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Bank-Failure Details Are Leaked Again

CHICAGO ( TheStreet) -- Regulators are trying to make deals to sell the assets of Corus Bankshares (CORS) by the end of the month, according to a published report.

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 - Get Report). 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.
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