dallas, Texas office.

“The federal agency, which insures deposits and disposes of failed banks and their assets, will add 125,000 square feet to the 185,000 square feet it rented last year at 1601 Bryan St., a 49- story tower in downtown Dallas. That agency will add about 300 staff at the building, including some of the 69 retirees it is bringing back to help handle the increased workload, said spokesman Andrew Gray.” Source Bloomberg

Defaults Likely to Force More Bank Failures

Big Bear — Thu, 21 Aug 2008 17:47:54 +0000

“The Federal Deposit Insurance Corp. (FDIC) has been called in as receiver for eight banks through August 4, 2008, following the closure of four institutions in 2007. Prior to the recent closings, the FDIC had not been appointed as receiver for a failed bank since 2004. Regulators expect bank failures in the near term to increase, partly due to some banks’ concentration in real estate loans and construction and development lending.” Source: AM Best

Fed Stops IndyMac Foreclosures

Big Bear — Tue, 15 Jul 2008 20:15:53 +0000

The FDIC has taken their first step as new owners of IndyMac by stopping all foreclosures on their mortgages. Shelia Bair, the FDIC Chairman, berated mortgage lenders for foreclosing on properties rather than working with the borrowers on refinancing mortgages.

From Reuters…

“The Federal Deposit Insurance Corp has temporarily halted any foreclosures on the $15 billion of bank-owned mortgage loans found in IndyMac’s portfolio, FDIC Chairman Sheila Bair said on Monday.

Bair has scolded mortgage lenders for being too slow to help distressed borrowers restructure their home loans.”

It will be interesting to see how the FDIC will restructure the mortgages of customers who are way upside-down in the their house mortgage.

Wall Street Braces for Bank Earnings and Fresh Writedowns

Big Bear — Tue, 08 Jul 2008 19:43:48 +0000

Three of the world’s largest banks will report quarterly earnings next week. Many anticipate that JPMorgan Chase, Citigroup and Merrill Lynch will add further writedowns to add to the $400 billion seen since the collapse of the subprime mortgage market.

The latest round of losses has been attributed to construction loans made by banks to home builders. From Bloomberg…

“According to the Federal Deposit Insurance Corp., delinquent loans accounted for $45.4 billion of the $631.8 billion in construction loans outstanding at the end of the first quarter. When banks announce second-quarter results in coming weeks, they are expected to report sharp increases in loans that builders can’t repay. Banks also are facing intensifying pressure from federal and state regulators to deal with the problem loans on their books.”

IndyMac the Next Bank Failure?

Big Bear — Wed, 02 Jul 2008 13:20:47 +0000

IndyMac Bancorp is shaping up to either be the next bank failure or the next government bailout recipient. IndyMac experienced a “mini run on the bank” over the weekend when about $100 million of its $19 billion in deposits were withdrawn by nervous depositors.

Grove Nichols, IndyMac’s director of communications, acknowledged that the withdrawals continued Monday saying, “we had continued elevated traffic in the branches today, but by afternoon it was subsiding.” Grioves added, “Hopefully, the rush is abating.”

The rush to withdraw has been attributed to a letter sent to the FDIC by Sen. Charles E. Schumer (D-N.Y.). Schumer expressed concerns that “that IndyMac’s financial deterioration poses significant risks to both taxpayers and borrowers.”

If this is all it takes for a run on the bank, what does this say about today’s environment? I am sure that similar notes have been sent hundreds of times to the FDIC. Bank failures are likely to increase. I also believe that FDIC will not have enough in its reverse account to pay the depositor insurance.

Can Private Equity Prevent Bank Failures?

Big Bear — Fri, 27 Jun 2008 13:31:41 +0000

In the latest attempt to prevent bank failures, the Wall Street Journal reports that, “the Federal Reserve is considering steps to make it easier for private-equity firms and others to invest in banks.”

Many experts believe the US banking system is on the verge of a series of bank failures, both at the local and national level.

Federal Deposit Insurance Corp Chairman Sheila Bair recently made the comment that, “there is also the possibility that future failures could include institutions of greater size than we have seen in the recent past.”

To date this year, 4 small FDIC-insured banks in the US have failed and 90 have been placed on the FDIC’s troubled lists. These 90 banks a combined $26 billion in assets, which is half of the FDIC’s deposit insurance fund. No wonder they are considering private equity as a solution.