Two More Friday Failures

I jumped the gun this evening. There were two more banks that bit the dust this evening and one isn’t inconsequential.

Downey Savings and Loan located in Newport Beach, CA and PFF Bank of Pomona, CA both were taken over. Downey had assets of $12.8 billion and deposits of $9.7 billion. PFF reported assets of $3.7 billion and deposits of $2.4 billion. All of the banking operations were acquired by U.S. Bank.

U.S. Bank entered into a loss share agreement with the FDIC which requires the bank to assume the first $1.6 billion of losses from the asset pool created from the two banks. Unless I missed it the FDIC did not indicate what its projected loss or cost from this latest shutdown will likely cost. I suspect it is not insignificant.

As part of the transaction, U.S. Bank agreed to institute a loan modification agreement similar to that instituted by the FDIC on the IndyMac loan portfolio it now owns. Sheila Bair is evidently determined to impose her prescription for the salvation of the world on just about anything she gets her hands on.

These aren’t insignificant failures. Once again it’s a reminder that we are a ways from getting out of this haunted forest.

Tom Lindmark

more: Reuters, FDIC

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