Big Texas bank on verge of failure [Guaranty, $13.4B assets] [FDIC only has $1.8B left?!]

Fortune / CNN Money ^ | 2009-07-31

[rabscuttle385]

NEW YORK (Fortune) -- Guaranty Bank is hardly a household name. But the Austin, Texas-based thrift's looming failure is shaping up as a big headache for bank supervisors -- not to mention a black eye for Carl Icahn and others in the smart money set.

Guaranty (GFG) could be soon seized by the government in what would be the biggest bank failure in a year that has already had 64 of them. Last week, the bank warned investors to expect a federal takeover after regulators forced a writedown of its risky mortgage investments and a bid to raise new capital failed.

Guaranty has $13.4 billion in assets and operates 160 branches in Texas and California -- two of the three best banking markets in the nation, thanks to their size and population growth.

. . . . .

A big tab on Guaranty would be costly to the deposit fund, whose balance was $13 billion at the end of the first quarter. The FDIC has estimated failure costs on cases since then at $11.2 billion.

A spokesman for the FDIC stresses that it has already set aside an additional $22 billion for failure-related costs in 2009, and adds that congressional action this spring gave the agency access to $500 billion in Treasury credit.

[JasonC]

Illiterates who cannot spell longing for bank runs, and attacking the experts and institutions that, as a fact, feed cloth and house them...

[Centurion2000]

There is nothing broke about the FDIC, but it is plain as a pikestaff that you wish it were.

This so genius? Then do you want to explain then why the FDIC is not moving on banks that are publicly posting negative capital ratios then? Colonial, Guaranty and Corus .... BY LAW these banks should have been siezed as insolvent banks. FDIC has not moved to secure these banks and protect depositors.

FDIC hasn't moved because they CAN'T ... they are broke.

[JasonC]

We are not entering a period of economic decline. You only wish that we were entering a period of economic decline - approximately because you don't like who won the last election, though I've no doubt you would hardly have been satisfied with the other fellow, either.

Instead it is an ordinary recession, one, and the ordinary political cycle, two. Democrats win some elections, Republicans win other elections. Some years the economy grows, some years it contracts.

You will say next that it isn't the momentary crisis that leads to your judgment but some longer sweep of history you see headed toward socialism or stagnation and regard in your philosophical pessimism as inevitable. But you are flat wrong. There is no such pattern in any longer sweep. The longer the sweep, the more clearly the pattern is relentlessly upward, and the more unstoppable the free market and the US in particular looks.

You are thus left predicting that this time it is different, that this time a non-entity ward heeler pol is the antichrist, that this time a contraction of the economy for a year or less is the end of capitalism. And I say it is rot and you have no evidence for it besides your wishing it were so, and that wish is prompted only by your pessimistic philosophy and your accumulated resentment that your ideas have not been accepted and embraced and made the dominant outlook for the American people.

Which is precisely what I have despised the Democrats for, rightly, for the last 5 years. They spent them treasonously screaming doom for the sole reason that they were not in power and other men were. It was transparent that they did not give a damn for the good of the country nor for any honest assessment of its policies or chances. They simply wanted the country to crash because it hadn't bowed down to worship them.

Do not make that mistake.

The American people have freed humanity and built the modern world, and are the source of all the justice you have ever known. Your rejecting them as hopeless is ridiculous on its face; they are vastly greater than you are. In power, in sustained achievement, in judgment, in justice. The US will be championing human freedom, successfully, when you and I are dust.

Why is the right now in the minority? Is it because everyone loves socialism and thinks it is the wave of the future? Hardly. It is much simpler than that.

You can't leave Rumsfeld at defense and "go slow" instead of surging to win rapidly - and expect no consequences. You can't spend your second term's political capital peddling immigration reform of all things - perfectly splitting your own base - and expect no consequences. And you can't moralize yourself into forcing a messy 90% creditor-loss bankruptcy on a systemically important financial firm like Lehman - and expect no consequences.

