We need a GLOBAL banking system??

Remarks by FDIC Chairman Sheila Bair to the Institute of International Bankers Annual Washington Conference, Washington, DC
March 2, 2009

Good afternoon. I’m delighted to be here again for your annual meeting.

I would like to begin with a few comments about the challenges facing our banking industry and the actions we’re taking to preserve and strengthen it.

There is no question that this is one of the most difficult periods we have encountered during the FDIC’s 75 years of operation. I want to assure you that the FDIC will continue to work together with other federal agencies to respond to the challenges facing the nation’s financial system.

Our job is to protect insured depositors and preserve the stability of our banking system. Financial innovations have come and gone over the years. But federally-insured institutions will always play an indispensable role in our economy.

Under the current severe economic conditions, the FDIC’s deposit insurance guarantee is more valuable than ever. Well-managed banks that rely on deposit funding should be able to weather the storm. And they will be a key source of lending to help the economy recover.

While many sources of bank funding have dried up in the past six months, deposits have not. In fact deposits are growing. They are a reliable source of funding because depositors know that insured deposits are absolutely safe. No one has ever lost a penny on an insured deposit.

All of the government measures that have been put in place in recent months are designed to ensure that credit flows on sound terms to consumers and business customers. Maintaining a stable banking system and preserving the availability of credit are absolutely critical to getting the U.S. and other major economies back on track.

That said, I have a few comments to make about three specific issues: Where we stand on the Basel Two capital standards, cross-border resolutions, and nationalization.

Basel II: still a big deal

The intense public debate over Basel II seems like a thing of the distant past. And maybe that’s understandable with everything else going on in the world. But when we emerge from this crisis, a top priority must be crafting a sound capital framework that helps avoid a repeat of past problems.

So, where do we stand? I still have grave concerns about the advanced approach. The advanced approach assumes banks’ internal, quantitative risk estimates are reliable. It also assumes the loss correlations we measured during good times … which is the backbone of the whole approach … will hold up in the future.

To say the assumptions turned out to be wrong would be an understatement. They were way wrong in estimating risk. The Basel Committee is changing the rules in a number of areas. These will be improvements. But for most banks, they are unlikely to offset what we see as a capital-lowering bias that is essentially baked into the advanced approach.

A Moody’s report in December gives some recent evidence. It looked at Basel II implementation outside the U.S. And it said that almost all the banks using advanced methodologies reported a reduction in risk weighted assets, in many cases material reductions.

So if the advanced approach says banks need less capital at the height of a global banking crisis, imagine the financial leverage it would encourage during good times.

With results like those, and in prior studies…and with the dangers of excessive leverage so clearly demonstrated over the last 18 months … it would be imprudent to determine regulatory capital based solely on the advanced approach.

I strongly believe that global leverage capital requirements are sorely needed. And they should apply for all systemically important financial firms, regardless of charter.

These two measures would reduce cross-country and cross-sector capital arbitrage.

But more significantly, they would set a capital floor for the advanced approach, which would limit excessive leverage in the future.

Nationalization/need for cross-border process

There has been considerable debate over how to deal with troubled institutions that are systemically important. As you know, the FDIC, the banking regulators, and Treasury recently announced a stress testing and capital program to help ensure that our largest institutions are prepared to support the economy.

The stress testing process is designed to see if they have enough of a capital buffer to get through economic scenarios that are more adverse than what is currently anticipated. If not, then they can raise private capital or, if needed, access a capital funding facility managed by Treasury.

Many have asked: “What happens if a large bank can’t continue? Will you nationalize?” Nationalization seems to mean different things to different people.

Whatever you may think it means, I don’t see the U.S. government operating a large institution for an extended period.

In fact, based on where we stand today, I would be surprised if the FDIC had to step in as conservator or receiver of a large, systemically important institution. The regulators’ Joint Statement last week restated our commitment to preserve the viability of systemically important financial institutions. This will be done through capital injections, if needed, and the supervisory process.

If more direct intervention to take over a large financial group is needed, that will present significant challenges. The main hurdle is that there’s no clear process for resolving a large financial holding company with multiple affiliates. We have a process for dealing with large banks, but not financial conglomerates.

FDIC model

Many have pointed to the FDIC’s model of resolving failed banks as a possible solution. I believe the FDIC model is tried and true. I take great pride in the fact that bank closings have gone smoothly. And we’ve been able to return failed institutions to private hands, despite the poor market for distressed financial assets.

