Sales of new homes should be booming based on low home prices and ultra low interest rates – instead new home sales in 2011 were at the lowest levels on record.

Are people just too frightened by the bad economy to take a chance on buying a home?  Was the pool of potential home buyers exhausted during the housing bubble years, resulting in the current lack of demand for new homes?  Does the general public understand that in many cases a fixed mortgage payment would be no more than an ever increasing rent payment?  Has confidence been so collapsed that no one believes home prices will ever rise again – the opposite of what everyone believed a few years ago?

Let’s take a look at some graphs to get an understanding of what’s going on in the housing market.

Median Cost of Rent Compared to Median Mortgage Payment

The plunge in fixed mortgage rates below 4% has resulted in much lower payments when purchasing a home.  Low interest rates and  dramatically lower housing prices have resulted in a convergence between the cost of rent and the cost of a mortgage, something that has previously never occurred.  That house you are renting today for $1,200 a month could be yours free and clear in 30 years with a fixed rate mortgage payment of $1,200 per month.

Despite the all time low cost of owning a home, new home sale collapsed in 2011 to only 302,000 homes – the lowest on record.

Home Prices Have Given Up All The Gains of The Bubble Years

The price of homes has collapsed since the real estate bubble blew up in 2008.  Many homes in hard hit states like Nevada and Florida have dropped in value by 60 to 80%.  Prices have dropped so low that you can now buy a home with a credit card.  Here’s the sorry looking graph on home prices from Calculated Risk.

Declining home values is a double edged sword for buyers.  Although current home buyers are able to buy homes for a fraction of their previous price, no one wants to buy a home and see it immediately drop in value.  The latest report from Case-Shiller shows that home values dropped another 1.2% last month to a post bubble low.

Many analysts are predicting that home value could decline another 10 to 20%, which would put all current new home buyers deeply underwater on their mortgages.  Also pressuring home prices is the flood of foreclosures which is causing home prices to drop further.  Total foreclosures in 2011 reached 2.7 million and this year is expected to be even worse.

Lack of Jobs and Income Is The Real Issue Preventing a Recovery in Home Prices

Four years after the start of the recession, the unemployment rate remains at almost 9%.  If you are unemployed, it doesn’t matter if home prices drop another 50% – the house will still cost too much.

We have come full circle in this great housing collapse.  When I bought my first house over 20 years ago, the standard sales line of real estate agents was that you couldn’t go wrong buying a home, which at that time was true.  Home prices rose year after year and better yet, incomes were rising as well.  Over time, rising incomes resulted in the mortgage payment becoming less and less of a burden in terms of a percentage of total monthly income.  Today the reverse is true -  home prices continue to decline with no end in sight and median household incomes have fallen to 1996 levels as seen in this chart from singularityhub.

The cold reality of the situation is that housing values are ultimately supported by jobs and incomes.  The academics at the Federal Reserve have things backwards by believing that an economic recovery can be engineered by re-inflating housing values with  easy money.  In fact, a real recovery in housing will not begin until the economy can start producing jobs and income.  The Federal Reserve can force interest rates lower through financial repression but the one thing they can’t directly do is create jobs.

Never in history has a collapsed asset bubble been quickly re-inflated.  Real estate values in Japan are still at less than half the valuation levels reached in the early 1980′s.  Anyone who thinks there is a quick and easy answer for a recovery in the housing market is delusional.

Related posts:

1. Mortgage Jobs Disappear As Rates Hit All Time Lows
2. Decade Low On Homeownership Rates Merely A Return To Normalcy
3. Housing Market On Critical List As Sales Plunge and Strategic Defaults Loom

The states with the biggest declines in non current mortgages are all non-judicial states in which the mortgage foreclosure process is not delayed through the court system.  Expect the non-judicial states to see the quickest return to a stable residential real estate market by repossessing properties from owners who are no longer able to afford them.

Foreclosure inventories remain 2.5 times higher in judicial states, causing a large shadow inventory which puts downward pressure on home prices.

Is the fastest cure for the current real estate crisis a speedy resolution of the foreclosure process and putting homes into the hands of owners who are able to afford them?

Related posts:

1. Mortgage Default Is A Financial Bonanza For Many Homeowners As Foreclosure Crisis Continues
2. Court Ruling Against Bank Foreclosures Could Spiral Into Full Blown Financial Crisis
3. Total 2011 Foreclosure Filings Reach 2.7 Million – Expect 2012 To Be Worse

Tennessee, with two bank closings, had previously not had a single bank failure since 2002.  The combined assets of the two failed banks in Tennessee totaled $1.5 billion.  Tennessee Commerce Bank of Franklin, TN, became the first billion dollar bank failure of 2012.  Last year, a total of 7 failed banks had assets in excess of $1 billion.

