BANK FAILURES "The Next Tsunami""

Tidal waves continue to hurtle through the banking industry

Manoeuvring a vessel with accuracy and precision through stormy waters is a fundamental skill, which most financial seaman acquire over time. But in the face of an all-out financial tsunami, those skills are of little use. This impending financial monster wave continues on a crash-course across America, leaving bank debris in its wake.

Bank insiders are reluctant to tell the public that the financial sector is still under tremendous pressure, with credit quality and toxic assets continuing to plague banks for the next 18 months to three years. Literally hundreds of banks will cease to exist over the next two years.

Commercial Real Estate will lead the next downturn - during the remainder of 2009 and the first half of 2010. Banks have tightened their credit criteria and hiked up fees to scandalous levels in an attempt to make back their losses and at the expense of the loyal customer. It appears the situation will get worse before it gets better.

Five institutions insured by the Federal Deposit Insurance Corp. (FDIC); two in Georgia and California respectively and one in Minnesota were closed Friday, bringing the total of bank failures for 2009 to 45. It is anticipated that over 100 banks will fail in 2009 alone.

Community Bank of West Georgia and Neighborhood Community Bank were both closed by the Georgia Department of Banking and Finance, which appointed the FDIC as receiver. Neighborhood Community Bank’s deposits will be assumed by West Point, Georgia-based CharterBank, which entered into a purchase and assumption agreement with the FDIC.

In California, Irvine-based MetroPacific Bank and LA’s Mirae Bank were closed by the California Department of Financial Institutions. The FDIC, again acting as receiver, entered into purchase and assumption agreements with SunWest Bank to assume MetroPacific’s deposits (minus those from brokers) and with Wilshire State Bank to assume all of Mirae Bank’s deposits.

The government's plan to enable banks to dump troubled assets is facing problems of its own. The Public-Private Investment Program (PPIP), like many of the government programs, have fallen short in their execution. So what will the Treasury do? Announce a new and improved PIPP to keep enthusiam running high? The Markets rallied in March when Treasury Secretary Timothy Geithner announced that plan and will likely rally again only to falter due to poor execution.