Rolfe Winkler

Sarbox isn’t the only regulatory regime under threat. As Ryan Grim writes over at HuffPo, an amendment has been introduced that would put FASB under the thumb of the new systemic risk oversight council, and give the council the power to literally do away with inconvenient accounting rules that pose a problem for banks.

Astonishingly, at a time when the public is crying out for greater regulation to limit excessive risk-taking by financial institutions, the banks are trying to get Congress to agree that the next time there’s a big downturn, they should have the ability to alter their accounting standards — essentially, fudge the numbers — so that the public and investors won’t be able to tell how insolvent they really are. By ignoring their declining asset values, they can avoid the standard requirement of raising more capital.

The mechanism is contained in an amendment set to be introduced in mid-November by Rep. Ed Perlmutter (D-Colo.) that would move final authority over the Financial Accounting Standards Board (FASB) from the Securities and Exchange Commission to a new body, a so-called “oversight” board, that would include the officials charged with managing systemic risks to the financial markets.

Accountants are apoplectic. Even the Chamber of Commerce is fighting this, on behalf of their non-bank membership, co-signing a letter with the Center for Audit Quality and the Council of Institutional Investors:

By placing the FASB under the jurisdiction of a structure charged with managing systemic risks to the financial markets, accounting rules will be viewed though the narrow lens of a few large companies from specific industries, rather than considerate of the applicability of financial reporting policies to over 15,000 public companies. Such a narrow focus can skew standards such that it makes understanding of transactions that businesses engage in on a daily basis more difficult and undermine the confidence of investors. We believe that the SEC has been and continues to be best suited to provide the oversight of the FASB for such a broad and diverse economy.

As such, we strongly support an independent standards-setting process, subject to public scrutiny and free of undue pressures.

Another helpful bit of the article explains how it isn’t Wall Street driving this, it’s smaller community banks.

It bothers me how small banks have been able to set themselves up as David to the Wall St. Goliath. No, they don’t benefit from TBTF guarantees so, yes, they are at a disadvantage relative to Wall St.

But that’s not a reason to bend the rules in their favor. No they didn’t get involved in more exotic products that blew up Wall St., but many got caught in the CRE mania. If they are insolvent, they need to be shut down. Otherwise they’ll continue to absorb capital that should go to solvent banks and borrowers.

But congressmen tend to like little guy storis (also they like campaign contributions from community banks) so many are happy to sponsor this race to the bottom.

(By the way….it’s interesting that Kanjorski is against this. Recall that it was his subcommittee that browbeat FASB into overriding fair value rules earlier this year.)

As per usual, we begin in Georgia. The last one of the night is a big one.

#116

• Failed bank: United Security Bank, Sparta GA
• Acquiring bank: Ameris Bank, Moultrie GA
• Vitals: as of 9/14/09, assets of $157m, deposits of $150m
• DIF damage: $58 million

Ameris Bank also bought American United two weeks ago.

#117

• Failed bank: Home Federal Savings Bank, Detroit MI
• Acquiring bank: Liberty Bank and Trust, New Orleans LA
• Vitals: as of 9/24/09, assets of $14.9m, deposits of $12.8m
• DIF damage: $5.4 million

#118

• Failed bank: Prosperan bank, Oakdale MN
• Acquiring bank: Alerus Financial NA, Grand Forks ND
• Vitals: as of 8/30/09, assets of $199.5m, deposits of $175.6m
• DIF damage: $60.1 million

#119

• Failed bank: Gateway Bank of St. Louis, St. Louis MO
• Acquiring bank: Central Bank of Kansas City, KC MO
• Vitals: as of 9/25/09, assets of $27.7m, deposits of $27.9m
• DIF damage: $9.2 million

#120

• Failed bank: United Commercial Bank, SF CA
• Acquiring bank: East West Bank, Pasadena CA
• Vitals: as of 10/23/09, assets of $11.2 billion, deposits of $7.5 billion
• DIF damage: $1.4 billion

The LA Times notes that United Commercial got $299 million of TARP money, which is now gone.

Fannie asks for another $15 billion (press release) That brings the company’s total draw on Treasury to $59.9 billion. Here’s the paragraph that scares me: “Total nonperforming loans in our guaranty book of business were $198.3 billion, compared with $171.0 billion on June 30, 2009, and $119.2 billion on December 31, 2008. The carrying value of our foreclosed properties was $7.3 billion, compared with $6.2 billion on June 30, 2009, and $6.6 billion on December 31, 2008.” Why is the value of nonperforming loans growing so much faster than foreclosures? If Fannie’s not going to foreclose, then why bother paying the mortgage?

