Georgia is home to 4% of US banks but 20% of US failures:
The struggles of Georgia banks have inflamed fights between regulators, politicians and local bankers about who is most to blame and what to do next. Some bankers in the state complain that regulators are making their problems worse, forcing banks to take big write-downs on loan values, a common response when bad assets start piling up.
Regulators respond that they are just trying to apply one of the big lessons from the savings-and-loan crisis of the late 1980s and early 1990s: If the government hesitates to deliver tough medicine to overextended lenders, things could get worse.
Still, the FDIC and other regulators are being more assertive, sending real-estate specialists into Georgia, California and Florida to scrutinize troubled loans. In Georgia, the FDIC has installed two new officials in its Atlanta office. To handle a wave of expected failures in the Eastern U.S., the FDIC recently opened a temporary office in Jacksonville, Fla., with 500 employees.
In March, Georgia’s two U.S. senators recently summoned banking regulators to a private meeting and conveyed the fury that bankers back home felt toward the FDIC. “What I’m hearing from banks is that the FDIC is squeezing them so tight they can’t breathe,” said Republican Sen. Johnny Isakson, according to people at the meeting.
In Alpharetta, an Atlanta suburb that was home to three banks that failed since September 2007, longtime banker D.R. Grimes recently tried to start a new bank. He said he raised $20.5 million, but his attorney was told by the FDIC’s Georgia office that it didn’t have the authority to grant any new charters. He sent the money back to investors.
“It is very frustrating to follow the rules and do everything you are supposed to do and just be ignored,” Mr. Grimes said. State and federal regulators said they don’t have a moratorium on new banks in Georgia but are giving applications close scrutiny.
Some bankers also have complained that they aren’t getting enough access to the Troubled Asset Relief Program, which the federal government has used to pump $199 billion into more than 600 U.S. banks. At the March meeting, lawmakers stopped short of demanding that Georgia banks get more money, but some regulators perceived that to be the point of the meeting.
“I represent all of the banks,” Sen. Isakson said. “To call the Treasury and say, ‘Hey, you need to let this bank have some money,’ that’s not my job. My job is to represent what’s happening in banking in our state to try to get the answers to our questions.”
A Treasury spokesman said many of the banks complaining about not getting TARP funds are troubled, and their “applications aren’t passed to us by the regulators,” who make the first call on whether a bank should get funds.
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This is not too surprising based on the legislation passed in Georgia a few years ago regarding branch banking. Net result: Atlanta loses its core banking to Charlotte and underfunded (relatively) Mom and Pop banks spring up all over the place.
I wonder what a lot of the politicos are going to do when they can’t make a killing off of being on the Board of Directors for these failed banks….
“What I’m hearing from banks is that the FDIC is squeezing them so tight they can’t breathe,” said Republican Sen. Johnny Isakson
About a year prior to the Bear-Stearns initial meltdown in July 2007, the financial bloggers – who NAILED the situtation – were posting articles and data showing that GEORGIA was a hot-spot of subprime, HELOC, and pay-option ARM madness.
Isakson was not paying attention THEN.
As for the bankers, they played with fire and they got incinerated. Stupidly they assumed they could do these things, only to learn that they were NOT to-big-to fail.
At the time there was an online petition to the FHA , SEC, and GSE’s that had begun in 2003 from appraisers complaining that the bankers were strong-arming them into false appraisals to feed the originate-to-distribute model. The petition back then had 9000 signatories, MANY FROM GEORGIA.
Isakson is complaining now, but WHY did he not stop the financial chicanery long before it blew up?
Georgia has two pathetic US Senators, neither of whom have any business being in office.
In most states, real estate is driven by enormous publicly-traded developers, who deal in mass with large banks. Georgia is a bit unusual in having so many small and mid-size developers, who deal with small local and regional banks. I don’t believe that Georgia necessarily leads in the nation housing crisis dollar amounts, but rather number of banks… because we’re a little closer to the mom-n-pop end of the spectrum here. As the dust settles, this may change…
All is as it should be… as long as the FDIC doesn’t cave.