But clearly, there would be practical problems if we had to use our resolution process for a large, internationally active institution. First, we do not have authority to resolve financial holding companies. Our powers extend only to federally insured banks.

Second, there is a very real question of whether our current funding mechanism is adequate to deal with the failure of a very large institution. Again our power is limited. Our assessment authority only extends to insured banks. This is something we are trying to get fixed.

Cross-border issues

Another major problem, which has received less attention, is the difficulty in handing a cross-border failure. The key question is: What you do when more than one country is regulating a piece of the institution?

This is an area where the FDIC has been doing some considerable work for over a year. We’re co-chairing a Basel Committee working group on cross-border issues. The panel includes members from the G-10 nations, Argentina, and several off-shore countries. And we’re coordinating with the Financial Stability Forum, the International Monetary Fund and other international groups.

Let me share what we know so far.

Today, a crisis involving an international company is resolved by domestic laws, in separate countries. The problems that can arise are obvious.

The national legal processes are inconsistent and too slow. The more complex the institution, the more inadequate most national laws become. And as a result, countries have relied on ring fencing and protection of their ‘national’ banks. So without burden-sharing, you can’t stop asset ring-fencing.

Let me go over a few of the problems that this can cause.

After legal intervention, continuity of essential banking operations is virtually impossible under most national laws. The U.S. does have an advantage here, except with financial groups.

Most laws have virtually no provisions to deal specifically with cross-border banking crises. No country has adequate laws to resolve problems in international financial groups that operate through separate legal entities in different jurisdictions. Indeed, few countries even have the tools for resolving domestic financial groups.

Many of the standard ways for dealing with failed banks – such as our bridge bank – will probably not work across borders. Simply put: other countries have no duty to recognize a bridge bank or its actions under U.S. law. Cross-country differences in close-out netting, the unwinding of financial transactions, and the enforceability of secured parties’ rights to collateral may add to increased uncertainty. In this environment, ring-fencing – also known as every man for himself – may simply be the only rational response.

A few policy proposals

So, how should we deal with this reality? We’re working on proposals to address whether current laws should be changed, or whether there are better ways of responding to the reality of ring-fencing.

Possible areas include: What are the lessons of the current crisis? We’re now reviewing – with our U.S. and international colleagues – how the different laws and regulators have responded. Are there better ways to promote private solutions? We clearly need new laws for cross-border financial groups.

What are the key elements in an effective framework? Are there areas where we need a more harmonized international approach? For example, on certain key international linkages, such as the interbank market, clearing and settlement as well as access to collateral and asset transfers.

One fundamental issue remains: burden sharing. Ring fencing is a logical response in the absence of some common framework for sharing burdens. If we are unlikely to get agreement on burden sharing – then: What’s the best way to get more effective responses within the reality of ring fencing?

The bottom line is that our 21^st century global economy needs a 21^st century global banking system that is reliable, and makes economic sense.

Conclusion

Obviously, these are very challenging times for financial institutions. And it’s likely that they will remain under pressure for the next few quarters.

But I want to emphasize that most institutions remain in sound financial condition. And the long term outlook for FDIC-insured banks and thrifts is very good.

There will be more challenges ahead before recovery takes hold.

There are no quick fixes. And if you’re looking for a quick fix, you’re not going to get one. It’s going to take time and patience.

But we’re going to dig out of this.

Thank you.

http://www.fdic.gov/news/news/speeches/chairman/spmar0209.html

GRAND JURY SUBPOENAS ISSUED ON REZKO/OBAMA LAND DEAL

A former Illinois bank official, now claiming whistleblower status, says bank officials replaced a loan reappraisal that he prepared for a Chicago property that was purchased by the wife of now-convicted felon Tony Rezko, part of which was later sold to next-door neighbor Barack Obama.

In a complaint filed Thursday in the Circuit Court of Cook County, Kenneth J. Connor said that his reappraisal of Rita Rezko’s property was replaced with a higher one and that he was fired when he questioned the document.

Mr. Connor, a real estate and commercial credit analyst at the Mutual Bank Corp. in Chicago, also noted in the complaint that the bank received a grand jury subpoena in October 2006 requiring it to produce information concerning Mrs. Rezko’s purchase, including the bank’s files on the property.