Fannie owed $15.8 billion by Lehman (Fannie 10-q) see page 103.

With tax break, a bigger carbon footprint (Glaeser, Boston Globe) “The real problem with the [home buyer tax] credit is that it continues the long-standing federal push toward far-flung McMansions and away from dense, apartment living.” It’s not just about carbon consumption. It’s about encouraging the expansion of a footprint that our incomes can no longer support.

Goodbye to reforms of 2002 (Norris, NYT) Floyd chimes in on Sarbox.

Pre-retirees in denial on savings (CalculatedRisk) Future generations (including mine) will look back in wonder at the 20-year retirements that were typical through the 80s/90s/00s.

950th time is the charm for learner driver (Couzens, Sky News, ht Troy M) Is this multiple choice? Surely a monkey filling ovals at random would have managed the necessary 60% at some point. Nevermind that the questions can’t change all that often. A regular should figure out the right answers by a simple process of elimination…

Student stuns Iran by criticizing Ayatollah Khamenei to his face (Faramarzi, AP)

Anne Frank offends Hezbollah (Yazbeck, AFP) “Anne Frank’s diary has been censored out of a school textbook in Lebanon following a campaign by the militant group Hezbollah claiming the classic work promotes Zionism.”

Women’s college soccer? Or UFC? (ESPN) How did this girl not get red carded?

You know you’re a redneck when …. (imgur) Click to zoom in.

Objective observers mostly agree that it doesn’t make sense for banks to be in the securities business, not if they’re explicitly insured by the government. Wall Streeters invent rationalizations to support the current structure because a large chunk of their profits come from trading.

It’s very refreshing that John Reed, an architect of Citigroup — the biggest, most disastrous financial supermarket of them all — now says the merger was a mistake and banks should be broken up.

From Bob Ivry, Bloomberg:

Congress’ overhaul of U.S. financial regulations should include ordering banks to hold more capital, ensuring executives’ compensation is aligned with long-term profitability and banning firms that take deposits from also engaging in equities and fixed-income trading, Reed said.

“I would compartmentalize the industry for the same reason you compartmentalize ships,” Reed said in the interview in his office on Park Avenue in New York. “If you have a leak, the leak doesn’t spread and sink the whole vessel. So generally speaking you’d have consumer banking separate from trading bonds and equity.”

Lawmakers were wrong to repeal the Depression-era Glass- Steagall Act in 1999, Reed said. At the time, he supported overturn of the law, which required the separation of institutions that engaged in traditional customer banking services from those involved in capital markets.

“We learn from our mistakes,” said Reed, who wrote an Oct. 21 letter to the editor of the New York Times endorsing a division of banking activities. “When you’re running a company, you do what you think is right for the stockholders. Right now I’m looking at this as a citizen.”

Again, this is just half the battle. Getting dangerous activities outside of insured banks doesn’t mean the activities themselves, which in many cases still pose systemic risks, won’t continue to benefit from an implicit government guarantee.

As long as investment banks remain highly complex, systemically dangerous institutions, they’ll always have a government lifeline. (”No more Lehmans!”)

Methinks gold is rising because investors are anticipating a big second stimulus to counter the rising unemployment rate.

I’m a fan of gold as insurance, especially for high net worth individuals who want some of their wealth “out of the system.” It protects against violent deflationary or inflationary episodes, both of which can wipe out the value of paper wealth very quickly. That said, the premiums to buy that insurance are getting pretty expensive…

Personally, I don’t see how we escape this crisis without a dramatic decline in paper wealth. Credit can’t expand forever, much as the Fed and Treasury would like for that to happen. Eventually the cycle goes into reverse because the government no longer has the balance sheet capacity to absorb more of the private sector’s liabilities. When that happens, asset values crater. The economy is so over-levered in my estimation, its equity value is probably negative. There’s a reason the Dow declined 90% a few years into the Depression. (Stocks have some option value, so they aren’t going to zero.)

The government is aware of how violent deflation can be…ergo, the stupendous show of monetary and fiscal support over the past year. But seems to me all we’re doing is re-inflating the bubble, using the public balance sheet for financing instead of private balance sheets.