These banks SHOULD fail (as well as more on the way, given the bad assets on their books). The politicians SHOULD convey their constituents’ fury to the regulators, if only to look like they’re doing their job.
And we, the people, should be grateful the FDIC is there to insure the deposits we leave in these failed banks.
I think of the FDIC as the medical insurance that will foolishly cover your expenses should you decide to purposefully run your arm through the table-saw.
If you don’t play with the table saw, then you don’t need the insurance.
Once again, when you have a monetary system in which someone can create credit by typing a few numbers on a keyboard instead of having people open savings accounts to be utilized for credit, Chernoblyl might look like a firecracker compared to what we’re dealing with.
I think of the FDIC as the medical insurance that will cover your expenses if your dentist breaks your jaw.
If you dentist has a history of breaking jaws, what do you expect?
your*
Banks that use sound fiscal responsibility do not typically go out of business. Banks that go out of business do so because they have loaned recklessly, or, they cannot compete with banks that have beat them to the slop trough, which put them out of business based on an unlevel playing field.
I’d be willing to bet that the mom-and-pop community banks fall into the latter category. They don’t buy the right people in Washington lunch, or they don’t contribute enough to their re-election efforts, or kiss the right arses.
Banks that use sound fiscal responsibility do not typically go out of business. Banks that go out of business do so because they have loaned recklessly, or, they cannot compete with banks that have beat them to the slop trough, which put them out of business based on an unlevel playing field.
A dentist only has to break one jaw in his career to cause me grief if that jaw happens to be mine.
I don’t really care if Bank of America goes out of business. I just don’t want to have to get in line as a creditor if it does.
I wonder if the fact Georgia voted against Obama has anything to do with it – not the sole reason, but some effect.
When GM & Chrysler car dealers who are profitable are losing their franchises, and also happen to almost exclusively be Republican donors, and when GM & Chrysler dealerships that lose money but supported Democrats get to keep their franchises – one has to wonder.
MSBassSinger,
Do you also wonder what would have happened had the federal government not stepped in and provided money to GM and Chrysler?
A whole bunch of states other than Georgia voted for McCain and they haven’t had the crazy amount of bank failures that we’ve had.
While the dealership contribution connection is possible, it seems rather unlikely. When you take the number of dealerships being closed and multiply by the maximum allowable contributions, the numbers come out to be pretty much a drop in the bucket of election money. Even if the intent was to “send a message”, it doesn’t seem like it would be very effective unless it turns out that the government is planning on taking over a large number of other businesses that have extensive dealer networks that can be bullied into submission. Occam’s razor probably says no in this situation.
This is the problem combined with government backed loans we cannot just walk away. Like it or not we are all on the hook!
FDIC warns US bank deposit insurance fund could tank
Yahoo-(AFP) – The US government is warning banks that its deposit insurance fund could go broke this year as bank failures mount.
The head of the Federal Deposit Insurance Corporation, Sheila Bair, in a letter to bank chief executives dated March 2, defended the FDIC’s plan to raise fees on banks and assess an emergency fee to shore up the fund and maintain investor confidence.
Bair acknowledged the new fees, announced Friday, would put additional pressure on banks at time of financial crisis and a deepening recession, but insisted they were critical to keep the insurance fund solvent and protect.
“Without these assessments, the deposit insurance fund could become insolvent this year,” Bair wrote.
The FDIC chief said in the letter that the rapidly deteriorating economic conditions raised the prospects of “a large number” of bank failures through 2010.
“Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative,” she wrote.
read more
http://www.google.com/hostednews/afp/article/ALeqM5hSg4FLy01YtT6zntV7lQQxVlA2jA
Who is the chairman of Banks and Banking in Georgia?
Senator Isakson represents “all banks?”
Figures. He’ll vote for and and every TARP deal out there, but as for individuals who have assets wiped-out by the AIG crooks, those folks can file bankruptcy and live on 5-day old bread for all he cares.
“any and every TARP deal out there”
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