BANKRUPT BANKER
latest news to hit the stands is the rescue package that the government has agreed to release to ailing banking giant Citigroup
Monday, 1 December 2008
latest news to hit the stands is the rescue package that the government has agreed to release to ailing banking giant Citigroup to the tune of $326 billion, $20 billion in direct investments and $306 billion to guarantee the company’s troubled assets.This crucial deal is one more of the many government moves to support the financial sector, and more importantly, avoid a much-dread collapse of the Citigroup which would further damage investor and consumer confidence in the entire US banking system. The deluge of financial woes on the once largest bank in the US is testament to the reality that even the biggest of them are not immune to the possibility of a bank failure.
Even on Thanksgiving month, 5 FDIC-insured banks closed their doors; 2 on Nov. 7, and 3 more just recently last Nov. 21. While there may be no more banks to go under in the remaining days of November, this is still the highest number of bank closures in a month for this year. October saw 4 bank failures while the preceding months July, September and October had 3 failed banks each.
According to the list published by the Federal Deposit Insurance Corp (FDIC) the count for the number of failed banks for this year 2008 is already at 22 — a big leap from last year’s 3. The years 2006 and 2005 were spared of any bank failures while there were 4 in 2004, 3 in 2003, and 11 in 2002, which is the closest number so far. The year 2001 had 4 failed banks and 2 in 2000.
Owing to the state of the US economy at this time, it is but expected that many of the closures that took place this year are some of the most expensive bank failures in US history, based on asset figures released by FDIC. Here is a rundown of the largest failed banks so far for the year 2008:
Washington Mutual, Seattle
With assets totaling to over $307 billion, the failure of WaMu will go down in history as the largest one ever. Reeling from the effects of the mortgage crisis, the once largest saving and loan bank of the US was put under the receivership of the FDIC on September 25, 2008, and promptly sold to JP Morgan Chase the following day at a fire sale price of $1.9 billion.
IndyMac Bank, Pasadena, California
Being the largest S&L bank in Los Angeles and the seventh in the country also didn’t save California-based IndyMac Bank from the jaws of a bank failure. The FDIC took control of the bank on July 11, 2008 after it suffered massive withdrawals from panicky customers since June which totaled to about $1.3 billion. On the day of its closure, Indy’s shares dipped to a 52-week low of $0.28 per share — a ghost of its $50 high in 2006. Since being put under the conservatorship of the FDIC, a bridge bank, IndyMac Federal Bank, has been running the operations of the bank until such time that it can be acquired by another bank and put back into the private sector.
Downey Savings and Loan, Newport Beach, California
One of the latest casualties to the growing number of failed US banks is Downey Savings and Loan in California. As of Nov. 21, all banking operations of Downey Savings have been sold to US Bank, National Association, together with those of PFF Bank and Trust, another California-based bank, which was also closed on the same day.
As of September 30, 2008, Downey Savings had total assets of $12.8 billion which could put it in the top 10 largest bank failures in the US to join Washington Mutual and IndyMac Bank, which currently hold the 1st and 4th spots respectively.
Wachovia Corporation
Technically, FDIC does not classify Wachovia a bank failure. A few months earlier though, the bank’s troubled mortgage portfolio and plunging stock value made it a probable candidate to go into FDIC receivership. In fact, at some point many believed that the bank would be the next to go following the demise of Washington Mutual, after suffering a loss of $5 billion on withdrawals on Sept. 26, or about 1% of the bank’s total deposits.
The FDIC initially brokered a deal to get Citigroup into takeover talks with the bank, but in an unprecedented turn of events, Wells Fargo emerged as the acquiring bank of Wachovia Corp in a $15.4 billion deal on Oct. 3, 2008.
Other US banks who have succumbed to bank failure this year are:
PFF Bank and Trust, Pomona, CA - November 21, 2008
The Community Bank, Loganville, GA - November 21, 2008
Security Pacific Bank, Los Angeles, CA - November 7, 2008
Franklin Bank, SSB, Houston, TX - November 7, 2008
Freedom Bank, Bradenton, FL - October 31, 2008
Alpha Bank & Trust, Alpharetta, GA - October 24, 2008
Meridian Bank, Eldred, IL - October 10, 2008
Main Street Bank, Northville, MI - October 10, 2008
Ameribank, Northfork, WV - September 19, 2008
Silver State Bank, Henderson, NV - September 5, 2008
Integrity Bank, Alpharetta, GA - August 29, 2008
The Columbian Bank and Trust, Topeka, KS - August 22, 2008
First Priority Bank, Bradenton, FL - August 1, 2008
First Heritage Bank, NA, Newport Beach, CA - July 25, 2008
First National Bank of Nevada, Reno, NV - July 25, 2008
First Integrity Bank, NA, Staples, MN - May 30, 2008
ANB Financial, NA, Bentonville, AR - May 9, 2008
Hume Bank, Hume, MO - March 7, 2008
Douglass National Bank, Kansas City, MO - January 25, 2008
Who’s next?Twenty two banks and counting. And here’s another certainty that’s going to bring about more gloom in the banking and finance industry that is already on shaky ground: many more banks will not survive the coming months.
While the US government is scrambling to get more bailout money into the market, a report released earlier this week shows that the tally of “problem banks” which the FDIC is currently keeping an eye out for has reached 171, up by 54 banks since the 2nd quarter. This number is the highest FDIC has had since 1995.
FDIC Chairman Sheila Bair said in a prepared statement, “We’ve had profound problems in our financial markets that are taking a rising toll on the real economy,” adding that the latest numbers reported are reflective of these challenges.
