Welcome to yet another addition of FDIC Friday. This weekend see the closing of three banks of modest size:
- Century Bank, Federal Savings Bank, Sarasota, Florida (total assets of $728 million and total deposits of approximately $631 million)
- Orion Bank, Naples, Florida (total assets of $2.7 billion and total deposits of approximately $2.1 billion)
- Pacific Coast National Bank, San Clemente, California (total assets of $134.4 million and total deposits of approximately $130.9 million)
The cost to the FDIC fund this week is roughly $986 million dollars. Remember back at the end of September the FDIC said they were going to be running in the red (out of money) and they were looking at “all options”. Well, they’ve picked their option – on Thursday, 11/12, the FDIC finalized their 3 year, forced pre-payment of fees, raising about $45B for their funding needs.
Does this decision make sense to anyone?
As banks will need to find this cash to pay the FDIC what will that impact? Their desire to lend. In a time where financial institution are holding back financing from even some of the best potential borrowers, why would the FDIC give banks an excuse to lend even less?
The other fear I have about this decision comes down to repeat behavior. Much like a crack addict looking to score his hit, what happens if the FDIC funds run out before the 3 year period ends? Will demanding 3, 4 or 5 years of payments become the norm for the industry and, if so, what impact would that have?
Just let that noodle around in your head for some time.
Related posts:
- 7(!) banks closed by the FDIC today. I’m shocked. I don’t say that with a cynical tone,...
- FDIC Friday, the 11/06/09 edition Another Friday and another set of failed banks. Up this...
- From the "I didn't see it coming" file: Dutch Seize Bank After Run on Assets This was an unexpected headline for me this morning: The...
- Two more banks shut down by the FDIC – Strategic Capital Bank, Champaign, IL and Citizens National Bank, Macomb, IL Last August I wrote a piece about “The Syk Falling”...
- FDIC admits it is in the red until 2012 FDIC bank fund in the red until 2012. The government...
Related posts brought to you by Yet Another Related Posts Plugin.