Various statistics prove that regulators are allowing hopelessly insolvent banks to remain open as detailed in Problem Bank List At 20 Year High As Regulators Let Zombie Banks Remain Open.   The banks closed so far during 2012 have been in much worse shape than those closed during 2011.

For all of 2011, the ratio of total FDIC losses on failed banks as a percentage of total failed bank assets was 20%.  For 2012 to date, total FDIC losses on 7 failed banks totaled $850.8 million and total assets of the 7 failed banks totaled $2.58 billion, for a loss ratio of 32.9%.

The four failed banks for the week ending January 27,  2012 are listed below.  Total losses taken by the FDIC on this week’s four failed banks totaled $607 million.  Total year to date losses for 2012 are $850.8 million.

Please click on the link for detailed information of each bank closing.

Bank Failure #4 - First Guaranty Bank and Trust Company of Jacksonville, Jacksonville, FL

First Guaranty, a 62 year old institution, is the second bank failure in Florida this year.   First Guaranty’s website said that “We are highly capitalized, profitable and FDIC insured”.

Bank Failure #5 – Tennessee Commerce Bank, Franklin, TN

Tennessee Commerce had $1.2 billion in assets and is the largest bank failure of 2012.  The loss to the FDIC Deposit Insurance Fund was $416.8 million.

The quality of assets at Tennessee Commerce Bank was so poor that the acquiring institution purchased only $203.9 million (17%) of the failed Bank’s assets.  The FDIC, which is already holding $30 billion of failed bank assets, got stuck with the balance of $854 million of junk loans to be disposed of later.

Bank Failure #6 - Patriot Bank of Minnesota, Forest Lake, MN

Patriot Bank Minnesota was a small locally owned bank that had been in business since 1998.

Bank Failure #7 – BankEast, Knoxville, TN

BankEast was one of two banks closed in Tennessee this week.  BankEast had been in business since 1968 but recklessly expanded lending during the real estate bubble.

Related posts:

1. Buyers For Failed Banks Hard To Find As FDIC Loses $1.8 Billion On 7 Bank Closings
2. FDIC Forecasts $19 Billion In Losses On Banking Failures – Why The Losses Will Be Five Times Larger
3. Four Banks Closed In Georgia, Florida and Colorado – Losses Now Total $7 Billion

Tennessee’s luck came to an abrupt halt today with the closing of two banks – Tennessee Commerce Bank of Franklin, TN and BankEast of Knoxville, TN.  The combined assets of the two failed banks weighed in at a substantial $1.5 billion and the failure of Tennessee Commerce was the first billion dollar bank failure of 2012.

BankEast was shuttered today by state regulators who appointed the FDIC as receiver.  In order to protect depositors, the FDIC sold the failed bank to U.S. Bank N.A., Cincinnati, Ohio, which assumed all deposits of BankEast.

BankEast had 10 branches which will all reopen on Monday as branches of U.S. Bank and depositors will continue to have full FDIC insurance coverage on all deposits up to applicable limits.  Over the weekend, depositors of BankEast will continue to have full access to their money through the use of checking, ATM and debit cards.

Founded in 1968, BankEast seemed to follow a slow and conservative growth path and total assets of the Bank amounted to only $50 million in 2003.  Starting in 2004, lending and asset growth began to grow exponentially and by 2008, total assets expanded to $368 million under an aggressive loan growth policy.  The apparent change in business strategy seemed to coincide with the purchase of both BankEast and Curtis Mortgage Company by bank holding company BankEast Corporation in 2004.

Starting in 2009, the aggressive lending policies of BankEast resulted in a rapid increase in loan defaults as the real estate bubble collapsed.  In April 2009, the Federal Reserve and BankEast entered into a written agreement which addressed numerous deficiencies in the Bank’s operations and financial management.  BankEast was unable to properly address deficiencies or raise additional capital and regulators were forced to close the Bank.

At September 30, 2011, BankEast had total assets of $272.6 million and total deposits of $268.8 million.  In addition to assuming all deposits, U.S. Bank also agreed to purchase all assets of failed BankEast.

The loss to the FDIC Deposit Insurance Fund resulting from the failure of BankEast is $75.6 million.  BankEast is the 7th banking failure of the year and the second in Tennessee.

Related posts:

1. Appalachian Community Bank, McCaysville, Georgia, Closed By Regulators
2. The First State Bank, Stockbridge, GA, Closed By Regulators
3. First Guaranty Bank and Trust Co of Jacksonville, FL, Closed By Regulators

Patriot Bank Minnesota, Forest Lake, Minnesota, was closed by state regulators who appointed the FDIC as receiver.  The failed bank was sold by the FDIC to First Resource Bank, Savage, MN, which will assume all deposits of Patriot Bank.

