On October 4th, I wrote that the FDIC had laid out over $55 Billion in insurance funds to cover bank loses, and that I felt the FDIC would go red in January or February of 2010, just based on the math and the rate of bank failures, coupled with the number of banks that were still in trouble. My concern were the bigger banks still in trouble like Citi. Last week, one of the major shareholders of Citi, Kuwait Investment Fund sold their stake in Citi. There is also a lot of money moving in the EU after the announcement that Greece is essentially bankrupt. In my October article, I personally thought that the FDIC might go red sooner than January or February, “much sooner” is what I said exactly.
Well, this just in.
Regulators have shut down banks in Florida, Arizona and Kansas, bringing to 133 the number of U.S. banks that have failed to hold up this year against the struggling economy and a cascade of loan defaults. The Federal Deposit Insurance Corp. said Friday it took over Miami-based Republic Federal Bank, with $433 million in assets and $352.7 million in deposits. A bank based in Boca Raton, Fla., 1st United Bank, agreed to assume all the deposits and $267.1 million of the assets of the failed bank. The FDIC will retain the rest for eventual sale.
In addition, the FDIC and 1st United Bank agreed to share losses on $210.4 million of Republic Federal’s loans and other assets.The FDIC also took over Valley Capital Bank, based in Mesa, Ariz., with $40.3 million in assets and $41.3 million in deposits; and SolutionsBank in Overland Park, Kans., with $511.1 million in assets and $421.3 million in deposits. Enterprise Bank & Trust, based in Clayton, Mo., agreed to assume the assets and deposits of Valley Capital, while Arvest Bank, based in Fayetteville, Ark., is buying the assets and deposits of SolutionsBank.The FDIC also agreed with Enterprise Bank to share losses on $29.8 million of Valley Capital’s assets, and agreed with Arvest Bank to share losses on $411.3 million of SolutionsBank’s assets.
The FDIC estimates the failure of Republic Federal will cost the deposit insurance fund $122.6 million; the failure of Valley Capital an estimated $7.4 million; and the failure of SolutionsBank an estimated $122.1 million. The shutdown of Republic Federal brought to 13 the number of bank failures in Florida so far this year. Failures also have been concentrated in California, Georgia and Illinois. Last week saw the failure of Ohio’s AmTrust Bank, the fourth-largest bank to fail this year, with about $12 billion in assets and $8 billion in deposits. The Cleveland-based bank’s failure is expected to cost the federal deposit insurance fund an estimated $2 billion.
As the economy has soured, with unemployment rising, home prices tumbling and loan defaults soaring, bank failures have accelerated and sapped billions out of the federal deposit insurance fund. It has fallen into the red.
Again, I will re-emphasize my recommendations. There is an ever increasing chance that the US Banking System is on the verge of collapse. All the “green shoots” talk about the economy is nothing more than a smoke screen to avoid panic. It is not real in any sense. I suspect the next move that will come right after the holidays, and I mean right after the holidays, and that is to declare the banking holiday I have written about in the past. This will be the last ditch effort to avoid a “run” on the banks. If you haven’t already done so, I urge you now to collect and keep at least 30 and preferrably 60 days of running cash in your physical possession. Might not be a bad idea to stock up on some grub too. I know this couldn’t happen at a more difficult time, with the holidays and all, but caveat emptor!