Rebel Traders – Analysis Without The Hype

Bank executive pleads guilty for overvaluing bank assets.

The former vice president of the failed Omni National Bank intentionally marked mortgage assets higher after the bank got caught with a significant amount of bad loans.

If this former bank executive is being charged, and now having plead guilty to, overstating the value of their assets then what does this say about the entire banking system as it now stands with “mark to guess” accounting rules? With many banks and other institutions marking their mortgage assets at higher values then what they are currently worth, then should not these executives also be charged with fraud? I say lock them all up!

ATLANTA — A former executive at a failed Atlanta bank pleaded guilty Thursday to charges that he overvalued bank assets in a scheme that prosecutors said helped hide bloated accounting figures that could have alerted regulators to massive mortgage fraud.

The guilty plea of Jeffrey L. Levine is the latest aftershock of the failure of the Atlanta-based Omni National Bank, which was taken over by federal regulators in March. Levine, the bank’s former executive vice president, is one of at least four people with ties to the bank to face federal charges since it collapsed.

Levine, 68, could face 30 years in prison and a fine of up to $1 million on charges that he cooked the bank’s books to mask millions of dollars in losses on loans designed for investors who rehab run-down houses.

Levine’s community redevelopment department doled out high-interest short-term loans to borrowers with lackluster credit who promised to renovate and then resell or rent houses in struggling neighborhoods, according to federal prosecutors.

But when the market collapsed and the bank was left with a string of foreclosures, prosecutors said Levine inflated the value of the loans to make it look like the bank’s finances were in a stronger position than they really were.[…] Source: Daily Citizen (H/T Butch)

FOR IMMEDIATE RELEASE
October 23, 2009

Flagship National Bank, Bradenton, Florida, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with First Federal Bank of Florida, Lake City, Florida, to assume all of the deposits of Flagship National Bank.

The four branches of Flagship National Bank will reopen on Monday as branches of First Federal Bank of Florida. Depositors of Flagship National Bank will automatically become depositors of First Federal Bank of Florida. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers should continue to use their existing branch until they receive notice from First Federal Bank of Florida that it has completed systems changes to allow other First Federal Bank of Florida branches to process their accounts as well.

This evening and over the weekend, depositors of Flagship National Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of August 31, 2009, Flagship National Bank had total assets of $190 million and total deposits of approximately $175 million. First Federal Bank of Florida did not pay the FDIC a premium for the deposits of Flagship National Bank. In addition to assuming all of the deposits of the failed bank, First Federal Bank of Florida agreed to purchase essentially all of the assets.

The FDIC and First Federal Bank of Florida entered into a loss-share transaction on approximately $130 million of Flagship National Bank’s assets. First Federal Bank of Florida will share in the losses on the asset pools covered under the loss-share agreement. The loss-share arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers. For more information on loss share, please visit: http://www.fdic.gov/bank/individual/failed/lossshare/index.html.

Customers who have questions about today’s transaction can call the FDIC toll-free at 1-800-355-0650. The phone number will be operational this evening until 9:00 p.m., Eastern Daylight Time (EDT); on Saturday from 9:00 a.m. to 6:00 p.m., EDT; on Sunday from noon to 6:00 p.m., EDT; and thereafter from 8:00 a.m. to 8:00 p.m., EDT. Interested parties also can visit the FDIC’s Web site at http://www.fdic.gov/bank/individual/failed/flagship.html.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $59 million. First Federal Bank of Florida’s acquisition of all the deposits was the “least costly” resolution for the FDIC’s DIF compared to alternatives. Flagship National Bank is the 103rd FDIC-insured institution to fail in the Nation this year, and the ninth in Florida. The last FDIC-insured institution closed in the state was Hillcrest Bank Florida, Naples, which also closed today.