FDIC: List Of 'Problem' Banks Grows In Q3

From Huffington Post.com:

The number of banks on the Federal Deposit Insurance Corp.'s "problem" list grew over the summer, even as the industry posted solid net income and fewer loans soured.

The number of troubled banks rose to 860 in the July-September quarter from 829 in the previous quarter. That's the most since 1993, during the savings and loan crisis.

The FDIC also said banks earned $14.5 billion during the third quarter. That was a decrease from the previous quarter's result of $21.4 billion.

The FDIC said earnings fell because Bank of America Corp took a one-time hit of $10.4 billion. That was because of new limits on debit card swipe fees that retailers pay to banks.

The industry's third-quarter results were well above the $2 billion that banks earned a year earlier.

The troubled banks were smaller, on average, holding $379.2 billion in assets. That's down from $403.2 billion in the April-June quarter.

FDIC May Seek More Than $1 Billion From Failed-Bank Executives

The Federal Deposit Insurance Corp. is going after over 50 failed bank officers and directors, to collect losses caused by the financial crisis. The agency is hoping to recoup more than $1 billion from credit crisis losses.

Bloomberg.com reports:

The lawsuits were authorized during closed sessions of the FDIC board and haven’t been made public. The agency, which has shuttered 294 lenders since the start of 2008, has held off court action while conducting settlement talks with executives whose actions may have led to bank collapses, Richard Osterman, the FDIC’s acting general counsel, said in an interview.

“We’re ready to go,” Osterman said. “We could walk into court tomorrow and file the lawsuits.”

The FDIC, which reviews losses for every bank failure, has brought only one case against officers or directors tied to recent collapses -- a suit filed in July seeking $300 million in damages from four executives of IndyMac Bancorp Inc.

When a bank fails, the agency’s investigators take about 18 months to complete their autopsies, meaning most of the probes stemming from the financial crisis are ongoing, Osterman said.

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Regulatory Squabbles Threaten Financial Reform

From MarketWatch.com:

The initial confrontation before the Senate Banking Committee didn’t come from the expected parties, Sheila Bair of the Federal Deposit Insurance Corp. or Treasury Secretary Timothy Geithner. It was between Geithner deputy Neal Wolin and the committee chairman.

The issue: Would Geithner be a good-faith participant with other regulators?

The answer was Geithner would, Wolin said. Moreover, he will head the council of regulators when it meets for the first time Friday. This seemed important to Sen. Christopher Dodd, D-Conn., who noted that the infighting and lack of communication between agencies was partly responsible for the regulatory breakdown that failed to forecast and address the financial crisis.

“There has to be a change in how we operate,” Dodd told the panel.

Committee officials and Treasury Department officials told MarketWatch that Geithner wasn’t invited, while Wolin was. They also said all of the agencies have been cooperating.

FDIC Says 829 U.S. Banks Remain at Risk for Failure

According to Wallet Pop, the FDIC has 829 financial institutions – or 1/10th of the banks in this country – on their “problem” list that need to be watched for potential failure. 118 banks have already gone under this year, compared with 140 in 2009.

Around 829 of the country's 7,800 banks were on the Federal Deposit Insurance Corp.'s "problem list" at the end of June, up from 775 at the end of the first three months of the year, the Wall Street Journal reported. Already this year 118 banks have failed, well ahead of last year when 140 went under.

It's still difficult to get a loan; total loan and lease balances fell 1.3 percent from April through the end of June. Total banking assets fell 1% to $13.2 trillion during the quarter.

FDIC Chairman Sheila Bair says banks are starting to ease lending standards in some cases but warned that "lending will not pick up until businesses and consumers gain the confidence they need to hire and spend."

The FDIC also says there were 104 fewer banks in the second quarter compared with the first quarter, and for the first time in the last 38 years, no new banks were added.

Continue reading at Wallet Pop.com…

Loan Picture Improves but Troubles Remain: FDIC

For the first time in four years, loans that are 90 days or more past due have decreased instead of increased. While this is no doubt a good sign for the housing industry, it comes just days after the National Association of Realtors reported a record 27% drop home sales.

According to Reuters the Federal Deposit Insurance Corp earned $21.6 billion during the quarter largely due to banks putting away less money to cover expected loan losses.

During the first quarter, the industry earned $17.8 billion.

In other signs of improvement, the total assets of banks characterized as "problem" institutions fell during the quarter to $403 billion from $431 billion, and the FDIC's insurance fund increased by $5.5 billion during the quarter.

But there are still troubling indicators.

