Now raising intellectual capital

Bair on PE bank deals: “We will get this right.”


The idea of the strip-and-flip crowd a/k/a private equity firms buying distressed banks out of government receivership raises a lot of dicey issues. But with federal regulators approving three such transactions this year and more bank failures on the way, get used to the idea of PE banking.

Last month Rhode Island Sen. Jack Reed, a member of the Senate Banking Committee, sent a letter to regulators in which he raised some concerns about these deals. Now at least one regulator, FDIC Chairman Sheila Bair has responded.

In a June 5 letter, Bair tells Reed that she fully expects PE firms to keep bidding on failed banks and her agency is in the process of developing “applicable policy guidance” for prospective investors. In the letter, she notes the FDIC has already imposed “resale restrictions” on the two transactions it has approved. For instance, she says the group of PE firms that bought BankUnited, a failed Florida thrift, can’t sell a controlling interest in the new bank for 18 months.

Bair’s response to Reed was obtained by Wharton finance lecturer Ken Thomas, a dogged Freedom of Information Act filer.

Kanas is the main man


It was never a secret that former North Fork CEO John Kanas was the prime mover behind a group of private equity firms that recently acquired the assets and banking operations of Florida-based BankUnited, a failed lender that the regulators had to takeover. But bid documents submitted by the investor group reveal just how central Kanas was to putting the team of private equity buyers together.

The formal bid for BankUnited came from a company called JAK Holdings, LLC, an entity that listed Kanas as its sole member, according to bid documents submitted to the Federal Deposit Insurance Corp. It appears JAK Holdings is the entity through which private equity firms such as, WL Ross, Carlyle Group, Blackstone and other invested. Technically, JAK Holdings submitted its bid on behalf of the new BankUnited.