The complaint also said that the grand jury wanted information on Mrs. Rezko’s checking account and loan file and that the Federal Deposit Insurance Corp. (FDIC) had audited the Rezko file – although Mr. Connor’s lower reappraisal had been replaced with a higher amount.

“Connor’s internal whistle-blowing activity at Mutual Bank implicates Mutual Bank and the potentially guilty officers thereof to prosecution under federal and Illinois statutes,” said the complaint, filed by attorney Glenn R. Gaffney.

The complaint said Mutual Bank officials could be guilty of making false statements, willfully overvaluing property, bank fraud, witness retaliation, willful violation of a lawful subpoena, FDIC violations, and state banking regulations.

Mr. Gaffney, contacted at his office, declined to elaborate but confirmed that the complaint had been filed.

“It says what it says,” said Mr. Gaffney of Glendale Heights, Ill.

According to the complaint, Mr. Connor reviewed the appraisal of the Rezko property by another firm, Adams Appraisal, which had set the value at $625,000. Mr. Connor’s complaint said that he told his bosses in a report that the property had been overvalued by at least $125,000 and that a “reasonable and fair evaluation” should have been no greater than $500,000.

Later, the complaint states, Mr. Connor observed that his lower appraisal was not in the Rezko file and that he notified his supervisors that it had been replaced. He said, according to the complaint, the new file had been reviewed by the FBI and “if the FBI were to ask me about such matters, I would tell them the truth. I never rescinded my original findings.”

Critics of Mr. Obama’s dealings with Rezko charge that the senator may have gotten a deal on his property purchase, noting that Mrs. Rezko paid the full asking price for her property on an adjacent lot. Both of which were sold by a single seller. Mr. Obama bought his house for $1.65 million – $300,000 below the asking price.

When the property was sold, Mr. Obama knew Rezko was under investigation on fraud charges.

The complaint said the Rezko loan was approved by Mutual Bank President and CEO Amrish Mahajan and others so that Mrs. Rezko could buy a 9,090-square-foot vacant parcel of real estate. It said that in January 2006, Mrs. Rezko and Mr. Obama, along with his wife Michelle, signed an agreement to sell a 10-foot strip of the property to the Obamas. At that point, according to the complaint, Mr. Connor’s firm asked him to conduct the reappraisal.

The complaint said Mr. Connor is seeking $4.2 million for compensatory damages, plus unspecified punitive damages.

Rezko was a key supporter and donor throughout Mr. Obama’s political career, with the Illinois Democrat estimating that Rezko raised $250,000 for his various political campaigns, though not for his presidential bid. The two were friends who talked frequently about politics and occasionally dined out together with their wives.

Rezko was convicted this summer on federal charges of using his clout with state government to squeeze kickbacks out of firms wanting to do business with the state. The charges did not involve Mr. Obama. Rezko is now cooperating with federal prosecutors in a continuing probe of corruption in Illinois government.

Mr. Obama consulted Rezko, a real estate developer, before buying his home in 2005.

As a state senator, Mr. Obama wrote letters endorsing government support of a Rezko housing project for senior citizens. Obama aides say he was simply supporting a project that would help residents of his district, not doing a favor for a friend.

http://www.washingtontimes.com/news/2008/oct/18/whistleblower-hits-obama-friends-appraisal/

The incredible bailouts that never end!!!!!!!!

*I need to proclaim myself a corporation or bank so I may receive these benefits.*

Nov. 12 (Bloomberg) — General Electric Co. said the U.S. government agreed to insure as much as $139 billion in debt for lending arm GE Capital Corp., the second time in a month it has turned to a federal program designed to help companies during a global credit crunch.

Granting GE Capital, which isn’t a bank, access to a new Federal Deposit Insurance Corp. program may reassure investors and help the unit compete with banks that already have government protection behind their debt, said Russell Wilkerson, a spokesman for the Fairfield, Connecticut-based company. Coverage would be for about $139 billion, or 125 percent of total senior unsecured debt outstanding as of Sept. 30 and maturing by June 30.

“Inclusion in this program will allow us to source our debt competitively with other participating financial institutions,” Wilkerson said. GE sent investors an e-mail about the program today and posted the letter on its Web site. “Our participation is a positive development for our investors.”

