bank run blog

To regular readers our recent lack of activity may seem curious, particularly as events in the US financial sector unfold and unwind in precisely the disorderly fashion that has been foretold on this blog and in redstateupdate.net articles dating back to 2005. In fact, two recent additions to our staff have given us pause, but we should be up and running as soon as they are finished training us.



The FDIC Failed Bank page lists sixteen institutions that have been closed by regulators since the beginning of the year, the most recent being the Security Savings Bank of Henderson, Nevada, and Heritage Community Bank of Glenwood, Illinois.

The nationalization of Citibank continues at the glacial pace preferred by the preferred shareholders, with the Economist reporting Citigroup is bailed out yet again by the American government. Nouriel Roubini thinks that a speedy, decisive intervention would be more effective and actually more market-friendly, as he argues in this video with Aaron Task and Henry Blodget of Yahoo Finance.

The markets continue to explore new depths, closing Friday well below the 7140 that represents a 50 percent loss of asset value since the November 2007 peak. The Washington Post reports Dow Hits 12-Year Low; Bank Stocks Pounded.

The Obama presidency, already hijacked by the policies of the previous administration, moves inexorably toward the siege mentality that will characterize the White House as the Old Deal fizzles. According to the Associated Press, Amid Obama’s change, there’s also more of the same.

The California Department of Financial Institutions closed the doors of County Bank in Merced California today and the Federal Deposit Insurance Corporation was appointed receiver. The FDIC has arranged for the Westamerica Bank of San Rafael, California to assume the deposits of the failed bank. The FDIC said that 39 of County Bank’s locations re-opened this weekend and the remainder will open on Monday. County Bank depositors will automatically become customers of Westamerica Bank.

The FDIC advised County Bank customers;

“Over the weekend, depositors of County Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.”

The FDIC reports that County Bank had total assets of $1.7 billion and total deposits of $1.3 billion. The agency estimates that the cost to the Deposit Insurance Fund to cover lost County Bank assets and deposits will be $135 million. County Bank is the ninth bank to fail so far in 2009 and the third to fail in California this year.

See release-
FDIC : Westamerica Bank, San Rafael, California, Acquires All the Deposits of County Bank, Merced, California

The California Department of Financial Institutions closed the doors of the Alliance Bank of Culver City. The Federal Deposit Insurance Corporation has been appointed receiver. The assets of Alliance will be sold to the California Bank & Trust of San Diego. Alliance Bank locations will reopen on Monday as branches of California Bank & Trust.

The FDIC said in a release that California Bank & Trust has agreed to enter with the agency into a “loss share agreement” where the bank will share in losses on some of Alliance Bank’s asset pools. The cost of replacing insured deposits for the FDIC will be $206.0 million. Alliance Bank is the eighth bank to fail in 2009 and the second this year to fail in California.

See release-
FDIC : California Bank and Trust, San Diego, CA, Acquires All of the Deposits of Alliance Bank, Culver City, CA

The Federal Deposit Insurance Corporation announced that FirstBank Financial Services of McDonough, Georgia was closed by the Georgia Department of Banking and Finance. The FDIC took the defunct bank into receivership.

The FDIC said in a statement;

“To protect the depositors, the FDIC entered into a purchase and assumption agreement with Regions Bank, Birmingham, Alabama, to assume all of the deposits of FirstBank Financial Services.”

The FDIC said that all FirstBank locations will open as Regions Bank branches on Monday. The agency said;

“As of December 31, 2008, FirstBank had total assets of approximately $337 million and total deposits of $279 million. In addition to assuming all of the failed bank’s deposits, including those from brokers, Regions agreed to purchase approximately $17 million in assets. The FDIC will retain the remaining assets for later disposition.”

The cost to the FDIC for insuring the bank’s losses will be approximately $111 million. FirstBank is the seventh bank to fail in the past five weeks.

see release-
FDIC : Regions Bank, Birmingham, AL, Acquires All the Deposits of FirstBank Financial Services, McDonough, GA

Married couples who work in the same companies are facing the daunting prospect of company lay-offs where both spouses could lose their jobs simultaneously. The Associated Press reports;

“As layoffs mount across the country and in all sectors, couples who are co-workers are increasingly vulnerable to losing their families’ twin sources of income at once. The lack of variety in job skills can also make it difficult to bounce back, especially in a struggling industry.”

Demographics have changed over the past decades, and the vast majority of families with children have two full time working parents. Although both parents are full time workers in most modern American families, having two incomes has not been too great a buffer from stagnant wages and increased cost for necessities such as health care. These factors and Americans’ lust for consumption has led to a situation where two income families are simply making ends meet. The AP writes;

“Before the 1970s, families weathered economic downturns by sending the non-working spouse, typically wives, into the work force. But today roughly 53 percent of all married couples, and 64 percent of married couples with children under age 18, rely on two incomes, according to the U.S. Census Bureau…

In theory that should have increased financial security. Instead, couples often use the extra income to buy bigger homes, nicer cars and other luxuries, said Rick Harper, director of the University of West Florida’s Haas Center for Business Research.

‘In the 1980s, both spouses worked and the savings rate for families went from 12 and 14 percent to essentially zero,” Harper said. “In this decade, households smoothed over the rough spots by taking equity out of their homes. Now there is no equity left to take.’”

The AP adds;

“There are no statistics on the number of couples who have both lost jobs. Nearly 3 million jobs were eliminated last year alone. On Friday, the Labor Department said 11.6 million were unemployed in January.”

see story-
Associated Press : More co-worker couples losing both incomes at once