Third largest bank failure of 2009 announced
Texas-based Guaranty Bank is bought by Spanish bank. Regulators also seize institutions in Alabama and Georgia, bringing this year's tally to 81.
Now are Foreign Banks going to need to bail out the FDIC?
F.D.I.C. Seeks to Attract More Buyers of Banks
Texas-based Guaranty Bank is bought by Spanish bank. Regulators also seize institutions in Alabama and Georgia, bringing this year's tally to 81.
NEW YORK (CNNMoney.com) -- Guaranty Bank was closed by federal regulators Friday in the third largest bank failure this year bringing the total number of failures to 81 in 2009
/The estimated cost of Guaranty's failure to the FDIC is $3 billion.
BBVA (BBV) emerged as the winning bidder for Guaranty's assets, beating out potential buyers including a private equity group led by investor Gerald Ford.
/The purchase marks the first time an overseas-based bank has bought a failed U.S. bank this year. However, the Bilbao-based bank made a series of acquisitions in Texas earlier this decade and already operates the fourth-biggest banking chain in the state by deposits.
/Over the next five years, the agency expects roughly $70 billion in losses due to the failure of insured institutions
Now are Foreign Banks going to need to bail out the FDIC?
F.D.I.C. Seeks to Attract More Buyers of Banks
For the F.D.I.C., led by Sheila C. Bair, it is critically important to keep the insurance fund full because confidence in the banking system depends in part on depositors knowing they will get their money back. But the fund, which is also used to cover losses at insolvent banks, has fallen to just $13 billion at the end of March, the latest month for which figures are available, down from $52.8 billon a year ago, as the number of bank failures accelerates. Because many of the troubled banks are small and their losses relatively large, few buyers are snapping them up. Even worse, buyers are reluctant to pick up illiquid assets, like troubled commercial real estate and construction loans that may continue to hemorrhage losses.
/Analysts are increasingly concerned the fund could be wiped out if more bank failures drained the money the agency has set aside to cover them. That could require the F.D.I.C. to tap a multibillion-dollar lifeline from taxpayers, through an emergency borrowing program run by the Treasury Department, to finance loan sales and other short-term obligations.
/If the F.D.I.C. ever needed to tap taxpayer money, the industry would eventually pay it back. Even so, that could unleash a new set of worries. Officials fear that a raft of troubling headlines about a taxpayer rescue might bring additional scrutiny from lawmakers, or in the worst case, create a run on banks by anxious depositors.