Showing posts with label FDIC. Show all posts
Showing posts with label FDIC. Show all posts

Someone Has A High Postage Bill. White Powder Envelopes Sent All Over The World.

12/18/2008 02:15:00 AM

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LetterSuspicious packages and envelopes are being received at all kinds of U.S. government offices around the world and here in the U.S.

Thirty six states have seen suspicious packages to National Guard facilities, forty governors offices have had suspicious white powder letters, fifteen U.S. embassies in Europe have received letters with white powder, and most have a Texas postmark. In October, Chase, the FDIC and a home loan company received similar letters with white powder, also with a Texas postmark.


  • Suspicious packages have been sent to National Guard bureaus and reserve facilities in 36 states.  An internal report from the Department of Homeland Security said 51 packages included anti-war compact discs, with one having a suspicious powder, found later to not be toxic.  All packages were postmarked from Tennessee and Oklahoma.

    In Draper, Utah at the National Guard’s headquarters, a package was received by a worker who “deemed the package suspicious because it matched the description contained in a security advisory received [Monday] from National Guard Bureau.”  The 85th Weapons of Mass Destruction Civil Support Team of the Guard was called to test the people in the mailroom at the time to make sure they weren’t exposed to any dangerous substances and to conduct tests on site.  Those field tests had negative results.  Later it was stated there was no white powder in that package according to one report, but according to several others, there was white powder in that package however, it was later found to be non-toxic.

    In recent days the 28th Division headquarters in Harrisburg, PA and another facility in Coraopolis have received suspicious mailings.  Those mailings were out of Memphis, TN.  Lt. Col. Chris Cleaver, public affairs officer for the PA National Guard said the package included a DVD, a picture of the flat at the remains of the World trade center and “other items.”
  • Fifteen U.S. embassies in Europe have also received letters containing a suspicious white substance, and tests have shown 14 of them to be harmless.  Test results from one has not yet been received.  Among the American embassies receiving the suspicious envelopes were those in Bern, Berlin, Brussels, Madrid, Oslo, Copenhagen, Stockholm, Riga, Paris, Rome, Bucharest and The Hague.  All letters were postmarked from Texas.
  • Forty governor's offices nationwide have also gotten the letters, which contain an unspecified note, that have been sent since October.  Letters have arrived in Alabama, Alaska, Arizona, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Indiana, Iowa, Kansas, Maine, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Dakota, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, Utah, Washington, Wyoming and West Virginia along with Puerto Rico and the Virgin Islands. [If I counted them correctly..]  The typewritten letters are “similar in nature” and makes some sort of threat, officials said.  All those letters were postmarked from the Dallas, Texas area, possibly San Antonio.  The FBI has declined to say if the letters are specifically addressed to each governor or written to a generic “governor’s office” address.

    In Nevada, there has been two letters received.  One was addressed to Gov. Jim Gibbon’s Las Vegas office, and the other, received the same day, was addressed to former Gov. Kenny Guinn in Carson City.  After two early tests at the Carson City Fire Department lab showed the possibility of anthrax, the FBI took the substance to a more sophisticated lab, with the third test showing the substance as harmless.  Two false-positive results also came back from the initial field tests in Vegas.  Both letters had a Texas postmark.

    In Pennsylvania, the letter bore a Dec. 8th postmark from North Texas.  Wayne Boulware, the worker who opened the letter, said the letter contained only one sentence, spelled out in capital letters:  “ARE YOU AL QAEDA?”

    In Maryland, ABC7/News Channel 8 reporter John Gonzalez learned that the substance in Annapolis was a protein additive.

    The Florida letter, interestingly enough, was addressed to former Governor Jeb Bush.

    The Alabama letter contained a “harmless food substance”, and Christopher Murphy, Alabama’s public safety director, said the letter received did not specifically target the Governor, but declined to elaborate on what it said.

    In Missouri, a chemical analysis by the state health lab found the powder appeared to be a bleached flour.  

    In Wyoming, the white powdery substance was found to be corn starch.

    In Hawaii, authorities had previous warned the governor’s office to be on the lookout for suspicious letters with a return address from San Antonio, Texas.  A clerk to the governor found a letter from San Antonio, and called security.  That letter was addressed to the current governor, Linda Lingle.  A test with a confidence rating of 98 percent indicated the substance inside the letter was cornstarch.

    The letter received by Utah did not have a post mark from Dallas, and declined to say exactly where it was from.
     
  • Additionally, in October, letters, many containing a suspicious white powder, were sent to many Chase bank offices, possibly more than 30, and two other financial institutions in several states and to the New York Times headquarters in New York. At the time, more than 45 threatening letters had been received at financial institutions in at least 11 states.  “Most of the letters contain a powder substance with a threatening communication,”  FBI spokesman Richard Kolko said.   Those letters warned “it’s payback time” according to the FBI.  FBI agent Mark White, spokesman for the FBI office in Dallas, said in October that in addition to the Chase banks, the Federal Deposit Insurance Corp. in Dallas and the U.S. Office of Thrift Supervision in nearby Irving, Texas, and the Federal Home Loan Bank in Atlanta, also received threatening letters and a white powdery substance.  

    letters102308b_500 In one of the letters, addressed to the JP Morgan Chase CEO, Jamie Dimon, threatened a series of attacks ending in an Oklahoma City-like bombing.  The writer accused Dimon of stealing WaMu, which JP Morgan recently took over.

    ABC News reported that the threat letters sent to Chase banks were all postmarked October 17 and 18, in Amarillo, Texas.letters102308_500

    The Times letter did not carry a Texas postmark and contained a different substance, according to the AP.
  • Similar scares have taken place at the Los Angeles and Salt Lake temples of The Church of Jesus Christ of Latter-day Saints and a Knights of Columbus building in Connecticut in November.  In all cases, the substance was found to be harmless.

     

    FBI spokesman in Dallas, Mark White,  has stated on the incidents that “Once these letters start showing up, they’ll keep showing up for days because some delivery of mail takes longer than others.”

    FBI spokesman Richard Kolko says, “Unfortunately this sort of hoax letter is phenomenally common.”  “In the last two years, we’ve had over 900 responses to white powder or WMD issues, and that doesn’t account for the countless numbers of incidents that don’t make it past the local police and fire departments.”

    “We get them from a variety of people,” Kolko said.  “A lot of times we find they are people in jail sending them to judges and lawyers, disgruntled citizens and kids.  It runs the gamut.  The problem is that people out of ignorance think if they send sugar or flour, ‘What can they do to me?’  Well, it’s a federal crime.  A hoax is not a joke, and they will go to jail.”

    RANT ON

    Well, there’s not going to be a rant on this one however, this is one of those new things that I will follow pretty closely.  Profiling on anonymous letters to people you have never met is something that’s not well documented, but it seems to happen quite often.  The Why? + How? = Who  on this is not adding up to me.  How this person is doing it, well USPS from possibly TX, if they aren’t using a mail drop.  Why is the question?  What happened in this person’s life to “push” them to act?  And what did this person plan on getting out of sending anonymous letters?  Personal satisfaction?  Did the person end up in a bad financial situation, lose their home, become depressed, lost “touch” a bit, and now blames the government for this persons bad fortunes? 

    Yea, I like reading mysteries…..

