From Fox Business News | Senior executives at major Wall Street banks say they doubt that community lender ShoreBank, despite its ties to the Obama White House, will be able to survive a government takeover and eventual liquidation that a bailout was designed to prevent. Just a few weeks ago, the officials thought they had contributed enough money to bail out the bank.
Filed under: Bank failures
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US regulators lower estimated cost of bank busts
U.S. regulators revised down the estimated cost of cleaning up the hundreds of bank failures Tuesday, saying the industry is seeing better earnings and a greater ability to raise capital. The staff of the Federal Deposit Insurance Corp said it now believes bank failures will cost the industry-backed insurance fund $60 billion between 2010 and 2014. Previously, the FDIC had estimated a cost of $60 billion over 2010 to 2013.
ShoreBank bailout hits political snag
The bailout of Chicago-based ShoreBank has hit a serious snag as the Federal Reserve and Treasury drag their feet on whether to provide funding to the ailing South Side lender, sources close to the situation say.
Last month ShoreBank lined up commitments from private sources, including Goldman Sachs, Bank of America, General Electric and Chase, for a capital infusion of about $135 million. That private money was to have made ShoreBank eligible for about $75 million in government funds from the Treasury’s Troubled Asset Relief Program. The bank has needed to raise about $200 million to stave off possible seizure. Get the full story »
BP reportedly considering $5B-$10B debt sale
Reuters | Oil giant BP Plc is considering a corporate debt
offering of $5 billion to $10 billion as early as next week, CNBC
reported Thursday.
BP is discussing the offering with five banks, including Goldman Sachs
and Morgan Stanley, CNBC reported. A spokesman for Goldman Sachs
declined comment. Morgan Stanley and BP did not have immediate comment.
Bridgeview Bancorp misses TARP payment
By Becky Yerak | Bridgeview Bancorp Inc., which in December 2008 became one of the first privately-held banks in the Chicago area to receive a capital infusion from the U.S. Treasury Department’s Troubled Asset Relief Program, missed its dividend payment in the latest quarter.
Another 500 to 700 bank failures predicted
By Becky Yerak | Nearly 250 U.S. banks have failed since the beginning of 2008, and a Chicago-area investment banker predicted Tuesday that another 500 to 700 U.S. lenders could be seized in coming years.
Steven Hovde, chief executive of Inverness-based Hovde Financial, made the forecast at an Association for Corporate Growth event in Chicago.
He noted that the outlook of other industry observers is even more grim. Fortress Investment Group, for example, said earlier this month that about 2,000 of the nation’s 8,000 banks could fail in coming years.
Fed introduces CD-like program for banks
Associated Press | The Federal Reserve has launched a new program that allows banks to set up the equivalent of certificates of deposit at the Fed. In an operation conducted Tuesday, the Fed says banks will be paid 0.27 percent in interest on 14-day “term deposits” set up at the central bank.
It’s a new tool that will help the Fed drain money from the economy when it decides to tighten credit. The Fed has repeatedly said investors shouldn’t read the operation as a step toward higher borrowing costs.
Get the full story: Fed introduces CD-like program for banks.
Community First Bank Chicago looks for capital
By Becky Yerak | Community First Bank Chicago, a 4-year-old bank that was told to shape up by regulators in February, has launched a stock offering to help raise capital. It has been inviting community members in Rogers Park, one of the neighborhoods in which it operates, to invest. It’s trying to raise at least $5 million.
The February order didn’t specify a capital target that the $60 million-asset bank needed to reach, but as of March 31, it had fallen below “well-capitalized” status.
Nearly 12 percent of its loans were seriously delinquent as of March 31, up from almost 5 percent in the year-ago period.
Arcola Homestead Savings joins list of failed banks
By Becky Yerak |
Arcola Homestead Savings Bank, which had $17 million in assets and $18.1
million in deposits, was closed today by state and federal banking
regulators.
The Federal Deposit Insurance Corp. was unable to find another financial
institution to take over the banking operations. Checks to the retail depositors for their insured funds will be mailed
Monday.
WaMu to meet with shareholders on bankruptcy
Associated Press | Washington Mutual Inc. has agreed to meet with
shareholders seeking information in the company’s Chapter 11 bankruptcy
after a judge threatened to reconsider her decision denying the
appointment of an independent examiner in the case.
With renewed talk of an examiner, a WaMu attorney on Thursday withdrew a
motion to establish discovery procedures in the case and said he would
be willing to meet with parties wanting information.
Congressman looking into ShoreBank bailout
Dow Jones Newswires | U.S. Rep. Spencer Bachus (R-Ala.), the top Republican on the House Financial Services Committee, is calling for an investigation into the private-sector recapitalization of Chicago community lender ShoreBankCorp, Fox Business Network’s Charles Gasparino reported Wednesday.
The company was said to have reached its goal of raising $125 million from private sources, mostly U.S. investment banks, The Wall Street Journal reports, citing people familiar with the situation. Bachus is asking why Wall Street took an interest in ShoreBank and is drafting a letter to President Barack Obama about the matter, Gasparino says.
FDIC swamped with toxic CDOs as banks fail
From The Wall Street Journal | The Federal Deposit Insurance Corp. has inherited hundreds of potentially worthless bonds from failed lending institutions, and this number appears to be growing. The FDIC (and, by extension, the U.S. taxpayer) owns more than 250 collateralized debt obligations that were purchased by small institutions that later failed.
Get the full story: wsj.com.
Harris, Northern Trust to support ShoreBank
By Becky Yerak | Harris Bank and Chicago-based Northern Trust Corp. have tentatively
agreed to participate in a possible financial bailout of teetering South
Side lender ShoreBank.
“Northern Trust has been a long-time supporter of ShoreBank and its
important role serving traditionally underserved communities,” said a
statement from the Chicago area’s biggest locally headquartered bank.
“We support its recapitalization and have committed several million
dollars to assist with this effort.” It didn’t say exactly how many
millions it was willing to kick in.
Midwest Bank fails; FirstMerit to take over
By Becky Yerak | Midwest Bank, a $3.2 billion-asset lender that was among the first community banks to receive federal bailout funds, was seized by U.S. banking regulators Friday after failing to raise the capital it needed to stay independent.
Its assets, deposits and branches will be taken over by Akron, Ohio-based FirstMerit. The failure of Midwest Bank, which is part of publicly traded Midwest Banc Holdings of Melrose Park, is expected to cost the Federal Deposit Insurance Corp., which is financed by insurance premiums paid by banks, $216.4 million.
It’s the 11th Illinois bank failure in 2010; in 2009, the state saw 21 banks collapse. On Thursday the Tribune reported that FirstMerit was the frontrunner in the bidding.
Goldman Sachs’ interest in ShoreBank: Why now?
Goldman Sachs CEO Lloyd Blankfein, center, listens as President Barack Obama addresses the Business Council in Washington, May 4, 2010. (AP Photo/Susan Walsh)
Tribune staff report | Troubled Chicago lender ShoreBank has received recent interest from Wall Street giant Goldman Sachs for several reasons.
The Tribune reported Wednesday that ShoreBank has generated little interest among strategic buyers, according to banking industry insiders, but it is counting on an infusion of about $75 million in capital from the U.S. Treasury. First, it must line up more than $120 million in capital from various banks. As the Tribune reported, existing investors such as Chase and Bank of America, as well as charitable foundations, are weighing additional investments in ShoreBank.
But Goldman Sachs is a more recent sign-on — the bank agreed to commit about $20 million to ShoreBank.
