Regulators shut down banks in Nevada and Washington on Friday, marking the 21st and 22nd failures this year of federally insured banks.

The Federal Deposit Insurance Corp. was appointed receiver of Carson River Community Bank, based in Carson City, Nev. and Rainier Pacific Bank in Tacoma, Wash.

Carson River Community Bank had $51.1 million in assets and $50 million in deposits as of Dec. 31. Rainier Pacific Bank had $717.8 million in assets and $446.2 million in deposits as of Dec. 31.

The FDIC said that Carson River’s deposits will be assumed by Reno, Nev.-based Heritage Bank of Nevada. Carson River’s lone branch will reopen Monday as an office of Heritage Bank.

Source/Full Story:   Yahoo! News

The Federal Deposit Insurance Corporation is bracing for a new wave of bank failures that could cost the agency many billions of dollars and further strain its finances.

With bank failures running at their highest level in nearly two decades, the F.D.I.C. is racing to keep up with rising losses to its insurance fund, which safeguards savers’ deposits. On Tuesday, the agency announced that it had placed 702 lenders on its list of “problem” banks, the highest number since 1993.

Not all of those banks are destined to founder, and F.D.I.C. officials said Tuesday that they expected failures to peak this year. But they also warned that the fund might have to cover $20 billion in additional losses by 2013 — a bill that could be even greater if the economy worsens.

F.D.I.C. officials say the fund has ample resources to cope with its projected losses.

“We think that we have the cash we need,”

Sheila C. Bair, the F.D.I.C. chairwoman, said in an interview on Tuesday. She said it was unlikely the F.D.I.C. would need to tap its emergency credit line with the Treasury Department, although she did not rule out such an action.

Source/Full Story NYTimes.com

An influential US Senate committee has proposed a sweeping overhaul of the country’s regulatory architecture that would strip powers from the Federal Reserve and create a single banking regulator.

Chris Dodd, chairman of the Senate banking committee, on Tuesday presented a more radical vision of regulatory reform than that proposed by the Obama administration. The move ushered into the open a behind-the-scenes struggle between banks, policymakers and regulators.

Democrats lined up behind Mr Dodd as he presented the bill. But senior Republicans were missing from a press conference in spite of attempts by President Barack Obama to secure their support for one of his most important legislative goals.

The proposal to consolidate regulators faces strident opposition from the Fed, the Federal Deposit Insurance Corporation and smaller regulators, which argue they are best placed to supervise banks.

Mr Dodd said most institutions should benefit from a regulator that would provide “clarity, cut red tape and make it easier to compete”, but banks would “no longer be able to shop for the weakest regulator”.

Source/Full Story: FT.com
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Nine more U.S. banks, all owned by the same Illinois holding company, were closed Friday by regulators, and the Federal Deposit Insurance Corp. said U.S. Bank of Minneapolis would assume their deposits.

The closings brought the 2009 total to 115 in 2009 — the first year since 1992 that more than 100 banks have gone under.
…
The deposit insurance fund will take an estimated $2.5 billion hit, the FDIC said.

All nine banks were subsidiaries of FBOP Corp., a holding company based in the Chicago suburb of Oak Park, Ill., according to the FDIC.

Source/Full Story: MarketWatch

Reporting from Washington – Despite signs of economic improvement, banks continue to fail at a brisk pace, forcing regulators to scramble to keep the industry-financed deposit insurance fund from running out of cash.

With the fund technically falling into the red today, the Federal Deposit Insurance Corp. proposed Tuesday to require banks this year to prepay $45 billion, or more than three years’ worth, of insurance premiums.

The move would allow the FDIC to avoid drawing on a $500-billion line of credit the agency has with the Treasury Department.

“It’s clear that the American people would prefer to see an end to policies that look to the federal balance sheet as a remedy for every problem,” said FDIC chief Sheila C. Bair. “In choosing this path, it should be clear to the public that the industry will not simply tap the shoulder of the increasingly weary taxpayer.”

Insured bank deposits continue to be “100% safe,” Bair emphasized, and analysts agreed.

Kevin Petrasic, a former special counsel at the Office of Thrift Supervision, described the FDIC’s decision, which is open for public comment for 30 days, “as the least objectionable of some not particularly good options.”

Source/Full Story: latimes.com
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Atlanta’s Georgian Bank became the 95th bank failure of the year, according to the Federal Deposit Insurance Corp. on Friday.

Source/Full Story: MarketWatch
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The Federal Deposit Insurance Corp. is weighing several costly — and never-before-used — options as it struggles to shore up the dwindling fund that insures bank deposits.