Loan balances continued to decline during the second quarter, with net loan and lease balances declining by 1.3 percent. Loans to small businesses and farms -- a major focus of the Obama administration -- fell by 1.8 percent during the quarter.

Bank Profits Rise, But So Do Bad Loans

Lately major financial institutions have been boasting higher profits lately to assure consumers they have rebound from the economic crisis. However, a new Federal Deposit Insurance Corp. report is asserting that although banking profits have increased, so have the number of bad loans.

Even though profits increased sharply, troubled assets continued to grow. According to the Workshop's analysis, 411 banks have a "troubled asset ratio" of more than 100, up from 389 banks at the end of December. In other words, they had more problem loans and foreclosed properties on their books than capital and loan loss reserves.

While not an official FDIC statistic, the troubled asset ratio has proven to be a strong indicator of bank stress. Of the 81 banks that have failed so far this year, nearly all had trouble asset ratios above 100, according to their latest FDIC reports.

One especially troubling fact: the FDIC reported that mortgage delinquencies hit an astounding 10.8 percent in the first quarter, up from 6.4 a year ago and just 1.2 percent three years ago. Those numbers may portend more defaults and foreclosures over the next several months.

FDIC Opposes $1.4 Billion Refund for JPMorgan

From the Associated Press:

Federal regulators are opposing a proposed $1.4 billion tax refund for JPMorgan Chase & Co.

The tax benefit has become an issue a year and a half after the Wall Street titan galloped in to buy the assets of Washington Mutual Inc. when it collapsed under bad mortgage loans and became the biggest bank ever to fail in the U.S.

The Federal Deposit Insurance Corp. seized Seattle-based Washington Mutual and sold its bank assets to JPMorgan for $1.9 billion.

JPMorgan has been involved in the bankruptcy reorganization proceeding for Washington Mutual's holding company, and had reached a compromise earlier this month with the FDIC.

Under that accord, JPMorgan agreed to turn over about $4 billion in disputed WaMu deposit accounts to Washington Mutual in return for a portion of the tax refunds expected from the fallen bank's prior operating losses.

JPMorgan would get the right to the $1.4 billion and creditors of the WaMu holding company would get the most of the remaining $2.7 billion refund.

Under economic stimulus legislation enacted late last year, money-losing companies — in this case WaMu — can use their losses to get refunds of taxes paid in the previous five years. That was an expansion from the previous two-year allowance for calculating refunds.

FDIC: Return to Profit Fails to Boost Bank Lending

From Risk.net:

Assistance from the US government has helped the country's banking industry back into profit, but the improvement hasn't been reflected in increased lending, according to the Federal Deposit Insurance Corporation (FDIC).

In its latest Quarterly Banking Profile, issued yesterday, the FDIC reports an aggregate net income for the banks it supervises of $914 million in the fourth quarter of 2009, down from $2 billion in the third quarter but still a huge rebound from the $37.3 billion loss the industry suffered in the fourth quarter of 2008.

But the report has more bad news than good. Non-current loans and leases, mainly residential mortgages, continued to rise, hitting $391.3 billion – 5.37 percent of all loans by value, the highest level ever recorded. And, the FDIC adds, the industry also reduced its coverage ratio – reserves as a fraction of non-current loans and leases – to a 28-year low of 58.1percent. In other words, the banks only managed to scrape into the black by deciding not to increase their reserves in line with their problem loan books – had they done so, it would have meant another $7.4 billion in reserves, meaning the industry would have been well into the red.

Although much of the aid to the banking industry had the explicit intention of improving the supply of credit to the wider economy, this has not yet happened. The FDIC has found: the quarter was the fourth in succession to see a drop in total assets, which fell 5.3%, the largest single-quarter drop since the FDIC was founded in 1942. Commercial and residential mortgages, and commercial and industrial loans fell hardest. This might represent a drop in demand, as well as reluctance to lend: in its most recent loan officers' survey, released last month, the Fed found that "demand from both businesses and households for all major categories of loans weakened further, on net, over the past three months".

US Bank Regulators Clash Over Private Equity Rules

From Reuters.com:

U.S. bank regulators on Thursday clashed over stringent proposed guidelines for private equity investments in failed banks, with some officials expressing concern that the tough proposals could scare away needed capital.

The heads of the Office of the Comptroller of the Currency and the Office of Thrift Supervision both aired their concerns at a board meeting of the Federal Deposit Insurance Corp, during which the board proposed the new guidelines.

FDIC Chairman Sheila Bair said the guidelines need to include strong capital requirements and other provisions to ensure the safety and soundness of the banks, but said she is open to comments on the proposal.

The FDIC plans to hold a roundtable discussion on the proposal next week, Bair said.