Nine Banks One Week – FDIC Friday
Prior to this week the FDIC had closed just over100 banks. However after “FDIC Friday” nine banks shut their doors, mostly due to plunging real estate values in the western US that eroded the value of the collateral backing the loans.
Who Closed Shop
Nine banks total closed up shop, all owned by FBOP corporation. The company was a holdings corporation which owned nine different banks that operated in California, Illinois, Texas and Arizona. In the interim, the banks will be under the ownership of the FDIC until they are sold to US Bancorp after all assets and liabilities have been totaled and verified.
An Aggressive Move by US Bank
US Bancorp comes out as the biggest winner in the closures. The bank, which has sought out greater marketshare in California among other areas, will open with more branches on Monday. US bank will now have twice the operations in California than it had previously, with California making up 20% of the US Bank branches across the United States. In total, the nine banks had 153 different branches and will open as US Bank once all the assets are settled. According to the FDIC, the banks had assets of $19.4 billion and deposits of $15.4 billion, making them a strong regional play should home prices recover.
The Biggest in 20 Years
2009 will go down as one of the worst years for the banking industry since 1989 when the FDIC shuttered 534 banks, mostly in states that produced high volumes of oil. Low oil prices at the turn of the decade sent many oil-workers home, and intense unemployment ensured that mortgages were defaulting hand over fist. During the S&L crisis of the late 1980s the same fundamentals were at play as in the latest real estate crisis as banks gave loans to everyone to later resell to Freddie and Fannie Mac.
Bailout Banks Well Capitalized, Regional Banks, Not So Much
The biggest failure of the TARP initiative (besides that it was created in the first place) is that a disproportionate amount of money was distributed to large investment banks while smaller regional banks were largely unfunded. Now, as real estate defaults grow in number and in velocity, it is certain that regional banks that were left to rot will only be bought up by banking giants, creating further consolidation in an industry that is already thin in competition.