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Three More Banks Go Bye-Bye [Bank Death Watch]

11/21/2008 11:31:00 PM

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The first is The Community Bank in Loganville, GA, number 20 on the list for the year of banks to go bye bye.
hey were closed today by the Georgia Department of Banking and Finance and the FDIC was named receiver.  The FDIC entered into a purchase and assumption agreement with Bank of Essex, to assume all the deposits of The Community Bank. 

As of October 17, The Community Bank had total assets of $681.0 million and total deposits of $611.4 million.  Bank of Essex purchased approximately $84.4 million of The Community Bank’s assets, and did pay the FDIC a premium of $3.2 million for the right to assume the failed bank’s deposits.  The FDIC will retain the remaining assets for later disposition.

The FDIC estimates that the cost to its Deposit Insurance Fund (DIF) will be between $200 million and $240 million.  This is the third bank to be closed in GA this year.

The second and third are Downey Savings and Loan in Newport Beach, CA and PFF Bank and Trust, Pomona, CA.  These two banks are number 21 and 22.

These banks weren’t “closed down” per say, but sold in a transaction facilitated by the Office of Thrift Supervision (OTS) and the FDIC.  The banks were sold to U.S. Bank, National Association, Minneapolis, MN.  The combined 213 branches of the two banks will reopen as branches of U.S. Bank.

As of September 30, 2008, Downey Savings had total assets of $12.8 billion and total deposits of $9.7 billion.  PFF Bank had total assets of $3.7 billion and total deposits of $2.4 billion.  Besides assuming all the deposits from the two California banks, U.S. Bank will purchase virtually all their assets.

The FDIC and U.S. Bank entered into a loss share transaction.  U.S. Bank will assume the first $1.6 billion of losses on the asset pools covered under the loss share agreement, equal to the net asset position at close.  The FDIC will then share in any further losses.

The FDIC estimates that the cost of to the Deposit Insurance Fund (DIF) for Downey Savings will be $1.4 billion and $700 million for PFF Bank.  The two banks are the fourth and fifth banks to close in California this year.  The last bank to be closed, Security Pacific Bank, Los Angeles, was only two weeks ago.

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American Express Falls In Bailout Black Hole.

11/10/2008 09:35:00 PM

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1958_card This is really getting scarier and scarier by the day.....  American Express (AXP)  is the next contestant in the $700 billion, $1 billion, $1 trillion, $2 trillion Black Hole bailout. 

Delinquencies on American Express' cards have gone up as the U.S. mortgage crisis has affected they way some consumers pay their bills on time, or at all.  For the 3rdQ, AXP set aside $1.4 billion for losses, up 51% from $905 million a year ago.  As a result, net income for American Express dropped to $815 million, from $1.1 billion reported in the prior year quarter.

October 2008, marked the first month since 1993 that card companies were unable to sell bonds back by customer payments, and this effected American Express.  On October 20th, American Express  reported a 24% decline in its latest quarterly profit.  Then on October 30th, American Express announced companywide "reengineering" initiatives.  These initiatives included elimination of 10% of its worldwide workforce, approximately 7,000 jobs, reducing  compensation expenses, cutting operating costs and scaling back investment spending.  Suspended was management level salary increases for 2009 and a hiring freeze for open positions.  The company said it expected this to produce benefits of nearly $1.8 billion in 2009.

Today, American Express applied to the Federal Reserve to become a bank holding company, and was approved, waiving the normal 30 day waiting period on the application, which was submitted on November 5th.  The approval puts American Express, the nation's largest credit card company in terms of purchases, on the same footing as former investment banks Goldman Sachs Group and Morgan Stanley, which received Fed authorization to become commercial banks.

This approval makes American Express eligible for an infusion of capital from the federal government as part of the $250 billion rescue plan for the banking system and gives the company access to the Fed's discount lending window.

American Express has total consolidated assets of about $127 billion, the Fed said.  The company already owns two bank units:  American Express Centurion Bank, which operated as an industrial loan company under FDIC supervision, and American Express Bank, which was regulated by the Office of Thrift Supervision.  Each has assets of about $25 billion and controls deposits of about $7.2 billion, the Fed said.  Centurion is being converted to a bank, the Fed order said.

"In light of the unusual and exigent circumstances affecting the financial markets, ... the Board has determined that emergency conditions exist that justify expeditious action on this proposal," the Fed said in a statement.

"Qualifying as a bank holding company will provide American Express maximum flexibility and stability in this challenging economic environment," American Express said in a release.

Said the chairman and chief executive of the credit card giant, Kenneth Chenault:  "Given the continued volatility in the financial markets, we want to be best positioned to take advantage of the various programs the federal Government has introduced, or may introduce, to support US financial institutions."

"The decision to become a bank-holding company does not fundamentally change American Express' core focus on the payments industry, nor will it require any significant divestitures," said Chenault.

In the filing, American Express said that its bank units have access to the Fed's discount window and the company already had enough cash to last more than a year.

AMEX-L270 The company's stock has tumbled 54 percent this year, the fourth-biggest decline in the DJIA.   The 52 week high for the stock has been $60.00 and the 52 week low for the stock has been $20.50.  The stock closed today at $23.98, down $1.33 or 5.2%.

American Express started off as a shipping company in 1850, shipping products across the US.  Their main customers were banks and they shipped various financial instruments like stock certificates and other notes.  They began selling money orders and traveler's checks in 1882 and issued its first credit card in 1958.

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Security Pacific Bank, Los Angeles 19th Bank To Fall [Bank Death Watch]

11/07/2008 11:30:00 PM

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SecurityPacificBankBanner The bank started out as Security Pacific National Bank in 1981 and in 1992 was acquired by Bank of America.  A new Security Pacific Bank emerged in February 2005, the result of a name change by a bank formed from the merger of Network Bank USA and Golden Pacific Bank.  The new Security Pacific Bank had no relation to Bank of America or the former Security Pacific National Bank.

The bank had a significant proportion of its loan portfolio in so-called acquisition, development and construction loans made in the Greater Los Angeles area and Inland Empire, said FDIC spokesman David Barr.  The loans became delinquent as the Southern California real estate market turned sour.  The California Department of Financial Institutions (DFI) had been monitoring the bank and had ordered it to increase its capital reserves to a safe and sound level.  Efforts by the bank to do so were unsuccessful. 

Security Pacific Bank, Los Angeles, CA was closed today by the Commissioner of the California Department of Financial Institutions, and the FDIC was named receiver.  The FDIC entered into a purchase and assumption agreement with Pacific Western Bank, Los Angeles, CA to assume all of the deposits of Security Pacific.

As of October 17, 2008, Security Pacific had total assets of $561.1 million and total deposits of $450.1 million.  As of October 31, 2008 the bank had total assets of $510 million and total deposits of approximately $440 million.

Pacific Western agreed to assume all the deposits for a two percent premium.  In addition to assuming all of the failed bank's deposits, Pacific Western will purchase approximately $51.8 million of assets.  The FDIC will retain the remaining assets for later disposition.

The cost to the insurance fund is expected to total $210 million.

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Franklin Bank, 18th Bank Failure. [Bank Death Watch]

11/07/2008 06:07:00 PM

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logo-franklinbank It's Friday, and as you all know that is the day the FDIC usually shuts down banks and today was another one.  The Feds closed Texas-based community bank Franklin Bank, S.S.B., Houston, Texas, today.  Franklin was founded in 2001 to create a Texas-based community bank concentrated outside the major metropolitan areas, according to its previous website.  It was bought by Franklin Bank S.S.B., in Austin, Texas, in April 2002.

