By Anthony M. Freed
More FDIC MOU’s were issued today, but exactly who received them is going to remain a mystery. It seems the Federal Government deems it necessary to place Additional Restrictions on how some banks conduct their business – a sure sign the bank is experiencing some level of distress.
But the Federal Government, in their typical patronizing fashion, does not find it necessary to inform investors or depositors in those banks that their institution of choice may be in jeopardy, and moving towards insolvency.
“As the Wall Street Journal tells us, the Fed and the Office of the Comptroller of the Currency are issuing more “memorandums of understanding”. The MOUs not only put the bank on notice that its finances or controls aren’t up to snuff, but also call for specific remedies, such as cutting dividends, raising capital, or revamping procedures.”“While this is a pro-active move, one wonders why these regulators didn’t become more aggressive a year ago. Note the Fed and OCC usually do not disclose if a bank has received a MOU, since the bank may not be at serious risk.”“Separately, the FDIC’s problem bank list is updated tomorrow, so the downdraft in financial may continue if the list is longer than expected or contains the names of some large players.”
Sheila Bair, Chairman of the FDIC said in a live statement that “more banks will come on the list” this year and next, continuing that the “results are pretty dismal,” as residential and construction loans continue to plague the lending industry.
There was one statement tinged with hope, when Bair said of banks nationwide that ”98% are well capitalized” and are “fundamentally sound.”
Wow, that’s a relief, I guess.
