Feds take over troubled Chicago-area Superior Bank
Hmm, this is the 12th largest bailout in FDIC history, and I bet it doesn't even make national front page news.
This bank was spawned out of the last FDIC bail-out disaster, and may be an early signal of another looming banking crisis.
I mean how can a bank basically go b/k when they can borrow for zilch, which we have been talking about????
The 2nd story is the better of the 2, but read both to get the the best backround. This is serious stuff....
HINSDALE, Ill. (CBS.MW) -- Chicago-area Superior Bank was closed by regulators and moved into a receivership Friday after making too many non-performing loans and keeping improper books, the Office of Thrift Supervision said.
The thrift had $1.9 billion in assets and operated 18 branches. It was majority owned by the Pritzker family of Chicago, which owns Hyatt Hotels.
The company was known to lend heavily in the sub-prime mortgage and auto loan markets -- which charge high interest rates to individuals with blemished credit records and then sold those loans on the secondary market. These loans often perform worse than higher-credit loans when the economy weakens.
"Superior became critically undercapitalized largely due to incorrect accounting treatment and aggressive assumptions for valuing residual assets," the OTS said in a statement. "The bank also experienced significant losses during 2000 from its automobile lending program."
The Federal Deposit Insurance Corporation will run the institution until it can be sold, Reuters reported.
The failure will cost the FDIC $500 million and ranks as the 12th largest closure ever for the FDIC.
"By transferring operations ... the FDIC will be better able to effect an orderly resolution with little or no disruption to insured depositors or other customers," acting FDIC chairman John Reich said in a statement. "Our goal is to have the institution back in private hands before year's end."
The Pritzkers offered to invest $210 million to save the bank, but were unwilling to meet the government's request for at least $250 million, according to attorney Harold Handelsman, Reuters said.
cbs.marketwatch.com
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Here is the better written story, from the Chicago Tribune>
Bank closes as Pritzkers back out of bailout plan
Two months after Chicago's multibillionaire Pritzker family announced a plan to rescue Superior Bank FSB of Oakbrook Terrace, a bank it half-owned, regulators closed the institution late Friday.
The bank's failure could cost $500 million, regulators said, making it one of the costliest financial institution failures in recent years.
The bank, which will be closed Saturday, will reopen Monday as a newly chartered savings bank also called Superior Bank FSB but known as "New Superior."
It will be run by the Federal Deposit Insurance Corp. until a buyer can be found for the $2.3 billion-asset institution, which could take six to eight weeks.
Deposit customers automatically become customers of New Superior and have immediate access to their insured funds, according to the FDIC, which has established a toll-free number for customers (800-331-6306).
The closing came quickly after the bank's owners balked at the cost of the bailout, regulators said.
"Very late in the process, they changed their mind and failed to implement the capital plan that we had approved," said Scott Albinson, managing director of supervision at the Office of Thrift Supervision, Superior's primary regulator.
"I'll probably never have a full understanding of what all their reasoning would be," Albinson said of the Pritzker family, which had planned to take full control of the bank from their partners, New York's Dworman family. "They felt that conditions had changed in the interim period and were unwilling, for one reason or another, to move forward."
Sources close to the Pritzkers say the cost to the family of the bailout plan could exceed the $255.5 million they expected. "As passive investors, they're not willing to pour money down a black hole of uncertain numbers and unknown losses, which appears to be the case," said Hank Handelsman, an attorney for the Pritzker group.
Superior ran into financial trouble because of loan losses, accounting problems and poor oversight by its board, regulators said.
At the time of closing, roughly $42.9 million of Superior's $1.6 billion in deposits were potentially uninsured; the federal government insures deposits up to $100,000. The uninsured funds were held by approximately 1,000 depositors, who will need to meet with FDIC claims agents. Those customers might not recoup uninsured funds.
Although no official figure has been released, regulator sources said the shutdown could drain $500 million from an FDIC insurance fund that is capitalized by premiums from savings banks.
"Through those premiums, we've created a substantial war chest to protect depositors in situations like this. The money does not come from the taxpayers; it comes from the savings and loans," said FDIC spokesman David Barr.
Although the Pritzkers have said that they were not involved in the day-to-day management of Superior, Albinson said the OTS will "review the degree of everyone's involvement in running the bank."
He blamed the bank's failure on "poor lending practices, improper record keeping and accounting, ineffective board supervision of management," as well as operating a high-risk business--making mortgage and auto loans to people with poor credit--without a good understanding of the risks and an ability to control those risks.
A spokesman for the Pritzker family, which has extensive business holdings, including hotel giant Hyatt Corp., said no family members currently sit on the bank's board of directors.
Penny Pritzker served as head of the board from 1991-94 and is a director of the bank's parent holding company, Coast to Coast Financial Corp.
Bert Ely, a well-known bank consultant in Alexandria, Va., said he expects "all kinds of litigation out of this, and I wouldn't be surprised if there were some criminal investigations, too."
Regulators will "try to pass as much of the loss back to the Pritzkers and Dwormans as they can, and there you've got some big pockets," Ely said.
The Pritzker spokesman declined to comment on any possible litigation, except to "express our confidence that we acted as responsible board members and as passive investors."
The failure of Superior Bank has a certain irony. In 1988, during the savings and loan crisis, the Pritzkers and Alvin Dworman, a New York banker, bought the troubled institution--then called Lyons Federal Trust and Savings Bank--from federal regulators.
In contrast to the failure of Lyons, which went under with hundreds of other savings banks, Superior has the unflattering distinction of being the only savings bank or savings and loan to fail in 2001. Only a handful have failed in the past five years.
A family spokesman said the Pritzkers tried to strike other deals with regulators before the bank's closure, but failed.
Albinson, at the OTS, was surprised the Pritzkers did not realize that their plan might end up costing more than initially projected. "This is a family with substantial resources, so I'd expect they'd understand how these asset values can change over time," he said.
chicagotribune.com |
