Financial Dispatch: Big bank on ‘brink of collapse’
[cnn-photo-caption image=http://i2.cdn.turner.com/money/2009/08/14/news/companies/colonial/chart_bank_failures2.gif width=292 height=320]
Andrew Torgan
CNN Financial News Producer
Colonial Bank, a southern regional bank with about $20 billion in deposits, is on the verge of failure.
In granting a request made by Bank of America to freeze assets worth $1 billion, a federal judge on Thursday said Colonial is “on the brink of collapse” and is suspected of criminal accounting irregularities.
Colonial, which has more than 350 branches in five states, has been under investigation for some time. It was one of two banks raided earlier this month by federal agents.
If Colonial does collapse, it would mark the 73rd bank failure this year, and it would also be one of the top 10 bank failures in U.S. history.
In the event that regulators shut down Colonial, customers' deposits are protected: The FDIC's insurance fund guarantees up to $250,000 per person per account. And the agency says on its Website that it historically "pays insurance within a few days after a bank closing either by establishing an account at another insured bank or by producing a check."
So far this year, 72 banks have failed. Those closures have cost the FDIC nearly $17 billion.
Consumer prices post biggest decline in 59 years
The government's index of prices paid by consumers was unchanged in July from the previous month, but the closely watched inflation gauge recorded its largest over-the-year decline in 59 years.
The Labor Department says that the Consumer Price Index, a key measure of inflation, has fallen 2.1% over the past 12 months. It was the sharpest over-the-year drop since January 1950 when CPI fell at the same rate.
The decline was led by a sharp drop in energy prices, which are down 28.1% from July 2008, when both gasoline and oil prices were at record highs.
And the highest paid CEOs are...
Last year was a bad one for most chief executives - but not for the top 10 highest paid CEOs.
Seven chief executives took home more than $100 million in 2008, and three others had paydays that topped $70 million, according to a report released today by The Corporate Library.
According to the report, Blackstone Group's Stephen Schwarzman was the highest-paid CEO in 2008, taking home $702,440,573 in salary and stock options. The head of the financial services giant vested nearly $700 million worth, or 25% of the stock options he was granted after taking the private equity firm public back in 2007.
Schwarzman will receive the other 75% of his $4.7 billion equity grant from the IPO in equal installments over the next four years, so he will likely remain at the top of this list for at least the next several years.
A Blackstone spokesman stressed that the $702 million for Blackstone is not "compensation," but is mostly the vested portion of his stock from the IPO.
Oracle Chief Executive Lawrence Ellison, 2007's highest paid CEO, was second on the list, pocketing nearly $557 million.
Follow the money… on Twitter: @AndrewTorganCNN
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Filed under: 360° Radar • Andrew Torgan • Economy |
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Due to the large number of failed banks in recent months, there's an important issue regarding FDIC insurance depositors need to be aware of. There are specific time limits within which an insured deposit or safe deposit box must be claimed, after which the funds or property are forfeited.
For an explanation of the rules for claiming insured deposits at banks that have closed, and a list of failed banks and those that they have acquired over the years – go to http://www.failedbankreporter.com
To Joe: Before you start bashing President Obama regarding TARP..you might want to do your research. President Bush spent most of the first half, roughly 350 million bailing out the banks before Obama was even in office. Anyone going to start calling President Bush a socialist?
is a bank collapse happens when the bank spend parts of the deposit and is not able to pay off the depositor? or there are any other reasons?
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@Harrison – I've had one credit card company do that to me too. I had another credit card with a balance transfer offer of very low percentage interest for a time period (long enough to pay off the balance) and I transfered it all there and closed the usurious credit card, stating it was at customer request because of the high rates and inflexibility of the bank. I had been a customer for almost 20 years but no more.
These types of gouge them practices have been going on for at least a decade if not longer. I had my interest rate increased on one card because we moved or so they said. Actually it wasn't a move; I changed my mailing address from a po box to my street address – since it was an address change they treated it like a move and upped my interest by at least 10%. Another card closed. I'm sure these practices will get worse as the economy stays depressed. The credit card companies will find themselves with no customers if this continues long.