One of those was readily survived. Two was nearly mortal. Three means a term in the minority and probably two terms.

You don't get to screw up policies that critical, that royally, and retain the trust of the American people.

They are not rocket scientists, they are empirics. They will throw you out if you screw up things that big, that badly, that often. They will not care if you are running against Mickey Mouse. They will take their chances with a cartoon, just to be rid of your incompetence.

We need to earn back the reputation for economic professionalism and competence, that was blasted to hell last year, in the name of an idiot puritanism about "moral hazard". Instead, we have a thousand populists screaming that the problem is that we haven't boiled enough bankers in oil. Trust me, we never regain power on that line. If it is boiled bankers that are demanded, the Dems will get the nod every time...

[JasonC]

Nonsense. They have ordered dozens of banks closed in the last month. Sometimes they arrange for a bank to be taken over by a solvent one - it is much less disruptive to depositers. How they resolve each one is a prudential matter. No depositer is losing anything. The FDIC can call on hundreds of billions if it needs them, it simply doesn't. Your rumor mongering is just a pathetic lie, nothing else.

[dalereed]

Go to hell!!!

[Petronski]

The FDIC collects premiums from all banks continually.

Continually except for that ten year gap when they collected little if any.

[Centurion2000]

They have ordered dozens of banks closed in the last month.

Yes they have ... the little ones. The three big I just mentioned have not been seized or closed in violation of the statutes that the FDIC operates under.

Oh look .... no rumors just numbers and FACTS.

See that little 826 at the bottom of the chart? That's the FDIC's balance. They have 826 million left ... that's IT.

Sure they can call the backstopped Treasury line of credit. And in doing so they WILL precipitate a bank run when they tap it. You ready to print up to roughly 23 trillion dollars to cover it?

Rumormongering? Try quoting facts and doing something most people call debate before resorting to insults.

[Centurion2000]

Correction: 8.26 billion is left.

[Centurion2000]

And finally that line of hundreds of billions of dollars from the Treasury to backstop the FDIC .... that’s not funded .... you tap that and Turbo Tax Timmy is going to be firing up the bond printing presses to try and make a sale.

[21twelve]

“Now come on, let the really smart folks print a bunch of money and give it to other smart folks so America can be great again and just shut up. Please. It’s for your own good.”

I forget - are we talking about finance or health care?

[ding_dong_daddy_from_dumas]

If you don't want to print about $2T to save the institutions that are the source of finance and capital that have made America Great then you are a communist. Why I bet you really resent all the folks at Goldman Sachs who work their butts off trying to save our country. Why shouldn't they be paid enormous bonuses out of bailout money. Why not? Really. Do you know how hard they work? Do you know who smart you have to be to understand modern finance? You probably think that it is all a stupid mess. That is because you are dumb and don't work hard and just don't understand the rules of high finance where you make bets on bets on bets on mortgages where no one pays off a dime of principal expecting to get rich on appreciation.
And you just resent it. I'll say it again. You are nothing but a wealth hating communist. Now come on, let the really smart folks print a bunch of money and give it to other smart folks so America can be great again and just shut up. Please. It's for your own good.

At first I thought this post was satire, but on second read it looks like it's sincere.

[sickoflibs]

Sounds sarcastic but it also sounds like our buddy Jason, that is what you are thinking.

[rabscuttle385]

No depositer is losing anything.

I find it ironic (and funny) that you whine about another Freeper's spelling at 61 and then commit your own grammatical faux pas three posts later.

[JasonC]

No bank run will occur due to tapping the treasury backstop, if they need to do it. Attempting to suggest that one will or should, is just hopelessly irresponsible and has no basis in any fact whatever.

Face it, you simply want the banking system to collapse and you are pissed that is hasn't. That is quite completely all.

[JasonC]

It is satire, but it is also a lying smear.

Goldman did not pay anyone's bonuses with bailout money. They have already repaid all bailout money they received, with a 23% annual rate of return to the US treasury.

