Nov. 10 Update: Two More Banks Fail; Govt. to Invest $40 Billion in AIGFranklin Bank, Security Pacific Become 18th & 19th Bank Failures of 2008
The Franklin Bank, a $5.1 billion asset bank in Houston, TX on Friday became the 18th failed bank of the year when it was closed by the Texas Department of Savings and Mortgage Lending. The FDIC was named receiver. Prosperity Bank, El Campo, TX assumed all of the deposits of Franklin Bank.
Right on the heels of that announcement came news of the year's 19th failed bank: Security Pacific Bank, a $561 million asset bank in Los Angeles, CA, which was closed by the Commissioner of the California Department of Financial Institutions. The FDIC was named receiver. Pacific Western Bank, a Los Angeles, CA agreed to assume all of the deposits of Security Pacific.
For more on what happens when one bank takes over the assets of another, see Anatomy of a Bank Acquisition: What Happens When the New Bank Moves in?
Fed Invests in AIG
On Monday morning troubled insurance giant American International Group (AIG) secured another $40 billion in financial assistance from the federal government in the form of restructured loan agreements and the purchase of preferred AIG stock by the U.S. Treasury Department. A joint announcement from the Federal Reserve and the Treasury Department of the aid comes after AIG announced it lost $24 billion in the third quarter.
Since the first bailout in September, aid to AIG is nearing $150 billion. As part of the new deal, AIG will freeze the bonus pool for its top 70 executives. Shortly after the first bailout of the insurance giant it was discovered that senior level AIG staff were continuing to spend on lavish trips, replete with limos, gourmet food and jets, drawing sharp criticism by industry and government leaders.
Auto Industry Next? Over the weekend, Democratic leaders in Congress asked the Bush Administration to give more help to the stumbling domestic automobile industry. Last week top auto makers posted the worst sales and earnings in a quarter-century. Democratic leaders have asked Treasury to consider expanding the $700 billion bailout program to include these manufacturers.
Markets Open Higher After a dismal performance last week, Wall Street is pointed toward a higher open on Monday with hopes that China's announced $586 billion financial stimulus program will aid a speedier recovery from the world's recession. China announced its plan that is aimed to boost its economy via subsidies, looser credit, spending, and tax cuts.
Mortgage-finance colossus Fannie Mae says it lost $29 billion in the third quarter, edging the troubled firm ever closer to having to dip into the $100 billion taxpayer fund that it secured in September. Much of the loss was attributed to a $21 billion non-cash charge for how the firm accounts for tax credits it is carrying. It says it is no longer confident it will post high enough earnings to take advantage of those tax credits.