Commentaries

Now raising intellectual capital

from Rolfe Winkler:

FDIC lowers capital rule, but there’s a twist

FDIC concluded its quarterly board meeting earlier this afternoon and the big news is it approved lower capital requirements for private equity shops looking to buy failed banks.*

But the weaker requirements come with a silver lining.

The previous proposal was that banks in the hands of private equity would have to maintain Tier 1 capital of 15%, triple the standard of 5% that is currently considered "well-capitalized."  [Your humble columnist thinks that threshold is way too low, but that's another discussion].

Under the rule that was adopted, such banks will have to maintain a 10% capital ratio, but the definition of capital isn't Tier 1, it's Tier 1 common equity.

Tier 1 common equity is close to tangible common equity, which is a stronger measure of capital than simple Tier 1.

from Rolfe Winkler:

Bank Failure Friday + DIF details

Another big one bites the dust.  Guaranty is the 81st failure of the year.  Plus two more in Georgia.

Below this evening's failure news I've got more detail about the Deposit Insurance Fund, including an interesting tidbit about why FDIC collected so little in premiums from 1996-2006.

FDIC bank debt program to end with a whimper

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The Federal Deposit Insurance Corp’s debt guarantee program in many ways saved the banking system from collapse during last year’s worst of times. Banks were effectively shut out of the credit markets after Lehman Brothers scared bond investors silly. More than $270 billion of guaranteed debt has been sold since the FDIC adopted the program in October.

The program ends in October, as it should. It’s served its purpose and there’s no reason to keep subsidizing banks with cheap financing now that they’re making gobs of money and handing out jaw-dropping bonuses. But don’t expect the banks to start crying uncle when they have to raise funds the old fashioned way without the FDIC backing. That’s because they don’t have to.

from Rolfe Winkler:

Talking Colonial

from Rolfe Winkler:

Bank Failure Friday, Talking Colonial & DIF update

Five bank failures tonight, bringing the total for the year to 77.  See below for a video clip and for details about the Deposit Insurance Fund's resources.

#73

    Failed Bank: Dwelling House S&L, Pittsburgh PA Acquiring Bank: PNC Bank, Pittsburgh PA Vitals: At 3/31/09, assets of $13.4 million, deposits of $13.8 million Estimated DIF damage: $6.8 million

#74

from Rolfe Winkler:

Colonial, gone … Did FDIC tip its hand?

FDIC will seize Colonial and sell its assets to BB&T.  This is the largest bank failure since WaMu last fall.  Reuters:

The Federal Deposit Insurance Corp is taking Colonial BancGroup Inc into receivership and will sell the struggling lender's branches and deposits to BB&T Corp, Dow Jones said, citing a person familiar with the situation.The deal was approved by the FDIC on Thursday night and is expected to be announced later on Friday, the news agency reported.

Fun commercial real estate figures and charts

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I just came across this research from the Cleveland Fed that has some scary numbers and charts on commercial real estate. They underscore why the Fed and the FDIC are so worried, particularly about construction and development loans, which are seeing the most stress.

Although commercial mortgage-backed securities (securitized CRE loans), have garnered their own significant amount of attention, they account for only 20 percent of outstanding commercial mortgage debt. Loans held by banks, meanwhile, account for 60 percent of the CRE debt market—much more than any other institutional holder. Also, unlike the residential mortgage market (where a majority of lending has been done by a few large banks), the array of banks holding large concentrations of commercial mortgage debt is broad and diverse.

Bair, a regulator for the people

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 In Sheila we trust.

Maybe that should be the new mantra for U.S. taxpayers — especially ones who don’t feel the nation’s bankers have shown sufficient gratitude for being bailed out and saved from their own incompetence and greed.

Sheila Bair, once again, has shown that she may be the one financial regulator who gets it.

from Rolfe Winkler:

Sheila Bair not cowed by Geithner tantrum, criticizes Obama

Last week Tim Geithner dropped multiple F-bombs in a meeting with regulators unenthusiastic about his plan to concentrate oversight of the financial system at the Fed.  Sheila Bair was one of his targets, but today she held her ground.  In testimony before the Senate Banking Committee this morning, she had this to say about concentrating regulatory power at the Fed:

...we do not see merit or wisdom in consolidating federal supervision of national and state banking charters into a single regulator for the simple reason that the ability to choose between federal and state regulatory regimes played no significant role in the current crisis.

Goldman needs to lose Gekko image

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So, Goldman Sachs has a “Gordon Gekko feel to it” according to an executive at Brand Asset Consulting. In a survey of leading U.S. brands, the market research firm has reached the conclusion that the investment bank’s stature has been diminished in the eyes of the public by recent events.

Somehow, this fails to do justice to the emotions the name Goldman <GS.N> stirs in the breast of the average American.

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