GE’s finance businesses are able to seek FDIC debt coverage because its GE Capital subsidiary also owns a federal savings bank and an industrial loan company, both of which already qualify. GE last month started using a new Federal Reserve program designed to revive demand for commercial paper amid the global crisis.

The company’s exposure to the deepest global financial crisis since the 1930s has cut its market value by more than half this year, as Chief Executive Officer Jeffrey Immelt twice lowered his target for 2008 profit. GE fell $1.52, or 8.5 percent, to $16.29 at 4:15 p.m. in New York Stock Exchange composite trading amid a broad decline in U.S. stocks. The shares are at their lowest level since January 1997.

FDIC Program

Credit-default swaps on GE Capital Corp. dropped 35 basis points to 390 basis points from 425 basis points on Nov. 7, according to broker Phoenix Partners Group.

U.S. regulators introduced the FDIC program Oct. 14, making the insurance automatically available for banks on debt issued through June 30, 2009. Affiliated non-bank units have to apply separately, as GE did. Like the banks, GE would pay a premium for the insurance. GE said the coverage would begin on or before Nov. 14 and lasts through June 30, 2012.

“If you’re a GE shareholder you’d be a fool not to want them to take advantage of every possible opportunity out there,” Peter Sorrentino, a senior portfolio manager at Cincinnati-based Huntington Asset Advisors, which oversees 6.12 million GE shares, said today. “By the same token there are far more pressing situations at companies that would be beneficiaries of taxpayer generosity. Should we really be expending here?”

GE Capital

The FDIC would gain the right to examine GE’s other finance units as a condition of participation. GE’s bank units already are regulated by the Office of Thrift Supervision. The program doesn’t require the U.S. to take a stake in GE, the e-mail said.

GE Capital, which carries the highest-possible AAA credit rating, includes divisions that are among the world’s largest lenders in commercial real estate, aircraft leasing and private- label credit cards. It also provides financing to help companies emerge from bankruptcy protection and so-called middle-market financing, or loans to smaller and midsized companies.

The unit makes money partly by taking advantage of the spread between the cost of debt it issues and the loans and finance contracts it writes.

GE’s finance divisions accounted for about half of sales and profit last year, and Immelt has said that percentage may shrink to about 40 percent in 2009. GE said Oct. 10 it still expects profit from the units to be about $9 billion this year.

General Electric Capital’s 5.625 percent notes due in 2018 rose 0.8 cent on the dollar to 88.5 cents, the highest since September, for a yield of 7.33 percent at 2:41 p.m. in New York, according to Trace, the Financial Industry Regulatory Authority’s bond-pricing service.

FDIC’s Terms

U.S. regulators expanded the coverage last month after a similar move by European regulators to ease inter-bank lending. The insurance is offered through the FDIC’s Temporary Liquidity Guarantee Program, which also includes expanded deposit coverage for business checking accounts. It guarantees all new senior unsecured debt issued between Oct. 14 and June 30, 2009, up to a cap set for each institution when it signs up.

“All participants are on notice under the terms of the regulation that the FDIC reserves the right to expand their oversight,” Louis Crandall, chief economist of Wrightson ICAP in Jersey City, New Jersey, said of the federal program.

The FDIC so far is taking an all-or-nothing approach on the terms of participation. Banks are automatically enrolled, unless they opt out. If a bank holding company joins, all of its banking subsidiaries must also join. Program terms apply to all commercial paper, promissory notes and other eligible debt.

GE Capital Debt

According to its Oct. 10 presentation to investors, GE Capital Services had $536 billion in debt at the end of the third quarter. Of that, commercial paper, or debt due in nine months or less, was $88 billion, or 17 percent. The company issues debt in 18 currencies, with about 60 percent in non-U.S. denominations.

GE Capital has about $81 billion in long-term debt maturing between now and the end of 2009, according to another Oct. 10 chart. Of that, $43 billion comes due by June 30.

GE is already among companies using a new short-term funding facility from the Federal Reserve opened to revive demand for commercial paper, the short-term borrowing that companies use to finance day-to-day operations. GE and its finance entities, top- rated issuers, had issued paper without interruption before tapping the facility.

Banks have until Dec. 5 to decide whether to opt out of the FDIC program. If they do, they’ll have to start paying premiums for the coverage, which lasts until June 30, 2012. For now, all FDIC-insured banks are automatically covered at no cost.