Last Sunday, Franklin said it had received proposals from parties to strengthen the capital position of its subsidiary Franklin Bank SSB.  "Consummation of anyone of proposals would restore the Bank's capital category, for regulatory purposes, to the well capitalized category," the bank said.

Franklin was closed today by the Texas Department of Savings and Mortgage Lending.  Subsequently, the FDIC was named Receiver.  No advance notice was given to the public.

Prosperity Bank of El Campo, Texas will acquire all the deposits of Franklin Bank, the FDIC announced.  All deposits have been transferred and are available immediately.

Franklin Bank's 46 offices will reopen as branches of Prosperity Bank under their normal hours, including those with Saturday hours.

fbAs of September 30, Franklin Bank had total assets of $5.1 billion and total deposits of $3.7 billion, the FDIC said.  Prosperity Bank agreed to assume all the deposits, including brokered deposits, for a premium of 1.7 percent.  In addition to assuming all of the failed bank's deposits, Prosperity will purchase approximately $850 million in assets.  The FDIC will retain the remaining assets for later disposition.

The FDIC estimates that the cost of today's transaction to its Deposit Insurance Fund will be between $1.4 billion and $1.6 billion. 

Franklin's stock (FBTX) closed today at $0.26, down 33.33% from yesterday.  Overall the return for FBTX is -93.94% YTD, -96.01% 1 Year, and -98.47% for 3 year.

fbtx Franklin Bank is the eighteenth bank to fail in the nation this year, and the first in Texas since Bank of Sierra Blanca, Sierra Blanca, Texas, on January 18, 2008.  The 18 bank failures so far this year compare with three for all of 2007 and are more than in the previous five years combined.

In an interesting side note, Lewis S. Ranieri who founded the Franklin Bank Corporation, spent the last few years warning anyone who would listen that the housing market was about to collapse.  Obviously, he didn't listen to his own words.

The Mortgage Lender "Implode-O-Meter" has an article listing a dozen outstanding law suits against Franklin Bank in June.

And back in July, 2008 Franklin Bank Corp received a notice from the NASDAQ stock market stating it no longer met listing requirements because its share prices had been below the required minimum price of $1 for 30 consecutive days.

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Freedom Bank, 17th Bank Failure. [Bank Death Watch]

11/03/2008 12:20:00 AM

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265-20081103-000407-pic-687491414.standalone.prod_affiliate.69 Freedom Bank had been operating under state and federal supervision since July 2007 when it entered into a memorandum of understanding with the FDIC and the Florida Office of Financial Regulation.  The memorandum required the bank to take corrective actions related to growth, loan administration and management of classified assets.

An order or cease and desist was issued in early September by the FDIC and the Florida Office of Financial Regulation and was made publish by the FDIC on Oct. 30th.  The bank previously had been operating under a memorandum of understanding with state and federal regulators.  The order had set a deadline for the bank to raise capital and eliminate bad loans, among other requirements. 

The bank obviously, could not do that in the timeline of the order.

From the FDIC Website:

"Freedom Bank, Bradenton, Florida, was closed today by the Commissioner of teh Florida Office of Financial Regulation, and the Federal Deposit Insurance Corporation (FDIC) was named reeiver.  To protect the depositors, the FDIC entered into a purchase and assumption agreement with Fifth Third Bank, Grand Rapids, Michigan, to assume all of the deposits of Freedom Bank.

As of October 17, 2008, Freedom Bank had total assets of $287 million and total deposits of $254 million.

The FDIC estimates the cost of the failure to its deposit-insurance fund will be between $80 million and $104 million."

Michigan based Fifth Third Bank assumed all of Freedom Bank's deposits for a premium of 1.16%.  Fifth Third will also purchase roughly $36 million of Freedom Bank's assets.  The remaining assets will be retained by the FDIC for later disposition.

Rickey McCullough, ombudsman with the FDIC stated:  "For [customers] it's transparent.  It's business as usual."  "There were no uninsured deposits in this transaction.  All the depositors were insured, even the ones over the new $250,000 limit."  All deposits were insured because they were assumed by Fifth Third Bank, McCullough said.

The bank posted a net loss of $7 million for the second quarter and had lost $14 million year-to-date.  At the end of the third quarter, Freedom Bank's losses for the year stood at $18 million.  Freedom Bank was struggling with roughly $35 million in non-performing loans.

New temporary signs had already gone up at Freedom Bank's four branches Sunday.

Freedom Bank was the 17th bank to fall this year.

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The New Improved Bank Bailout, And It Will Probably Need More Money.

10/15/2008 02:50:00 AM

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ist2_3416170_money_tree BTW, Congress is anticipating that the Treasury will need more money than the $700 billion, just FYI.

In case you weren't paying attention yesterday, President Bush made an announcement yesterday from the Rose Garden, at what's being called a historic investment in the nation's banks.  The Treasury Department will invest $250-billion of the $700-billion economic rescue plan in financial institutions.  The full text of the announcement is available on The White House's website.

"This is an essential short-term measure to assure the viability of America's banking system," Bush said.  "These measures are not designed to take over the free market but to preserve it."

Shortly afterwards, there was a joint statement released by the Treasury, Federal Reserve and the FDIC about the "voluntary" Capital Purchase Program.  This program will be available to qualifying U.S. controlled banks, savings associations, and certain bank and saving and loan holding companies engaged only in financial activities that elect to participate before 5:00 p.m. (EDT) on November 14, 2008.

The full text of that announcement is available on the Federal Reserve's website.

The TARP Capital Purchase Program

PART ONE

Basically the Feds are using most of the $700-billion to inject capital into banks by purchasing equity shares.  The minimum investment will be 1 percent of risk-weighted assets with the maximum up to $25 billion or 3 percent of risk-weighted assets, whichever is less.  The Treasury will receive preferred shares that pay a 5 percent dividend, rising to 9 percent after five years with a minimum of a three year investment.  After three years, the stock may be paid back at face value.

It will get warrants to purchase common shares, equivalent to 15 percent of its initial investment.  Dividends will be payable quarterly in arrears on February 15, May 15, August 15, and November 15 of each year and dividends on other still  can not be paid until dividends have been paid to the government.  But the Treasury said it would not exercise its right to vote those common shares.  For more explicit details, see a press released on the Treasury's website.

What is also in that part are restrictions on executive compensation of the top five executives at banks that receive the capital injections.  These include a ban on the payment of golden parachutes, repayment of any bonus based on earnings that prove to be inaccurate, and a limit of $500,000 on the tax deductibility of salaries.  You can read more about this on the Treasury's website in the above press release or on a Public Term Sheet (PDF), also available from the Treasury's website.

PART TWO

The FDIC will temporarily guarantee most new debt issued by insured banks as a part of the FDIC Act that it insures through June 30, 2009.

PART THREE

Third, the FDIC will immediately and temporarily expand government insurance to cover all non-interest bearing transaction accounts through December 31, 2009, also as a part of the FDIC Act.  These accounts are primarily used by businesses to meet payroll and other continuing expenses.

PART FOUR

And finally, the Federal Reserve will soon finalize work on a new program to serve as a buyer of last resort for commercial paper or the Commercial Paper Funding Facility (CPFF) program.  Beginning October 27, the CPFF will fund purchases of commercial paper of 3 month maturity from high-quality issuers, who have investment-grade credit ratings.

