bank run blog

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

The Associated Press is reporting on efforts by Connecticut hedge fund managers to stop a run on several of their funds favored by schools and colleges :

“An investment fund that serves about 1,000 colleges and private schools partially froze withdrawals this week amid the credit crunch, forcing colleges to develop new plans to pay bills.

Wachovia Bank, trustee for the $9.3 billion Short Term Fund offered by Commonfund, said Monday it was terminating the fund and establishing a process to ensure the orderly liquidation and distribution of the fund’s assets. Wachovia initially told investors Monday that they could only withdraw 10 percent of their money, but that figure was increased to 34 percent by Wednesday and 37 percent by Thursday.

Commonfund, a Wilton, Conn.-based nonprofit that advises colleges and schools on money management, also said Thursday it put a 30 percent limit on withdrawals from its Intermediate Term Fund after investors in the Short Term Fund tried to withdraw money from that fund, said Keith Luke, managing director of Commonfund.

About 200 colleges and universities have about $1 billion in the intermediate fund, which is used for long-term needs, such as equipment plant purchases, he said.”

full story

Despite scant reporting, there is obviously a run on these products, and other prominent hedge funds have had to freeze withdrawals or take other emergency actions this week. According to Bloomberg :

“Commonfund’s move reflects rising concern among money managers that panicked investors can cripple a fund in a matter of days. Reserve Primary Fund, a $62.5 billion money-market mutual fund, and Putnam Prime Money Market Fund, a $12.3 billion cash account for institutions, were frozen after investors rushed to avoid potential losses.


‘It’s unheard of to shut down a fund if investors aren’t already taking their money out,’ Peter Crane, president of Crane Data LLC, a money-fund research firm in Westborough, Massachusetts, said in an interview.”

full story

In a development that underscores the widespread lack of confidence in the solvency of the US banking system, even non-customers are making panicky withdrawals. According to the Associated Press :

“Times have been tough for banks everywhere, but a San Diego-area Wells Fargo branch had an especially difficult day this week.

The branch in La Mesa was robbed twice on Monday — by two different robbers.

The men the FBI call “The Hard Hat Bandit” and “The Chatty Bandit” each robbed the branch about three hours apart, authorities said.

FBI spokeswoman April Langwell says “The Chatty Bandit” walked in to the branch about 3 p.m., showed a pistol and demanded cash.

Less than three hours later “The Hard Hat Bandit” walked in and presented a note demanding money.

The FBI believes “The Chatty Bandit” has held up nine banks since March and “The Hard Hat Bandit” has struck three times this week. Neither has been arrested.”

Associated Press : San Diego-area bank hit by 2 robbers on same day