Fee Structure

In general, participating companies “will be charged an annualized fee equal to 75 basis points multiplied by the amount of debt issued, and calculated for the maturity period of that debt or June 30, 2012, whichever is earlier,” according to the FDIC interim regulation. The regulation also says no fees will be charged during the first 30 days of the program, and it includes several options for calculating the insurance premiums.

The FDIC now is in the process of revising its interim regulation in response to comments, so the final fee structure may be different.

Andrew Gray, a spokesman for the FDIC, wasn’t immediately available for comment.

http://www.bloomberg.com/apps/news?pid=20601103&sid=a59q5TXyQY8E&refer=news

Franklin Bank Fails

On November 7, 2008, Franklin Bank, SSB, Houston, TX was closed by the Texas Department of Savings and Mortgage Lending and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.

The FDIC has assembled useful information regarding your relationship with this institution. Besides a checking account, you may have Certificates of Deposit, a car loan, a business checking account, a commercial loan, a Social Security direct deposit, and other relationships with the institution. The FDIC has compiled the following information which should answer many of your questions.

http://www.fdic.gov/bank/individual/failed/franklinbank.html

Two More Banks Closed by Regulators

WASHINGTON (Oct. 10) – Regulators on Friday shut down two small banks, Main Street Bank in Michigan and Meridian Bank in Illinois.
They brought to 15 the number of federally insured banks that have failed this year.
The Federal Deposit Insurance Corp. was appointed receiver of the banks. Main Street Bank, based in Northville, Mich., had $98 million in assets and $86 million in deposits as of Oct. 7. Meridian Bank, based in Eldred, Ill., had assets of $39.2 million and deposits of $36.9 million as of Sept. 25.
The FDIC said all of Main Street Bank’s deposits will be assumed by Monroe Bank & Trust of Monroe, Mich. The two offices of Main Street Bank will reopen Saturday as branches of Monroe Bank & Trust.
All of Meridian Bank’s deposits will be assumed by National Bank of Hillsboro, Ill. Meridian’s four offices in Altamont, Carlyle, and Eldred will reopen for normal hours on Saturday, and its Alton office will reopen Tuesday, as branches of National Bank.
The 15 bank failures so far this year compare with three for all of 2007, and federal banking officials have said that more banks are in danger of collapse.
Regular deposit accounts are now insured up to $250,000 as part of the financial rescue legislation enacted last week. The FDIC formally approved the increase from $100,000 per account at a meeting on Friday. The limit on individual retirement accounts held in banks remains at $250,000.
Concern has been growing over the solvency of some banks amid the housing slump and the steep slide in the mortgage market. The pressures of tighter credit, tumbling home prices and rising foreclosures have been battering many banks nationwide.
The 15 federally insured banks and savings and loans to fail this year include two major thrifts, Washington Mutual Inc. and IndyMac Bank, and more collapses are expected. The deposit insurance fund is now at $45.2 billion – below the minimum target set by Congress and the lowest level since 2003.
Of the roughly 8,500 FDIC-insured banks in the country, 117 were considered to be in trouble in the second quarter – the highest level in about five years and up from 90 in the first quarter. The agency doesn’t disclose the banks’ names.

http://money.aol.com/news/articles/_a/bbdp/two-more-banks-closed-by-regulators/207923?icid=200100397x1211373371x1200675175

Your money is NOT safe if banks fail!!!!!!!!!

WASHINGTON – Banks are not the only ones struggling in the growing financial crisis. The fund established to insure their deposits is also feeling the pinch, and the taxpayer may be the lender of last resort.

The Federal Deposit Insurance Corp., whose insurance fund has slipped below the minimum target level set by Congress, could be forced to tap tax dollars through a Treasury Department loan if Washington Mutual Inc., the nation’s largest thrift, or another struggling rival fails, economists and industry analysts said Tuesday.

Treasury has already come to the rescue of several corporate victims of the housing and credit crunches. The government took over mortgage finance companies Fannie Mae and Freddie Mac, and helped finance the sale of investment bank Bear Stearns to J.P. Morgan Chase & Co.

Eleven federally insured banks and thrifts have failed this year, including Pasadena, Calif.-based IndyMac Bank, by far the largest shut down by regulators.