"We are pleased to announce that nine major financial institutions have already agreed to participate in both the capital purchase program and the FDIC guarantee program.  We appreciate that these healthy institutions are taking these steps to strengthen their own positions and to enhance the overall performance of the U.S. economy." - Joint Statement by Treasury, Federal Reserve, and FDIC Oct 14, 2008

THE NINE BANKS

A U.S. Treasury official declined to confirm the names of the nine banks that agreed to this program.  The Wall Street Journal however, reported Monday the following banks and amounts:

  • Bank of America (BAC), $25 billion
  • Merrill Lynch & Co. Inc (MER), $25 billion
  • JPMorgan Chase & Co. (JPM), $25 billion
  • Citigroup Inc. (C), $25 billion
  • Wells Fargo Corp (WFC), between $20 and $25 billion
  • Goldman Sachs Group (GS), $10 billion
  • Morgan Stanley (MS), $10 billion
  • Bank of New York Mellon Corp. (BK), $3 billion
  • State Street Corp. (STT), $2 billion

AND BUSH ISN'T DONE

According to a CNN Money article, Bush towards the end of yesterday, was mulling over whether to tap the second installment of its $700 billion authority to rescue the financial system as it looks set to burn quickly through the first $250 billion with its new bank recapitalization plan.

Treasury Secretary Paulson and other Bush administration officials were in discussions about whether they will need to access the next $100 billion, a Treasury official said Tuesday.  Doing this would require "merely a transmittal letter from the president to Congress," the official said.

While the Treasury received $250 billion up front, the administration must notify Congress to access the next $100 billion.  The final $350 billion, which also requires such notification, can be blocked by Congress.

President Bush sent a letter to House Speaker Nancy Pelosi, on Tuesday to certify that it's "necessary" for the Treasury secretary to use his authority to "purchase, or commit to purchase, troubled assets up to the limit of $350 billion outstanding at any one time."

House Financial Services Chairman Barney Frank said Congress might need to give the Treasury more money if its multi-pronged approach does not sufficiently quell the financial crisis.  "If it's being well-used and more is needed, then yes," Frank said when asked if the Treasury Department coudl need more than $700 billion.  

"IT WAS A TAKE IT OR TAKE IT OFFER" FOR THE NINE BANKS

What the above doesn't state about the nine major financial institutions is that they weren't given a choice by the Feds.  The New York Times in an article dated October 14th states:

The chief executives of the nine largest banks in the United States trooped into a gilded conference room at the Treasury Department at 3 p.m. on Monday.  To their astonishment, they were each handed a one-page document that said they agreed to sell shares to the government, then Treasury Secretary Paulson said they must sign it before they left.

The chairman of JPMorgan Chase, Jamie Dimon, was receptive, saying he thought the deal looked pretty good once he ran the numbers through his head.  The chairman of Wells Fargo, Richard M. Kovacevich, protested strongly that, unlike his New York rivals, his bank was not in trouble because of investments in exotic mortgages, and did not need a bailout, according to people briefed on the meeting.

But by 6:20, all nine chief executives had signed...

What happened during those three and a half hours is a story of high drama and brief conflict, followed by acquiescence by the bankers, who felt they had little choice but to go along with the Treasury plan to inject $250 billion of capital into thousands of banks - starting with theirs. [...]

"It was a take it or take it offer," said one person who was briefed on the meeting, speaking on a condition of anonymity because the discussions were private.  "Everyone knew there was only one answer."

WALL STREET

On Monday of this week the Down gained 936.42 points, more than 11 percent, its biggest one-day rally since 1933.  The S&P advanced 104.13, 11.58 percent.  It was the biggest percentage gain for the index since March 15, 1933, when it surged 16.6 percent.  The Nasdaq rose 194.71, or 11.81 percent, its 10th biggest point gain.

On Tuesday of this week the Dow dropped 76.62, or 0.82 percent.  S&P dropped 65.24 or 3.54 percent.  Nasdaq dropped 65.24 or 3.54 percent.

Today, the foreign markets are dropping like flies again and as of this posting, the Dow has not opened.

Does this look normal or good to you? 

Return as of October 15, 2008

1 Month -18.48%
6 Month -24.31%
YTD -29.81%
1 Year -33.93%
3 Year -9.49%
5 Year -5.12%
quote-web.aol.com

 

Steven Pearlstein, who won a 2008 Pultzer Prize for Commentary, wrote yesterday in the Washington Post:

"Do not confuse this moment of calm with a stock market bottom or a sign that a serious recession has been avoided.

"We are in a bear market and will be for some time.  That doesn't mea that you can't have good days or even long strings of good days -- what traders refer to as bear market rallies.  But for a bear market to become a bull market, there needs to be some evidence that corporate profits have bottomed out and are about to take off again in response to a pickup from the economy -- and at this point we're a long way from that." [..]

"Put it another way, we didn't just have a housing bubble and a corporate takeover bubble and a consumer credit bubble and a commodities bubble.  In time, those asset bubbles led to the creation of a bubble economy, with too many airplanes and restaurant seats and hotel rooms, too many office buildings and shopping centers, too many investment banks and media outlets dependent on advertising revenue from car companies producing too many cars and home builders producing too many houses.  Shrinking all that back to the right size is what the coming recession is all about.

"Nobody really knows how long or how deep this recession will be.  What we do know is that recessions that follow the collapse of asset bubbles tend to last longer than average -- and that this was the mother of all bubbles.  So it's a fair assumption that this recession will last through 2009 and well into 2010. [..]

"This thing ain't going away any time soon."

WILL IT HELP?

Time will tell, I suppose however, there are still issues that have not been addressed.

It does not address he systemic problem underlying all of these problems.  Unsustainable mortgages written on artificially high housing prices.  Without household debt relief, this will do nothing except transfer money from Main Street to Wall Street.

It does not force the financial institutions to be financially responsible.  This program takes huge risks in hopes that the banks can bail themselves out, if they can't, then the taxpayers lose.  If they can, then the Federal Government wins.

It does not address that people borrowed more than they can repay, and when the foreclose, who is the winner and loser in all of this?

It does not provide the fiscal stimulus that is necessary to get the economy going again.  Unemployment continues to rise.  Foreclosure rates continue to rise.  Inflation continues to rise.

It does not provide the change in corporate governance to prevent a repeat of the problems that caused this crisis.

It does not address the criminal behavior of some financial institutions.

It does not address any auditors on this deal.

SOCIALISM

Again, welcome to Socialism however, is it a lesser evil or a greater evil than letting the banks run free?

What American's keep screaming is why are they getting help?  Why are they losing their jobs and their homes?  It's become brutally obvious that our Government's priorities are focused solely on the financial institutions of this country, and nothing else, selling it under the guise that this will fix everything. 

Which brings up the question.  Which is the Government more responsible to?  Fixing the banks and Wall Street, bailing them out, paying their bills, ensuring they continue on intact in hopes that this will 'fix' everything.  Or helping the taxpayers to find jobs, so they don't lose their homes, to stop inflation, to help with medical bills, and to simply put food on the table.

Bankers, although the top five executives income will drop but no one else, and there are ways around that, will still have their jobs, their homes and food on the table.  They will still have their limo rides, and helicopter rides to work.  They will still have all their little corporate benefits.  They will still have their vacation homes.  They will still have their yachts, mansions, cocktail parties, art collections, etc.  What will you have when this is all over?

I give it until the end of the year until it all comes crashing down, and that's the best case scenario.