Patriot Bank had been in business since 1998.  According to the Bank’s website, the Bank was founded under the premise that “customer service is a part of community banking which will never go out of style”.

Patriot Bank came under scrutiny by regulators well over a year ago when the Bank signed a consent order on September 29, 2010 relating to charges of “unsafe or unsound banking practices”.  Patriot Bank was cited for a litany of operational and financial deficiencies and ordered to raise additional capital.  Unable to comply with the terms of the consent order, regulators had no choice but to close Patriot Bank.

All three branches of Patriot Bank will reopen on Saturday as branches of First Resource Bank and depositors will maintain their FDIC deposit insurance up to applicable limits.  Customers of Patriot Bank will also have full access to their money over the weekend through the use of checks, ATM and debit cards.

At September 30, 2011, Patriot Bank had total assets of $111.3 million and total deposits of $108.3 million.  In addition to assuming Patriot Bank deposits, First Resource Bank will purchase all of the assets of the failed bank.

The asset pool acquired by First Resource will be protected from a percentage of potential future losses through a loss-share agreement between the FDIC and First Resource.  The loss-share transaction will cover $79.4 million of the failed banking assets acquired by First Resource.  According to the FDIC, the use of loss-share transactions reduces ultimate losses by keeping the failed banking assets in the private sector and by minimizing disruption to loan customers.

The estimate loss to the FDIC Deposit Insurance Fund for the failure of Patriot Bank is $32.6 million.  Patriot Bank Minnesota is the sixth bank failure of the year and the first in Minnesota.

Related posts:

1. Patriot Bank of Georgia Closed By Regulators
2. Rosemount National Bank of Minnesota Closed By Regulators
3. Community Security Bank of Minnesota Closed By Regulators

The FDIC, acting as receiver, sold the failed Bank to Republic Bank & Trust Company, Louisville, Kentucky, which will assume all deposits of failed Tennessee Commerce.

Tennessee Commerce Bancorp, Inc., was started in 2000 with only $9.3 million in assets but quickly expanded its assets by focusing on business lending and aggressively expanding its loan portfolio.

According to information released by Tennessee Commerce, through a combination of “strong leadership and decisive vision”, the Bank was able to quickly surpass the billion dollar mark in assets.

Tennessee Commerce Bank (assets in yellow) - courtesy faqs.org

From a standing start in 2000, the Bank’s total assets exploded to almost $1.5 billion by 2010.  According to Tennessee Commerce, they did not compete based on traditional banking standards as evidenced by their policy of operating from only one location and refusing to open a branch network.

Tennessee Commerce seemed to evade regulatory scrutiny until an examination by the FDIC in 2011 revealed deep problems which were disclosed in a Bank press release dated November 1, 2011.

FRANKLIN, Tenn., Nov. 1, 2011 (GLOBE NEWSWIRE) — Tennessee Commerce Bancorp, Inc. (Nasdaq:TNCC), the bank holding company of Tennessee Commerce Bank (the “Bank”), today reported financial results for the nine months ended September 30, 2011. The Company reported a net loss of $120.0 million for the nine months ended September 30, 2011 or $9.83 per diluted common share.

The net loss for the nine months ended September 30, 2011 was primarily driven by a $92.6 million charge to provision expense during the third quarter. The increased provision expense is in large part due to preliminary loan losses of $76.3 million combined with $12.1 million of specific reserves on classified loans identified by examiners from the Federal Deposit Insurance Corporation (the “FDIC”) and the Tennessee Department of Financial Institutions during their regulatory joint examination started on September 26, 2011, which is still in progress. The provision charges made in the third quarter relate to events that occurred in the second quarter. As a result, we will be restating our second quarter results and amending our second quarter form 10-Q and Bank Call Report to reflect these charges and until such restatement is complete, such second quarter financial statements should not be relied upon.

As previously disclosed and as a result of the Bank entering into a written agreement with the FDIC during the second quarter, the Bank has to achieve and maintain a tier 1 leverage capital ratio of 8.50%, a tier 1 risk based capital ratio of 10.00% and a total risk based capital ratio of 11.50% by no later than December 31, 2011. As a result of the reported net loss through the nine months ended September 30, 2011 the Bank has a tier 1 leverage ratio of 0.95%, a tier 1 risk based capital ratio of 1.17% and a total risk based capital ratio of 2.34%. The holding company had a tier 1 leverage ratio of 0.42%, a tier 1 risk based capital ratio of 0.52% and a total risk based ratio of 1.04%. For purposes of the Prompt Corrective Action (“PCA”) provisions of the Federal Deposit Insurance Act (the “FDIA”), the Bank will be classified as critically undercapitalized upon the filing of the September 30, 2011 Call Report. Critically undercapitalized is the lowest category under the PCA spectrum resulting in mandatory actions by the regulators and mandatory restrictions on the Bank’s operations. Under the FDIA, depository institutions that are “critically undercapitalized” can be placed into conservatorship or receivership within 90 days of becoming critically undercapitalized, unless they raise sufficient capital, merge with another financial institution or the FDIC determines and documents that “other action” would better achieve the purposes of the PCA capital requirements (12 U.S.C. Section 1831o).

