Ladies & Gentlemen, Your 81st Bank Failure Of The Year
Normally we wouldn't rely on the phrase "third largest bank failure of the year" to impress upon you the seriousness of a situation, but since we're at our 81st bank failure of 2009, we're going to go with it. Meet Guaranty Bank of Texas. It has now failed.
From CNN:
Guaranty was the third largest bank to fail in 2009. It tied for the title of 11th largest bank failure in U.S. history with First City Bancorporation, which failed in 1988.
The estimated cost of Guaranty's failure to the FDIC is $3 billion.
And what was Guaranty Bank's downfall? Option adjustable rate mortgages. The bank also financed home builders in, gulp, California.
Third largest bank failure of 2009 announced [USAToday]
Post a comment
Comments:
@thisheregirafFe: my initial thought as well.
the only name that could fail more would be "Unfailable Bank"
...and probably many more to come.
It's okay. I've got all of my holdings in Goliath National Bank.
All my holdings are conveniently tucked away in my mattress. Honey, you threw away my mattress while I was gone?!@?
I dont think the FDIC has any money left.
Aww crap... I was thinking, "I know I've seen that bank name before.." and then I realized..
My husband's pay checks are drawn on that bank.
We have (had) one of these banks on the corner down the street from my house, and I never knew where it came from. There aren't any more in my town (central valley, CA) and I have never ever seen one elsewhere in life. I also thought it was guarantee, and not guaranty (but it seems both are acceptible).
The one time I saw someone go in there was the other day. Some 127 year old lady who walked from her car, walked back towards her car for a few feet, and then turned around and walked towards the door again.
I used to work for Guaranty Bank. I still work for their old parent company and their are cops stationed at all the doors to the building now not letting any Guaranty employees into the building.
i'd like to know by comparison/contrast how many banks normally fail each year.
Sure, blame the bank. No mention of the jerks who didn't read the terms of their mortgages and realized three years down the road they couldn't pay. All the bank did (and most of the others too)was try to get people into the "American dream" of home ownership. Maybe we should blame the schools because people today are illiterate and either can't or don't understand what they're signing.
@AllanG54: Those people lost their houses according to the terms of the loan. At least the bank received some cash and closing costs from the deal while "renting" it to them.
And if a bank thinks it's their job to make everyone, even the least qualified, indebted on a home then it deserves to fail.
@ AllanG54 nope GuarantyBank just sucks. They use old outdated systems that crash daily and bring down whole banking centers because they are still trying to run Win95 apps emulated in XP. They just dont give a crap.
@futuresuperbowlMVPJayCutler: Yea but since the banks stand to make so much more over a 30 yeard period vs. 3 year and foreclosure you'd think they'd be at least a little more willing to assist/cooperate/meet halfway.
@AllanG54: Of course the bank is to blame. The bank is in the business of assessing risk on loans. It assumes there will be a certain number of defaults because that's what happens when you loan out money. The riskier the loans, the more the defaults. The idea is that you 1) calculate how many defaults you are likely to have and 2) charge a high enough interest rate to cover the losses from the defaults.
Banks abdicated their responsibility when they started giving out "no peek" loans--where they stopped looking at credit history or employment before giving people lots of money. They assumed that the usurious interest rates they were charging would make up for the higher default rate that would result from their neglect at looking at the credit-worthiness of the borrowers.
This assumption turned out to be disastrously wrong. I don't see how this can be construed as the fault of anyone but the bank. To be sure, the borrowers should have been wiser and not borrowed under such horrible terms. But in the end, the bank had the power to say yes or no to those loans, and it said yes when it should have said no, and now the shareholders (and all the other banks who pay into the FDIC) are paying for the Guaranty's foolishness.
@costanza007: Depends on which year/era. I like this graph, from Calculated Risk:
It's out-of-date now, since it only goes up to July 2008, but it gives a great retrospective.
Other than the Depression & the 1980s, looks like less than 20 and sometimes less than 10 a year. So 81 so far this year is quite significant. (But not as off-the-charts as what was going on in the 1980s).
Shit, thats my bank!
I thought Obama's TARP, etc., stimulus/bailout programs were supposed to stop this from happening?
As an intelligent Texan, I stopped using banks, bought my cat a gun and have him guard my moniez with his life. He understands the importance cash holds. He knows how to use a $100 to snort a line of catnip, AND he understands the $100's little brother, the $10 bought said catnip. My fat headed baby <3
@madog: There are still 4 in the valley - 1 each in Fresno, Clovis, Atwater and Merced. I'm down in Fresno, where are you?
@AllanG54: It takes two to tango. The bank's agent signed the contract too. Why should we bail the bank out when they already agreed to take the house if they weren't paid. What, having hundreds of houses doesn't pay their bills? They should have thought of that before they signed on the dotted line.
@DragonThermo: None of the bailouts seem to have managed much beyond pumping up stock values, which I guess is important if you're looking to polish that golden parachute before jumping.
That said, the bill that created TARP was signed by Bush on Oct 3.
@AllanG54: There were terms in the mortgages that said they couldn't pay in three years? That's a new one.
@pecan 3.14159265: I put all my money there too. When I saw the new HQ w/the stainless fire breathing dragon's head on the building's roof, I knew it was the bank for me.