Additional failures of large banks or savings and loans companies seem likely, and that could overwhelm the FDIC’s insurance fund, said Brian Bethune, U.S. economist at consulting firm Global Insight.

“We’ve got a … retail bank run forming in this country,” said Christopher Whalen, senior vice president and managing director of Institutional Risk Analytics.

Treasury Secretary Henry Paulson said Monday that the country’s commercial banking system “is safe and sound” and that “the American people can be very, very confident about their accounts in our banking system.” FDIC officials also have said 98 percent of U.S. banks still meet regulators’ standards for adequate capital.

But fear is growing on Main Street as well as Wall Street about the likelihood of multiple bank failures and the strain that would put on the FDIC.

The fund, which is marking its 75th anniversary this year with a “Face Your Finances” campaign, is at $45.2 billion — the lowest level since 2003. At the same time, the number of troubled banks is at a five-year high.

FDIC Chairman Sheila Bair has not ruled out the possibility of going to the Treasury for a short-term loan at some point. But she has said she does not expect the FDIC to take the more drastic action of using a separate $30 billion credit line with Treasury — something that has never been done.

The FDIC’s fund is currently below the minimum set by Congress in a 2006 law. The failure of IndyMac Bank in July cost $8.9 billion.

Next month, Bair plans to propose increasing the premiums paid by banks and thrifts to replenish the fund. That plan is likely to be approved by the FDIC board, which consists of her, Comptroller of the Currency John Dugan, Thrift Supervision Director John Reich and two other officials.

Bair also is considering a system in which banks with riskier portfolios would be charged higher premiums, raising the possibility those costs could be passed on to consumers.

A Washington Mutual failure would dwarf the largest bank collapse in U.S. history — Continental Illinois National Bank in 1984, with $33.6 billion in assets.

By comparison, WaMu and its subsidiaries had assets of $309.73 billion as of June 30 and IndyMac had $32 billion when it shut down.

Arthur Murton, director of the FDIC’s insurance and research division, said that when large institutions have failed in recent years, the hit to the fund has been about 5 to 10 percent of the company’s assets.

Standard & Poor’s Ratings Service late Monday cut its counterparty credit rating on WaMu to junk, action that followed downgrades by both Moody’s and Fitch last week. Concern about the Seattle-based thrift, which has significant exposure to risky mortgage securities and other assets, has grown in recent weeks, and the company’s stock price has plummeted.

WaMu responded Monday by saying that it did not expect the S&P downgrade to have a material impact on its borrowings, collateral or margin requirements. The bank said its capital at the end of the third quarter on Sept. 30 is expected to be “significantly above” required levels and that its outlook for expected credit losses is unchanged.

Some analyst estimates put the cost of a WaMu failure to the FDIC at more than $20 billion, but other experts say it is very difficult to predict. Unknown, for example, is the amount of advances that institutions may have taken from one of the regional banks in the Federal Home Loan Bank system. Banks and thrifts have significantly increased their requests for advances, or loans, from the 12 regional home loan banks since the mortgage crisis began last year.

These amounts aren’t publicly disclosed but must be repaid if a bank or thrift fails, notes Karen Shaw Petrou, managing partner of Federal Financial Analytics.

If the FDIC doesn’t have enough cash to cover the initial costs of a bank or thrift failure, one option would be short-term loans from the Treasury. That last happened in 1991-92, during the last part of the savings and loan crisis, when the FDIC borrowed $15.1 billion from the Treasury and repaid it with interest about a year later.

Based on projections of possible scenarios of bank failures, “between the (insurance) fund that we have now and our ability to draw on the resources of the industry … we do have the resources” needed, Murton said Tuesday.

Though short-term borrowing from Treasury for working capital may be possible, he said, tapping the long-term credit line is unlikely.

But Whalen said the Federal Reserve, the Treasury and Congress should “immediately devise” and announce a plan to backstop the FDIC with up to $500 billion in borrowing authority to meet cash needs for closing or selling failed banks.

“While the FDIC already has a credit line in place and this figure may seem excessive — and hopefully it is — the idea here is to overshoot the actual number to reinforce public confidence,” Whalen wrote in a note to clients. “Simply having Treasury Secretary Hank Paulson or Ben Bernanke making hopeful statements is inadequate. Like it says in the movies: ‘Show us the money.’”

