I was checking the various blogs I read and noticed that Calculated Risk posted on another bank failure. New Frontier Bank of Greeley, CO has failed. The bank had total deposits of $1.5 billion and the estimated hit to the FDIC fund is $670 million. This is big news. In fact, if you just look at the press releases, you’ll notice how big this is. Check the New Frontier press release and the Cape Fear press release from earlier today. Remember a while ago that I commented on a Krugman clip and said:
As far as Krugman’s specific comments in the actual video, some of them are factually incorrect. Particularly, his comments on nationalization and receivership. He makes some absolute claims (such as saying that the FDIC doesn’t close a failed bank … this is one of the three officially stated options, though it still involves making the depositors whole) that are incorrect, but they aren’t important.
Well, guess what? It appears as if the FDIC is going to close a failed bank.
This language says “you are screwed”:
Customers with accounts in excess of $250,000 should contact the FDIC toll-free at 1-800-830-4705 to set up an appointment to discuss their deposits. This phone number will be operational this evening until 9 p.m., MDT; on Saturday from 9 a.m. to 6 p.m., MDT; on Sunday from noon to 6 p.m., MDT; and thereafter from 8 a.m. to 8 p.m., MDT. Customers who would like more information on today’s transaction should visit the FDIC’s Web site at http://www.fdic.gov/bank/individual/failed/newfrontier.html.
Beginning Monday, depositors of New Frontier with more than $250,000 at the bank may visit the FDIC’s Web page “Is My Account Fully Insured?” at http://www2.fdic.gov/dip/Index.asp to determine their insurance coverage.
Yeah, that’s bad. The title of the press release itself spells out how messy this bank closure is:
FDIC Creates a Deposit Insurance National Bank to Facilitate the Resolution of New Frontier Bank, Greeley, Colorado
“Deposit Insurance National Bank?” What does that mean? Why isn’t it New Frontier Federal Something Something? I’m curious. Apparently the naming convention changes when things are truly f*cked (see IndyMac). The press release gives some more info:
New Frontier Bank, Greeley, Colorado, was closed today by the State Bank Commissioner, by Order of the Banking Board of the Colorado Division of Banking, which then appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC created the Deposit Insurance National Bank of Greeley (DINB), which will remain open for approximately 30 days to allow depositors time to open accounts at other insured institutions. At the time of closing, the receiver immediately transferred to the DINB all insured deposits of New Frontier, except for brokered deposits, certificates of deposit (CDs) and individual retirement accounts (IRAs). The receiver also transferred to the DINB all secured public unit deposits. Under the FDI Act, the FDIC may create a deposit insurance national bank to ensure that depositors have continued access to their insured funds where no other bank has agreed to assume the insured deposits.
Bank of the West, San Francisco, California, was contracted by the FDIC to provide operational management of the DINB. The main office and two branches of New Frontier will open on Monday, April 13, 2009. Banking activities, such as direct deposit and writing checks, ATM and debit cards, can continue normally for former customers of New Frontier during the 30-day transition period. It is also important to note that New Frontier official checks will continue to clear and will be issued to customers closing accounts.
All insured depositors of New Frontier are encouraged to transfer their insured funds to other banks. They may do so by asking their new bank to electronically transfer their deposits from the DINB or by writing checks for the amount in their accounts.
Wait, you encourage people to transfer their deposits elsewhere? 30 days? This is bad. The FDIC didn’t even have this wording in the IndyMac press release. So … yeah, bank closure.
