Another Bank Bites the Dust
Georgia has become a black hole for banks, and the galactic vortex swallowed two more on Friday. First Coweta Bank of Newnan and ebank of Atlanta were closed by regulators. This brings the number of Georgia bank failures to 23 in the past year. First Coweta lost $14 million in the past 18 months. The FDIC agreed to loss-sharing arrangements with both two outside banks to pick up the bulk of the failed banks’ pieces, namely, loan portfolios and deposits. First Coweta’s four branches - and most of its deposits – have been acquired by United Bank of Zebulon. A Minnesota bank will step in to take over ebank in Atlanta. Ebank and the First Coweta branches will reopen in the coming days.
Much like the legal layoff watch, in the financial sector, one doesn’t have to wait long to see the tipping point when a flailing bank becomes a failed bank. The gamble here amounts to real money and lots of it: he FDIC has droppped billions into loss-sharing arrangements that incentivize other banks to take home the leftovers – much like barnacles feeding on detritus.
With banks collapsing faster than Steve Winn can raze an old casino in Vegas, the FDIC launched an investigation. Of course, it doesn’t take Ben Bernanke to finger the housing bubble as a usual suspect. Bad loans and no cash – like a record player stuck indefinitely on the same sorry country music song. While the government insists that things are improving, you have to wonder where it bought those rose-colored glasses (and where the money came from). It’s been a long and hard recession, and it’ll be a long and hard climb out of it. For every bank that goes belly-up, there’s another two or three riding on the brink. Numbers 22 & 23 are likely to have company in the black hole.
It is also worth noting WHY the loans at these banks were bad- because many of these banks (excepting the various branches of Security Bank which were taken over by the FDIC in late July) disproportionately served the homebuilding, contractor, and developer clientele. In addition, the AJC has highlighted that many banks engaged in depths of nepotism that would even make good ol’ boy legislators blush: http://www.ajc.com/business/audits-shine-harsh-light-113517.html
What is most striking about Bernanke’s response to the bank failures is that he continually insists that the Federal Reserve retain the full scope of its regulatory duties. If anything, I would argue that the Fed should focus on its primary duty (monetary policy).
Lastly, I count at least four (!) distinct similes in this piece. Can I add a fifth by saying that Georgia banks are folding faster than bad hands at a high-stakes poker game?
When Kenny Rogers as “the Gambler” intersects with bankruptcy, it deserves to be noted.
It was a very nice idea! Just wanna say thank you for the selective information you have distributed. Just continue publishing this kind of post. I will be your hardcore reader. Thanks again.