Needless to say, Tennessee Commerce was unable to attract additional capital or sell itself to another institution and regulators were forced to close the Bank.

Tennessee Commerce Bancorp, Inc. operated as the bank holding company for Tennessee Commerce Bank.  The company’s stock, which once traded as high as $30, closed today at 16 cents, effectively wiping out the Bank’s shareholders.

Tennessee Commerce - courtesy yahoo.com

At September 30, 2011, Tennessee Commerce Bank had total assets of $1.185 billion and total deposits of $1.156 billion.

The asset quality of Tennessee Commerce Bank was so horrendous that the acquiring bank, Republic Bank & Trust, agreed to purchase only $203.9 million of the failed bank’s assets.  Typically, all of a failed bank’s assets are purchased by the acquiring bank since the FDIC minimizes losses on the asset pool acquired through the use of a loss-share transaction. 

If the failed bank assets have little recovery value or do not fit the asset model criteria of the acquiring bank, the FDIC is forced to retain the failed bank assets that cannot be sold.  The FDIC, already holding a mountain of $30 billion in failed bank assets that could not be sold, will now be adding to their holdings $854 million in bad assets from Tennessee Commerce Bank.

The loss to the FDIC Deposit Insurance Fund for the failure of Tennessee Commerce is estimated at $416.8 million or 35% of total assets.  Tennessee Commerce is the 5th banking failure of the year and the first in Tennessee since 2002.

Related posts:

1. Superior Bank of Alabama Becomes First Billion Dollar Bank Failure of 2011
2. First Chicago Bank & Trust Closed – Illinois’s Billion Dollar Bank Failure
3. The Bank of Commerce, Wood Dale, IL, Becomes 26th Banking Failure of 2011

First Guaranty Band and Trust was a family owned bank with a 62 year history.  Inexplicably, according to the Bank’s website “First Guaranty Bank’s 62-year history is built on time-tested, sound financial decisions.  We are highly capitalized, profitable, and FDIC insured”.  The latest reported numbers on First Guaranty show that the Bank had an astronomical troubled asset ratio of 522%.  Bank failure is almost a certainty once a bank’s troubled asset ratio exceeds 100%.

First Guaranty increased its lending rapidly during the real estate boom, growing its asset from $282 million in 2004 to $498 million in 2007.  First Guaranty signed a consent order with regulators in August 2010 for operating in an unsafe and unsound manner.

First Guaranty - courtesy faqs.org

All deposits, excluding certain brokered deposits, were transferred to CenterState Bank.  All eight branches of failed First Guaranty will reopen as branches of CenterState Bank.  Customers of First Guaranty will continue to have full access to their money over the weekend through the use of checking accounts, ATM and debit cards.

At September 30, 2011 First Guaranty had total assets of $377.9 million and total deposits of $349.5 million.  In addition to assuming the deposits of First Guaranty, CenterState Bank also agreed to purchase all assets of the failed bank, subject to a loss-share transaction with the FDIC.  Under the terms of the loss-share agreement, the FDIC agrees to cover a substantial portion of losses on the assets purchased by the acquiring bank.

The loss-share transaction will cover $292.9 million (77.5%) of the failed bank’s asset pool purchased by CenterState Bank.  According to the FDIC, the use of loss-share transactions minimizes losses by keeping assets in the private sector and also minimizes disruptions to loan customers.

CenterState Bank has now acquired 6 failed banks in Florida, including Central Florida State Bank on January 20, 2012, which had $79 million in assets.  The four failed banks acquired by CenterState Bank prior to this year are Ocala National Bank, Olde Cypress Community Bank, Community National Bank at Bartow and Independent National Bank.

CenterState Bank is owned by publicly traded parent company CenterState Banks Inc. which is a regional multi bank holding company doing business through over 40 offices. For the year ending December 31, 2011, CenterState Banks Inc. lost $5.5 million but has a capitalization level of almost 11%, which is above average.

The loss to the FDIC Deposit Insurance Fund for the failure of First Guaranty is estimated at $82.0 million.  First Guaranty is the fourth banking failure of the year and the second in Florida.

Related posts:

1. First Bank of Jacksonville, Florida, Closed By Regulators
2. Independent National Bank, Ocala, Florida, Closed By Regulators
3. Community National Bank of Bartow Florida Closed By Regulators

The December enforcement actions included 9 consent orders, 19 civil money penalties, 4 prompt corrective actions, 3 voluntary terminations of insurance, 12 removal and prohibition orders and 10 orders terminating previous consent orders and cease and desist orders.

