Colonial, gone … Did FDIC tip its hand?

August 14, 2009

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.

Colonial, based in Montgomery, Alabama, operates 355 branches in Florida, Alabama, Georgia, Nevada and Texas and has over $25 billion in assets.

WaMu had $307 billion of assets when it was shut down.  The largest bank failure since then had been BankUnited, with $12.8 billion of assets.

FDIC pulled a move with Colonial earlier this week that was eerily reminiscent of a similar move made with WaMu the week it was seized.  Those of us who thought Colonial would outlast other banks like Corus and Guaranty, should have realized this move foreshadowed a much quicker seizure.  Oops.

Here are the specifics from that filing earlier this week:

Colonial Bank … a wholly owned subsidiary of The Colonial BancGroup, Inc. … received notice on August 10, 2009 from … FDIC … directing  … a … subsidiary of the Bank, to exchange all outstanding shares of its … REIT Preferred Stock for an equal amount of Fixed-to-Floating Rate Perpetual Non-cumulative Preferred Stock, Series A of BancGroup … due to the occurrence of an “Exchange Event.”

What does that mean in English?  Reader frog said the following when I asked him about it on Wednesday:

My reaction is that its bad news for Colonial’s shareholders and debt holders.  Shifting the debt from having any claim, direct or indirect, on the BANK to having claim only on the HOLDING COMPANY makes it much easier for the FDIC to pluck away the Bank and leave the HC with nothing but debt.  The fact that the FDIC itself is tapping Colonial on the shoulder and saying, “Hey, how about you move this stuff over there so it doesn’t get in my way later” would not make me happy if I have any stake in the company.

In future I will blog such tidbits with more alacrity…

Comments

I demand 24 hour a day instant news cycle for you Rolfe.

We’ll put you in a hyperbaric chamber filled with an oxygen/caffeine gas mixture and plate the inside with tv feeds.

We can call it the “Situation Room”. Wait… is that name taken?

Posted by Andrew | Report as abusive
 

great investigative work…

Posted by Hany | Report as abusive
 

Excellent idea, Andrew. I’ll help build the chamber.

Posted by Marty | Report as abusive
 

Failed Banks Total Goes to 74 in 2009 and 99 since 2008.

Colonial Bank, Montgomery, Alabama was the biggest bank failure of 2009.
As of June 30, 2009, Colonial Bank had total assets of $25 billion and total deposits of approximately $20 billion.

Before this in 2008, we have seen bigger failures as Washington Mutual(Assets : $307 billion ) and IndyMac (Assets : $32 billion).

Check all the failed banks in 2009 at
http://portalseven.com/Failed-Banks-2009

Check map of failed banks at :
http://portalseven.com/Failed-Banks-Map- 2009

 

Where are the bonuses??

Guess they werent too big to fail

Posted by steve | Report as abusive
 

I question your use of “failed banks” description of what has been going on by the FDIC vis a vis your reference to WMI, Inc. the bank holding company of Washington Mutual Bank(WMB). WMI, Inc. had a $4.1B cash deposit(the turn over) and $17B in capitol infusion with WMB when it was seized and sold to JPMorgan for $1.88B. How do you like that-JPM take 21B of WMI,Inc. money for 1.9B of your money- Fair trade from your point of view I suppose when you refer to it as a “failed bank”. Have you done your reporting investigative due diligence? Do you know that there is a Fradulant Conveyance law suit
filed against the FDIC by WMI, Inc. in washiongton DC federal court? Do you know that several insurance companies holding equity ownership in WMI, Inc. have filed a law suit against JPMorgan for collusion in the destruction of WMB? Do you know that Judge Walrath issued an order for discovery ineffect ordering JPMorgan in a subpoena to produce records of events leading to the seizure of WMB? The records were due Aug 1, 2009?
Do you know that the WMI, Inc. lawyers have made mention of a global settlement discussions with the FDIC and JPM in there latest billing for their services?
The least you can do is admit that there is a lot about WMB seizure you don’t know? Don’t go around calling yourself an investigative reporter unless you do a thorough due diligence and report the facts. I hope your next blog will show that you are a good investigative reporter when you report Washington Mutual was far from a “failed bank” when it was seized. The question for you is Why then it was seized and sold for a fraction of its value?

Posted by Jack Matalka | Report as abusive
 

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