by Jake Bernstein, ProPublica
This article is from ProPublica.
United Commercial Bank has become the first recipient of TARP bailout money to be shut down by the FDIC. Last year, regulators approved a $299 million taxpayer funded injection into the bank. That money, which was supposed to go to only “healthy banks,” is now gone. The FDIC estimates United Commercial’s failure will cost the agency’s deposit fund about $1.4 billion.
Our resident TARPologist, Paul Kiel,
reported a few weeks ago that United Commercial Bank and three other supposedly “healthy banks” were in deep trouble. On November 1, CIT, another of the four, filed for bankruptcy protection. The collapse
taxpayers lost $2.33 billion in TARP money invested in CIT.
United Commercial was one of five bank failures Friday, following bank closings earlier in the day in Georgia, Michigan, Minnesota, and Missouri. The number of bank failures for the year now stands at 120. It’s the most failures since 1992, when the FDIC closed down 181 banks. The total cost of the other four bank failures to the deposit fund was an estimated $132.7 million. (See ProPublica’s
complete list of bank failures this year.)
Last month, FDIC chairman Sheila Bair testified that the deposit fund was
in the red and would likely stay so until 2012. The FDIC board is expected to finalize a rule this Thursday that will require banks to pre-pay their assessments to the fund for the next three years. The agency estimates that move will raise approximately $45 billion.
The FDIC entered into an agreement with East West Bank of Pasadena, California to take United Commercial’s $7.5 billion in deposits, which will make it the largest bank in Southern California. East West paid a 1.1 percent premium for the deposits. The bank also agreed to purchase approximately $10.2 billion in assets of the failed bank and share in $7.7 billion in losses.
In his post “
Four Banks in Govt’s ‘Healthy Bank’ Bailout Struggle to Survive,” Kiel detailed the travails of United Commercial, which served the Chinese community in the US. The bank lost big in commercial real estate. An internal investigation by the bank found that executives had downplayed the severity of United Commercial’s problems and misled auditors, resulting in a crackdown by regulators. United Commercial had branches in Hong Kong and a subsidiary bank in Shanghai. Both will reopen as East West.
The four other banks to fail Friday were
United Security Bank of Sparta, Georgia;
Home Federal Savings Bank of Detroit, Michigan;
Prosperan Bank of Oakdale, Minnesota; and Missouri’s
Gateway Bank of St. Louis.The deposits for the banks were assumed by respectively Ameris Bank of Moultrie, Georgia; Liberty Bank and Trust Company of New Orleans, Louisiana; Alerus Financial of Grand Forks, North Dakota; and Central Bank of Kansas City, Missouri.
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