Some would argue that so long as there is an “output gap” this won’t be inflationary. I disagree. I think runaway stimulus means the U.S. will eventually face a “sudden stop” situation á la Argentina or Ireland when credit markets lose confidence in U.S. paper. They’ll see the only way they will be paid back is via direct monetization. When that happens, the bid for dollar-denominated assets could disappear more quickly than folks might be willing to admit.

But these dynamics could literally take years to play out. We still print the currency in which our debt is payable. Some consider this a huge advantage. To me, we just have more rope to hang ourselves with.

And I’m not saying this is going to happen. It’s entirely possible we get our act together and let the economy deflate gradually, using stimulus to support a gradual de-levering of the economy. But politically that may not be possible, and so the correction may be forced on us. To hedge that risk, it’s not a bad idea to diversify out of paper wealth into tangible wealth.

BTW, I don’t think you make money on gold in the long run. I think, at best, you protect the purchasing power of the dollars you already have.

From Marketwatch:

Gold futures rose to a new record high of $1,100 an ounce Friday after data showed the U.S. unemployment rate topped 10% in October, raising the metal’s appeal as a safe asset. Gold for November delivery gained 1% to $1,100 an ounce on the Comex division of the New York Mercantile Exchange, the highest level for a front-month contract. The more actively traded December contract rose to $1,101.90 an ounce.

Fight over blog comments hits NH high court (NHPR, ht AK) Aaron Krowne is fighting the good fight for bloggers everywhere.

FHA delays release of financial audit (ElBoghdady, WaPo) The dog ate my homework…

Wells Fargo defers reckoning on troubled mortgage balances (Eckblad, DJ) Wells’ book of option ARMs threatens to blow up in the next few years as the loans recast, forcing borrowers to start paying down principal, not just making a minimum payment as they might on a credit card. Turning them into 6-10 year interst only loans pushes back the pain for the borrower…extend and pretend. The example used in the article notes that as part of the modification, this borrower gets a $100k reduction in principal owed. That’s not nothing. Writing down principal reduces the borrowers leverage, and it means the bank is taking a loss on part of the loan balance. Call it a silver lining.

Mirabile Dictu! Goldman lost money one day last quarter (Yves Smith) In its quarterly filing with regulators, Goldman published a “frequency distribution” for daily profits. That’s a fancy way of describing the average amount of money it made each day last quarter. Out of 65 trading days, only once did it lose money. And a pittance at that. (Alphaville published the chart yesterday.)

FDIC reduces risk-weight to 0% on TLGP-backed debt (FDIC) Yuck, that sounds complicated. Say you’re a bank, and you hold GMAC bonds that were sold with an FDIC guarantee. Normally when you have a bond on your balance sheet (an asset) you have to carry capital against it just in case the bond’s value declines. But for regulatory capital purposes, FDIC-backed debt is now the functional equivalent of Treasuries. “Risk-free” as it were. This will allow banks to hold more TLGP-backed debt on their balance sheet.

Goldman benefits from debt gold mine (Eavis, WSJ) Speaking of cheap funding, the average interest rate on Goldman’s long-term debt is down to 0.92% from 3.53% a year ago. Eavis notes this is due to clever hedging. Pretty easy to make money as a bank when your cost of funds is close to zero. Helps to have the implicit backing of the government.

Bald bears baffle zookeepers (Daily Mail) This must be what Cerberus looks like…with two more heads I guess.

Dutch smoke less pot than other Europeans (The Australian) Who’d a thunk it.

Squirrel deterrent (photobucket)

African Gothic…

In a note to clients yesterday, Paul Miller of FBR Capital Markets wrote:

We are hearing that discussion of breaking up large financial institutions that pose systemic risk to the market is gaining traction on the Hill. At this point, discussions are in the early stages, but we understand that an amendment addressing breaking up institutions deemed “too big to fail” could be introduced in the House over the next few days. How does one define “too big to fail” and how would the divestiture process work - these are good questions that Congress will have to address as the discussion moves forward. To our understanding, any amendment that could be introduced in the coming week would likely be vague and would give the regulators discretion to determine which institutions qualify as “too big” and how to address the risk they pose to the system.

[UPDATE: It appears this legislation may be coming from PA's Paul Kanjorski]

Hmmm. A “vague” amendment directing regulators to look into breaking up TBTF banks might not lead to much, not when regulators have made clear they have no interest in breaking up big banks.

