FDIC geared up for busy year of bank failures - expects failure rate to remain high in 2010



* FDIC says expects failure rate to remain high in 2010

* Says equipped with staff, tools to handle failures

* Defends Oct. decision to sell 9 units of FBOP Corp

By Karey Wutkowski

WASHINGTON, Jan 20 (Reuters) - The U.S. agency charged with dismantling or selling off failed banks said it is equipped to deal with what it sees as a busy 2010, according to remarks to be delivered before Congress on Thursday.

The Federal Deposit Insurance Corp expects that bank failures will remain elevated this year, said Mitchell Glassman, director of the FDIC's division of resolutions and receiverships.

Regulators seized 140 banks in 2009, the highest annual level since 1992 in the wake of the savings and loan crisis. Many of the institutions collapsed due to deteriorating loans from the credit boom.

"While the economy is showing signs of improvement, recovery in the banking industry tends to lag behind other sectors. We expect to see the level of failures continue to be high during 2010," Glassman said in testimony posted to the website of the House of Representatives subcommittee on financial institutions.

The FDIC has said it expects the total bill for bank failures to reach $100 billion for the period of 2009 through 2013.

FDIC Chairman Sheila Bair told a commercial real estate conference on Wednesday that troubles in the commercial sector will increasingly be a driver of bank failures this year.

The woes in the banking industry have migrated from home mortgages to commercial real estate (CRE), especially for community banks that tend to have higher concentrations of commercial loans.

Bair said that failed banks with high concentrations of CRE may be difficult to sell as a whole bank, meaning the FDIC may resolve more institutions through securitizations.

Glassman said in his testimony that the FDIC has beefed up the division in charge of bank failures, almost tripling the staff to 1,161 in 2009. That number is expected to grow to 2,310 this year.

He also noted that the FDIC relies on a large number of private contractors and outside law firms to quickly and efficiently resolve failed banks.

In the most recent sign of the FDIC girding for continued distress across the nation, the agency announced this week plans to open up a satellite office in Chicago, to complement the work of other satellite offices in Irvine, California, and Jacksonville, Florida.

FBOP sale

Glassman further used his testimony to explain why the FDIC chose to sell the nine subsidiary banks of FBOP Corp in October, saying it was the least-costly solution.

He said the banks' chartering authorities notified the FDIC of plans to close seven of the subsidiary banks, but the FDIC decided to also sell the two other subsidiaries because of their clear weaknesses.

It used its cross-guarantee authority to sell the other two units. That authority says the FDIC can assess banks that have not failed for the anticipated losses to the Deposit Insurance Fund caused by the failure of affiliated banks. If the losses are too great, it can result in the affiliated banks also being closed.

U.S. Bancorp (USB.N) acquired the nine banks that had been held by FBOP Corp, picking up $19.4 billion in assets and $15.4 billion of deposits.

Glassman said FBOP's banking units were "in deteriorating financial condition and had poor future prospects." It had unsuccessfully tried to sell off subsidiary banks and raise new capital, he said.

Also in prepared testimony, Michael Kelly, the chief executive of FBOP, said his company's story should challenge policymakers to understand the challenges of community banks.

While not accusing regulators of improperly seizing the institution, Kelly said FBOP was not given a chance to raise private equity that would have served as a match for funds from Treasury's Troubled Asset Relief Program.

Two previous FBOP proposals for TARP funds were deferred by regulators.


The testimony is posted at: here: http://www.house.gov/apps/list/hearing/financialsvcs_dem/FIhr_01212...


(Reporting by Karey Wutkowski; Editing by Tim Dobbyn)

FDIC says expects failure rate to remain high in 2010 - 20 January 2010 (Reuters) http://tinyurl.com/ydqwgy5

Views: 62

Comment

You need to be a member of 12160 Social Network to add comments!

Join 12160 Social Network

"Destroying the New World Order"

TOP CONTENT THIS WEEK

THANK YOU FOR SUPPORTING THE SITE!

mobile page

12160.info/m

12160 Administrators

 

Latest Activity

Sandy posted videos
9 hours ago
cheeki kea commented on cheeki kea's photo
15 hours ago
cheeki kea posted a photo
15 hours ago
cheeki kea favorited Doc Vega's blog post A Grain of Hope
16 hours ago
Doc Vega posted blog posts
yesterday
Doc Vega's 7 blog posts were featured
yesterday
tjdavis's blog post was featured
yesterday
Burbia's blog post was featured

Mystery illness strikes Russia with fever, blood symptoms, and no cure in sight.

I guess releasing this bio-weapon upon Israeli neighbors would be hitting too close to home. I…See More
yesterday
Less Prone commented on Doc Vega's photo
Thumbnail

main-qimg-357a10f7111dcf87a3cc6e2afad83855

"Islam is only a phase preceding a total Talmudic rule and a new world religion."
yesterday
Less Prone commented on tjdavis's photo
Thumbnail

WWRJD

"I doubt a d-rat Jesus would be better. Much worse. “Politicians are the lowest form of life…"
yesterday
Less Prone favorited tjdavis's photo
yesterday
Doc Vega posted blog posts
Friday
cheeki kea commented on cheeki kea's photo
Thumbnail

Lost History

"The Tartar wall - aka The Great Wall of China is hundreds of years old and was up and running in…"
Friday
cheeki kea posted a photo
Friday
tjdavis posted a blog post
Friday
tjdavis posted a photo
Friday
Doc Vega posted blog posts
Thursday
Doc Vega posted a photo
Wednesday
Doc Vega posted a blog post

No Place to Hide

Stumbling through this confusing lifeLike a blunt and rusty knifeSo why is there all this…See More
Wednesday
Burbia posted a blog post
Wednesday

© 2025   Created by truth.   Powered by

Badges  |  Report an Issue  |  Terms of Service

content and site copyright 12160.info 2007-2019 - all rights reserved. unless otherwise noted