Yesterday's five bank failures bring the number of banks to fail during this economic storm to 120. Should these bank failures come as a surprise? No, some were already slapped with a Cease and Desist order prior to the FDIC shutting them down. The FDIC never announces to anyone, not even to the bank being closed that they will be seized ahead of time.
When the FDIC shows up at the bank it is most often done on a Friday after the bank has said goodnight to their last customer for the day. As the bank is about to lock the doors for the night it is then that the FDIC and regulators enter the facility and announce that they are being put into the control of the FDIC.
The FDIC feels it is in everyone's best interest to never let the public or anyone else know ahead of time that a bank is about to be seized for fear of creating a panic situation among depositors. If I knew that my bank was going to be seized next Friday the first thing I would do is go and withdraw all of my funds and this is what they want to avoid, even if it means knowing that some depositors will not receive all of their money (for having more than the $250K limit). Even if I had less than the $250K limit I would still take my funds out for fear of having to wait for my money to be returned to me by the FDIC or wait while a new bank takes over my accounts.
So is there really no way at all to know a bank ‘may‘ be in trouble? Yes there is, just look at the list I published on November 4th (FDIC Cease and Desist Orders for 2009 ). This is public information that anyone can find on the FDIC website.
Let's look at the five banks that failed yesterday:
First is United Commercial Bank of San Francisco.
United Commercial Bank, San Francisco, California, was closed today by the California Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.
If you had an account at First United Commercial Bank you probably awoke this morning and heard about it on your local news. You probably went into the bank in previous weeks and months never knowing anything was wrong, the same smiling faces were behind the counters, the deposit slips were still on the tables, and the floors were clean and shinny.
But, behind the scenes the management of United Commercial Bank of San Francisco was notified on September 3rd of 2009 that they were operating in a manner that was judged to be unsafe. United Commercial appears on the list of Cease and Desist orders issued by the FDIC. What did the FDIC tell United Commercial?
(excerpt from FDIC order dated September 3, 2009)
The FDIC and the CDFI considered the matter and determined that they had reason to believe that the Bank had engaged in unsafe or unsound banking practices. The FDIC and the CDFI, therefore, accepted the CONSENT AGREEMENT and issued the following:
ORDER TO CEASE AND DESIST
IT IS HEREBY ORDERED, that the Bank, its institution-affiliated parties, as that term is defined in section 3(u) of the Act, 12 U.S.C.
