Word: fdic
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...shore each other up. But the combined company, First RepublicBank, lost nearly $2.3 billion in the first half of this year and showed no signs of recovery. Last week's huge commitment, coming on top of earlier Texas rescues, is likely to stir debate over the adequacy of the FDIC's $18 billion insurance fund...
...Paul Horvitz, a professor at the University of Houston: "The merger may turn out to have been the worst business decision ever made." Worried First RepublicBank's depositors have pulled some $2 billion out of their accounts this year. If First Republic were to fail, it could cost the FDIC $5 billion to restore the bank's financial health. That would make the rescue more expensive than the $4.5 billion bailout of Continental Illinois...
Federal officials are still trying to work out a successful rescue package for First City. Under a plan announced last September, the FDIC said it would pump $970 million into First City, but only if holders of the bank's bonds agreed to sell their securities for up to 45 cents for every $1 of face value. Noteholders were supposed to exchange 90% of the bonds for cash by March 8. But many of them are demanding a better deal, and when a one-week extension passed last week, only 51% of the securities had been redeemed. Stalling, First City...
...small institutions and stunting the growth of larger ones. Earlier this month federal regulators closed nine insolvent banks in a single day; during all of 1987 they expect to shut down nearly 200, a post-Depression record. Says L. William Seidman, chairman of the Federal Deposit Insurance Corporation (FDIC): "The banking industry will have its worst year since...
...course, a hard-edged manager may be just what First City needs. Despite a partial recovery in petroleum prices this year, the Texas economy is still stagnant and oil-patch lending remains a risky business. The FDIC has already rescued eleven Texas banks, while 38 others went belly up. Last week, as Abboud set up temporary quarters in a First City Tower conference room, he said he will aggressively seek new business, and predicted that First City will be profitable "very shortly" after the influx of FDIC and private funds. "As this bank emerges, it's going to be formidable...