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FDIC Seizes Two More Banks, Meridian Bank and Main Street Bank

10/12/2008 07:34:00 AM

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600px-US-FDIC-Seal.svg Two banks -- one in Illinois and one in Michigan -- failed on Friday night, the FDIC said, underscoring just how much the credit crunch is hurting financial institutions.  The FDIC said that depositors in both would continue to have uninterrupted access to their money, and they would still be insured.  It estimates that the two failures will cost its insurance fund between $46 million and $53.5 million.

Main Street Bank of Northville, Mich., was closed by Michigan state officials, and the FDIC was named receiver.  Monroe Bank & Trust of Monroe, Mich., will assume all of Main Street Bank's deposits.  Main Street Bank had $98 million in total assets as of Oct. 7, and $86 million in total deposits.  Monroe has agreed to pay a premium of 1% for the failed bank's total deposits.  Main Street Bank's two offices were scheduled to reopen Saturday morning as Monroe branches.

Meridian Bank in Eldred, Ill., which had $39.18 million in total assets and $36.88 million in total deposits, was closed by Illinois state officials, and the FDIC was named receiver of the assets.  National Bank in Hillsboro, Ill., will assume all of Meridian's deposits.  National Bank will purchase about $7.55 million of Meridian's assets, and did not pay the FDIC a premium for the right to assume all of the failed bank's deposits.  The FDIC will retain the remaining assets for later disposition.  Meridian's four offices, located in the Illinois cities of Altamont, Alton, Carlyle and Eldred, will reopen as National Bank branches on their next day open for business.

For more information on what to do if you were a customer of this bank, visit the FDIC's "Failed Bank List" which is now up to 15 banks for 2008.

SOURCES:

  • FDIC
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Senate's Bailout Bill says $250K FDIC increase is only TEMPORARY and Banks DO GET a blank check!

10/01/2008 07:00:00 AM

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lender-bailout Oh wait, we aren't suppose to call it a bailout, we are suppose to call it a rescue........

And one thing to remember in all of this, The Glass-Stegall Act of 1933, separated the business of lending institutions and securities institutions.  And if the government profits from this, by purchasing assets from private companies for profit, then isn't that against the Constitution?  I mean, really.  Government takes over a financial institution, and then makes money off of it..................

The Senate is suppose to vote on their own version of the $700 billion bill today. At first glance, the Senate's version of the "Emergency Economic Stabilization (PDF)" bill seems similar to the original House's version of the "Emergency Economic Stabilization (PDF)" bill right down to the same vague definition of "Troubled Assets".

Sec. 3. Definitions

  (9) TROUBLED ASSETS. - The term "troubled assets" means -

     (A) residential or commercial mortgages any securities, obligations, or other instruments that are based on or related to such mortgages, that in each was originated or issued on or before March 14, 2008, the purchase of which the secretary determines promotes financial market stability; and

     (B) any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittla of such determination, in writing, to the appropriate committees of Congress.

So, the Secretary still has all powerful, SINGLE power to make a decision on the vague term of "troubled assets".  Consultation does not mean approval.  And if a loan was given after March 14, 2008, then the bill does not apply to that loan.

But hey, at least the Senate fixed the little error under TITLE I - Troubled Assets Relief Program, Sec. 116. Oversight and Audits. (a) COMPTROLLER GENERAL OVERSIGHT (3) REPORTING

REPORTING:  The Comptroller General shall submit reports of findings under this section, regularly and no less frequently than once every 60 days.

The bill from the House, did not have the "60" in the wording.  It simply stated "no less frequently than once every days...."

HOWEVER, everyone is talking about the increase in FDIC insurance on deposits from $100,000 to $250,000. What they aren't saying is that IT IS ONLY TEMPORARY.  IT IS NOT PERMANENT.  From the bill:

SEC. 136 FEDERAL DEPOSIT INSURANCE ACT; TEMPORARY INCREASE IN DEPOSIT INSURANCE. -

  (a)  FEDERAL DEPOSIT INSURANCE ACT; TEMPORARY INCREASE IN DEPOSIT INSURANCE. -

     (1)  INCREASED AMOUNT. - Effective only during the period beginning on the date of enactment of this Act and ending on December 31, 2009, section 11(a)(1)(E) of the Federal Deposit Insurance Act (12 U.S.C. 1821 (a)(1)(E) shall apply with "$250,000" substituted for "$100,000".

     (2) TEMPORARY INCREASE NOT TO BE CONSIDERED FOR SETTING ASSESSMENTS. - The temporary increase in the standard maximum deposit insurance amount made under paragraph (1) shall not be taken into account by the Board of Directors of the Corporation for purposes of setting assessments under section 7(b)(2) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)(2)).

     (3)  BORROWING LIMITS TEMPORARILY LIFTED. - During the period beginning on the date of this Act and ending on December 31, 2009, the Board of Directors of the Corporation may request from the Secretary, and the Secretary shall approve, a loan or loans in an amount or amounts necessary to carry out this subsection, without regard to the limitations on such borrowing under section 14(a) and 15(c) of the Federal Deposit Insurance Act (12 U.S.C. 1824(a), 1825(e)).

So here's the deal.  If you have more than $100K in a FDIC insured bank, up to $250K, yes your deposits are insured, but it ends on December 31, 2009, when it goes back to $100K.  I guess the Senate has a crystal ball enabling them to see the future that "all will be well" on January 1, 2010.

And Wall Street gets its blank check.............................

The magic number of $700 million does appear in the wording:

SEC. 115.  GRADUATED AUTHORIZATION TO PURCHASE.

  (a) AUTHORITY. - The authority of the Secretary to purchase troubled assets under this Act shall be limited as follows:

     (1)  Effective upon the date of enactment of this Act, such authority shall be limited to $250,000,000,000 outstanding at any one time.

     (2)  If at any time, the President submits to the Congress a written certification that the Secretary needs to exercise the authority under this paragraph, effective upon such submission, such authority shall be limited to $350,000,000,000 outstanding at any one time.

     (3)  If, at any time after the certification in paragraph (2) has been made, the President transmits to the Congress a written report detailing the plan of the Secretary to exercise the authority under this paragraph, unless there is enacted, within 15 calendar days of such transaction, a joint resolution described in subsection (c), effective upon the expiration of such 15-day period, such authority shall be limited to $700,000,000,000 outstanding at any one time.

Oh, and also in this bill, there are changes about getting tax credits to help small businesses and promote renewable energy, as well as an expansion of the child tax credit and help for the victims of the recent hurricanes.

As a taxpayer, another $2,300 will be added to your share of the national debit - though not your taxes... yet.

The bailout are expected to add up to $1.8 billion overall.  That's $15,000 per US household.

The house is set to vote on the bill on October 1, the House is expected to discuss the bill on October 2.

Thomas Jefferson once said:  "If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks... will deprive the people of all the property until their children wake-up homeless on the continent of their fathers' conquered... The issuing power should be taken from the banks and restored to the people, to whom it belongs properly.

We, the average "Main Street" taxpayer are screwed.........................

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KLAS Las Vegas Reports Silver State Bank Execs Made Millions Prior to Failure.

10/01/2008 03:11:00 AM

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Silver State BankWhen the casinos treat you poorly, let Silver State Bank treat you like a valued customer. - Silver State Bank Motto

On September 5, 2008, Silver State Bank was shut down due to losses on soured loans, mainly in commercial real estate and land development.  The company's failure comes a little more than a year after the bank completed an initial public offering of stock at $20 a share.   Shares closed on September 5, 2008 at 56 cents, unchanged from the prior day, on the Nasdaq. This was the sixth bank to fail in Nevada since the Great Depression, and the 11th bank in the United States to fail this year.

