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60 Minutes Goes Behind the Scenes of a Bank Failure

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60 Minutes followed the FDIC on the February 27th closure of Heritage Community Bank. I was surprised to see how many agents were involved in the closure of this small bank. According to the report, a team of nearly 80 were involved in the Friday evening take-over of the bank's 4 branches. A few days before the closure, the FDIC held a secret auction to find a buyer of the bank. As is typical, FDIC did find a buyer. MB Financial Bank won the auction, and it agreed to assume all deposits of Heritage Community Bank, including deposits over the FDIC limits.

60 Minutes also showed reaction of some customers when the bank opened Saturday. One came in with a suitcase with the intent to cash out his deposits. The FDIC agent was able to calm his worries, and he decided to leave his deposits at the bank.

The 60 Minutes reporter Scott Pelley also interviewed the FDIC Chairman, Sheila Bair. When asked about Citibank, Bair was careful not to give any hints of a take-over, but she did express concern about mega-banks. I think it's likely we'll see new regulations in the next few years with more limitations on bank sizes.

To review the recent bank closures and to learn about FDIC rules, refer to the following:

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Comments
19 comments.
Comment #1 by Anonymous posted on
Anonymous
Educational yet very scary!

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Comment #2 by Anonymous posted on
Anonymous
Good article from last year on same topic - http://online.wsj.com/article/SB121262738508347067.html

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Comment #3 by Anonymous posted on
Anonymous
I actually worked for a small independent bank in OC (CA) in the late 80's. The bank was closed on a Friday night and there were no acquirers, so an FDIC insured deposit payout occurred. I was the bank's controller and my accounting dept. stayed in the wind-down for about 6 months after the closing date.

I later worked for the RTC and was involved in closing S&L's, specializing in REO real estate accounting. Our Newport Beach, CA RTC office was staffed with many former bank/S&L employees. We knew what it was like and how you feel to work for a closed institution.

Based upon my experiences, this article is very accurate and honest.

OC Steve

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Comment #4 by Anonymous posted on
Anonymous
SunTrust is stealing thousands of $'s from me. Stay away from this bank. They operate a criminal enterprise. Bunch of Thieves.

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Comment #5 by Avi (anonymous) posted on
Avi
Very interesting video. Thanks!

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Comment #6 by Anonymous posted on
Anonymous
Stealing from you? Are you referring to account fees and other charges in the bank's schedule of fees? Are you referring to interest borrowing rates? I have had an account (no loan) with them since 1996. They have never charged me anything since it was opened. I did get a service charge on one statement once, but got it refunded when they incorrectly did not link my accounts. They do pay very little interest on the accounts though (if you want to consider that highway robbery).

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Comment #7 by O-Qua Tangin Wann (anonymous) posted on
O-Qua Tangin Wann
Thank you, Banking Guy, for letting your readers know about the 60 Minutes piece.

I watched it online at CBS, thanks to you letting us know.

Great story. Very entertaining and informative.

It looks like the FDIC is a first-class operation, and well-run. Obviously the FDIC is not a government agency, but an independent agency backed by the government should the agency run out of money. If the FDIC was a government agency, there is no way these bank failures would go down so smoothly.

~O-Qua Tangin Wann

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Comment #8 by Anonymous posted on
Anonymous
"the FDIC is a first-class operation"

Uh, the TV was there.

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Comment #9 by Anonymous posted on
Anonymous
As OC Steve commented from fisrt hand experience, the article was very accurate. So the FDIC is a "first class operation" on and off the TV cameras. At least once acgency has it right!

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Comment #10 by Sofa King Frustrated (anonymous) posted on
Sofa King Frustrated
To Anonymous at 2:10 a.m.:

Name one government agency that could close an institution that holds hundreds of millions of dollars and then make all that money available the following day without any interruption or red tape. Come on, are you distorted in your thinking?

Think about it: Your bank is closed at night, but by the next morning your checks, ATM card, and online banking still works the exact same way. First class indeed!

And did you not listen to the head of the FDIC being interviewed? She came across as intelligent and knowledgeable, and with good opinions and recommendations. First class indeed.

If the entire government was run like the FDIC, we'd all be better off.

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Comment #11 by Anonymous posted on
Anonymous
Excuse me, if the FDIC was doing their job in the first place, banks would not be failing.

Banks are not healthy one day and insolvent the next. It takes some time for bank mismanagement to reach point of no return, and there are plenty of warning signals along the way.

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Comment #12 by Anonymous posted on
Anonymous
FDIC lovers sure are blind.

It's TV. Media. Lies.

Since you didn't get it the 1st time.

Do you know what goes on in backrooms?

No. "the FDIC is a first-class operation" is a joke.

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Comment #13 by Anonymous posted on
Anonymous
"If the entire government was run like the FDIC, we'd all be better off."

You are deluded. The entire government is run like the FDIC, that's the problem you ****.

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Comment #14 by Anonymous posted on
Anonymous
The FDIC's job is not to prevent bank failures, it's to protect depositors.

Preventing bank failures is the job of bank management.

Speaking of bank management, the posts above this one sound like disgruntled ex-managers of closed banks.

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Comment #15 by Anonymous posted on
Anonymous
Showed up with a suitcase? That's really funny. Imagine the risk of carrying that thing home...

I must admit I do have complete faith in the FDIC. Fortunately I have a Salem Five Account, so there's DIF there too.

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Comment #16 by Anonymous posted on
Anonymous
The FDIC looks to be like an independent agency (not a true government agency) similar to Fannie Mae, Freddie Mac, and Sallie Mae. Those three institutions are in a boatload of financial problems and in need of a federal bailout. I am a Federal employee who works in an agency that handles the big bucks for the government and if it went under, the whole economic landscape of this country would change.

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Comment #17 by Anonymous posted on
Anonymous
I never saw the FDIC as an examiner of the banking system. I thought that role was delegated to the Office of Comptroller of Currency (OCC) for commercial banks and the Office of Thrift Supervision (OTS) for savings banks (these used to be the old Savings and Loans). I saw the FDIC role like an insurance company that steps in when a company defaults (like when a corporate or municipal debt defaults and a private insurance company steps in). Remember when the Orange County debt in California that defaulted several years ago? A private insurance company had to step in and cover the principal and interest.

http://www.occ.treas.gov/aboutocc.htm

http://www.ots.treas.gov/?p=OTSProfile

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Comment #18 by Anonymous posted on
Anonymous
The only thing I can come up with while watching Sheila Bair with 60 Minutes is: PRINTING PRESS!

She kept repeating “….insurance….insurance…..”.
Everything has its limit including insurance.

Tell that to my associates who lost money with the collapsing of IndyMac.

http://www.obama2009plans.com/sitemap.html

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Comment #19 by Anonymous posted on
Anonymous
The FDIC deposit "insurance" is not insurance. When you are given fire insurance, the agent promises you up front how much insurance you have. When you get your deposit "insurance", you only have a suggestion on how much coverage you have. Almost all the time for almost all the depositors, your insurance is good, but for some poor unlucky saps (as in a few depositors at Indymac Bank), who misunderstood the rules, had a bank error in documenting the account, or just had a beneficiary die at the wrong time, they lose the lottery and some thousands or hundred of thousands of dollars.

When you hand over your money to the bank you can't call the FDIC and get a non-hedged answer binding on the FDIC about whether your insurance is good for your entire balance, You have to wait until the bank fails and then find out. Should you have to wait until your house burns down or your car get hit to find out if you have enough coverage? What is so hard about asking the FDIC and the bank officers to get together and agree up front how much your insurance on your CD is and stick to their agreement?

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