The agency is considering borrowing billions from healthy banks. Alternatively, it may impose a special fee on the banking industry.

Each option carries risk: Drawing money from healthy banks would take dollars out of the private sector, making that money unavailable for investment in the weak economy. But charging the whole industry a fee to replenish the fund could push weaker banks toward failure.

A third option — borrowing from the Treasury — is politically unpalatable, since it would resemble another taxpayer-financed bailout.

A fourth option would be to have banks pay their regular insurance premiums early. But this idea wouldn’t solve the fund’s long-term cash needs.

“The bottom line is, there’s no good solution,” said Jaret Seiberg, an analyst with the research firm Concept Capital. “This is a fight over which option is least bad.”

The FDIC is expected to propose a solution, possibly combining two or more of the options, at a board meeting next week.

Source/Full Story: Yahoo! Finance
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U.S. taxpayers may be on the hook for as much as $23.7 trillion to bolster the economy and bail out financial companies, said Neil Barofsky, special inspector general for the Treasury’s Troubled Asset Relief Program.

The Treasury’s $700 billion bank-investment program represents a fraction of all federal support to resuscitate the U.S. financial system, including $6.8 trillion in aid offered by the Federal Reserve, Barofsky said in a report released today.

“TARP has evolved into a program of unprecedented scope, scale and complexity,” Barofsky said in testimony prepared for a hearing tomorrow before the House Committee on Oversight and Government Reform.

Treasury spokesman Andrew Williams said the U.S. has spent less than $2 trillion so far and that Barofsky’s estimates are flawed because they don’t take into account assets that back those programs or fees charged to recoup some costs shouldered by taxpayers.

“These estimates of potential exposures do not provide a useful framework for evaluating the potential cost of these programs,” Williams said. “This estimate includes programs at their hypothetical maximum size, and it was never likely that the programs would be maxed out at the same time.”

Barofsky’s estimates include $2.3 trillion in programs offered by the Federal Deposit Insurance Corp., $7.4 trillion in TARP and other aid from the Treasury and $7.2 trillion in federal money for Fannie Mae, Freddie Mac, credit unions, Veterans Affairs and other federal programs.

Source/Full Story: Bloomberg.com
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U.S. regulators are set to buttress their defenses this week against a slew of sick banks still facing closure and the risks to the dwindling fund that protects depositors.

The Federal Deposit Insurance Corp has been looking at expanding the pool of potential bidders for distressed banks, providing some capital relief for troubled assets that will soon be brought back onto banks’ books, and charging further industry premiums to replenish the insurance fund.

All of these moves are geared to get the banking industry, and the agency charged with ensuring the industry’s safety, through a financial crunch that is coming to a head.

“We’re working through this problem. We’re not at the beginning, we’re not at the end,” said James Chessen, chief economist for the American Bankers Association. “We’re in the middle and it’s painful.”

Regulators have shuttered 81 banks so far this year, compared with 25 last year, and three in 2007. Analysts say the wave of failures is far from over. Richard Bove of Rochdale Securities said on Sunday that 150 to 200 more U.S. banks will fail in the current banking crisis, which started with a dramatic fall in housing prices that sent the economy into a recession and caused many borrowers to default on their loans.

Bove said the continuing failures will force the FDIC to turn increasingly to non-U.S. banks and private equity funds to shore up the banking system.

Source/Full Story: Reuters

Guaranty Bank of Austin, Tex. became the 81st bank failure of 2009 after it was closed by Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corp. as receiver, the federal agency said late Friday. The FDIC said it has entered into a “purchase and assumption agreement” with BBVA Compass of Birmingham, Ala. As of June 30, Guaranty Bank had total assets about $13 billion and total deposits of about $12 billion.

Source/Full Story: MarketWatch

Regulators have shut down Colonial BancGroup Inc. CNB-N , a big lender in real estate development that buckled under the collapse of the market. It was the biggest U.S. bank to fail this year, with about $25-billion in assets.

The Federal Deposit Insurance Corp. was appointed receiver of Montgomery, Ala.-based Colonial. The agency approved the sale of Colonial’s $20-billion in deposits and about $22-billion of its assets to BB&T Corp. The failed bank’s 346 branches in Alabama, Florida, Georgia, Nevada and Texas will reopen at the normal times starting on Saturday as offices of BB&T, the FDIC said.

BB&T, based in Winston-Salem, N.C., operates throughout the Southeast and is considered among the nation’s stronger regional banks.

The failure of Colonial is expected to cost the deposit insurance fund an estimated $2.8-billion.

The bank was a major lender to developers in Florida and Nevada and was hit hard by the collapse of the real estate market in those states.