[After she gave a speech complaining about TBTF at the Economist's Buttonwood Conference, I asked Sheila Bair if she would favor policies to proactively shrink/break up big banks. She said "no, I don't know how we would do that."]

And breaking up banks is only half the battle. While it’s very important to get commercial banks out of the trading business, if derivative books don’t shrink dramatically systemic risk won’t have gone away.

Neither Bear nor Lehman had a commercial bank. But the size, opacity and interconnectedness of their trading books posed huge risks for the system.

Speaking of the systemic risk posed by derivative books, there’s a very interesting and relevant tidbit in Andrew Ross Sorkin’s new book titled “Too Big to Fail.”

Not long before AIG collapsed, CEO Bob Willumstad went to Tim Geithner — then head of the NY Fed — and asked that AIG be made a “primary dealer,” giving it access to the Fed as its lender of last resort….

He left Geithner with two documents. One was a fact sheet that listed all the attributes of AIG FP [the division run by Joe Cassano that blew the company up] and argued why it should be given status as a primary dealer. The other–a bombshell that Willumstad was confident would draw Geithner’s attention–was a report on AIG’s counterparty exposure around the world, which included “2.7 trillion of notional derivative exposures, with 12,000 individual contracts.” About halfway down the page, in bold, was the detail that Willumstad hoped would strike Geithner as startling: “$1 trillion of exposures concentrated with 12 major financial institutions.”

You will bail me out or I’ll bring the whole system down with me.

Until they neuter the derivatives business by putting all contracts on exchanges, enhanced “resolution authority” will probably be meaningless. Regulators still won’t be able to shutter the largest financials because doing so would cause the systemic event they’re trying to avoid in the first place.

An amendment permanently exempting small public companies from complying with a key provision of the Sarbanes-Oxley Act advanced in Congress today, demonstrating the bankruptcy of our approach to reform.

Sarbox was passed in the wake of scandals at Enron, WorldCom and others to protect investors. Sections 404(a) and 404(b) are important provisions.

The first requires executives to sign off on the integrity of internal controls. Can employees walk off with inventory? Are two people signing checks? Is accounting in order? Basic stuff to reduce the risk of misstatements and fraud.

The second requires an outside audit of the above. And that costs money.

At the time, companies with market caps below $75 million successfully lobbied to delay compliance, arguing that the costs were too big relative to their size.

Apparently, a delay is no longer enough. Representative John Adler, a New Jersey Democrat, pushed through the House Financial Services Committee today an amendment that would permanently exempt companies below $75 million from 404(b). And it would direct the Securities and Exchange Commission to “study” how to ease rules for companies with market caps of under $250 million. The amendment has the support of the Obama administration.

“This is an insult to investors given what we’ve experienced over the past year,” says Kurt Schacht of the CFA Centre for Financial Market Integrity. “Small companies have had plenty of time to plan for this.”

In a phone interview, Adler told me that 404(b) is problematic for several reasons. First, it has reduced the number of IPOs. To support his point he compares the 1990s with this decade, conveniently forgetting that the number of offerings last decade was dramatically inflated by the dot.com bubble.

Second, he says, small American companies are either moving their headquarters overseas or listing shares in London to dodge Sarbox compliance. Asked for examples, he cited Princeton Review and Peet’s Coffee & Tea. Actually, Princeton Review is based in Massachusetts, Peet’s in California. And both are listed on Nasdaq.

Are small foreign companies listing less frequently in the United States because of Sarbox? Yes, according to a 2008 paper by Suraj Srinivasan of Harvard and Joseph Piotroski of Stanford.

So shed a tear or two for banks, which may lose underwriting fees, and for small foreign companies, which may get locked out, but American investors are protected as a result because our markets have more integrity.

This benefits larger foreign firms that do comply with Sarbox, Srinivasan notes, because compliance gives their managements more credibility.

The legitimate argument against compliance is that it costs money. Those are dollars that small firms can’t invest in their business. But cost estimates vary widely. Adler points to a 2006 SEC study that put the average cost for small firms at $900,000. Jeff Mahoney of the Council of Institutional Investors, however, cites other studies that suggest the cost is lower.

Because of concerns over cost, regulators have already issued guidance instructing auditors to go easy. So if small companies — which have a much higher rate of accounting misstatements than their larger brethren, by the way — don’t want to comply with Sarbox, that’s fine. But they should issue stock privately.

The race to the regulatory bottom continues. With no natural constituency fighting in favor of tough market rules, those subject to them steadily chip away.

