Colonial Bank: Can an Insolvent FDIC Take One More Hit?
Cornified for your viewing pleasure
don't want to hurt your innocent eyes or anything...
Holy crap, the DoJ is in on this? I'm impressed. Sort of. I still want to know why SIGTARP raided Colonial offices when no TARP money actually went to the "sucking hard" bank. Barofsky's people are still keeping quiet and the details keep pouring in pile after steaming pile.
Colonial BancGroup Inc (CNB) said it faces a criminal probe by the U.S. Department of Justice (DoJ) related to accounting irregularities at its mortgage lending unit, and the struggling lender warned it may be put under receivership.
In a regulatory filing, the company said the Alabama State Banking Department may appoint the Federal Deposit Insurance Corp as receiver or conservator for its banking unit after August 12.
Earlier this week, the agency that investigates misuse of U.S. banking bailout money raided Colonial's mortgage warehouse lending division in Orlando, Florida.
The U.S. Securities and Exchange Commission also issued subpoenas to the company seeking disclosures related to its participation in the U.S. Treasury Department's Troubled Asset Relief Program (TARP) and its accounting for loan-loss reserves.
Colonial announced in December that it was to receive $550 million in TARP money. Shareholders subsequently filed a class action lawsuit accusing Colonial of failing to disclose that the TARP money was contingent on the company raising $300 million in private financing.
Taylor, Bean and Whitaker Mortgage Corp, the 12th-largest U.S. mortgage lender, had offered $300 million to help keep the troubled Montgomery, Alabama-based lender afloat, but the agreement fell apart last week.
In the following week, Taylor Bean shut down its mortgage lending operations after the Federal Housing Administration barred it from making loans that the agency insures.
The DoJ's allegations of irregularities relate to more than one year's audited financial statements and regulatory financial reporting, Colonial said in the regulatory filing.
Colonial said it intends to cooperate with the investigation.
The company operates 355 branches in Florida, Alabama, Georgia, Nevada and Texas and has over $25 billion in assets. If it fails, it would be the largest failure this year.
The company said it continues to explore all possible capital-raising alternatives to comply with the regulatory orders.
Colonial did not immediately return calls seeking comments. The State of Alabama Banking Department and the FDIC, which insures deposits of up to $250,000 per account, declined to comment.
In June, the banking unit had agreed to a cease-and-desist order with regulators, requiring the bank to increase capital levels and reduce problem assets, among other things.
Oh yeah? What is the FDIC going to do? As I said today over at Going Concern, the FDIC may need to seize itself before too long, and it is my humble opinion that it cannot possibly digest a failure like CNB.
It is also my humble opinion that the shit hasn't even begun to hit the fan on this.