Buyers Take a Pass on Some Failed Banks

WSJ ^ | 11/30/09 | MATTHIAS RIEKER

[FromLori]

Last Monday's change of plans by the Bridgeport, Conn., bank-holding company underscores a problem with the growing pile of terminally ill U.S. banks being wrestled with by the Federal Deposit Insurance Corp.

Some are in such bad shape that potential buyers won't touch them at any price, even if the government agrees to eat losses on the failed bank's bad loans. In addition to their depleted capital, many seized banks operate in areas with sluggish growth prospects, are puny and are loaded with expensive deposits gathered through brokers that are likely to leave when the acquiring bank reins in interest rates, some bankers complain.

Philip Sherringham, chief executive of People's United, said it is getting harder to find the dream deal that bank officials hoped to hatch from a wrecked bank. The supply of ideal targets—sensible deposit-gatherers that fatally "overextended" their loan portfolio—is slim and the competition fierce, he said.

The company's roots go back to 1842. Its biggest deal was the 2008 purchase of Crittenden Corp., including six banks owned by the Burlington, Vt., company. The financial crisis has given People's United an appetite for dying banks that nevertheless might have some valuable pieces

But of the 124 banks to fail so far this year, many of those put up for sale by regulators as part of the seizure process "are of very poor quality," said Norm Skalicky, chief executive of Stearns Financial Services Inc. "It's not as if you can walk in and you are in business."

[FromLori]

ping

Another interesting article you might like to read

http://www.zerohedge.com/article/best-buy-krugman-and-carry-trade

[Tempest]

The vultures are just looking for a sweeter deal. And they know if they hold out the government will give it to them.

Why not, the free money from the government so that they can invest overseas and crush the US dollar is a much better offer...

[PGalt]

Interesting post & link. Thanks Lori.

[Bean Counter]

This is exactly what Karl Denninger has been railing about for months: How the hell were these banks allowed to get into poor of a condition??

The answer is that the Treasury, The Federal reserve and the FDIC have been in direct violation of Federal banking law for years. These banks are insolvent and deserve to be closed as soon as possible, but there isn’t enough cash to do that even if “the Feds” wanted to.

[FromLori]

I know and if people have funds in some of them I would seriously consider taking it out see these for the list

http://www.chrismartenson.com/blog/fdic-broke-now-what/25274

http://www.chrismartenson.com/martensonreport/how-safe-my-fdic-insured-bank-account

[expat_panama]

How the hell were these banks allowed to get into poor of a condition??

Right, and what we need are lots of tax hikes and armies of regulators.  Or not; before we loose our continence over "the 124 banks to fail so far this year" we also need to remember that we had five times as many in '89 with a crisis that went on for a decade.   The '30's?   Make that over 4,000 bank failures per year.