@RWB: When we moved across states, three years ago, selling our old house and purchasing a new one, my hubs shopped around to local mortgage agents, and when he sat down to talk turkey, he had to threaten to walk out at quite a few places before they would talk about a 30-year fixed rate. Which was the only thing we would consider. Other people who didn't know any better might be more easily swayed. That's what they were counting on. Yeah, that worked well for them in the long term, didn't it?
@AllanG54: Yes, I think we SHOULD blame the bank, who either devised those loan products or chose to sell them, on their own terms, using employees they hired and trained. The consumers may have had a *moral* obligation to be very careful about the loans they took out, but the PROFESSIONAL obligation to make sure the loans were sound rested very firmly in the bank's jurisdiction.
Of course, they put themselves out of business doing things this way, so perhaps we don't need to blame them so much as learn the lesson they're teaching us.
@oneandone: That's a little misleading because a huge portion of the 1980's failures were savings and loans, not banks. Same basic cause though...investment in real estate related instruments without thought or risk analysis.
@oneandone: Yeah, the 81 so far is definitely much higher, but the folks on TV make it sound like it nevar evar ever happened before now, evar.
Now I revise my wonderment to ponder how many banks per year "fail" in the operational sense, only to be bought or taken over by other banks, and is that comparable to the concept of "fail" from our 81 here.
Nothing left to do now but continue stocking up on ammo and find some way to blame this on the government. Bonus points if your able to tie this back in with Healthcare reform and it's un-Americaness.
@costanza007: Good point. I bet there's a terminology distinction for when a bank gets bought out / taken over vs. when the FDIC can't get a new buyer, but I have no idea what that might be. I think the graph & what the press tend to refer to as 'failures' mean that the FDIC had to get involved to some extent, so it wasn't just a bank being bought out by competition.
Wow. I used to work at a large US bank that bought loans from them. They always tried to skirt the boundaries of regulations.
@oneandone: typically, mergers caused by failures are still considered failures. the regulators have 3 choices when dealing with a failed institution:
-merge (preferred)
-take over
-liquidate
note that the 2nd choice is often a path to either the first or third choices & can (very rarely) result in the creation of a new bank altogether.
if you take a look at this list:
[www.fdic.gov]
you'll notice 2 things: 1) most (if not all - i don't have time to look at them all) of the failures resulted in a bank merger. 2) they're picking up the pace:
Q1: 21
Q2: 24
Q3: 36
& here's a little something else to consider: the FDIC just opened & filled a field office in jacksonville, FL with 500+ people to oversee bank closures. i don't know if they're working exclusively in FL or throughout the southeast (weird deal - the regulating offices span from GA to TX, so this could be for the entire region). no matter which way you slice it, there's a whole lot more coming soon to a bank (possible) near you.
@oneandone: here's an example of the 3rd kind:
Failed Bank Information
Information for Community Bank of Nevada, Las Vegas, NV
(Aug 14, 2009)
"The FDIC has created the Deposit Insurance National Bank of Las Vegas, NV ("DINB of Las Vegas") to facilitate the resolution of Community Bank of Nevada, Las Vegas, NV. The Federal Deposit Insurance in its capacity as Receiver has negotiated with Nevada State Bank to serve as paying agent and administer the orderly payment of certain deposits."
the key word there is "resolution". when this bank is finally closed, any remaining capital/assets will be sold & DINB will cease to exist.
@mcnerd85: dude, you've got some serious issues.
& don't look now, but your cat's sleeping on the job.
@Fresh-Fest-1986: well, i'll say this: if washington didn't require banks to lend to poor people with the CRA then this never would've happened. do us all a service & put those irresponsible paupers back where they belong - in a cardboard box under the freeway. you want to give them something, how about a free bottle of windex & some newspaper so they can be productive members of society & clean my windshield? maybe then they can afford their own insurance like the rest of us working-folk. just like jesus said: "give the man a fish, he'll trade it for a dose of crystal meth & be back tomorrow to steal your plasma tv. teach a man to fish & hopefully his junkie-ass will fall out the boat & drown. problem solved. amen."
@EdnaLegume: It's ok. They're now Compass bank. Or at least that's what the big one page ad in the Sunday Houston Chronicle said yesterday.
@kompeitou:
That's one of those government agencies that will never, ever, ever, ever be allowed to run out of money. The sheer metric shiton of bad that would occur if the FDIC went under is enough to guarantee its perpetual funding at whatever level is required.
All the bank did (and most of the others too)was try to get people into the "American dream" of home ownership.
@AllanG54: OK, I'm confused. Do you think the people getting the home loans tricked the banks into thinking that they could afford the loan or do you think the bank isn't responsible for giving out loans they knew wouldn't get paid off?
I am amused. My home loan was through them (unrelated transaction) and they sold it almost immediately to Countrywide. It was probably one of the few good loans either one of them had. I'm betting BoA, which now holds the paper, dies next. ;o)
But on the theme of scr*wing...a few years ago, I went on a blind date with one of the VPs of Guaranty and ended up with a nasty headache and had to call the date short. It was a couple of days later that I figured out that he had plied me with knockout drops. Constitution of Rasputin = win. Bank VP who has to drug dates to get any action = loser. Bank VP who drugs his date and still doesn't get any = a whole new category of sub-loser.
guar⋅an⋅ty • /ˈgærənˌti/ [gar-uhn-tee] • -noun
1. a warrant, pledge, or formal assurance given as security that another's debt or obligation will be fulfilled.
LOL bankname/liquidity fail!