Tag Archives: FDIC

A new Teri Buhl article

While Greenwich Time editor Dave McCucumber stil refuses to provide her with copies of her own stories (they’re ours,” he insists, “and we can do what we like with them” – like erase them – that’s a nice way to help a fired reported find new work, Dave), Teri graciously sent along this article that would have appeared over on the Elm Street rag, were she still there.

J.C. Flowers Exec says FDIC will allow single private investment firms to buy failed banks this year

by Teri Buhl

The FDIC is meeting with private equity titans today to talk about the
rules around private investment firms buying failed banks. Reuters was first
to report the pow-wow and quoted industry sources who said they don’t expect
the FDIC to make big changes to the rules <http://www.reuters.com/article/idUSTRE62G50O20100317>
. Some of the tension between the FDIC, the OCC, and the private equity firms
centers around the percent of ownership individual P.E. firms can own in
banks and the higher levels of capital they are currently required to have
if they want to buy a bank. The FDIC would not admit the date of the
private meeting with industry financiers but told Reuters they will ‘issue additional clarifications’ about
the rules.

Two weeks ago Dow Jones held a distressed debt restructuring and turnaround
summit in New York where industry leaders talked about deal flow, economic
conditions, and regulatory or legal issues involved in buying bankrupt
companies. Industry speakers second the view that there will definitely be
more opportunity for private  investment firms to buy failed banks because
of the number of banks expected to continue to fail this year.

John Oros, managing director at J.C. Flowers & Co. who runs a fund that
invests in financial firms, told this reporter in an interview at the
conference that he believes in 2010 single private equity firms will be
allowed to buy failed banks. Oros is the first industry vet we’ve heard say
that.

Oros reminded us that his firm tried to bid twice for the assets of IndyMac
when the FDIC placed the failed bank out for bid in 2008 but were turned
down. Since his firm wasn’t allowed to buy the bank on their own, it ended up working with a group of other P.E. firms
<http://ml-implode.com/viewnews/2008-12-26_EXCLUSIVEFDICtoSellIndyMacToPriva
teEquityFirm.html> including Dune Capital, Paulson & Co, George Soros, and
Michael Dell’s investment firm to successfully win the bid to buy IndyMac.
It was the first time we’d seen the regulators allow a group of private investors to
buy a failed bank and many industry veterans thought they got a sweet-heart
of a loss sharing deal. At last weeks industry conference there was
consensus that margins on buying failed banks have shrunk since last year,
but the opportunity is still a viable economic investment for distressed
investors.

For now it’s a waiting game as the FDIC works to find the best possible
solution for how to unload the droves of toxic assets it’s taken on from
loss sharing in failed bank deals and prepares for future failures.
 
In an interview last week, Connecticut Banking Commissioner Howard Pitken told this reporter that they are carefully watching the commercial loan portfolios of banks in Fairfield County. He told this reporter there is concern about default levels in some local banks but they are trying to get ahead of the problems before failures occur. He would not name which banks he is currently worried could fail because of their troubled commercial loan book. Patriot Bank and Darien Rowayton Bank have both needed private investor funding as they neared collapse, but if they were seized and placed under FDIC conservatorship it is unlikely a single private equity firm would have been able to take control of the failed banks.

11 Comments

Filed under Uncategorized

Obama’s new era of transparency and open government

FDIC responds to FOI request on its shut down of Washington Mutual in a er, rather uncooperative manner.

Nothing to hide here!

Comments Off on Obama’s new era of transparency and open government

Filed under Uncategorized

I’d like next year’s commissions paid now, please

Not that the FDIC is broke, or anything, but it’s demanding that banks pay next year’s fees now, just to keep things current. Hey, if they aren’t worried, why should I lose sleep over this?

Comments Off on I’d like next year’s commissions paid now, please

Filed under Uncategorized

Banks and bad loans = denial

The FDIC has (scrapped its plan to rid banks of bad loans because it couldn’t persuade the banks to go along. It is possible that this reluctance can be attributed to the growing confidence of lenders that their crappy, underwater mortgage loans are about to leap out and fly, but I suspect it has more to do with their fear of acknowledging their fatally weakened position.

In a move that confirmed the suspicions of many analysts, the agency called off plans to start a $1 billion pilot program this month that was intended to help banks clean up their balance sheets and eventually sell off hundreds of billions of dollars worth of troubled mortgages and other loans.

Many banks have refused to sell their loans, in part because doing so would force them to mark down the value of those loans and book big losses. Even though the government was prepared to prop up prices by offering cheap financing to investors, the prices that banks were demanding have remained far higher than the prices that investors were willing to pay.

In a statement, the F.D.I.C. acknowledged that it had not been able to get banks interested in its so-called Legacy Loans Program. Scheduled to start later this month, the pilot program was aimed at selling off $1 billion in troubled home mortgages.

F.D.I.C. officials portrayed the change as a sign that banks were returning to health on their own.

“Banks have been able to raise capital without having to sell bad assets through the L.L.P., which reflects renewed investor confidence in our banking system,” said Sheila C. Bair, chairwoman of the F.D.I.C.

But some analysts said the banks’ reluctance to clean up their balance sheets meant they were merely postponing their day of reckoning. Indeed, some analysts said government policies had made it easier for banks to gloss over their bad loans.

“What’s happened is that the government’s programs have addressed the symptoms of the financial crisis, but not the cause,” said Frederick Cannon, chief equity strategist at Keefe, Bruyette & Woods, which analyzes the industry. “The patient feels better, but the underlying cause of the problem is still unaddressed.”

 

3 Comments

Filed under Uncategorized

Get rich by failing

Here’s a deal for you, as detailed by Saturday’s New York Times. First, borrow $10 million from a bank to run a gas station/casino chain. Default on the loan, then have your lender fail and the FDIC take over the loan. Now buy back your debt for less than 50 cents on the dollar and there you are: last week you were $10 million in debt with a creditor breathing down your neck. Today you own your business again, freed of half that debt. It’s a fresh start – a “stimulus” to coin a term, and it’s all paid for by U.S. taxpayers. This all just keeps getting better.

1 Comment

Filed under Uncategorized