Criminal mafia coprorate banks continue crime wave.
WASHINGTON – Real estate lender Colonial BancGroup Inc. has been shut down by federal officials in the biggest U.S. bank failure this year.
The ., which was appointed receiver of the Montgomery, Ala.-based Colonial and its about $25 billion in assets, said the failed bank's 346 branches in Alabama, Florida, Georgia, Nevada and Texas will reopen at the normal times starting on Saturday as offices of Winston-Salem, N.C.-based BB&T.
The FDIC has approved the sale of Colonial's $20 billion in deposits and about $22 billion of its assets to .
Regulators also closed four other banks: , based in Phoenix; Union Bank, based in Gilbert, Ariz.; , based in Las Vegas; and Dwelling House Savings and Loan Association, located in Pittsburgh.
The closures boosted to 77 the number of federally insured banks that have failed in 2009.
Old Banks, New Lending Tricks
Lenders haven't sworn off risky financial products. They've come up with a slew of new ones
That didn't take long. The economy hasn't yet recovered from the implosion of risky investments that led to the worst recession in decades—and already some of the world's biggest banks are peddling a new generation of dicey products to corporations, consumers, and investors.
In recent months such big banks as Bank of America (BAC), Citigroup (C), and JPMorgan Chase (JPM) have rolled out newfangled corporate credit lines tied to complicated and volatile derivatives. Others, including Wells Fargo (WFC) and Fifth Third (FITB), are offering payday-loan programs aimed at cash-strapped consumers. Still others are marketing new, potentially risky "structured notes" to small investors.
There's no indication that the loans and instruments are doomed to fail. If the economy keeps moving toward recovery, as many measures suggest, then the new products might well work out for buyers and sellers alike.
But it's another scenario that worries regulators, lawmakers, and consumer advocates: that banks once again are making dangerous loans to borrowers who can't repay them and selling toxic investments to investors who don't understand the risks—all of which could cause blowups in the banking sector and weigh on the economy.
CDS-LINKED CORPORATE CREDIT LINES
Some of Wall Street's latest innovations give reason for pause. Consider a trend in business loans. Lenders typically tie corporate credit lines to short-term interest rates. But now Citi, JPMorgan Chase, and BofA, among others, are linking credit lines both to short-term rates and credit default swaps (CDSs), the volatile and complicated derivatives that are supposed to act as "insurance" by paying off the owners if a company defaults on its debt. JPMorgan, BofA, and Citi declined to comment.
In these new arrangements, when the price of the CDS rises—generally a sign the market thinks the company's health is deteriorating—the cost of the loan increases, too. The result: The weaker the company, the higher the interest rates it must pay, which hurts the company further.
The lenders stress that the new products give them extra protection against default. But for companies, the opposite may be true. Managers now must deal with two layers of volatility—both short-term interest rates and credit default swaps, whose prices can spike for reasons outside their control.
Making matters more difficult for corporate borrowers: high fees. Banks are raising their rates for credit lines across the board—but the new CDS-based credit lines cost far more than the old lines. FedEx (FDX) could end up paying $1.9 million to $3.6 million a month if it decides to tap a new line from JPMorgan and Bank of America. On its previous line with JPMorgan, FedEx would have paid about $540,000.
Yet many companies have little alternative. With corporate credit remaining tight, banks increasingly are steering borrowers to the CDS-linked loans. All told, lenders have handed out nearly $40 billion worth this year—roughly 70% of the total in credit lines extended to borrowers in fairly good standing. That's up from around 14% in 2008. FedEx, United Parcel Service (UPS), Hewlett-Packard (HPQ), and Toyota Motor Credit have all taken the plunge. "It wasn't our idea," says a UPS spokesman. "The banks pulled back from offering set rates."
BIG BANKS OFFERING PAYDAY LOANS
At the other end of the borrower spectrum, big banks are entering another controversial arena: payday loans, whose interest rates can run as high as 400%. Historically the market has been dominated by small nonbank lenders, which mainly operate in poor urban centers and offer customers an advance on their paychecks. But big lenders Fifth Third and U.S. Bancorp (USB) started offering the loans, while Wells Fargo continues to boost its payday-loan program, which it began in 1994.
More big banks are getting into the market just as a recent flurry of usury laws has crippled smaller players. In the past two years lawmakers in 15 states have capped interest rates on short-term loans or kicked out payday lenders altogether. The state of Ohio, for example, has imposed a 28% interest rate limit. But thanks to interstate commerce rules, nationally chartered banks don't have to follow local rules. After Ohio limited rates, Cincinnati-based Fifth Third, which has 400 branches in the state but also operates in 11 others, introduced its Early Access Loan, with an annual interest rate of 120%. "These banks are skirting state laws," says Kathleen Day of advocacy group Center for Responsible Lending. Says a spokeswoman for Fifth Third: "Our Early Access product fully complies with federal regulations and applicable state regulations."
( translation " our mafia criminal banks will do as they please, we are loan sharks, get it?
GOT IT G )
Feds total faliure in protecting consumers.
Under President Obama's proposal for financial regulatory reform, the Fed could be given expanded oversight powers to go with its mandate to ensure price stability and full employment. But at the same time, the Obama plan would strip the Fed of its existing consumer protection authority and give those responsibilities to a new agency.
Federal Reserve is an abysmal and total failure, NO consumer protection.