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

Bank Failure Haiku Update (With No Haiku)

I just can't let this one go.

Surprise, surprise, surprise, GMAC, the troubled former credit arm of General Motors, which has already sucked down 12.5 Billion in taxpayer dollars is back asking for more. GMAC is critical to the ongoing operations of Government Motors comprising the former GM and Chrysler. (GM And Chrysler bailout money not included)

The companies former commercial real estate unit, Capmark filed for bankruptcy protection on Sunday. Meanwhile, the losses continue.

Rolf Winkler

"Yet another argument against those who say we “made money” on TARP because Goldman, AmEx and a few others bought back their warrants at a small premium. All the profits from those warrants wouldn’t add up to the amount we’ve already poured into GMAC, never mind this latest infusion. There’s also the small matter of $100 billion+ we’re never getting back from AIG….

Readers may recall that FDIC was rather peeved at GMAC for previously offering high rates on deposits. This is the ultimate moral hazard of deposit insurance. Depositors aren’t willing to impose discipline on the bank — taking their money out — because they know it’s guaranteed. GMAC knew this and, through its subsidiary GMAC Ally Bank, offered the highest deposit rates in the nation for a time.

In order to sell more government backed debt under TLGP program, FDIC struck a deal by which GMAC will “keep its [deposit] rates at certain amounts,” according to WSJ.

One would think a change of management might be in order. Well, it’s not gonna happen. CEO Alvaro de Molina — formerly CFO at Bank of America — will stay on."

Don't worry your deposits are protected say's Sheila Bair. The assets and future earnings of all successful or potentially successful employer or person in the country has been placed on the block. Wisely, many are shutting down.

Where will it end?