A consent order is a formal enforcement action issued by regulators to a bank.  The bank is required by the consent order to stop unsafe or unsound practices.  Once a bank materially complies with the consent order, the regulatory order may be terminated.

Far more serious than a consent order is a prompt corrective action notice (PCA) under which a bank is required to take immediate action to return to “minimum capital standards”.  Generally, a bank that is issued a PCA is considered to be operating in “an unsafe and unsound condition”.  An institution receiving a prompt corrective action is considered to be undercapitalized, significantly undercapitalized or critically undercapitalized.

It is highly likely that banks receiving a consent order or prompt corrective action are on the FDIC confidential problem bank list.  Statistics from the FDIC’s last Quarterly Banking Profile show that almost 12% of all banks are on the Problem Bank List.  The number of banks currently considered to be problem banks is 844 at September 30, 2011, compared to 865 in the previous quarter.

The banks on the Problem Bank List have weak capital positions and operational deficiencies which triggered regulatory actions.

Listed below are the enforcement actions taken by the FDIC for December 2011.

FINAL ORDERS ISSUED PURSUANT TO SECTION 8(b), 12 U.S.C. § 1818(b)
(Cease-and-Desist)

Chambers Bank, Danville, AR; FDIC-11-597b; Issued 12/21/11 – PDF

Colorado East Bank & Trust, Lamar, CO; FDIC-11-522b; Issued 12/1/11 – PDF

First Bank of Delaware, Wilmington, DE; FDIC-11-669b; Issued 12/29/11 – PDF

SouthernTrust Bank, Goreville, IL; FDIC-11-507b; Issued 12/13/11 – PDF

Republic Bank & Trust Company, Louisville, KY; FDIC-10-079b; FDIC-10-216k; in the amount of $900,000.00; Issued 12/8/11 – PDF

United Bank and Trust Company, Versailles, KY; FDIC-11-609b; Issued 12/16/11 – PDF

American Gateway Bank, Port Allen, LA; FDIC-11-607b; Issued 12/21/11 – PDF

Woodland Bank, Deer River, MN; FDIC-11-516b; Issued 12/19/11 – PDF

Pacific International Bank, Seattle, WA; FDIC-11-670b; Issued 12/2/11 – PDF

FINAL ORDERS ISSUED PURSUANT TO SECTION 8(e), 12 U.S.C. § 1818(e)
(Removal and Prohibition Orders)

Premier Business Bank, Los Angeles, CA; FDIC-11-600e; FDIC-11-601k; against David Y. Lee in the amount of $75,000.00; Issued 12/19/11 – PDF

Citizens Bank and Trust of West Georgia, Carrollton, GA; FDIC-10-701e; FDIC-10-702k; against Connie F. Greene in the amount of $10,000.00; Issued 12/20/11 – PDF

Appalachian Community Bank, Ellijay, GA; FDIC-11-579e; against Tracy R. Newton; Issued 12/20/11 – PDF

Hancock Bank, Gulfport, MS; FDIC-10-851e; against Lisa A. Brooks; Issued 12/20/11 – PDF

Bank of Dwight, Dwight, IL; NKA Bank of Pontiac, Pontiac, IL; FDIC-10-442e; against Kelly D. Klingler; Issued 12/20/11 – PDF

Silver State Bank, Henderson, NV; FDIC-11-605e; FDIC-11-606k; against Gary A. Gardner in the amount of $1,000.00; Issued 12/20/11 – PDF

Branch Banking and Trust Company, Winston-Salem, NC; FDIC-09-241e; against Bonnie Jean Bain; Issued 12/20/11 – PDF

Metropolitan Savings Bank, Pittsburgh, PA; FDIC-11-293e; against Donna Shebetich; Issued 12/6/11 – PDF

South Carolina Community Bank, Columbia, SC; FDIC-11-030e; against Torlando Ramont Childress; Issued 12/6/11 – PDF

Community South Bank, Parsons, TN; FDIC-11-050e; against Jeffrey L. Phillips; Issued 12/20/11 – PDF

Commercial State Bank, Andrews, TX; FDIC-10-665e; against Richard Shay Wallace; Issued 12/20/11 – PDF

Sterling Bank, Houston, TX; FDIC-09-360e; against Kim L. Arnold; Issued 12/6/11 – PDF

FINAL ORDERS ISSUED PURSUANT TO SECTION 8(i), 12 U.S.C. § 1818(i)
(Civil Money Penalties)

Premier Business Bank, Los Angeles, CA; FDIC-11-600e; FDIC-11-601k; Order of Removal From Office and Prohibition From Further Participation and Order to Pay against David Y. Lee in the amount of $75,000.00; Issued 12/19/11 – PDF

