First National Bank of Nevada, Reno, NV, has become one of three banks to fall into the lap of the FDIC in as many weeks.
On July 25, 2008, First National Bank of Nevada, Reno, NV, was closed by the Office of the Comptroller of the Currency (OCC). Subsequently, the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed. As of June 30, 2008, the former First National Bank of Arizona, Scottsdale, AZ, merged with First National Bank of Nevada and is included in this action.
When the FDIC took down IndyMac Bancorp, no advance notice was given to the public despite the bank’s highly publicized distresses. Apparently, the agency had no advance notice itself:
Each quarter, the FDIC discloses how many banks and thrifts are on its problem list. It does not name which institutions make the list because if it did, depositors would yank out their money and they would almost surely fail.
In May, the FDIC reported that for the quarter ended March 31, the list had 90 companies with $26.3 billion in combined assets.
IndyMac, which by itself had $32 billion in assets at the end of March, was obviously not on the list, a fact confirmed by the FDIC after its failure. The FDIC says it was added in June.
The FDIC’s web page explains that the “assuming institution” is Mutual of Omaha Bank, Omaha, Nebraska, and the site has all the pertinent information and assurances like this one: “All deposit accounts will be available as usual.” That makes people feel a whole lot better, but….
IndyMac was the third-largest bank failure in US history and it still failed to make the FDIC problem list. What chance did First National have? What chance could it have had? Just the publicity of IndyMac’s problems led many depositors to stand in line for hours to withdraw funds from branches across Southern California BEFORE regulators moved in.
All of this makes one wonder what regulators actually regulate? While you are pondering that, give this a thought as well: IndyMac’s receivership is expected to deplete between $4B and $8B from the FDICs industry-funded insurance fund of about $53B. In case you don’t like doing arithmetic that’s between 8% and 15% gone already. WaMu is just waiting.
How assured are you about that FDIC insurance now?
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