Remember the odd thing about Park National Bank’s demise? How on the fateful day, it got money from Treasury for poor neighborhoods? Well, FDIC, which supervised the demise, blames T-Sec Geithner for the gaffe-goof, as reported by The Street-dot-com on 11/1, two days after the seizure:
The Treasury Department, not the Federal Deposit Insurance Corp., should be held responsible for a public relations gaffe last month in which the FDIC closed a Chicago bank just hours after it received an award from Treasury Secretary Tim Geithner, according to FDIC spokesman David Barr.
The grim details:
Park National Bank of Chicago received $50 million in tax credits to encourage investment in poor communities at an Oct. 30 ceremony attended by Geithner. Hours later . . . it was seized along with eight other banks around the country that formed part of a holding company called FBOP Corp. and sold to U.S. Bancorp.
However:
One financial services executive, who did not want to be on the record for fear of running afoul of regulators, accused the FDIC of timing the closure as it did in a deliberate effort to embarrass Geithner.
Among a dozen or so comments disputing or accepting this claim is a call by CNBC’s Jim Cramer for FDIC head Sheila Bair’s ouster as “as a rogue operator who cannot be reined in,” to which came a rejoinder by commenter CedricT:
Not really—it just shows how poorly managed and co-oordinated our Government is—these turf wars are their life blood. . . . Looks like the same happened in Ft Hood–the FBI knew about the mad Major but neglected to tell the Army—and these are the guys who are going to “Fix” the Healthcare system–God Help us!!
Normally, I say leave God out of it, but this time prayer seems appropriate.
Finally, the article itself ends with this about what the hell happened to FBOP:
Though Park National was relatively healthy, it was shuttered because it could not cover the losses of other banks in the FBOP holding company.
Yes, we understood that, especially in Oak Park, which may never recover from the shock of it all.
Then too, the buying into governmentally approved and supervised (?!) operations:
In addition to the usual real estate loans gone bad that have dogged virtually every institution from Bank of America . . . to Goldman Sachs . . . the FBOP banks had big losses on preferred shares of Fannie Mae . . . and Freddie Mac . . . according to a report in the Wall Street Journal [here] . . .
How WSJ characterized FBOP owner Mike Kelly:
The nine small banks represented the holdings of FBOP Corp., based in Oak Park, Ill., and owned by a banker who had plowed into real-estate lending around the country. [italics added]
Cost to FDIC: $2.5 billion.
A (non-Oak Park) banker put it to me this way: FDIC was cutting its losses by moving when it did, forestalling FBOP’s cutting loose its troubled banks (assets) and leaving FDIC with something unsalable. Better for taxpayers, the argument goes, to have the whole bunch of them and making a sale — in this case to U.S. Bank.
Total number of failed banks this year: 115, the most since 1992, when 181 banks collapsed during the savings-and-loan crisis — which is when Kelly began to expand his holdings, buying banks outside Chicago that proved his undoing.