One thing I want to know – on a bank closure I know the deposits of the customers are insured by FDIC but what about the stuff (like bonds, jewelry, etc) that you keep in a safety deposit box there? Are they still there for you or does the bank take them??
My little ol' local bank owned and run by family and friends looks a whole lot safer the deeper we get into this debacle with these mega banks. I have multiple accounts in multiple banks, and my best experiences are with the smaller ones where I know the people in charge. I think businesses lose when they become impersonal conglomerates more concerned with the bottom line and lining their own pockets at the top than taking care of the communities they serve.
Good Job Mr. Obama, how embarrassing for you – banks are still on the brink of collapse, foreclosures are increasing as is unemployment – retail sales are falling, interest rates are rising and with all your spending and your acronym bailout of TARP, TALF, PIIP, etc you have burdened us with massive debt as we watch our peers exit recession – France and Germany announced this week they are out of recession and did not spend a fraction of what we did – good going Mr. Obama, what a massive amount of wasteful spending.
Interesting that in the beginning the media had so quickly laid the blame for this economic failure on AIG but now so many banking facilities are being charged with fraud and illegal activities stemming from the economic meltdown. Was AIG ever charged with anything? No. AIG was a victim of bad mortgages and was drug through the coals by the media.
Having made all payments to Citicard on time, the last payment was short by 82 cents – $415.00 instead of $415.82. In response, Citicard charged me $39 late fee and jacked my interest rate from 11.15% to 28.99%, making the next payment due $775.89! I called them, explaining it was a clerical error, that the payment was on time and requesting my lower interest rate be restored. The gal I spoke to said I'd have to make the current payment of $775.89 on time before my request could be reviewed, which I did on the spot by phone at an additional charge of $14.50! A few days later, I received a letter from S. Larson, Consumer Service, stating that I had "defaulted" on my agreement and therefore was "not eligible" for a credit of finances charges. They're maintaining the usurious 28.99% interest rate over an 82 cent error from a customer with a long-term pristine record.
After receiving billions of taxpayer dollars to ameliorate the results of their incompetence, that incompetence is now being extended to gouge their customers and bite the hand that feeds them – we taxpayers. It appears that since President Obama's smack-down on these practices doesn't go into effect until next year, banks making hay while the sun of consumer/taxpayer powerless shines by taking ANY excuse to extract as much booty as possible in the interim.
I can just hear the Colonial Bank executives now, "we need bailout cash so we can retain our talent."
Only in America.
Strange how $20bn. doesn't sound like alot of money,when in the near future the # 's could come in somewhere at a $trillion,when the annual decade-long ritual of systematic (risk assured?) crises comes-a-rollin around it's perrinnial (awakening of the black-hole) fixed money orbit! What should we do? This anomaly,"To Big To Fail, Green' Planetary Feeding Frenzy" that the good old Federal Reserve can't seem to escape it's grasp.This gravitational field of "Money-Changers" feasting on it's "Dark Matter",weird to say the least,...but very real indeed! I ask again,what should we do,if we can control our own destiny's?
Well, this is a problem. I think the whole system would have crashed by now if the federal government hadn't propped it up with trillions of dollars.
They really need to think very carefully about reforming the banking system, and dumping all the toxic waste assets somewhere. Let the capitalists buy these if they want to, but don't dump them on Joe Average taxpayer to foot the bill. Just take them off the books and dump them in a Bad Bank.
I also thing we need a public option in banking and finance, particularly a national investment bank and national housing and mortgage bank.
Bank failures have been pushed to the sidelines – now all we hear about is HEALTH CARE, We may end up being the healthiest nation in the world, but also the poorest. 73 bank failures this year and 35 million people on food stamps would indicate recession is not over. And then there are all those CEO's who make 70 million a year. Something is very wrong. Perhaps there is so much anger because of the general situation. Economy should continue to be our priority.
Regarding the potential bail-out of yet another bank, I certainly hope Congress can plug the holes in the plan prior to the bail out of this, smaller bank.
The bonuses for Schwarzman are absurd.
It would be great to just say "no"!