Colonial Bank seized by FDIC - Largest bank failure of 2009

[ricket]

http://www.reuters.com/article/merge...40478220090814

Aug 14 (Reuters) - The Federal Deposit Insurance Corp is taking Colonial BancGroup Inc (CNB.N) into receivership and will sell the struggling lender's branches and deposits to BB&T Corp (BBT.N), Dow Jones said, citing a person familiar with the situation.

The deal was approved by the FDIC on Thursday night and is expected to be announced later on Friday, the news agency reported.
Colonial officials could not immediately be reached for comment. The FDIC said it does not comment on open and operating institutions. A BB&T spokesman declined to comment.

Colonial, based in Montgomery, Alabama, operates 355 branches in Florida, Alabama, Georgia, Nevada and Texas and has over $25 billion in assets.

Its failure would be the largest bank failure since Wachovia collapsed last September.

Earlier this week, the Alabama State Banking Department had said it might appoint the FDIC as receiver or conservator for its banking unit after Aug. 12.

On Wednesday, however, Alabama banking regulators canceled a scheduled meeting with Colonial to discuss the bank's fate, without giving a reason. [ID:nN8C121593] Colonial has been battered by the credit crisis and faces a U.S. Justice Department criminal probe into alleged accounting irregularities at its mortgage lending unit.

Another one bites the dust!

And they say the recession is over! :rolleyes:

[vinoveri]

Re: Colonial Bank seized by FDIC - Largest bank failure of 2009

maybe we're supposed to believe that bank closings are a lagging indicator;)

[sn1p3r]

Re: Colonial Bank seized by FDIC - Largest bank failure of 2009

25 billion in assets and last i heard FDIC only had 12 billion to cover it? Should I be making a trip to the bank?

[zoog]

Re: Colonial Bank seized by FDIC - Largest bank failure of 2009

25 billion in assets and last i heard FDIC only had 12 billion to cover it? Should I be making a trip to the bank?

Since they already have a buyer (BB&T) lined up, as I understand it, effectively this won't cost the FDIC anything. At any rate I'm pretty sure Congress approved the bill to allow the FDIC to "borrow" up to $500 billion from the Treasury if needed.

[ST]

Re: Colonial Bank seized by FDIC - Largest bank failure of 2009

25 billion in assets and last i heard FDIC only had 12 billion to cover it? Should I be making a trip to the bank?

Can you imagine the backlash if the US gov't let any depositors lose their money sitting in bank accounts while it has been bailing out investment and commercial banks who have gambled away hundreds of billions in the derivatives casino?

Losing your bank deposit money no matter the amount is politically untenable. Stealthily seeping away purchasing power via inflation is also tough in a financial oligarchy, but in the very end inflation will win (not to be confused with disinflation striking a few rabbit punches this fall again).

[zoog]

Re: Colonial Bank seized by FDIC - Largest bank failure of 2009

Since they already have a buyer (BB&T) lined up, as I understand it, effectively this won't cost the FDIC anything. At any rate I'm pretty sure Congress approved the bill to allow the FDIC to "borrow" up to $500 billion from the Treasury if needed.

Ok it's costing the FDIC ~$3 billion...

The FDIC and BB&T entered into a loss-share transaction on approximately $15 billion of Colonial Bank's assets. BB&T will share in the losses on the asset pools covered under the loss-share agreement. The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement is also expected to minimize the disruptions for loan customers.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $2.8 billion. BB&T's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to alternatives.

[bpr]

Re: Colonial Bank seized by FDIC - Largest bank failure of 2009

Can you imagine the backlash if the US gov't let any depositors lose their money sitting in bank accounts while it has been bailing out investment and commercial banks who have gambled away hundreds of billions in the derivatives casino?

Losing your bank deposit money no matter the amount is politically untenable. Stealthily seeping away purchasing power via inflation is also tough in a financial oligarchy, but in the very end inflation will win (not to be confused with disinflation striking a few rabbit punches this fall again).

Interesting thought: the Fed's QE policies may not directly lead to excessive inflation due to the QE being contained within the banking system, but if enough banks fail that the FDIC needs a bailout, then everyone's going to be lined up at the printing press and... poom. One of the big ones dropping would probably do that.

I can see it: you wait three weeks for Congress to pass the law and for the FDIC to send your check, and by the time you get it, milk is $12 a gallon.