FDIC May Add to Special Fees as Mounting Failures Drain Reserve

Aug. 20 (Bloomberg) -- Colonial BancGroup Inc.’s collapse and the prospect of mounting failures among regional lenders may prompt the Federal Deposit Insurance Corp. to impose a special fee as soon as next month to boost reserves by $5.6 billion.

The FDIC board might act sooner than expected after the Aug. 14 failure of Alabama-based Colonial cost the agency’s insurance fund $2.8 billion, and as banks such as Chicago-based Corus Bankshares Inc. report dwindling capital and Guaranty Financial Group Inc. of Austin, Texas, says it may fail. The fund fell to the lowest level since 1992 in the first quarter.

“With the failure of Colonial Bank and the possible near- term failures of one or two more large banks, the FDIC may be forced to levy a special assessment on the industry sooner than it had planned,” said Camden Fine, president of the Independent Community Bankers of America, an industry group.

The failure of 77 banks this year is draining the fund, prompting the agency in May to set an emergency fee of 5 cents for every $100 of assets, excluding Tier 1 capital, to raise $5.6 billion in the second quarter. The agency has authority to set fees in the third and fourth quarters, if needed, to prevent a decline in the fund from undermining public confidence.

The FDIC board has until Sept. 30 to adopt a fee that banks would set aside in the third quarter. The agency has already signaled another special fee this year.

“We will likely have to have another special assessment in the fourth quarter,” FDIC Chairman Sheila Bair said in an Aug. 5 Bloomberg Television interview.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aqxHLAHU_m2k

Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest bank, took over ailing Guaranty Financial Group Inc. of Texas to expand in the U.S. South, and regulators shut banks in Georgia and Alabama, pushing the 2009 toll to 81.

Branches of Guaranty in Texas and California today become offices of Birmingham, Alabama-based BBVA Compass, the U.S. affiliate of the Spanish bank, in a deal brokered by the Federal Deposit Insurance Corp., the agency said. Regulators seized three other banks with total assets of $927 million including two in Georgia, pushing that state’s tally this year to 18.

Guaranty had $13.5 billion in assets and $12 billion in deposits and “was in an unsafe and unsound condition because of the deteriorating quality of its loan portfolio, critically deficient earnings, capital insolvency and strained liquidity position,” the Office of Thrift Supervision, the lender’s regulator, said in a statement.

The collapse is the 11th biggest bank failure in U.S. history as regulators close lenders at the fastest pace since 1992, when more than 120 lenders were shut. Of banks seized this year, three had assets exceeding $10 billion: Guaranty, Alabama’s Colonial BancGroup Inc., seized Aug. 14, and Florida’s BankUnited Financial Corp., closed May 21. BB&T Corp. bought Colonial and private-equity firms bought BankUnited.

The failure will cost the FDIC deposit fund $3 billion, and the closings in Georgia and Alabama will drain $262 million, the agency said. The fund, which pays customers for deposit losses up to $250,000 and is generated by fees on banks, had $13 billion at the end of the first quarter, according to the FDIC.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aj833suxjw1o

So is the FDIC already tapping the 100 bllion credit line at Treasury or what ? If so, where is the public statement from FDIC ?INquiring minds want to know...

 

Southerners will probably call the new bank, Banco Billy Bob.

 

From: Barr, David [mailtoBarr@FDIC.gov]
Sent: Saturday, August 22, 2009 4:28 PM

Subject: Re: Public statement about remaining FDIC insurance funds

The FDIC has not borrowed from Treasury. We will provide an update on the fund on Aug 27.

--db