In 2006, SNL Financial, a research firm in Charlottesville, Va., reported that Silver State was the second most profitable publicly owned bank in the country as measured by return on equity, which is profit divided by shareholder equity.  Silver State had been the top Small Business Administration lender in dollar terms for seven consecutive years.

KLAS reports that "At the end of 2007, Silver State Bank had a profit of about $25 million.  In the first six months of 2008, that profit turned into an $88 million loss, mainly because of foreclosures.  For the loss, the president and CEO, as well as the executive vice president of commercial real estate lending walked away with millions."

Corey Johnson was the bank's former president and CEO who resigned August 1, 2008 under "re-organization".  Eyewitness News states they obtained his employment contract with states that voluntary termination because of reorganization triggers a lump sum payment in cash equal to three times his executive compensation within five days of the termination.  If he did not resign, he would have received his base salary of $350,000 but because he did resign, he received $2.1 million.  According to Business Week, Johnson's 2007 total compensation was $750,770 ($350,770, salary, $400,000 bonus).

Additionally on August 4, 2008 in an earnings press release dated August 1, 2008, Silver State Bank  reported a net loss for 2nd Q of $62.7 million, compared with net income of $6.2 million. 

What is interesting to note about this time, is during this time, Silver State Bank was under daily review by the FDIC and the Nevada Financial Institutions Division begin monitoring the financial stability of Silver State Bank after a review of their records by the FDIC.  The FDIC had determined in July that "Silver State Bank exhibited extremely unsafe and unsound practices and conditions; exhibited a critically deficient performance; contained inadequate risk management practices relative to the institution's size, complexity, and risk profile; and is of the greatest supervisory concern; the volume and severity of problems are beyond management's ability or willingness to control or correct; immediate outside financial assistance is needed in order for Silver State Bank to be viable; and, Silver State Bank poses a significant risk to the FDIC deposit insurance fund."  This was the reasoning for the daily monitoring, beginning on July 21, 2008.

From their records, on August 1,  2008 Silver State had just under $290,000 in available liquidity.  From August 1, 2008 to August 7, 2008 Silver State had just over $220,000 in available liquidity, down $70,000 in seven days.  On August 15, 2008 the FDIC reported that Silver State had just under $60,000 in available liquidity, down about $160,000 in just seven days, and down a total of $230,000 in fourteen days.

Douglas French, the bank's executive vice president for commercial loans, sold 161,000 shares of stock in the month of February.  French made almost $1.7 million by selling before their customers knew their bank was in trouble, according to Eyewitness News.  According to the articles that I have found French had sold 168,000 shares of Silver State stock in several transactions for $2 million.  Another article stated that French had sold 162,200 shares of company stock since November 2007 because "they were purchased with borrowed money."  French resigned on May 23, 2008 after selling the stock.  What his compensation package was, is unknown at this point.

INCOMES 2007

Corey Johnson, president, chief executive and director of Silver State Bancorp, $767,413
Michael Threet, chief operating officer and chief financial officer, $582,285
Calvin Regan, president of the bank, $660,943
Douglas French, executive vice president, $652,364
Thomas Russell, chief credit officer, $327,240
Source: 

In Business Las Vegas

__________________________________________________________________________________

TIMELINE

2007

The company raised about $30 million in an initial public stock offering in July 2007.

At the time, many Southern Nevada banks started bleeding red ink as borrowers started defaulting on real estate loans, but not Silver State.  At the time, Silver State Bank was charging more than 10 percent on average for loans, compared with 7.8 percent for comparable banks.  May of its borrowers provided raw land for collateral, leaving the bank exposed if land values plummeted and borrowers began defaulting.

In the last three months of 2007, Silver State reported that profits increased to $5.9 million from $5.7 million in the last quarter of the previous year and nonperforming loans remained low.

Silver State gave $1.4 million in bonuses for 2007 to five senior executives who also received increases in base pay.

1st Quarter, 2008

In a Las Vegas Review Journal article dated January 31, 2008, it was reported that 4th Q, 2007 net income increased to $5.9 million, up from $5.7 million in the last quarter of the prior year with Silver State's net income increasing every quarter during 2007.  Meanwhile, Silver State boosted its provision for loan losses to $3.6 million, up from $2.4 million for the third quarter and $804,000 for year end 2006.  Nonperforming loans totaled $13.1 million, or 0.84 percent of total loans, compared with 0.01 percent of total loans a year earlier.  For the year 2007, earnings increased to $24.8 million from $20.9 million.

On March 21, 2008 it was announced that Silver State Bank will finalize its acquisition of Choice Bank and announce plans to add 12 banks in Arizona and 17 in Nevada in the next three years.  Choice Bank was acquired by Silver State Bancorp  in March or April of 2006 with completing the acquisition as of September 5, 2006.  That transaction was valued at approximately $31.2 million. 

2nd Quarter, 2008

On April 1, 2008 Choice Bank merged into Silver State Bank.  Andres McCain joined Silver State as director and member of the Audit Committee following the bank's merger with Choice Bank where McCain was a director since 2006.  McCain had served as a director of Choice Bank in Scottsdale, Arizona from 2006 to April 1, 2008 when Choice Bank merged into Silver State Bank.  McCain had been appointed to the Boards of the Company and Silver State bank in February, 2008 and had served on the Audit Committee.

May 1, 2008 In an Earning Press Release, Silver State reported a $14.4 million loss in the first quarter of 2008, which the bank blamed largely on the deteriorating real estate market.  IN comparison, they reported a net income of $5.6 million.  The bank boosted its total outstanding loans up $68.4 million from the year-end -- an annualized rate of $274 million.  The net loss for the quarter reflected an increased provision for loan losses of $31.0 million, attributed to first quarter charge-offs of $9.7 million and an increase in nonperforming loans to $78.0 million from $13.1 million.  Stocks dropped more than 11% that day, from $4.19 to $3.67 per share.

May 2, 2008 Silver State's stock is downgraded by investment firm Sandler O'Neill to a "Sell."  Stock plummets another 24% by the end of the day to $2.80.

May 5-8, 2008  Silver State's stock continues to sink on successive days to $2.56 (5th), to $2.30 (6th) to $2.23 (7th) to $2.02 (8th)

May 21, 2008 in a SEC 8-K filing, Mike Thorell was appointed as Executive Vice President, Chief Lending Officer and Chief Credit Administrative Officer for Silver State Bank.  Thorell was previously appointed as President of the Arizona region, and would retain that position.  Prior to working for Silver State, Thorell had been president of Choice Bank.

May 23, 2008 Douglas French, executive vice president of Silver State and a key lending officer, resigned from Silver State Bank for "personal reasons".  He had sold 168,000 shares of Silver State stock in several transactions for $2 million.  Another article stated that French had sold 162,200 shares of company stock since November 2007 because  he was forced to sell the shares when they declined in value because "they were purchased with borrowed money."

June 5, 2008.  Silver State files a statement with the SEC stating it intends to raise $40 million in capital through additional stock issuance, which would double the number of outstanding shares, effectively diluting its stock's value by half.  The only problem was  their share price had dropped over 95% in the past year, from a high of $19.48 to July 29th's closing price of $1.18.  The market cap had fallen from $275 million to less than $17 million.

