Some banks borrow, some bankrupt

By SCAN editors, with material from ProPublica, journalism in the public interest

Mark McQueen makes the point (see his post below or click here) that Canadian banks have had government help to contend with the recent financial tsunami just as their cousins down south have. But there's a world of difference between here and there in the extent of taxpayer help. Banks got about $15 billion from Ottawa, while the Troubled Assets Relief Program (TARP) in the U.S. provided $700 billion to those who fouled the credit ocean with toxic waste and set sail on it.
The irony may be that none of the Canadian Big Six — or indeed any of the four score deposit-taking institutions in Canada — was in danger of failing but no amount of Washington pump priming was able to prevent all manner of destruction among U.S. banks. The much-publicized New York invesment bank debacle is just the high end.
Fridays have become known as "bank failure day" in U.S. financial circles. Friday is the day the Federal Deposit Insurance Corporation (FDIC) tells the world how many U.S. banks have gone down the tubes that week.
Last week it was three, bringing the total for the year to 133. The FDIC insures deposits at the nation's 8,195 banks and savings associations. It's counterpart in Canada, the Canada Deposit Insurance Corporation (CDIC), has not had a single member failure in more than a decade. But CDIC has only 80 clients, less than 1% of the FDIC portfolio.

There's nothing without a silver lining, nor any ill wind that doesn't blow someone some good, or the yin flows to yang, or it's just the American way, but out of the banking wreckage new opportunities arise. While FDIC is paying US$250 million insurance claims to secure deposits at last week's three failed banks, all three were being snapped up by eager buyers.
In Florida, the 1st United Bank of Boca Raton assumed all the deposits of Republic Federal Bank of Miami. It also purchased $267.1 million of the failed bank’s assets including loans, cash and marketable investment securities. South Florida is a region where small banks are reeling from the consequences of aggressive lending into a real estate bubble. Sensing weak opposition and chances to score, a special meeting of 1st United shareholders last week approved an equity issue to increase capital available for acquisitions.
In Kansas, Arvest Bank assumed all of the deposits of 122-year old SolutionsBank. Arvest is owned by the family of WalMart founder Sam Walton. It is based in Arkansas and is already a regional player, with 220 branches spread over Oklahoma, Kansas, Missouri and Arkansas. Thanks to the misfortunes of others, it's now a bit bigger.

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