Lunchtime Links 2-12

Feb 12, 2010 18:34 UTC

China tightens rules on bank lending to curb inflation (Bradsher, NYT) Banks in China are chock full o’ excess reserves. Because their economy is growing, loan demand is healthy, so excess reserves are being lent out….multiplying the money supply and causing inflation. U.S. stocks are taking it on the chin because China is the world’s main economic driver at the moment…moves to cool it down, while totally prudent, are bad for stocks.

Georgia gives lenders more rope (Fitzpatrick, WSJ) Not such a good idea for the state topping the charts on bank failures…

BofA forecloses on home for which couple had paid cash (Marrero, St. Pete Times)

NJ Governor declares fiscal emergency, freezes spending (Sloan, CBS2) Wow, a Republican is  actually cutting spending instead of talking about cutting spending.

Me writing about the First Energy/Allegheny deal in the Times (Winkler, NYT) Scroll down the page to “Electric Synergy.”

Volcker rule gives Goldman stark choice (FT) This interview with Paul Volcker puts the lie to press arguments that Goldman will be the firm most impacted by his new “Volcker Rules” because it has the largest prop trading operation. All Goldman has to do is give up its bank charter, which it got in November ’08. The bank doesn’t have much in the way of deposits funding its business. The bank charter was just a gimmick to get access to cheap funding via the FDIC and to get access to the Fed as lender of last resort. And if the crisis comes roaring back, Goldman needn’t worry about failing. They’re still so big and interconnected, regulators wouldn’t let them go down…

Subpenny trading (CFA Institute letter) The latest abuse of the equity market?

Small banks hit snag as they try to raise cash (Sidel, WSJ) Trust preferreds remain a problem…

COMMENT

Good article on sov debt Rolfe.

Sentiment these days almost reminds me of summer 2008, when we knew some bad stuff was in the pipeline, but nobody acknowledged the extent of it all.

Stock prices didn’t reflect the risk then, and definitely don’t reflect much, if any risk now. They assume uber growth for 5+ years.

Congrats on the NYT byline, btw. That’s pretty cool.

Posted by Sharpie | Report as abusive

Busy Friday

Jun 27, 2009 00:08 UTC

FDIC announced five more bank seizures this evening, two of which are in Georgia, the Chernobyl of Banking.  None of the five will be a big drain on the Deposit Insurance Fund, but, as noted at the bottom, there’s another DIF-related issue that bears watching.

#41

  • Bank:  Community Bank of West Georgia, Villa Rica, Georgia
  • Buyer:  None  (FDIC will mail checks to insured depositors).
  • Vitals:  At 5/15/09, assets of $199.4 and deposits of $182.5 million.
  • DIF Damage:  $85 million

Note that this was a payout transaction.  FDIC couldn’t find a buyer for the banks assets.  As CR noted a couple months back, FDIC tries very hard to avoid payouts.

#42:

  • Bank:  Neighborhood Community Bank, Newnan, Georgia
  • Buyer:  CharterBank, West Point, Georgia.
  • Vitals:  At 3/31/09, assets of $221.6 million and deposits of $191.3 million
  • DIF Damage:  $66.7 million

#43

  • Bank:  Horizon Bank, Pine City, Minnesota
  • Buyer:  Stearns Bank, National Association, St. Cloud, Minnesota
  • Vitals:  At 3/31/09, assets of $87.6 million and deposits $69.4 million
  • DIF Damage:  $33.5 million

#44

  • Bank:  MetroPacific Bank, Irvine, California
  • Buyer:  Sunwest Bank, Tustin, California
  • Vitals:  At 6/8/09, assets of $80 million and deposits of $73 million
  • DIF Damage:  $29 million

#45

  • Bank:  Mirae Bank, Los Angeles
  • Buyer:  Wilshire State Bank, Los Angeles
  • Vitals:  At 5/29/09, assets of $456 million, deposits of $362 million
  • DIF Damage: $50 million

The Deposit Insurance Fund had dwindled to $13.0 billion as of March 31st.  Since then, nearly $9.0 billion of new estimated losses have accrued.  (The biggest chunk was $4.9 billion for BankUnited.)

Luckily, $13.0 billion isn’t the sum total of FDIC’s reserves.  Before Sheila Bair has to hit up Treasury, she also has $28.5 billion of loan loss reserves.  Also, there’s the (estimated) $5.6 billion special assessment that will be collected over the next week.

But there’s another potential issue here.  Once upon a time, before the cascade of bank failures, the DIF was invested entirely in Treasurys.  Now a portion is composed of received assets from busted banks.

Questions for FDIC: What portion of the DIF’s assets are illiquid?  What are the marks on these assets?  How much of the DIF may need to be written off if markets stay depressed?

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