Before Congress passed the law overhauling deposit insurance in 2006, about 90 percent of all insured banks and thrifts — considered to have adequate capital and to be well managed — paid no premiums to the FDIC. Today, all of them do.

There were 117 banks and thrifts considered to be in trouble in the second quarter, the highest level since 2003, according to FDIC data released last month. The agency doesn’t disclose the names of institutions on its internal list of troubled banks. On average, 13 percent of banks that make the list fail. Total assets of troubled banks tripled in the second quarter to $78 billion, and $32 billion of that coming from IndyMac Bank.

Last month, Bair called those results “pretty dismal,” but said they were not surprising given the housing slump, a worsening economy, and disruptions in financial and credit markets. “More banks will come on the (troubled) list as credit problems worsen,” he said. “Assets of problem institutions also will continue to rise.”

http://news.yahoo.com/s/ap/20080916/ap_on_bi_ge/bank_deposits_safety

FDIC shutters Silver State Bank of Nevada

Son of presidential nominee John McCain was reportedly former board member; closing marks the 11th bank failure this year.
Last Updated: September 5, 2008: 10:43 PM EDT

WASHINGTON (AP) — Nevada regulators have shut down Silver State Bank. It was the 11th failure this year of a federally insured bank.

Andrew McCain, son of Republican presidential nominee John McCain was a member of the bank’s board, but recently stepped down for “personal reasons,” according to The Wall Street Journal. The younger McCain, 46, had also served on Silver State’s audit committee, and was only with the bank for five months before leaving on July 26, the Journal reported.

The Federal Deposit Insurance Corp. was appointed receiver of the bank, located in Henderson, Nev. It had $2 billion in assets and $1.7 billion in deposits as of June 30.

The FDIC said Friday the bank’s insured deposits will be assumed by Nevada State Bank of Las Vegas. Its branches will reopen Monday as offices of Nevada State Bank in Nevada and National Bank of Arizona in Arizona.

The agency said depositors of Silver State Bank will continue to have full access to their deposits.

The 11 failures so far this year compare with three for all of 2007, and federal banking officials have said that more banks are in danger of collapse.

Silver State Bank has operated 12 branches in Nevada and Arizona as well as loan offices in Nevada, Utah, Colorado, Washington, Oregon, California and Florida.

The FDIC estimated its resolution will cost the deposit insurance fund between $450 million and $550 million.

Regular deposit accounts are insured up to $100,000; for some individual retirement accounts, the limit is $250,000.

There were about $20 million in uninsured deposits held in roughly 500 accounts at Silver State that potentially exceeded the insurance limit, the FDIC said.

Concern has been growing over the solvency of some banks amid the housing slump and the steep slide in the mortgage market. The pressures of tighter credit, tumbling home prices and rising foreclosures have been battering many banks, large and small, across the nation.

The largest bank failure by far this year has been that of savings and loan IndyMac Bank, which was seized by regulators on July 11 with about $32 billion in assets and deposits of $19 billion.

The seizure of Pasadena, Calif.-based IndyMac, which was the largest regulated thrift to fail in the United States, prompted hundreds of angry customers to line up for hours in Southern California to demand their money. IndyMac also was the second-largest financial institution to close in U.S. history, after Continental Illinois National Bank in 1984.

The FDIC has been operating the bank, now called IndyMac Federal Bank, under a conservatorship.

The FDIC plans to raise insurance premiums paid by banks and thrifts to replenish its reserve fund after paying out billions of dollars to depositors at IndyMac. The fund, currently at $45 billion, is expected to take a hit from IndyMac of $4 billion to $8 billion.

Federal officials expect turbulence in the banking industry to continue well into next year, and more banks to appear on the FDIC’s internal list of troubled institutions.

Of the 8,500 or so FDIC-insured banks in the country, 117 were considered to be in trouble in the second quarter – the highest level in about five years and up from 90 in the first quarter. The agency doesn’t disclose the banks’ names.

Only 13 percent of banks that make the list fail, on average, and most are nursed back to health or acquired by stronger institutions, according to the FDIC.

Federally insured banks and thrifts set aside a record $50.2 billion to cover losses from soured mortgages and other loans in the April-June quarter, when profits plunged 86 percent from a year earlier.

http://money.cnn.com/2008/09/05/news/economy/bank_closure.ap/index.htm?postversion=2008090522