Two more banks have failed…
This evening the FDIC has announced two additional banks have closed and the FDIC was forced to step in. The following is the official press release from the FDIC:
Mutual of Omaha Bank Acquires All Deposits of First National Bank of Nevada and First Heritage Bank, N.A.
All Insured and Uninsured Deposits Transferred to Acquiring BankFOR IMMEDIATE RELEASE
July 25, 2008Media Contact:
In Washington: Andrew Gray
(202) 898-7192
angray@fdic.gov
In Arizona: David Barr
Cell: (703) 622-4790
dbarr@fdic.govFirst National Bank of Nevada, Reno, Nevada, and First Heritage Bank, N.A., Newport Beach, California (owned by First National Bank Holding Company, Scottsdale, Arizona), were closed today by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation (FDIC) was named receiver. The FDIC entered into purchase and assumption agreements with Mutual of Omaha Bank, Omaha, Nebraska, to take over all of the deposits and certain assets of the First National Bank of Nevada, Reno (also operating as First National Bank of Arizona, which recently merged into it), and First Heritage Bank, N.A., Newport Beach, California.
The 28 offices of the two banks will reopen on Monday as branches of Mutual of Omaha Bank. All depositors, including those with deposits in excess of the FDIC’s insurance limits, will automatically become depositors of Mutual of Omaha Bank for the full amount of their deposits. Depositors will continue to be insured with Mutual of Omaha Bank so there is no need for customers to change their banking relationship to retain their deposit insurance.
Over the weekend, customers of the banks can access their money by writing checks or using ATM or debit cards. Checks drawn on the banks will be processed normally. Loan customers should continue to make loan payments as usual.
Of the 10 institutions that have failed over the past two years, this is the second time in which another bank acquired all of the failing banks’ insured and uninsured deposits. Mutual of Omaha Bank’s acquisition of all deposits was the "least costly" resolution for the Deposit Insurance Fund compared to all alternatives because the expected losses to uninsured depositors were fully covered by the premium paid for the banks’ franchises.
As of June 30, 2008, First National of Nevada had total assets of $3.4 billion and total deposits of $3.0 billion. First Heritage Bank had total assets of $254 million and total deposits of $233 million.
Customers who would like more information on today’s transactions should visit the FDIC’s Web site at http://www.fdic.gov/bank/individual/failed/fnbnv.html (for First National Bank of Nevada) and http://www.fdic.gov/bank/individual/failed/heritage.html (for First Heritage Bank, N.A.). They may also call the FDIC toll free about both institutions at 1-866-674-8944 and 1-800-523-8089 until 9:00 p.m. Pacific time this evening, and then 8:00 a.m. to 8:00 p.m. daily, thereafter.
In addition to assuming all of the deposits of the banks, Mutual of Omaha Bank will purchase approximately $200 million of assets from the receiverships. Mutual of Omaha Bank will pay the FDIC a premium of 4.41 percent to assume all the deposits. The FDIC will retain the remaining assets for later disposition.
First Heritage Bank, N.A., Newport Beach, California, had three branches; its clientele was comprised primarily of corporations. First National Bank of Nevada, with 25 branches, also operated as First National Bank of Arizona. It is not affiliated with National Bank of Arizona, Zions Bancorporation or its affiliates.
The cost of the transactions to the Deposit Insurance Fund is estimated to be $862 million. The failed banks had combined assets of $3.6 billion, .03 percent of the $13.4 trillion in assets held by the 8,494 institutions insured by the FDIC.
First National Bank of Nevada is the first bank to be closed in Nevada since Frontier Savings Association, Las Vegas, on December 14, 1990. The bank closed most recently in California was IndyMac Bank, F.S.B., Pasadena, on July 11, 2008. This year, a total of seven FDIC-insured banks have been closed.
These two banks were no where near the size of IndyMac, but just the fact of additional bank failures is concerning. I am sure there are going to be more as the stresses of the credit implosion are having a severe impact on the financial institutions. And which has been evident by the record amount of money being borrowed from the Federal Reserve every day.
From July 24, 2008
[...] Loans to commercial banks increased by $2.47 Billion to an average $16.4 Billion a day in the past week. The $16.4 Billion per day is an all time record. [...]
Over the weekend the US Senate will be voting on the housing bailout bill (HR 3221). This will impact Freddie Mac (FRE) and Fannie Mae (FNM) should it become law. There is much discussion as to if this will be good for the two companies or not, and if it will be good or bad for the country as a whole. I see great peril in this bill, that is my opinion and I know that not all will feel the same way. As traders we will play along with what ever the charts give us to work with, that is how we make our money.
I don’t like the housing bailout bill and my wishes are that it fails to become law. I am for a free market, and companies should not be rewarded or offered ’special considerations’ for their mistakes and/or their poor investment decisions. Home builders should not be allowed ’special’ tax write offs for their failing businesses. They share in the responsibility for over building the market and now they are trying to sell their unsold homes at deep discounts in order to unload them, even if at a loss. But why not, they could get special tax breaks from the housing bailout bill if it becomes law and they can write it off. In doing so the existing homes on the market will continue to go unsold for they can’t compete with the dumping from the new home builders. This only worsens the housing market situation as home values will continue to slide further and at a faster pace. (hey Chuck.. get off the soap box!)
