Bank Failures

You can go for years not thinking about federal insurance on bank deposits - and then a bank failure reminds you of how important this protection can be. That happened last week, when regulators took over NetBank Inc., an Internet savings and loan based in Georgia. In a failure, customers whose deposits are fully covered by the Federal Insurance Deposit Corp. will have ready access to their funds. But if deposits exceed the insurance coverage, you may have to wait years to get your hands on the uninsured money, and even then you might not get it all back.

DOWNTOWN IS a lot safer than the suburbs, if you happen to be visiting a bank. Robberies of banks downtown fell nearly 70 percent, from 67 in 1996 to just 21 last year. Conversely, bank robberies in Baltimore County increased about 75 percent, from 74 in 1996 to 129 in 1997.Central District police Maj. Steven E. McMahon says downtown bank robberies decreased in part because arrests there are up, from 87 in 1996 to 98 last year.But he said another reason is better communication with police.

Accounting firm to use LotusIn a significant endorsement of Lotus Development's business-office software, Coopers & Lybrand, the accounting and consulting firm, has decided to adopt Lotus' products for use on all of the company's personal computers.Although the initial order is worth only about $10 million to the Lotus Development Corp., and analysts said the deal might eventually total $20 million or so, it is Lotus' biggest single-customer agreement yet. And it could have a broad impact because Coopers is an influential business consultant on the corporate use of information technology.

Of the people and politicians caught in the vortex of the bank failures and savings and loan scandal of the late 1980s, few emerged as unscathed as L. William Seidman, former chairman of the Federal Deposit Insurance Corp.He came to the agency that insures bank deposits in 1985 and guided it through six stormy years as scores of banks failed. Although his agency was not in charge of insuring the nation's savings and loan associations, he was one of the first government officials to warn the president and the public that a crisis loomed in that sector, too.Bald and blunt, Mr. Seidman was and is perfect for a compelling sound bite on the evening news.

WASHINGTON -- The Federal Deposit Insurance Corp. made more money than it spent last year, for its first surplus in five years.Unofficial figures show that deposit insurance premiums were about $6 billion, while bank failures cost the agency about $5 billion. The annual surplus -- of $1 billion -- is expected to rise to about $1.5 billion this year.In a year when banks earned record profits, the FDIC reduced its problem-bank list by 25 percent, to 863. Only 120 banks, with $46 billion in assets, failed last year -- about half what the agency predicted.

Insurance for mutual funds costly ideaIn the wake of the devastating bank failures of the Great Depression, there was enacted banking legislation in 1935 which established the Federal Deposit Insurance Corporation (FDIC).Before this, bank failures had resulted in financial disaster for many depositors. Many communities in which financial institutions had failed were left without viable banking facilities.Both of these were remedied by the establishment of the FDIC. Depositors are now protected up to $100,000, and banking facilities are assured even if the bank is insolvent.

After years of protecting large deposits from loss in bank failures, the Federal Deposit Insurance Corp. has changed its policy, and is now frequently protecting individual and business depositors only up to the insured maximum of $100,000 for each insured account. Hundreds of bank depositors have been unpleasantly surprised by the change.In theory, uninsured bank depositors have always been at risk when a bank fails, but until this year, the losses were infrequent because the FDIC usually found another bank to take over all deposits of the failed bank.

Here's a nutty notion: Bank failure as a bullish stock-market indicator.Don't laugh!That's how come respected banking expert Tracy Herrick, a director and adviser of San Francisco-based Anderson Capital Management, turned bullish on the market in early January, days before the powerful rally began.He told clients in a published report to start loading up on stocks the day Bank of New England officially failed, saying that bank calamities have been a reliable buy signal in the past.Just look at the explosion in stock prices that occurred shortly after Continental Illinois Bank ran into trouble in 1984, or after the one-two punch in 1982 of Chase Manhattan's Mexico bond crisis and the flop of Oklahoma's Penn Square.

WASHINGTON -- The nation's senior auditor said yesterday that the banking industry might be headed for a large taxpayer bailout.Some members of Congress and analysts of the nation's commercial and savings bank industry have made such warnings before.But the prediction by the comptroller general, Charles A. Bowsher, is significant because he is widely considered the most credible impartial voice in government.His early assessments of the problems of savings and loan institutions and later of the huge costs in that bailout have proved prophetic.

Just as the bank failures in the Depression years bred a generation of conservative bankers, the new banking crisis is creating a cautiousness among lenders that bankers themselves say may slow the flow of loans long after the recession ends.Many factors affect a bank's willingness to lend, from the health of the bank to the size of its underlying capital base. But none are as important as the mindset of the bankers themselves.And there is widespread evidence that that mindset has changed in a way that may transform banking for months or years to come.