Bank of the West, San Francisco CA; FDIC-11-662k; in the amount of $135,000.00; Issued 12/22/11 – PDF

Premier Community Bank of the Emerald Coast, Crestview, FL; FDIC-11-525k; in the amount of $5,000.00; Issued 12/5/11 – PDF

Citizens Bank and Trust of West Georgia, Carrollton, GA; FDIC-10-701e; FDIC-10-702k; Order of Prohibition From Further Participation and Order to Pay against Connie F. Greene in the amount of $10,000.00; Issued 12/20/11 – PDF

FirstSecure Bank and Trust Co., Palos Hills, IL; FDIC-11-172k; in the amount of $3,000.00; Issued 12/30/11 – PDF

The Peoples Bank, Pratt, KS; FDIC-11-672k; in the amount of $3,270.00; Issued 12/27/11 – PDF

Republic Bank & Trust Company, Louisville, KY; FDIC-10-079b; FDIC-10-216k; Consent Order; Order to Pay; and Order Terminating Order to Cease and Desist in the amount of $900,000.00; Issued 12/8/11 – PDF

East Boston Savings Bank, Boston, MA; FDIC-11-558k; in the amount of $35,000.00; Issued 12/13/11 – PDF

First Independence Bank, Detroit, MI; FDIC-11-453k; in the amount of $4,000.00; Issued 12/7/11 – PDF

Silver State Bank, Henderson, NV; FDIC-11-605e; FDIC-11-606k; Order of Prohibition From Further Participation and Order to Pay against Gary A. Gardner in the amount of $1,000.00; Issued 12/20/11 – PDF

First Trust and Savings Bank, Oneida, TN; FDIC-11-282k; in the amount of $1,800.00; Issued 12/21/11 – PDF

Commercial State Bank, Andrews, TX; FDIC-11-619k; against Richard Shay Wallace in the amount of $5,000.00; Issued 12/20/11 – PDF

Triumph Savings Bank, SSB, Dallas, TX; FDIC-11-656k; in the amount of $9,825.00; Issued 12/2/11 – PDF

United Central Bank, Garland, TX; FDIC-11-519k; in the amount of $9,850.00; Issued 12/5/11 – PDF

Justin State Bank, Justin, TX; FDIC-11-117k; in the amount of $16,500.00; Issued 12/2/11 – PDF

The Village Bank, Saint George, UT; FDIC-11-604k; in the amount of $3,960.00; Issued 12/21/11 – PDF

Portage County Bank, Almond, WI; FDIC-11-231k; in the amount of $1,200.00; Issued 12/30/11 – PDF

Cleveland State Bank, Cleveland, WI; FDIC-11-162k; in the amount of $5,000.00; Issued 12/30/11 – PDF

First Citizens State Bank, Whitewater, WI; FDIC-11-128k; in the amount of $800.00; Issued 12/30/11 – PDF

FINAL ORDERS ISSUED PURSUANT TO SECTION 38, 12 U.S.C. § 1831o
(Prompt Corrective Actions)

Mile High Banks, Longmont, CO; FDIC-11-584PCAS; Issued 12/1/11 – PDF

The First State Bank, Stockbridge, GA; FDIC-11-688PCAS; Issued 12/22/11 – PDF

Waukegan Savings Bank, Waukegan, IL; FDIC-11-610PCAS; Issued 12/14/11 – PDF

Tennessee Commerce Bank, Franklin, TN; FDIC-11-618PCAS; Issued 11/2/11 – PDF

FINAL ORDERS ISSUED PURSUANT TO SECTION 8(p), 12 U.S.C. § 1818(p)
(Termination of Insurance)

Fireside Bank, Pleasanton, CA; FDIC-11-599p; Issued 12/8/11 – PDF

First Investors Federal Savings Bank, Edison, NJ; FDIC-11-639p; Issued 12/29/11 – PDF

Greystone Bank, Raleigh, NC; FDIC-11-564p; Issued 12/28/11 – PDF

TERMINATIONS

Orders Terminating Consent Orders and Cease and Desist Orders

First Standard Bank, Los Angeles, CA; Now Known As Open Bank, Los Angeles, CA; FDIC-07-273b; Issued 12/29/11 – PDF

First Standard Bank, Los Angeles, CA; Now Known As Open Bank, Los Angeles, CA; FDIC-09-349b; Issued 12/29/11 – PDF

Old Harbor Bank, Clearwater, FL; FDIC-10-463b; Issued 12/9/11 – PDF

Premier Community Bank of the Emerald Coast, Crestview, FL; FDIC-10-648b; Issued 12/22/11 – PDF

AztecAmerica Bank, Berwyn, IL; FDIC-10-129b; Issued 12/30/11 – PDF

First Security Bank & Trust Company, Norton, KS; FDIC-09-616b; Issued 12/5/11 – PDF