Ok.. on to some charts 
Freddie Mac (FRE)
Russell 2K ($RUT)
Financial Sector (XLF)
We will have some more posts over the weekend. We hope you have a wonderful evening.
RebelTraders, I am providing this link as a supplement to the Housing bailout bill. Those of you who believe handing Govt. $300 BILLION is a good idea may find this link goes hand in hand with your belief system. http://www.stopabductions.com/
Ecklebob– LOL That is too funny!
Without reading the bill, they passed it, even with some questionable last-minute stealth provisions, like some change in the IRS tax code to benefit Art Colonies development(C-SPAN said someone from their foundation is a director on Fannie/Freddie’s board) Please tell us how much in taxes paid will be REFUNDED in any 4-YEAR carry-back provision for homebuilders & mortgage companies! How much will this add to the deficit, refunding taxes they paid for all of 2 boom years?(if it’s in there) TIA.
Even the Commies don’t want our banks as comrades anymore. http://www.cnbc.com/id/25869463/for/cnbc/
FOXY LADY: http://www.foxnews.com/story/0,2933,391544,00.html
Question: Why is Barney Frank so outraged that it will take months to implement the Housing bailout bill? Answer: Here are his 20 top campaign contributors since 1989. (Source:opensecrets.org)
JPMorgan Chase & Co $69,500
American Bankers Assn $68,150
National Assn of Realtors $65,042
Human Rights Campaign $50,275
Laborers Union $49,750
American Fedn of St/Cnty/Munic Employees $49,000
UBS AG $47,850
American Assn for Justice $46,500
Securities Industry & Financial Mkt Assn $40,996
American Institute of CPAs $39,859
Credit Union National Assn $39,000
National Assn of Home Builders $38,000
Teamsters Union $37,500
United Food & Commercial Workers Union $36,948
Bank of America $35,000
Brown Brothers Harriman & Co $33,300
Mortgage Bankers Assn $33,000
Carpenters & Joiners Union $32,000
National Assn of Letter Carriers $32,000
Machinists/Aerospace Workers Union $31,000
For the time being, glad I didn’t buy some speculative calls on financials. That all being said, while I agree that banks and homebuilder equities have further to fall, I wonder if the best risk to reward short areas are now firmly in retail, commercial real estate, Tempted to get short commodity producers, but wonder if that trade is too far off to put on yet. Any thoughts?
These bailouts are a sign of USA’s strength, not weakness.
No other country in the world could bailout its banking system with borrowed money that will be repaid with a ever depreciating currency.
Yes, our lenders don’t like it and many of us don’t like it, but we have no choice. The alternative is an economic depression and political instability.
If all new lending is fully collaterized under tight lending standards, then the $Trillion of bad loans will be lost in the rounding over the next decade.
These steps taken by the SEC/FED/White House/Congress are massive bold actions that will contain the mistakes made in 2004-2005.
Do you want inaction, a collasping equity market and another 30’s style depression lasting 10-20 years????
Jim, dear, with all due respect, you are advocating socialism. Please re-read what you have written, and roll it around a little longer. Feel free to email me at any time to discuss this further. I appreciate your posts.
I fail to understand how the shift to privatized profit and shared losses benefit a capitalist market system and the people of out country. “Risk/reward” is on the verge of becoming an oxymoron as Govt. moves to ensure that the interests of the banks WILL supercede the interests of the American citizen. Polls show that 80% af American voters are against the Housing bailout bill. Politicians cross their constituents at their own risk.
Strength, eh? Contain the mistakes? Right.
In a way, I do agree with you to an extent, it does show the strength of the US, in that we still remain the reserve currency of the world, for now, and global growth, at least at the pace that most people consider to be “normal,” is based upon an ever more leveraged US consumer.
That all being said, there is a point at which the rest of the world says “no mas.” Now, I’m not suggesting that day is today, in fact, I’m of the opinion that the dollar should strengthen if this does turn out to be a prolonged recession (dollar smile theory). When that day comes, US rates, treasuries, corporates, etc etc all dramatically increase. That being said, that day will not come until the rest of the world economy is in a place that it can allow the US economy to become a much smaller cog in the global engine.
In the end, it is the market that sets prices. While our beloved government is taking drastic measures to stem the financial crisis, if you believe in any sort of efficient markets, you have to acknowledge that the market cannot be fooled and will see the eventual cost of the various swap arrangements, bank bail outs, etc etc.
In the end, however, I think the truth is that all the drastic measures being put forth by the US government are more indications of how bad things have become and how much worse they will get, even WITH the bailouts. The only sign of “strength” is the ability of the US to bail out its banking system without tanking its currency, while the rest of the world, by and large, cannot.
While I’m sure you will disagree with me Jim, I don’t think there is anything wrong with recession in of itself. Recessions serve an important structural purpose of reallocating resources to the most efficient use. Honestly, the USA hasn’t had a real, proper, recession since the early 90s. All you need to do is take a look around at gas prices, food prices, the PPI, and you can see the effects of such a long time without a real wash out of the dead weight, which is finally beginning to happen now.