FDIC’s Shelia Bair is cautious on authority to break up “too big to fail” banks
Looks like Chairman Bair is getting in line with the Administration’s thinking that breaking up the “too big to fail” banks. They think it is better to regulate them or create “glass ceilings” for firms that are systemically important to the U.S. economy. Jamie Dimon from JPMogranChase did an op-ed piece stating he would rather not get bailouts and fail then have artificial ceilings in place. I wish this statement would of come out about 12 months earlier and then it would of garnered more creditability.
It uses interesting that Ms. Bair says she wants to deal with these large financial institution but does not seem to support downsizing or limiting what financial activities commercial banks can engage in oppose to investment banking institutions. In my opinion to have a real market economy and functioning democracy, we can never have any organization that is “too big to fail” other than a handful of defence-contractors that are in our national security interest and even those companies should not be allowed to engage in business practices that make them a systemic risk to our economic livelihood.
Reuters, Washington D.C. - A top U.S. bank regulator on Tuesday said lawmakers need to be careful about moving forward with a proposal that could break up the largest financial institutions, while also voicing support for its objective.
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“Too big to fail” must end for all according to FDIC’s chairman Sheila Bair
I agree with this policy but having it actual becomes practice is another. Problem is that letting large firms at this time is not politically feasible currently. We have administration that is filled with financial insiders that did everything they could to prevent any of these firms from failing under the fear-driven threat that the entire economic system would collapse if we did not bail them out fully other than a few players that we obviously not as “politically connected” as the most established firms. I still believe that if we would of let capitalism take its course we would of have a speedy downturn and much of this bad debt would of been defaulted on and that would of brought back confidence in markets and we would be seeing real job driven growth in the coming year.
Instead, we have pledged our nations credit to bail out system out without any guarantee that we actually recovering and it looks like we will not see any real structural change or oversight that might prevent this type of reckless leverage to happen again. We need our representatives to show real leadership and enforce our existing rules on the books and investigate all the obvious fraud that has happened and set the proper precedence for future generations.
Reuters, Istanbul - The head of the U.S. Federal Deposit Insurance Corp. said on Sunday that she wanted to end the “too big to fail” doctrine and shrink the shadow banking system that operates outside the reach of regulators.
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FDIC closes an additional 5 U.S. banks to bring total to 69 failed banks for 2009
Wow, the U.S. bank failures are picking up speed in 2009. We should see premiums increase in the coming months or some other emergency action to bring more backing to the FDIC fund. Just in these closure alone we have approximately $1 billion more in deposits.
Many of these banking institutions are holding commercial, home-builder, equity lines along with normal loans. Many of these deals were not setup to survive a protracted downturn and only because of lax lending standards they made sense and were approved. This debt needs to default and get pushed through the system so we can achieve balance. So every time I hear one of these announcements it tells me we are one step closer to a “real” recovery.
News (Reuters):
Bank regulators closed five banks on Friday, bringing the number of failures so far this year to 69 as the struggling economy and falling home prices take their toll on financial institutions.
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Seven more U.S. banks fail going into the holiday weekend, brings total to 52 for 2009
The market does not like this news. The Dow down over 2.5% at the time of this writing. This does seem to be accelerating and that does not bode well as a sign for future events to pass. We are going to see more regional and local banks go bust as the loans on their books go into default and that make their capital reserve inadequate for what regulators are requiring. This also is putting a severe strain on the FDIC and its funds. It already has had raise rates this year to cover the number of banks that went bust in 2008.
News (Bloomberg):
Six banks in Illinois and one in Texas were seized by regulators as the deepening financial crisis pushed the toll of failed U.S. lenders this year to 52, the most since 1992.
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FDIC closes 4 more U.S. banks to bring the 2009 total to 44
And more to come. Many loans are going into default and that puts stress on the banks to raise their reserves to they are within federal and state guidelines for capital reserves ratios to deposits.
News (Reuters):
U.S. regulators closed four small banks on Friday — two in Georgia, one in Minnesota and one in California, bringing the total of U.S. bank failures to 44 this year.
The Federal Deposit Insurance Corp said the closings were:
– Community Bank of West Georgia, a small bank in Villa Rica, Georgia, with assets of $199.4 million and total deposits of $182.5 million, as of May 15. A buyer could not be found, so the FDIC was appointed as receiver and will mail checks to insured depositors for their insured funds on June 29.
– Neighborhood Community Bank, of Newnan, Georgia, with $221.6 million in assets and $191.3 million in deposits, as of March 31. CharterBank, of West Point, Georgia, agreed to assume the insured deposits and $209.6 million of the assets. Neighborhood’s four offices will reopen as CharterBank branches.
– Horizon Bank, of Pine City, Minnesota, with $87.6 million in assets and $69.4 million in deposits as of March 31. Stearns Bank, NA, of St Cloud, Minnesota, agreed to assume all of Horizon’s deposits and to buy $84.4 million of its assets. Horizon’s two offices will reopen on Saturday as Stearns branches.
– MetroPacific Bank, of Irvine, California, with $80 million in assets and $73 million in deposits, as of June 8. Sunwest Bank, of Tustin, California, agreed to assume all of the deposits, excluding those from brokers, and virtually all of MetroPacific’s assets. MetroPacific’s sole office will reopen on Monday as a branch of Sunwest Bank.
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New Frontier Bank seized by the FDIC to become the 23rd bank failure of 2009
Another bites the dust. New Frontier was a little bigger than the most we have seen this year at $2 billion in assets and $1.5 billion in bank deposits. This trend will continue sadly and we will see the local and regional banks take the brunt of these while we bailout national banks that have lost literally trillions of dollars. They are just too connect in too many ways and this is the reality we are dealing with.
News (Reuters):
U.S. regulators on Friday closed New Frontier Bank of Greeley, Colorado, and set up a temporary bank so depositors can open accounts at other insured institutions.
The Federal Deposit Insurance Corp said it immediately transferred New Frontier’s insured deposits to the Deposit Insurance National Bank of Greeley (DINB), except for brokered deposits, certificates of deposit and individual retirement accounts.
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Omni National Bank is the 21st bank failure of 2009
They went under with almost $1 billion in assets. They must of had a lot of bad loans and other assets on their books for the FDIC to come in and shut them down. I wish they would be more open about what the “unsound” practices they were using so the public could be more educated.
News (Reuters):
Georgia-based Omni National Bank was seized on Friday and placed into receivership under the Federal Deposit Insurance Corp, the U.S. government said on Friday.
The bank had about $980 million in assets at the end of 2008, the Office of the Comptroller of the Currency said in a statement.
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