Sunday, August 23, 2009

The FDIC Goes Broke; Guaranty Bank Find Its Way To The Dustbin Of History (And Three Other Banks Fail)

The FDIC is trickling bank deaths at its New Normal steady state of four or five per week. As we predicted a ways back, at least 250 banks would die before the end of September 2010.

Our bank death scoreboard on the July 1st, 2009 through September 30, 2010 period stands at:

36 down: 214 (minimum) to go

Should be fun.

We also had our second $10+ billion asset bank fail in as many weeks.

This week, Guaranty Bank of Austin Texas took a Glock single shot to the dome...and the FDIC dragged its feet long enough on reforming its rules that govern private equity ownership of banks that We The People ended up placing Guaranty in the hands of Spain's second largest (and probably best run) bank, Banco Bilbao Vizcaya Argentaria (BBVA). Technically BBVA's Birmingham, Alabama based subsidiary BBVA Compass is the acquiror (the South(ern banking capital of Birmingham) will rise again!).

This transaction cost the FDIC Deposit Insurance Fund (DIF) a cool $3 billion on Guaranty's $13 billion asset base (23%). As a citizen guarantor of the DIF, aren't you comforted by the FDIC's desire to keep private capital bidders out of these auctions? Nothing like suppressing capital to get a full and fair price on our behalf!


Of the other three banks that failed, two were in Georgia (numbers 17 and 18 for the year) and one was in Alabama (its second in two weeks). And for the fourth time in less than three months, Stearns Bank of Minnesota acquired a failed bank (this time an internet bank ostensibly located in Atlanta, Georgia called eBank). This puts the Red Jersey of Shame leaderboard at: Georgia 18, Illinois 13, California 8, Florida 6.

Weekly Failure Summary:

eBank, Atlanta, GA
Assets: $143mm, FDIC Losses: $63mm, Losses as a Percentage of Assets: 44.1%

First Coweta, Newnan, GA
Assets: $167mm, FDIC Losses: $48mm, Losses as a Percentage of Assets: 28.7%

CapitalSouth Bank, Birmingham, AL
Assets: $6170mm, FDIC Losses: $151mm, Losses as a Percentage of Assets: 24.7%

Guaranty Bank, Austin, TX
Assets: $13,000mm, FDIC Losses: $3,000mm, Losses as a Percentage of Assets: 23.1%

Straight Average Losses as a Percentage of Assets: 30.1%
Weighted Average Losses as a Percentage of Assets: 23.4%
...another brutal week.

Per the FDIC's own estimates, since July 1st alone the DIF has lost $10.5 billion! Mind you, at March 31st the DIF stood at $13 billion and while the FDIC has taken in rich TLGP guarantee fees during that period, when the 4/1/09 - 6/30/09 losses (which we don't have at our fingertips but are substantial) are taken into account we can safely state that the DIF is, for all intents and purposes, broke.

Now, now, we know the US Treasury guarantees the DIF, so depositors need not fear, but hopefully this recognition of functional insolvency allows us to get past the ruse that the FDIC has fulfilled its duty of charging appropriate insurance premiums and providing capable regulatory oversight. In fact, the FDIC's has been an abject failure at these core functions. If the FDIC DIF were were an actual insurer, the FDIC Deposit Insurance Fund itself would have been taken over and killed by the government.

Keep that track record in mind when the FDIC "experts" espouse their opinions on the "solutions" to our current ills.

As an aside, the FDIC continues its rampant and unrighteous theft from its US citizen guarantors by providing deposit insurance to accounts over $250,000!

Memo To Sheila:
As if your horribly managed insurance "business" was not screwing us all enough, you have decided to insure depositors that - in essence - have not paid for insurance! What the deuce?! For the love of all that is holy, this gift to certain rich depositors is a regressive tax to end all regressive taxes. You are providing free deposit insurance to rich people paid for by the deposits of the portion of the population that does not happen to have two hundred fifty thousand dollars cash on hand. Are you kidding me? At least stop pretending like you don't insure these deposits and charge banks for this insurance. Otherwise, stop violating your mandate and stealing from U.S. citizens out of some sense of unfounded paranoia.

The below video is intended to deliver TILB's message to the FDIC. Anytime it refers to Arthur, his cohort, or the English just substitute The Sheila Bear, her cohort, or the FDIC. Yes, we accept the roles as the French guys. It can be summarize as, "I fart in your general direction, your mother was a hamster and you father smelled of fuckers."