From a SEC filing (EX-99.1 of 8-K) showing a slide presentation to be used in investor conferences for the raising of $40 million,  that there was significant insider ownership via the directors and executive officers in the amount of 35.5% of stock.  And that "Other 10% or greater shareholders" represented 16.2% of stock with a notation of "Linda Yanke, who is the mother-in-law of our Chairman of the Board, is the only non-insider shareholder to own greater than 10% of our common stock."

Sometime in June, 2008 Silver State Bank was examined for soundness by the FDIC.  The following comes from the September 5, 2008 "Summary Order For Revocation of Charger and Appointment of FDIC as Receiver/Liquidator"(PDF):

During June of 2008, the Federal Deposit Insurance Corporation (FDIC) and the Nevada Financial Institutions Division conducted an examination regarding the safety and soundness, including liquidity and solvency, of Silver State Bank.  The examination determined that Silver State Bank exhibited extremely unsafe and unsound practices and conditions; exhibited a critically deficient performance; contained inadequate risk management practices relative to the institution's size, complexity, and risk profile; and is of the greatest supervisory concern; the volume and severity of problems are beyond management's ability or willingness to control or correct; immediate outside financial assistance is needed in order for Silver State Bank to be viable; and, Silver State Bank poses a significant risk to the FDIC deposit insurance fund.

3rd Quarter, 2008

July 21, 2008.  The FDIC and the Division begin monitoring the financial stability of Silver State Bank on a daily basis.

July 26, 2008. Silver State announces that Andrew McCain has resigned from the board of directors and Audit Committee immediately "for personal reason."  According to other reports, resignation took place late Friday and hit the wires on Saturday.  McCain was a member of the bank's audit committee, responsible for oversight of the company's accounting.  The committee also oversees the "safety and soundness" of the bank, according to a charter that was posted on the company's Web site.  To this date, Andres McCain has not commented on why he left Silver State Bank.  He worked the for only three months.  His term was set to expire in 2011.

On August 1,  2008 according to the FDIC, Silver State had just under $290,000 in available liquidity.

August 4, 2008 in an earnings press release, SSB reported a net loss for 2nd Q of $62.7 million, compared with net income of $6.2 million.  The loss was attributed as a "direct result of a $58.6 million provision to the Company's loan loss reserve, an impairment charge of $18.8 million representing a full write-down of the Company's goodwill asset, and the establishment of a valuation allowance of $7.1 million to the company's net deferred tax assets." 

Michael J. Threet, COO and CFO, said, "Our second quarter and six month results are due to the severe economic downturn in our nation, in our region and in the real estate values in the markets we serve."

"There is no question that these are unprecedented times for our nation, our region and our company.  The economic downturn is the most severe downturn ever manifest in our largest market, Nevada, and has had a severe impact on the banking industry as a whole, as reflected in the results of operations that so many other financial institutions are posting.  Despite these difficult economic times, our capital position remains adequate to support our balance sheet, our allowance for loan losses is adequate to protect against probably losses in our loan portfolio and we enhance our liquidity position to support our customer's needs.

In an additional press release dated August 1, released August 4, announced the resignation of Corey L. Johnson as President and Chief Executive Officer at Silver State Bancorp and as Chief Executive Officer of Silver State Bank.  The resignation of Silver State Bancorp's and Silver State Bank's Chairman of the Board, Bryan S. Norby was also announced.  Both Johnson and Norby would continue to serve as directors on Silver State Bancorp and Silver State Bank's Board of Directors.

Philip C. Peckman was named as acting Chairman of Silver State Bancorp and Silver State Bank.  Michael J. Thorell was named acting President and Chief Executive Officer of Silver State Bancorp and Silver State Bank.  The Board said that it will be conducting a search for a permanent President and Chief Executive Officer to the Company and Chief Executive Officer of the Bank, and Thorell would be a candidate for these positions.

On August 6, 2008, Silver State Bancorp announced it closed $9.7 million in Small Business Administration (SBA) Loans in the past month.

On August 8, 2008 the FDIC reported that Silver State had just over $220,000 in available liquidity, down $70,000 in seven days.

On August 14, 2008 in a press release, Silver State reported a restated net loss for the 2nd quarter of $73.2 million, compared to the previously disclosed net loss of $62.7 million.  Their reasoning for the update was due to receiving an updated appraisal on teh collateral underlying one of the company's commercial land loans.  The bank reported its nonperforming loans - those overdue by 90 days or more - increased to $252 million, from the $78 million reported in its first quarter report on March 31, 2008.  Those loans represented 16.23 percent of the bank's loans.  The company, in a release at the time, blamed poor residential construction and land loans, not subprime mortgages, which the company said it has never issued.

On August 15, 2008 the FDIC reported that Silver State had just under $60,000 in available liquidity, down about $160,000 in just seven days, and down a total of $230,000 in fourteen days.

On August 21, 2008 Silver State received a letter from the Nasdaq Stock Market indicating that the company no longer complies with the audit committee composition requirements, which requires a listed company to have an audit committee of at least three independent members.  Silver State had not replaced the third seat since Andres McCain resigned on July 26, 2008.  Silver State announced in a press release on the same date that the Nominating and Governance Committee of Silver State recommended Philip C. Peckman to be appointed to the vacant spot.  Peckman at the time, served as a Chairman of the Board of Directors.

On August 22, 2008 the FDIC reported that Silver State had just over $30,000 in available liquidity, down about $30,000 in seven days, and down a total of $260,000 in twenty one days.  On the same day, in a press release, Peckman was appointed to the Audit Committee.

On August 29, 2008 the FDIC reported that Silver State had just over $25,000 in available liquidity, down about $5,000 in seven days, and down a total of $265,000 in twenty eight days.

TAKEOVER

On September 04, 2008 the FDIC reported that Silver State had around $15,000 in available liquidity with approximately $30,000 in brokered CD's maturing between October 14-20th with a total of $157,565M brokered CD's maturing in the 4th quarter 2008.

September 05, 2008  Nevada Financial Institutions Division closed Silver State and the FDIC was appointed receiver of the bank, based in Henderson, Nevada.   

The following comes from the September 5, 2008 "Summary Order For Revocation of Charger and Appointment of FDIC as Receiver/Liquidator"(PDF):

"The FDIC and the Division have monitored the financial stability of Silver State Bank on a daily basis since the week of July 21, 2008.

Based upon the daily liquidity analysis conducted by the FDIC and the Division from information provided by Silver State bank and the liquidity trend analysis completed by the Division, Silver State Bank suffers a continuous loss of liquidity on a daily basis. 

Because of the withdrawl demands of depositors and the decreasing amount of liquidity, Silver State Bank is an unsafe and unsound condition, and is unable to meet the demands of its depositors in the ordinary course of its business without substantial financial assistance from outside resources.

Previously, Silver State Bank executed lending documents with, and pledged collateral to, the Federal Reserve Bank of San Francisco (FRB), pursuant to which the FRB may, but is not obligated to, make advances to Silver State bank.

The FRB has notified Silver State Bank that it is not prepared to make advances to Silver State Bank beyond September 5, 2008.

Because the FRB is not willing to make advances to Silver State Bank beyond September 5, 2008, and the Bank is unable to obtain viable significant outside financial assistance in a timely manner, Silver State Bank cannot meet depositor demands as they become due.

