Bank-Failure Details Are Leaked Again
The New York Times said on Thursday that regulators were looking to "cleave the bank in two and sell its banking operations and condominium loans separately."
This is the third time in the past month that details have emerged in advance of a large bank's failure.
News of the Federal Deposit Insurance Corp.'s intention to sell the deposits and branches of Guaranty Bank to Banco Bilbao Vizcaya Argentaria SA (BBV) leaked on Aug. 20, and Guaranty failed the next day.Early on Aug. 14, Dow Jones reported that Colonial BancGroup was set to be seized by regulators, with the FDIC selling its deposits to BB&T (BBT). The FDIC announced Colonial's failure after the close of business that day. Since those two leaks occurred right before the banks were seized by regulators, they probably didn't cause much damage, but the early release of the details of an FDIC auction of a failing bank's assets at an earlier stage in the process could cause an outflow of deposits. Of course, with Corus reporting that it was insolvent as of June 30 with negative capital ratios, any depositors with balances exceeding FDIC insurance limits were likely to have already taken action. The FDIC's temporary increase of the basic individual deposit insurance limit to $250,000 (set to expire) has limited the likelihood of runs on deposits at troubled banks. The temporary increase on individual deposit insurance coverage has been extended to the end of 2013. The temporary waiver of all limits on non-interest-bearing transaction accounts (mainly business-checking accounts) has been an even bigger factor in limiting the chances of deposit runs, since even small businesses can keep very large sums of operating funds in these accounts. Deposit coverage on these checking accounts is set to revert to the standard $100,000 limit on June 30, 2010.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV