Buried in the brouhaha over the $20 billion bailout of Citigroup last week was U.S. Bancorp’s takeover of the failed Downey Savings and Loan and PFF Bank and Trust, two of the most prominent financial institutions based in Southern California. Downey was the third-largest bank to collapse this year, behind WaMu and IndyMac. PFF had been in an agreement to be acquired by privately held banking holding company FBOP, but that deal was scrapped when PFF went under.
Under the terms of the new takeover deals, US Bancorp will assume the first $1.5 billion of Downey’s loan losses, and the first $100 million of PFF’s. The FDIC, which assisted in the transaction, will help cover all losses beyond those figures. A third institution, Georgia-based The Community Bank, also failed last week. Virginia-based Community Bankers Trust took over its branches and deposits, with the FDIC on the hook for nearly $600 million of the failed bank’s assets.
In addition to the aid promised to US Bancorp (if needed), the FDIC has assumed approximately $6 billion of assets from failed banks in the fourth quarter alone. (Nine banks have collapsed so far in Q4. That number matches 3Q’s total, which had been the highest since 1993.)
The FDIC typically securitizes and sells pools of loans and problem assets of failed financial institutions in auctions among other banks. However, with the amount of these assets on its books ballooning, the agency announced on Wednesday that it will open up the process to buyers that do not have bank charters. To help grease the wheels, the agency has said it will potentially accept abbreviated applications and could grant conditional deposit insurance to interested parties. CB Richard Ellis, one of the largest real estate brokerages in the nation, will appraise, manage, lease, and sell any US real estate that the agency has assumed ownership of as it looks for buyers.
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