...Silver State Bank is not viable without significant outside financial assistance.  When the Bank was asked to disclose its plan to resolve this liquidity crisis by the Division and the FDIC, the Bank presented no competent basis to persuade regulators that the outside financial assistance was attainable, accessible or possible in a viable and timely manner.

The volume and severity of problems are beyond Silver State bank management's ability or willingness to control or correct.

Because its liquidity position is critically deficient, Silver State Bank is operating in an unsafe and unsound condition to conduct its business.

Silver State Bank poses a significant risk to the FDIC deposit insurance fund.

Therefore, the Division finds that Silver State bank is unable to meet the demands of its depositors.

The FDIC then entered into a Purchase and Assumptions Agreement with Nevada State Bank, Las Vegas, NV to assume the Insured Deposits of Silver State Bank.  All insured non-brokered deposit account at the Nevada branches were transferred to Nevada State Bank, Las Vegas, NV.  In addition to assuming the failed bank's insured deposits, Nevada State Bank will purchase a small amount of assets comprised of cash and securities.  The FDIC will retain the remaining assets for later disposition.

All insured non-brokered deposit account at the Arizona branches were transferred to National Bank of Arizona, Tuscon, AZ.

It had $2 billion in assets and $1.7 billion in deposits as of June 30.  At the time of closing, there were approximately $20 million in uninsured deposits held in approximately 500 accounts that potentially exceeded the insurance limits.

Silver State Bank also had approximately $700 million in brokered deposits that are not part of today's transaction.  The FDIC will pay the brokers directly for the amount of their insured funds.

FDIC spokesman David Barr said Silver State Bank ran into difficulty because of a substantial amount of "poor-quality loans primarily related to real estate development" in southern Nevada and other distressed markets.  "When the housing market slowed down, people who bought raw land to build new homes didn't need that land so they couldn't get anything with it and repay their loans.  So those loans went bad," Barr added.

The FDIC stated "The transaction is the least costly resolution option, and the FDIC estimates that the cost to its Deposit Insurance Fund is between $450 and $550 million. "

When taken over by state and federal regulators, when called be a reporter, Silver State Bank President Calivin Regan said he had "no comment" and hung up the telephone.

Silver State Bank branches in Nevada opened the following Monday as part of Nevada State Bank, which is part of Zions Bancorporation.  Nevada Bank of Arizona, another Zions subsidiary, took over four Silver State branches in Arizona.

September 07, 2008
Per a SEC filing, it was stated that Michael J. Thorell resigned as acting Chief Executive Officer and President of the Company, effective immediately.  In addition, on the same date, Mark S. Bosco, resigned as a director of the Company, effective immediately.

September 18, 2008
Silver State Bancorp who owned Silver State Bank filed an SEC filing stating that as of

September 16, 2008 the Company's primary asset, excluding its investment in Silver State bank and its investments in Silver State Capital Trusts II, III, IV, V and VI, which investments are expected to be written off completely, consisted primarily of cash and cash equivalents of approximately $490,000.  Liabilities comprised primarily of junior subordinated debt of $69.6 million, accrued and unpaid interest of $575,400 and known accounts payable of approximately $214,000.  The filing stated the Company was insolvent.

Based upon the Company's current financial condition, the board of directors of the Company has retained special counsel to evaluate the Company's options for winding down the affairs of the Company.  The alternatives under consideration include filing a voluntary petition seeking relief under Chapter 7 of Title 11 of the Untied States Code.

A Chapter 7 is a bankruptcy meaning that the business ceases operations unless continued by the Chapter 7 Trustee.  A Trustee generally sells all the assets and distributes the proceeds to the creditors.  Fully-secured creditors, such as bondholders or mortgage lenders, have a legally-enforceable right to the collateral securing their loans or to the equivalent value, which right cannot be defeated by bankruptcy.  In a Chapter 7 case, a corporation or partnership does not receive a bankruptcy discharge.

 

THINGS YOU DIDNT HEAR ABOUT

An article on The Faulking Truth, entitled Silver State Bank:  What's deposited in Vegas Doesn't Stay in Vegas details Silver State Banks's shady involvement in the defrauding of over 50,000 shareholders of in excess of $250 million in the CMKM Diamonds scan by Casavant running a "company" from his house in Las Vegas, Nevada and CMKM had no meaningful operations other than issuing and promoting its own stock, selling the stock from $0.0001 to $0.001, with volume sometimes exceeding two billion shares per day.

The article detailed an ugly trail of apparent money laundering that was facilitated by Silver State bank, who never filed a single Suspicious Activity Report (SARs) while hundreds of millions of dollars was pilfered from CMKX shareholders.  The article states that a large portion of that money was run through a single Silver State Bank branch in Las Vegas. 

In one multi-million dollar gamble taken by Silver State Bank, they accepted not just one but four checks for $2.5 million dollars each from a fraudulent company account at Wells Fargo Bank in Las Vegas in one week.. written on temporary checks.    John Edwards opened an account for a company called Saint George Metals on the same day that CMKM Diamonds announced a "business partnership" with the company, which in reality was just a bank account whose only signor was John Edwards.  Edwards would write a $2.5 milion check to CMKM Diamonds on a temporary check from Wells Fargo, and Urban Casavant would deposit it the "official" company account at Silver State Bank and write a press release announcing the investment.  In turn, money was filtered back to Edwards either in illegally issued company stock or cash, essentially making the exchange a wash.  To Silver State Bank's credit, they at least wrote "HOLD" across one of the deposits, apparently waiting for the $2.5 million temporary check to clear before crediting the CMKM Diamonds' account.

This was not an isolated case, but was instead the normal way of doing business with Casavant, Edwards, and their cohorts.  It was an incredible whirlwind of activity for Silver State Bank and other Las Vegas banks, including Wells Fargo, Nevada State, and Sun West Bank. Hundreds of checks, wire transfers, and deposits totalling tens of millions and possibly hundreds of millions of dollars flowed like champagne in the Vegas casnios.

Among the transactions executed by Silver State Bank:

  • Wire transfers totaling hundreds of thousands of dollars were executed with only the notation "transferring to Personal Acct. per cust. transfer via phone".
  • Checks from the CMKXtreme and other accounts controlled by Casavant and Edwards written out only to "CASH".. including one for $350,000.
  • Multi-million dollar wire transfers between Edwards and Urban, run through one of the almost 100 accounts they controlled there.
  • Millions of dollars written out of company accounts to Urban, his wife Carolyn, and several family members, often on temporary checks.

    The scam finally came crashing down in late 2005 when the SEC finally delisted CMKX, and a shareholder named Kevin West was appointed by Urban to take over while Casvant fled to Canada.  West inherited a company with no tangible assets, no real business.. and $558 in the bank.  Edwards, Casavant, and their cohorts had stolen the rest.  West brought in Bill Frizzell, an attorney from Tyler, Texas, who had been conducting a multi-year investigation into CMKX for a shareholder's group.

    They have since filed numerous lawsuits against Edwards, Casavant, and others, and have subpoenaed records from Silver State bank and other banks associated with the scam in an ongoing effort to recover assets for the defrauded shareholders.  The SEC recently filed charges against eleven individual and three companies in the CMKX case, but a multi-year investigation by a task force comprised of the DOJ, FBI, and IRS has yet to produce any arrests or charges.

    Silver State Bank has not been charged in the CMKM Diamonds case, although they did fire an employee named Patricia DeCosta, who approved most of the transactions. 

    • Silver State was founded in 1996 to specialize in construction and land-development loans in Nevada and Arizona. 

    SOURCES:

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