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The FDIC ate seven more banks yesterday, six of them in Georgia. For the year, this brings the total to 64 banks with a net cost to the FDIC’s deposit insurance fund of $13.4B.
That’s a lot of eating.
But it’s important to observe something else — they’re not eating everything that’s on the table, at least not all at once.
Yesterday morning, Brendan Case of the Dallas Morning News reported that Guaranty Bank of Austin has said that they probably can’t continue as a going concern. More specifically, they have agreed to be closed
Guaranty Bank has agreed to be taken over by federal banking regulators, but a takeover has not yet occurred. Guaranty could end up as the largest U.S. bank failure of the year so far.
After looking at a Thursday night SEC filing by Guaranty, CalculatedRisk notes "Current stockholders will get nothing. . . The bank has consented to be seized . . . It is just a matter of when. Guaranty Financial will be the largest bank failure this year with approximately $14 billion in assets."
For Guaranty, "when" was not yesterday.
The fact that Guaranty is still operating today is a sign that the FDIC is taking a page from the world of competitive eating.
- Focus on the task at hand.
- Prepare your body for the experience beforehand.
- Plan your eating strategy before you get to the table.
- Don’t enter too many events too close together — give yourself time to recover.
- Build up your stamina.
As Case notes, it is likely that the FDIC is looking for a buyer and trying to negotiate a sale that limits the hit to the DIF, as well as trying not to over-stretch their own resources. That’s focus, preparation, and planning.
The FDIC’s job postings have consistently shown this same pattern. They have been ramping up their hiring of examiners, compliance officers, resolution & receivership specialists, and closings managers, as well as lawyers, HR administrators, and others, all in an effort to stay ahead of the game and prepare for what’s coming down the road. And they’re still hiring in large numbers. Pick any mid-to-large size city, and it’s a decent bet they’re looking to hire someone there.
To switch competitive metaphors, it’s a marathon, not a sprint.
4 Comments
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Great article! This is exactly why Bernanke and Bush Tarp programs make no sense at all. If it was to save the banks and increase their interbanking loans, how could so many fail?
This has been another episode of Monopoly. I will never believe that this country has a “Free Market”.
Going public with this kind of information maybe an attempt to shrink it down. It will allow people that might have in excess of $250K to protect their assets. Watching what happens now will show just how much faith people have in the banking safety net.
Posts like this are why I don’t trust the banks or the insurance companies numbers. :)
What needs to be borne in mind is that when Guaranty is sold off that will be money that won’t be going into loans and credit for the wider economy, not that other banks were likely going to use it for that anyway.
The TARP was about PR. Its original purpose to buy up toxic sludge barely survived its enactment before it was abandoned for the loan program which was an afterthought added to the bill. Geithner’s PPIP, modified TALF, and help for homeowners, the Obama Administration’s signature programs have gone nowhere. Meanwhile the Obama stimulus dribbles out. So if none of the programs to shore up the banking system and the economy have done anything what has been going on?
The big banks could use the TARP money but didn’t need it. The PPIP would have exposed their underlying insolvency so it was a non-starter. The TALF could buy up securitized loans but the banks weren’t lending. And homeowners would have to be insane to participate in the government’s home loan program. The stimulus is, as was predicted, too little too late. It isn’t the programs we hear about that are important. They are just distractions. It is the programs we don’t hear about that is where the real action is. The Treasury’s mysterious but huge $3.2 trillion backstop to money markets. The Fed expansion and change of makeup in its balance sheet trading good dollars for crap. And the FDIC’s temporary loan program which has proven an invaluable credit line to the speculators at the big banks, and Goldman and Morgan Stanley.