The non-response to last year’s financial crisis — toothless reform for derivatives, “resolution authority” that codifies too-big-to-fail — suggests that it will take a total market collapse before we get real reform.

Glass-Steagall, for example, was a great piece of legislation that protected us from the worst excesses of banking. But it took a Depression to deliver it.

BofA’s counsel had no legal authority in Merrill deal (DeCambre/Wilner/Whitehouse, NY Post)

Congress agrees to keep homebuyer tax credit (NYT)

Fitch downgrades Ireland (Kennedy, Marketwatch)

Berkshire may lose AAA rating from S&P on Burlington deal (Frye, Bloomberg)

The deferred tax asset disaster (Tracy Alloway, Alphaville) A very helpful reminder from Tracy about DTAs. Banks still count these as capital (and yes, it’s included in TCE) even though, in a stressed situation, they don’t provide any cushion whatsoever to absorb losses.

In Somalia, cheap mobile calls help more young couples elope (Skeikh, Retuers) Stick with the article to the second page in order to get the gist.

Zimbabwe plane veers off runway after colliding with warthog (David Smith, BBC)

Film-makers want government money (Schweizer, Bloomberg)

The viper logo upside down is daffy duck (imgur)

Hilarious….the “action” shots in the middle are the best

From the American Bankruptcy Institute (no link yet):

The 135,913 consumer bankruptcy filings in October represented a 27.9 percent increase over last October’s monthly total of 106,266, according to the American Bankruptcy Institute (ABI), relying on data from the National Bankruptcy Research Center (NBKRC). The October 2009 consumer filings represented an 8.9 percent increase from the September 2009 total of 124,790. Chapter 13 filings constituted 28.5 percent of all consumer cases in October, a slight increase from the September rate.

“The nearly 9 percent increase in consumer bankruptcy filings in October, together with a 7 percent jump reported in business cases, demonstrates the sustained stress on the U.S. economy,” said ABI Executive Director Samuel J. Gerdano. ABI forecasts that total bankruptcies this year will exceed 1.4 million, the highest number since 2005.

Filings in 2005 were inflated by the passage of a new bankruptcy law that made it harder to file.

It’s Japan we should be worrying about, not America (Evans-Pritchard) There’s no pretty way to de-lever…

Buffett splits “B” shares 50:1 (Jonathan Stempel/Lilla Zuill, Reuters) This will put shares in reach of regular folks. Look for index funds to load up. Oh and by the way, this should make it easier to short Buffett too…

Santelli vs. Liesman (CNBC) Santelli has a penchant for getting worked up, but how can you blame him when he’s talking to Liesman, who seems so worried about losing access to top policy-makers, he never takes a contrary position?

Here comes the “second stimulus” (Pimm Foxx/Mark Drajen, Bloomberg) It won’t be the last. Economists of all stripes are convinced that we have to stimulate as long as unemployment is high. But none of their models account for debt, so this will all end badly…

Economists reach for new paradigm (WSJ) Speaking of not accounting for debt in their models…Good article…but no mention of Minsky? There were plenty who read him years ago and were appropriately positioned to avoid the crash…)

Cell phone users miss the obvious, like a unicycling clown (Kie Relyea, Bellingham Herald)

Kitty doing math (Reddit)

How come the monkey gets top billing? (The coolest part is just past the three minute mark)

From Surojit Gupta and Lesley Wroughton, Reuters:

The International Monetary Fund has sold 200 tonnes of gold to the Reserve Bank of India for $6.7 billion, quietly executing half of a long-planned bullion sale that has threatened to slow gold’s ascent….

…Although the IMF’s plan to sell a share of its gold holdings in order to increase low-cost lending to poor countries had been flagged for a year before it was formally approved in September, the speed, scale and identity of the buyer were a surprise….

….The market’s focus has now shifted to China, which has reportedly been in talks with the IMF about buying some of the fund’s bullion as Beijing seeks to shift some of its more than $2 trillion in foreign exchange reserves away from the U.S. dollar….

Already the world’s top producer of gold and rivaling India as a consumer, China revealed this year that it had quietly lifted its own government holdings of gold stocks to 1,054 tonnes from 600 tonnes when it last reported its holdings in 2003.

200 tons is decent chunk. I’ve seen varying estimates, but according to Peter Bernstein, the total supply of gold is 125,000 tons. That puts this single purchase at about two-tenths of one percent of the total.

