Colonial BancGroup + BB&T = Love Forever? Or a Sick FDIC Threesome?
Someone might want to forward this to the White House as it seems just a little fishy; I'm not sure if it's libertarian-minded BB&T utilizing the FDIC as an awfully anti-capitalist deep discount bank laundering vehicle or the manner in which Colonial collapsed. In fact, it could be any number of suspicious details surrounding this; the SIGTARP connection, TBW's deal gone awry, Colonial scraping at the bottom of the TARP barrel for a Treasury handout... A week after the news broke, I've got to admit that I'm still in that WTF stage and perhaps still a little disoriented by the bright lights and noise. Let's try to filter some of that out and see where we're at.
Tampa Bay's Venture couldn't have said it better (I'm partial to "Who is John Allison?" myself):
Barron's reports that North Carolina's BB&T -- which recently began crowing its initials stand for "Best Bank in Town" -- might make a good buyer. Citing the analysis of Fox Pitt Kelton, BB&T is relatively healthy and may view the addition of Colonial into the BB&T fold as an opportunity too good to ignore. Says Fox Pitt Kelton:"We assume that BB&T would be interested in acquiring Colonial if it is taken over by the FDIC and BB&T receives an adequate loss-sharing agreement."
What that means is that BB&T would wait for the feds to "fail" colonial and name the FDIC as receiver. Then a bank like BB&T would buy the remaining institution -- stripped of its worst assets -- for a modest sum.
Didn't that happen last year with WaMu and JP Morgan? And aren't there a whole shit ton of lawsuits raging in the courts as a result?
While BB&T may already be on my good side by virtue of its fantastically capitalist attitude alone, it gets better. Did you know they belong to my favorite Fed bank? CEO Kelly King sits on the Richmond Fed board, and Chairman Allison says regulation tends to "put balls and chains on good people, and bad things happen." I'm throwing up rainbows and glitter over here it'ssofreakingawesome.
So what gives, BB&T? Colonial? Really? That's your bright idea?
Analysts are already getting worked into a lather, giving BB&T a nice little stroke in hopes that a "favorable acquisition environment" will encourage this further. Sort of like zookeepers trying to get a pair of captive pandas to breed, I suppose, and I sincerely hope Richmond regulators don't find Colonial to be "scary and ugly" like they did Merrill Lynch. Burn!
What this means:
The FDIC has escaped from being exposed as insolvent. At least for now. It is doubtful that it can limp along much longer with nearly 2 full quarters left in the year and the worst of commercial real estate still waiting to rot off.
Richmond Fed has been set up once again. I'm no conspiracy theorist, of course, but if I were and subscribed to the crazy idea that Bank of America's Ken Lewis is being maliciously targeted for speaking "Bernaulson threatened me" out loud, I might start to wonder if BAC's regulator is somehow getting bitch-slapped by the Lewis backlash as well. Need I even bring up LandAmerica?
(possible scenario: maybe BB&T is bluffing, the analysts are stupid, and Colonial is going under whether Sheila Bair approves or not. Somehow I have a feeling Sheila's got her fingers crossed that the BB&T rumors are true - or rather, she's shopping around the useable bits of Colonial like a meth addict dropping off stolen Acuras at the chop shop. Poor CNB, going down as little more than spare parts and garbage.)
Who can say? All I can suggest at this point is to stay the hell away from both CNB and BBT. Unless you like playing with fire, in which case I wholeheartedly encourage you to go ahead and get burned.
CNB ended the day up 8.16%, BBT +0.35% with a pretty promising upward trend. Again, I'll be in the Hazmat suit in the bunker if anyone needs me. Touch this at your own risk.
(h/t to ML-implode for the inspiration to dig just a little deeper at the Colonial scab. Who knew it could be so much fun?)