When a man objects to a banker making money not because it comes at his own expense, but despite the fact that it pays him, then yes he is a communist - in the sense that he has bought and is regurgitating the same class war bilge they live on.

There is nothing wrong with Goldman making money, it does not pick you pocket or break your nose, and everyone pretending otherwise is pretending. And a useful idiot, at best, for class warfare ideologues.

[JasonC]

He's not talking about anything. He is emitting his spittle into space, hoping it lands on better men's faces. But there is a wind...

[ding_dong_daddy_from_dumas]

They have already repaid all bailout money they received, with a 23% annual rate of return to the US treasury.

Including the indirect bailout billions via AIG?

[wafflehouse]

Now with it doing the correct thing with the correct result, it is excoriated by men who *wanted* the smash to be *worse*, because they don't like the government or any of its institutions or present policies. They simply want to be *obeyed*, and if their pet policies are not enacted them they ritualistically predict disaster - and *want* it.

They are in this respect no different from the leftists who wanted to lose the war in Iraq because the other party voted for it. The disease is hyperpartisanship and its underlying cause is the inability to admit that politics is not the sum total of human life, combined with a strident demand for total obediance to this or that "canned" ideology.

Well, the world simply does not require your approval to live and adapt and grow.

i dont know if you are deluded, or blowing smoke for some unknown reason. there are perfectly good reasons to be pessamistic about the intermediate economic future. you are certainly entitled to your opinion, but i think you are overly optimistic

certainly there are unrepentant doomers who see a complete reset as the only solution.. but there are a lot of perfectly sane people (myself included) who see no sunshine or rainbows in the near future.

you incorrectly equate everyone who sees rainclouds as anti capitalist america hating doomers.

[ding_dong_daddy_from_dumas]

There is nothing wrong with Goldman making money, it does not pick you pocket

I would not mind Goldman or anyone else making money honorably, but lobbying for Crap and Trade and preparing to contribute toward the weakening of this nation via that scam is "picking my pocket" and everyone else's.

[JasonC]

I can understand ordinary pessimism based simply on the recent past, or on the non sensical policy recommendations of the Dems this year (cap and trade, higher taxes in a recession, giant new entitlements we can't afford, etc).

But that is not what this thread is about. This thread is predicting a failure of deposit insurance in an attempt to cause bank runs. The men doing that know *exactly* what they are doing, and no they are not "worried". They hate the FDIC and the Fed and the entire present monetary system of the country, and by present I mean since 1913, about. If you haven't noticed them, look around.

As for the real economy, the immediate recession is basically over. The next quarter will show an uptick in GDP(highly probable, at least), as will the 4th quarter (certainly). Unemployment though will take significantly longer to fall back to livable levels.

One reason I stress these facts so stridently is I believe the right is playing the present economic crisis remarkably poorly. It is betting the movement in immediate and permanent doom, and when that doom predictably fails to materialize it will have zero credibility. This is vital, because the recovery has nothing to do with the poor policies mentioned about, that the Dems are engaging in. It is purely the result of the competent actions of the Fed, of the bank bailout last year before the election, and of the ordinary self healing nature of capitalist economic crises.

In other words, the snap back will be due to the sound policies followed by Bush late last year and the continuation of them by the agencies.

But the men mentioned above (gold bugs, Ron Paul supporters, sundry Wall Street hating populists, etc) are committed to the proposition that those policies and those institutions are the root of all evil - note it well, not the Dems. They cannot admit the possibility. And they are speaking loudest on the right these days, over all of the airways. (Kudlow at NRO is about the only prominent exception in the explicitly conservative press).

Their prediction is knowably wrong. All sound economists measuring what is actually happening, instead of peddling an ideological line, know it. When the economy dutifully recovers, they will be left without ammunition - beyond raising their voices as usual. Meanwhile there are very real longer term dangers in the Dem policies they are not bothering to fight. (To their credit, the airway conservatives *are* fighting the health care bill - but have scarcely been heard from on taxes or cap and trade. And none of them have supported the Fed, not one).