So I thought I’d do a little number crunching on Buffett’s Burlington deal. What does that tell us? That Buffett is paying a full price for a business with mediocre returns on capital, that he’s betting on growth, not value.

Valuation (based on share prices of $100 for Burlington, $59 for Union Pacific, and $48 for Norfolk Southern):

• Enterprise Value to 2010 unlevered free cash flow (think of this as a better alternative to P/E ratios):
  • BNI = 29x
  • UNP = 24x
  • NSC = 18x

• Return on capital employed (based on 2010 operating income and year-end ‘10 balance sheet estimates.
  • BNI = 11%
  • UNP = 10%
  • NSC = 10%

(I’m using Stifel Nicolaus estimates for 2010)

The cash flow characteristics of the business aren’t very good. From 1999 to 2009, BNI poured 68% of operating cash flow back into capital expenditures. That’s cash flow that doesn’t go to shareholders.

Nor are the returns fantastic. Because operating a railroad requires so capital, the return on capital employed is only mediocre.

And the business is not without risk. High fixed costs mean railroads generate increasing returns during upswings, but decreasing returns during downturns.

As an asset, railroads do seem well-positioned. And Burlington Northern particulary so.

1. Increasing fuel costs hit truckers harder than railroads, so that works in their favor.

2. As my Reuters colleague John Kemp points out: “Burlington’s track and rights of way are perfectly positioned to benefit from a massive expansion of the country’s coal-fired output in the next 20 years, coupled with ‘carbon capture and store’ technology to curb the carbon-dioxide emissions.”

He’s talking about Burlington’s track near the Powder-River Basin in Wyoming and Montana. PRB coal has lower sulfur content than Appalachian coal. To the extent we increase coal-fired power generation in the U.S., we’re likely to do it on a “clean” basis, giving PRB coal (and those who ship it) a competitive advantage.

3. Most important: Pricing. As volumes have increased the last few years, railroads have been able to increase their prices. Buffett is betting this will continue.

But again, given the high price he’s paying, Buffett needs a lot of things to go right for this deal to generate meaningful returns for shareholders.

More than anything, I bet he’s anxious about sitting on $25 billion worth of cash. Yields on short-term investments are at rock-bottom rates thanks to the Fed, and Buffett has gone on record that he’s worried about inflation.

CIT files for bankruptcy (Wilchins/Comlay, Reuters) The $2.3 billion they got from TARP? It’s gone. We’ve known that for a while….another dagger in the heart of the we-made-money-on-TARP argument…

Senate health bill won’t reduce health costs as % of the economy (PGPF)

Can Citigroup carry its own weight? (Martin/Morgenson, NYT) “Over the past 80 years, the United States government has engineered not one, not two, not three, but at least four rescues of the institution now known as Citigroup.”

Aussie dollar channeling Yuan shows increased trading in China (Zachariah/Goodman, Bloomberg) The Aussie currency is in good shape thanks to strong demand for the country’s national resources. Look for another rate increase there today.

PA judge accepted millions in kickbacks to send juveniles to private jails (AP)

FDIC closed 9 banks late last night, with a combined $19.4 billion of assets all of which were owned by one holding company and sold to US Bank in Minnesota. From Robin Sidel, WSJ:

Banking regulators seized nine related community lenders in California, Illinois, Arizona and Texas, representing the collapse of one of the nation’s largest privately held bank holding companies that grew through a string of acquisitions dating back to the savings-and-loan crisis of the 1990s.

The nine small banks represented the holdings of FBOP Corp., based in Oak Park, Ill., and owned by a banker who had plowed into real-estate lending around the country.

#107-#115

• Failed banks: Bank USA, Phoenix AZ; California National Bank, LA CA; San Diego National Bank, SD CA; Pacific National Bank, SF CA; Park National Bank, Chicago IL; Community Bank of Lemont, Lemont IL; North Houston Bank, Houston TX; Madisonville State Bank, Madisonville TX; Citizens National Bank, Teague TX.
• Acquiring bank: US Bank, Minneapolis MN
• Vitals: as of 9/30, $19.4 billion of assets, $15.4 billion of deposits
• DIF damage: $2.5 billion

US Bank has been highly acquisitive during this failure cycle. They also picked up Downey Savings and Loan and PFF Bank and Trust last November. Those two had $12.4 billion and $3.7 billion of assets when they failed.