A few weeks into this and we look smart.
After seven failures last week, the FDIC cashed five more banks this week. LB's line for weekly bank failure over/under has ceased to be a question of whether or not the overs will take it and instead has become a question of "by how much?"
Weekly Failure Summary:
First State Bank of Altus, OKThis is on par with the worst set of averages over the past month and a half since the pace of collapse has accelerated.
Assets: $103.4mm, FDIC Losses: $25.2mm, Losses as a Percentage of Assets: 24.4%
Integrity Bank, Jupiter, FL
Assets: $119mm, FDIC Losses: $46mm, Losses as a Percentage of Assets: 38.7%
People's Community Bank, West Chester, OH
Assets: $705.8mm, FDIC Losses: $129.5mm, Losses as a Percentage of Assets: 18.3%
First BankAmericano, Elizabeth, NJ
Assets: $166mm, FDIC Losses: $15mm, Losses as a Percentage of Assets: 9.0%
Mutual Bank, Harvey, IL
Assets: $1,600mm, FDIC Losses: $696mm, Losses as a Percentage of Assets: 43.5%
Straight Average Losses as a Percentage of Assets: 26.8%
Weighted Average Losses as a Percentage of Assets: 33.8%
Two other points worth noting.
First, Illinois sank another basket, tightening the Red Jersey of Shame tally: Georgia - 16, Illinois 13, California 8. In our opinion, Florida with four seems woefully underrepresented. We suspect their most shameful days are ahead of them
Secondly, the FDIC again this week made sure that all deposits were absorbed by an acquiring bank.
Our opinion is this is illegal.
The FDIC is taking losses (that means TILB and our dear readers, as citizen guarantors of the FDIC, are taking losses) rather than depositors that clearly do not qualify for insurance.
The FDIC waterfall should look like this:
1) FDIC takes over failing institution;
2) Cash out from FDIC Deposit Insurance Fund (DIF) to insured depositors;
3) Cash into DIF for sale of insured deposits;
4) Cash into DIF for sale of assets;
5) Cash to uninsured depositors if #3 and #4 exceed #2;
6) Any final excess cash falls through the capital structure as expected: unsecured creditors, subordinated debt, preferreds, equity.
For reasons that we can guess at but that have not been adequately addressed, #5 has generally been moved ahead of repaying the DIF. Basically, the FDIC is insuring depositors that have not "paid" an insurance premium and thusly should not receive insurance proceeds. The FDIC is doing this with our money and we feel it is akin to theft.
TILB is getting angry...