Colonial BancGroup shut by regulators – The Globe and Mail

Four more banks failed according to the Federal Deposit Insurance Corp. on Friday, bringing the year’s total to 68, and to 93 failed banks since the beginning of the recession. First BankAmericano of Elizabeth, N.J., will have its deposits transferred to Crown Bank, Brick, N.J.; Peoples Community Bank of West Chester, Ohio, will have deposits sent to First Financial Bank of Hamilton, Ohio; Integrity Bank of Jupiter, Fla., will transfer deposits to Stonegate Bank of Fort Lauderdale, Fla.; and First State Bank of Altus in Altus, Okla. will transfer deposits to Herring Bank of Amarillo, Texas.

Source/Full Story: MarketWatch

Shares in CIT, the US small-business lender, fell 75 per cent on Thursday after the failure of government bail-out talks prompted fears of a bankruptcy filing.

The company was scrambling on Thursday to obtain last-minute financing commitments from lenders that could help CIT persuade the Federal Deposit Insurance Corporation to allow it to transfer assets to its banking subsidiary, said people close to the situation. However, chances of success were slim, these people said, and the company was also engaged in talks with lenders about financing that would allow the business to keep operating while in bankruptcy.

Goldman Sachs on Thursday was trying to put together a rescue financing for CIT that would offer lenders security, putting the new claims ahead of other unsecured creditors, according to one person familiar with the matter. That financing would likely only stave off a probable bankruptcy filing by a couple of months, others involved with CIT say. Goldman declined to comment.

Goldman has various exposures to CIT. In addition to engaging in derivatives transactions with CIT, including a $3 bn total return swap. As recently as Wednesday, Goldman staffers were telling other investors that a government bail-out of CIT would materialize and that the company was considering other measures, such as a debt exchange offer, that would buy it time.

If the group were to file for Chapter 11 protection it would be the fourth largest bankruptcy by assets in the US. But restructuring experts said it could end up in liquidation, given CIT’s difficulty in attracting additional funding and the lack of obvious white knights.

CIT’s failure to come up with a convincing plan to fund itself was considered a big factor in the government’s decision to withhold support from CIT. “If there was going to be an effort to save them, we needed to see a viable end point,” said one regulator.

Source/Full Story:: FT.com
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The survival of CIT Group Inc, a key source of financing for thousands of small and medium-sized companies, became ensnared in disagreements between regulators in Washington on Monday.

The Federal Deposit Insurance Corp, which insures deposits at U.S. banks, opposed an attempt by the Treasury Department and Federal Reserve to rescue the lender by granting it access to a government debt-guarantee program, according to a source familiar with the matter.

The prices of CIT shares and bonds tumbled as investors worried the commercial lender would not be able to meet its obligations to bondholders, perhaps pushing the company into bankruptcy and disrupting the financing on which its corporate customers depend.

CIT’s difficulties are “going to make funding more expensive all around,” said Dan Brown, chief economist for Euler Hermes, a unit of insurer Allianz SE.

The lender’s failure would be the biggest collapse of a financial firm since regulators seized Washington Mutual Inc in September.

It is not the first time in recent months that there has been a disagreement between the FDIC and the Treasury and Federal Reserve. FDIC Chairman Sheila Bair, who is well-liked by key congressional leaders, and Treasury Secretary Timothy Geithner have battled over policy and turf, according to numerous reports.

Source/Full Story: Reuters

U.S. small businesses, already facing the toughest credit conditions since the 1980s, may soon find things are about to get tougher.

Concerns over the future of CIT Corp (CIT.N) — a major lender to small businesses — which provides capital in situations where many commercial banks fear to tread, makes small business advocates wary about the next few months.

Since small business is typically a major driver of the U.S. economy, any barrier to this sector’s recovery could mean a longer, slower U.S. economic revival, and could limit the effectiveness of the government’s stimulus dollars.

CIT has tried various capital-raising plans, including growing its retail bank and selling assets and stock, to pay off maturing debt and avoid further ratings downgrades.

CIT said it was talking to the U.S. government to gain access to funding, but that there was no guarantee the Federal Deposit Insurance Corp would approve its application to join the Temporary Liquidity Guarantee Program. That has exacerbated a liquidity crunch and led CIT To explore a possible bankruptcy filing, The Wall Street Journal said.

“The CIT crisis takes a lending source that’s been relatively active in a very tight credit market and eliminates one more source of capital,” said Ken Gaebler, president of Gaebler Ventures LLC, a consultancy that helps entrepreneurs raise capital and acts as a business incubator.

CIT’s failure, if it happens, would pull existing lines of credit, forcing creditors to seek alternative funding.

Source/Full Story: Reuters