One Of Cleveland's Biggest Banks Fails: FDIC Get's Poem

Can't keep on stealing all these great haiku from Calculated Risk.

Wow, a bright comet...
Giant "Amtrust-Rex" looks up.
Annihilation

Soylent Green Is People

Another, bank failure Friday bringing us to 130 this year. Amtrust, which had 12 billion in assets and 8 billion in deposits hits a bit closer to home, another big smack Cleveland doesn't need. The failure also points out a recent trend; unlike troubled National City which quickly found a buyer in PNC, AmTrust had been shopped around and couldn't attract any interest.(or at least anyone who would pay any cash)This is happening more and points to larger losses for the FDIC.

New York Community Bank will be taking over the entire branch network, but from what I can tell they are not putting money in since the banks losses are so great.

Remember-- Depositors are protected up to $250,000!

Taxpayers don't fair so well. Estimated cost to the FDIC for this failure--2 Billion.



"Among the nation's 8,100 banks, AmTrust was the 92nd largest as of June 30. At its height, it was the 68th largest in 2006 and 2007. In the last two years it's lost nearly 40 percent of its assets and deposits as its loans lost value, CDs matured and customers left. AmTrust was simply into mortgage lending too deep, much of it risky or in markets that were about to implode."

To bad for them, they never became "too big to fail".

From what I have read, the company was far from the worst bank out there. To pursue growth it moved into the then hot, speculative markets in Florida and Arizona-- Yadda, Yadda, Yadda.

But,the bank's problems were hardly a secret either.

"The move comes more than a year after AmTrust's federal regulator said the bank was guilty of "unsafe and unsound banking practices," including making risky loans with no documentation of income a year after most banks had stopped such loans.

The Office of Thrift Supervision essentially told AmTrust to shape up, or else. Instead, AmTrust's finances got worse every quarter and the bank had lost money for seven of the past nine quarters. The bank tried to cut costs and raise money by laying off nearly 40 percent of its workers -- more than 1,000 people -- in the past two years and by holding a fire sale on various branches."

Honestly, the FDIC is probably overwhelmed. The plug was also pulled on 5 other banks on Friday including one with almost $900 million in assets.

Greater Atlantic Bank, Reston, Virginia
Benchmark Bank, Aurora, Illinois
The Tattnall Bank, Reidsville, Georgia
The Buckhead Community Bank, Atlanta, Georgia
First Security National Bank, Norcross, Georgia

More Poems For Disaster

Another Friday and more bank failures, (some big ones last week too)fortunately, our poet master at Calculated Risk has their juices flowing.

Combined losses for just the three banks closed yesterday, may be 1 Billion to the FDIC fund. Remember when that was a lot of money?

Suited Bureaucrats
Waiting for critical mass
Century flames out

by Soylent Green is People

"The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $344 million. ... Century Bank, FSB is the 121st FDIC-insured institution to fail in the nation this year, and the tenth in Florida. The last FDIC-insured institution closed in the state was Flagship National Bank, Bradenton, on November 6, 2009."

Also gone Orion Bank in Naples, Florida which had assets of 2.7 Billion and deposits of about 2.1 billion.

"The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $615 million. ... Orion Bank is the 122nd FDIC-insured institution to fail in the nation this year, and the eleventh in Florida. The last FDIC-insured institution closed in the state was Century Bank, Sarasota, FL, earlier today."

A number of these banks had previously received Tarp infusions which are now gone. While only thee were taken down, this is likely because the FDIC is too overwhelmed and overworked to do more. More cynical types might suspect they are also very reluctant to hit the public with too many big losses at once and are trying to contain the media coverage. It's working.

Losses at the FHA soon will be too big to hide.

Bank Failure Haiku

I'll try to get back to more regular posts. Doing a lot try to make or at least preserve a buck which means reading a lot.

One of my favorite economics, websites, Calculated risk has a guy writing little Haiku poems for each Bank failure. They call themselves, Soylent Green is people.

105 failures so far this year-- perhaps more as we speak since the FDIC has a habit of doing most of them on Fridays.

Bank Failures 56 & 57

Pitcher throws to home
Failure swings.... to deep center
A double this time.

Bank Failures 79 & 80

Birmingham failure
Georgia, running out of banks?
South will sink again...

Bank Failure 81, Guaranty Bank, Austin, TX

A mushroom cloud forms
Deep in the heart of Texas
Guaranty is ash

Bank Failure 90, Corus Bank, Chicago

Scavengers alight
Finally, the King is dead
Long live Corus Bank!

Bank failure 100

One Hundred, so far....
The pig still in the python
Working its way through.

Bank Failures 104 & 105

Failure "two by two"
A flood is on horizon
The Ark is near full.

Given Calculated long list of unofficially troubled institutions, this poet's creative juices will be tested.

Update another bank has been officially closed making it 106.

I have to add this message from the head of the FDIC which is designed to make me feel better.



In the tone of a kindergarten teacher she tells a pretty slick half truth. When measured by the number of banks closed, so far we are barely at the more than 500 failed banks in the S&L crisis. But, what she doesn't say is that if measured by assets, we are far far worse off.



Chart From Calculated Risk

Below is an out of date chart but it gives one a clue. Remember that without the bailout, it's likely that Citigroup, Bank America and almost all of the big banks would have failed. (which is what should have happened)



Chart From Calculated Risk

Second she evades real subject and tells what really is an outright lie. The government has done an excellent job at preventing people from fearing for their deposits which are now insured up to $250,000. So, that's great right? People just don't have to worry. But, this lack of fear has worked to push more and more money into some of the riskiest banks since they usually pay the highest deposits, it may also be promoting a lot of new bad loans as well as helping banks to put off recognizing losses. Time will tell, how this will work out but so far it don't look good.

Now on to this quote "We are the government and cannot run out of money". This is both a very true and very false statement. No entity at all is free from the laws of reality other than "god", and even one of the greatest nations on earth can run out of assets. By the way, the only real asset of the government is the future earning power of it's people. Does the word slave come to mind?

When people use the term money, most people think of something of value. If what Sheila is really saying is we can't run out of zeros to print on our bills, I guess she's right.

Update

So just a couple of days after my last Haiku post,things are looking considerably more grim.

The Dow took what looks to be a serious reversal lead by the supposedly "recovered" financial stocks. The day before on a Sunday, word came out of another large financial bankruptcy.

In its Chapter 11 bankruptcy filing yesterday, the commercial-property lender, Capmark Financial based in Horsham, PA listed assets of $20.1 billion and debts of $21 billion.Capmark was the new name for the commercial real estate arm of what was once GMAC and played a big role in commercial real estate lending.

Moreover, Capmark owns a large FDIC insured bank Capmark Bank, the wholly-owned Utah industrial bank subsidiary of Capmark Financial Group Inc., agreed to a cease and desist order with each of the Federal Deposit Insurance Corp. (FDIC) and the Utah Department of Financial Institutions. The orders require Capmark Bank to maintain a Tier 1 leverage ratio of at least 8% and a Total Risk-Based Capital ratio of at least 10%.

Anyway, it's pretty obvious that when Sheila Bair made her more than slightly deceptive statements she knew a line of zombie banks are in Capmarks condition.



I leave you with the latest Peter Schiff video. No joke, they tried to sell him on a adjustable rate mortgage!