United Bank and Trust Company, Versailles, KY; FDIC-09-485b; Issued 12/16/11 – PDF

Citizens Bank & Trust Company, Covington, LA; FDIC-09-503b; Issued 12/14/11 – PDF

Citizens State Bank, New Baltimore, MI; FDIC-09-391b; Issued 12/8/11 – PDF

West One Bank, Kalispell, MO; FDIC-10-592b; Issued 12/16/11 – PDF

Related posts:

1. FDIC Issues 76 December Enforcement Actions On Problem Banks
2. FDIC Issues 72 Enforcement Actions Against Problem Banks In November
3. FDIC Issues October Enforcement Actions On Problem Banks

Courtesy - joemiller.us

David Stockman, former budget director in the Reagan administration, argues persuasively that the fundamental problems of the financial system are worse than in 2008.

The “too big to fail” banks have become bigger, politicians have been bought and paid for, an entitled class of Wall Street financiers are being served by government policies and a massive amount of  economic resources are being allocated into financial speculation at the expense of society as a whole.

David Stockman on Crony Capitalism from BillMoyers.com on Vimeo.

The full interview with David Stockman can be accessed through the above video link.  Selected commentary from his interview follows.  Most Americans know that something is fundamentally flawed with the current financial and political systems and are likely to agree with David Stockman’s analysis.

Moyers & Company explores the tight connection between Wall Street and the White House with David Stockman, former budget director for President Reagan.

Now a businessman who says he was “taken to the woodshed” for telling the truth about the administration’s tax policies, Stockman speaks candidly with Bill Moyers about how money dominates politics, distorting free markets and endangering democracy. “As a result,” Stockman says, “we have neither capitalism nor democracy. We have crony capitalism.”

Stockman shares details on how the courtship of politics and high finance have turned our economy into a private club that rewards the super-rich and corporations, leaving average Americans wondering how it could happen and who’s really in charge.

“We now have an entitled class of Wall Street financiers and of corporate CEOs who believe the government is there to do… whatever it takes in order to keep the game going and their stock price moving upward,” Stockman tells Moyers.

DAVID STOCKMAN: A massive amount of resources are being devoted, being allocated or being channeled into pure financial speculation that has no gain to society as a whole, has no real economic contribution to the process by which GNP is created, GDP is created and growth occurs.

By 2007 40 percent of all the profits in the American economy were coming from finance companies. 40 percent. Historically it was 15 percent.

So the financialization means that as we attracted more and more resources and capital, and we made speculation easier and easier, and we funded it with almost free overnight money, managed and manipulated by the Fed, that’s how the economy got financialized. But that is a casino. Casinos — they’re, you know, places for people to go if they want to speculate and wager. But they’re not part of a healthy, constructive economy.

And we need not only a reinstitution of Glass-Steagall, but even a more serious limitation on banks. And what I mean by that is, that if we want to have a way for, you know, average Americans to save money without taking big risks and not be worried about the failure of their banking institution, then there can be some narrow banks who do nothing except take deposits, make long-term loans or short-term loans of a standard, business variety without trading anything, without getting into all of these exotic derivative instruments, without putting huge leverage on their balance sheet.

And we need to say simply, that if you’re a bank and you want to have deposit insurance, which ultimately, you know, is backed up by the taxpayer — if you’re a bank and you want to have access to the so-called “discount window” of the Fed, the emergency lending, then you can’t be in trading at all.

Now, on the other hand, if they want to be a hedge fund, then they’ve got to raise risk capital and they have to take the consequences of their risks, both to the good side and the bad side. And until we really approach that issue, and dismantle these giant, multi-trillion dollar balance sheet banks, and separate retail and deposit insured banking from just financial companies, we’re going to have recurring bouts of what we had in 2008.

And they haven’t even begun to address that, and it’s so disappointing to see that the Obama administration, which in theory should’ve had more perspective on this than a Republican administration under Bush, to see that one, they appointed in the key positions the same people who brought the problem in: Geithner and Summers and all of those, and secondly, that Obama did nothing about it.

BILL MOYERS: What do you mean by the free money that banks are using overnight?

Well, by that we mean when the Fed, the Federal Reserve sets the so-called federal funds rate at ten basis points, where it is today, that more or less guarantees banks can go into the Fed window, the discount window, and borrow at ten basis points.

And then you take that money and you buy a government bond that is yielding two percent or three percent. Or buy some corporate bonds that are yielding five percent. Or if you want to really get aggressive, buy some Australian dollars that have been going up. Or buy some cotton futures. And this is really what has been going on in our markets.

The cheap funding, which is guaranteed by the Fed, the investment of that cheap funding into speculative assets and then pocketing the spread. And you can make huge amounts of money as long as the music doesn’t stop. And when the music stops then all of a sudden, the cheap, overnight money dries up. This is what’s happening in Europe today. This is what happened in 2008.