Starbucks to close 7 Maryland stores Starbucks Coffee Company said this week it is closing 195 stores across the country, including seven in Maryland, as consumers worried about the economy continue to cut back on luxuries such as gourmet coffee. In the Baltimore area, the Seattle-based company will close a store at Westfield Annapolis mall as well as the location at 300 N. Charles St. in downtown Baltimore. Starbucks has more than 200 stores in Maryland. Andrea K. Walker China's reserves at $1.9 trillion BEIJING : China's central bank says its foreign exchange reserves rose 16 percent year-on-year to $1.954 trillion by the end of March.

FDIC Chairwoman Sheila Bair said yesterday in Baltimore that the one step the federal government still needs to take in this financial crisis is to stop unnecessary foreclosures. And it can do so, she said, by spending about $24 billion of the bank bailout money on a program to modify troubled loans. Bair, breaking with the Treasury Department, has been advocating for a program to keep homeowners out of foreclosure by modifying the interest rate or other terms of their mortgages. As part of that, the government would guarantee a portion of the loans in case the homeowner later defaulted.

Are things really that bad? Is this the worst situation we've faced since the Great Depression? Is there any way out? Those questions must be asked thousands of times a day in private and public conversations about the financial system and the economy. The Internet is filled with often bitter commentaries insisting that this time America has dug a hole from which there's no escape. That kind of talk is always out there, but it is becoming increasingly pervasive. It's also understandable given what the nation has suffered through in the past year: tumbling home prices, soaring mortgage defaults, the worst stock market decline since 2000-2002 and record oil prices.

Every Christmas, millions of Americans get a close look at the pain and hysteria of a run on a bank when George Bailey contemplates suicide after panicked customers demand their money from his tiny savings and loan in the Frank Capra classic It's a Wonderful Life. In the movie, George's friends and neighbors raise the money to pay depositors, and the bank is saved. Rules established to insure deposits and limit risks have made recent, real-life runs less painful. Now, investors have a different reason to be afraid.

You may not know it yet, but you're about to join Ben S. Bernanke and Henry M. Paulson Jr. in the effort to clean up toxic mortgages. They'll get the glory. You'll pick up the tab. How taxpayers will pay for dumb borrowing decisions and even dumber lending decisions is far from clear. But don't believe the Bear Stearns bailout is the only thing financial regulators have been cooking up. The mortgage crisis is too big for the remedies offered so far. You're the only thing left - or at least the only thing Washington can push around.

You can go for years not thinking about federal insurance on bank deposits - and then a bank failure reminds you of how important this protection can be. That happened last week, when regulators took over NetBank Inc., an Internet savings and loan based in Georgia. In a failure, customers whose deposits are fully covered by the Federal Insurance Deposit Corp. will have ready access to their funds. But if deposits exceed the insurance coverage, you may have to wait years to get your hands on the uninsured money, and even then you might not get it all back.

DOWNTOWN IS a lot safer than the suburbs, if you happen to be visiting a bank. Robberies of banks downtown fell nearly 70 percent, from 67 in 1996 to just 21 last year. Conversely, bank robberies in Baltimore County increased about 75 percent, from 74 in 1996 to 129 in 1997.Central District police Maj. Steven E. McMahon says downtown bank robberies decreased in part because arrests there are up, from 87 in 1996 to 98 last year.But he said another reason is better communication with police.

Accounting firm to use LotusIn a significant endorsement of Lotus Development's business-office software, Coopers & Lybrand, the accounting and consulting firm, has decided to adopt Lotus' products for use on all of the company's personal computers.Although the initial order is worth only about $10 million to the Lotus Development Corp., and analysts said the deal might eventually total $20 million or so, it is Lotus' biggest single-customer agreement yet. And it could have a broad impact because Coopers is an influential business consultant on the corporate use of information technology.

Insurance for mutual funds costly ideaIn the wake of the devastating bank failures of the Great Depression, there was enacted banking legislation in 1935 which established the Federal Deposit Insurance Corporation (FDIC).Before this, bank failures had resulted in financial disaster for many depositors. Many communities in which financial institutions had failed were left without viable banking facilities.Both of these were remedied by the establishment of the FDIC. Depositors are now protected up to $100,000, and banking facilities are assured even if the bank is insolvent.

Of the people and politicians caught in the vortex of the bank failures and savings and loan scandal of the late 1980s, few emerged as unscathed as L. William Seidman, former chairman of the Federal Deposit Insurance Corp.He came to the agency that insures bank deposits in 1985 and guided it through six stormy years as scores of banks failed. Although his agency was not in charge of insuring the nation's savings and loan associations, he was one of the first government officials to warn the president and the public that a crisis loomed in that sector, too.Bald and blunt, Mr. Seidman was and is perfect for a compelling sound bite on the evening news.