Regulators Seize Nine Banks

WASHINGTON (TheStreet) -- Regulators Friday seized nine U.S. banks -- a record number of failures in a single day during the 2008-2009 banking crisis.

The 2009 tally of failed U.S. banks and thrifts now stands at 115.

The nine failed banks were in four states. All were subsidiaries of FBOP, a privately held banking company headquartered in Chicago. Together, they had $19.4 billion in assets.

U.S. Bank N.A. of Minneapolis, the main subsidiary of U.S. Bancorp(USB), acquired all of the nine banks' deposits and most of their assets.

FBOP had been under pressure over the past year as mounting losses on securities investments nearly wiped out its capital. The holding company's capital ratios were low enough for it to be considered undercapitalized for more than a year according to regulatory guidelines.

Despite the holding company's very weak capital position, five of the failed subsidiaries were still adequately capitalized as of June 30, so only four were included in TheStreet.com's most recent list of undercapitalized banks and thrifts.

Still, regulators shut down all nine banks because of the cross guaranty provisions that Congress added to the Federal Deposit Insurance Act in 1989. These provisions stipulate that all bank subsidiaries of a multibank holding company are financially responsible for the costs of resolving the failure of any of the other subsidiaries.

The Federal Deposit Insurance Corp. had been quietly soliciting bids for FBOP's subisidiary banks for several weeks. After state and federal regulators acted on Friday, the FDIC sold the nine banks' $15.4 billion in deposits and $18.2 billion of their assets to U.S. Bank N.A. Although the FDIC did not announce what U.S. Bank N.A. actually paid for the acquisitions, the agency agreed to share in losses on $14.4 billion of the acquired assets and estimated that the combined cost to the FDIC's deposit insurance fund would be $2.5 billion.

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