And then people are stuck with all these risky assets, and they can’t fund them. They owe cash to the people they borrowed overnight from or on a weekly basis. That’s what creates the so-called contagion. That’s what creates the downward spiral. Now, unless we let those burn out, it’ll be done over and over. In other words, if, you know, if a lesson isn’t learned, then the error will be repeated over and over.

BILL MOYERS: The Bush administration came to the rescue of some of the county’s largest financial institutions, to the tune of 700 billion tax-payer dollars.

DAVID STOCKMAN: We elect a new government because the public said, you know, “We’re scared. We want a change.” And who did we get? We got Larry Summers. We got the same guy who had been one of the original architects of the policy in the 1990s, the financialization policy, the too big to fail policy.

Who else did we get? We got Geithner as Secretary of the Treasury. He had been at the Fed in New York in October 2008 bailing out everybody in sight. General Electric got bailed out. Morgan Stanley, Goldman Sachs, all of the banks got bailed out, and the architect of that bailout then becomes the Secretary of the Treasury. So it’s another signal to the financial markets that nothing ever changes. The cronies of capitalism are in charge of policy.

The Congress is owned lock, stock and barrel by one after another, after another special interest. And they logically say how can we expect, you know, anything good to come out of this kind of process that seems to be getting worse. So how do we turn that around? I think it’s going to take, unfortunately a real crisis before maybe the decks can be cleared.

BILL MOYERS: But on the basis of the record, the lessons of the past. The experience you have just recounted and are writing about. Do you see any early signs that we might turn the ship from the iceberg?

DAVID STOCKMAN: No. I think we’ve learned no lessons. We really have not restructured our financial system. The big banks that existed then that were too big to fail are even bigger now. The top six banks then had seven trillion of assets, now they have nine or ten trillion.

Rather than go to the fundamentals which have been totally neglected– we’ve simply kind of papered over the current system and continued the game of having the Federal Reserve and the Treasury if necessary prop up all of this leverage and speculation, which isn’t helping the economy.

And when we talk about zero interest rates. That’s not helping Main Street. Our problem in this economy is not our interest rates are too high. The zero interest rates are just more fuel for leverage speculation for what’s called the carry trade and that is causing windfall benefits to the few but it’s leaving the fundamental problems of our economy in worse shape than they’ve ever been.

Related posts:

1. Will “Too Big To Fail” Banks Crash The Financial System?
2. Too Big To Fail Casino Banks Make $518 Billion Bet On PIIGS Sovereign Debt
3. Who Will Rescue Collapsing European Banks When Banks Are Bigger Than Countries?

The complete list of 2011 banking failures is listed below followed by some interesting facts on last year’s banking failures.

Interesting Facts On The Banking Failures of 2011

1.  The total losses to the FDIC Deposit Insurance Fund for 2011 bank failures was approximately $7.2 billion.  Losses on bank failures since 2008 have totaled $86.3 billion, virtually wiping out the deposit insurance fund which currently insures $6.8 trillion.

2.  The FDIC was unable to find buyers for two failed banks, Enterprise Banking Company, Georgia, and Firs Tier Bank, Colorado.  The two failed banks had total assets of $878 million which the FDIC was forced to retain for later disposal.  The FDIC currently has almost $30 billion in failed bank assets that they are trying to dispose of.

3.  Georgia and Florida accounted for almost 40% of last years banking failures.  Georgia had 23 bank failures followed by Florida with 13.

4.  The 92 banks that failed had total assets of approximately $36 billion.  Total assets of banks that failed during the period 2008 to 2010 totaled a staggering $634 billion.

5.  The increase in bank failures required the FDIC to almost double its number of employees to 8,129 from only 4,532 in 2007.

6.  There were 92 banking failures during 2011 compared to 157 in 2010,  140 in 2009 and 25 in 2008.

Bank Failures - courtesy The Wall Street Journal

7.  Seven failed banks had total assets of over $1 billion at the time of closing.  The largest bank failure of 2011 was Superior Bank of Alabama which had $3.0 billion in total assets.

8.  Losses as a percentage of total failed bank assets was 20%.  Prior to failing, many banks carried these assets on the books far above their fair market value.

9.  Bank failures occurred in 28 different states.  Nevada, which has seen one of the greatest drops in real estate values of any state since 2008, had only one bank failure in 2011.

10.  Plunging real estate values and foreclosures have fueled the banking crisis.  During 2011, there was a staggering 2.7 million foreclosure filings.

Related posts:

1. Four Bank Failures In Four States Brings Year’s Total To 80
2. 2010 Banking Failures By State – Why 2011 Should Look The Same
3. 2011 Bank Failures Decline For First Time In Three Years