Two more bank failures this weekend!
Hat tip to Patrick
Nervous US Banking System - Friday, July 25, 2008 - FreeMarketNews.com
1. Paulson appears on Face The Nation and says "Our banking system is a safe and a sound one." If the banking system was safe and sound, everyone would know it (or at least think it). There would be no need to say it.
2. Paulson says the list of troubled banks "is a very manageable situation". The reality is there are 90 banks on the list of problem banks. Indymac was not one of them until a month before it collapsed. How many other banks will magically appear on the list a month before they collapse?
3. In a Northern Rock moment, depositors at Indymac pull out their cash. Police had to be called in to ensure order.
4. Washington Mutual (WM), another troubled bank, refused to honor Indymac cashier's checks. The irony is it makes no sense for customers to pull insured deposits out of Indymac after it went into receivership. The second irony is the last place one would want to put those funds would be Washington Mutual. Eventually Washington Mutual decided it would take those checks but with an 8 week hold. Will Washington Mutual even be around 8 weeks from now?
Well, it certainly looks as if Treasury Secretary Paulson has understated the problem:
Two more banks fail Friday; FDIC sells deposits
Mutual of Omaha Bank takes over accounts of California, Nevada lenders
SAN FRANCISCO (MarketWatch) -- Two more banks were shut down by federal regulators late Friday, who sold the banks' deposits to Mutual of Omaha Bank. It brings to seven the number of bank failures so far this year.
The Federal Deposit Insurance Corp. said it was appointed receiver of First National Bank of Nevada, based in Reno, Nev., and First Heritage Bank of Newport Beach, Calif. - both units of First National Bank Holding Co., of Scottsdale, Ariz.
The Office of the Comptroller of the Currency, a division of the Treasury Department, said First National Bank of Nevada "was undercapitalized and had experienced substantial dissipation of assets and earnings due to unsafe and unsound practices," according to a report in the online edition of The Wall Street Journal.
First National Bank of Nevada had 25 branches, 15 in Arizona and 10 in Nevada, some of which came from its June 30 merger with the First National Bank of Arizona.
First Heritage Bank, which specializes in commercial banking, operated three locations in the Los Angeles area. It had a first-quarter net loss of $1.9 million, according to a regulatory filing.
FDIC will retain most of First National's loan portfolio, Mutual of Omaha Bank said in a statement on its Web site.
The FDIC said the failures would likely cost the FDIC's deposit insurance fund roughly $862 million. The failed banks had combined assets of $3.6 billion, .03% of the $13.4 trillion in assets held by the 8,494 institutions insured by the FDIC.
"We would first like to reassure all customers of First National Bank of Nevada and First Heritage Bank that all their deposits are safe and accessible," Jeffrey R. Schmid, Mutual of Omaha Bank's chairman and chief executive, said in a statement. "Their deposits will automatically transition to Mutual of Omaha Bank and we will be open for business on Monday morning."
Earlier this month, IndyMac Bancorp Inc. became the biggest casualty of the subprime mortgage crisis over the weekend, as federal regulators shut down the troubled Pasadena, Calif.-based savings bank in one of the largest U.S. bank failures ever.
So, how safe is your bank and what happens when the FDIC runs out of money?
Note: The FDIC only had (before ~10% loss to IndyMac) $53 Billion (in insurance funds) backing total FDIC insured deposits of ~ $4.5 Trillion.
What happens then, when FDIC insurance is depleted - Another Gvt bailout?
As I stated in an earlier post ( Washington Mutual and National City Lead to Steepest EVER Bank Stock Decline) "Why not -- the Gvt will have already taken over Fannie and Freddie by then, so what's a few more trillion shared among the broke citizens of an already insolvent country."
So, is YOUR bank safe and do you have enough cash on hand in the event it closes? What if the FDIC goes broke and it takes 6-months or better to get your hyperinflated FDIC insurance money - compliments of our printing presses and another Gvt bailout? Are you prepared?
All the best