United Commercial Bank of San Francisco: the Crime Scene

SF Gate did the autopsy of San Francisco's United Commercial Bank - which I sort of took personally when it failed on November 6th - and this is so familiar that it's sad.

SF Gate:

United Commercial Bank of San Francisco liked to boast that it was the first U.S. bank to buy a bank in China. Instead it will go down in history as the first U.S. depository institution to fail after its parent company took money from the Treasury's Troubled Asset Relief Program.

As investigators seek to uncover the exact causes of the bank's death, some big questions remain:

-- Should the government have done more due diligence before investing $300 million worth of taxpayer money in parent company UCBH Holdings?

-- Would it have made any difference if the Federal Reserve had allowed China Minsheng Bank to acquire a controlling interest in UCBH?

-- What role did fraud play?

When regulators shut down United Commercial Bank on Nov. 6 , "it was like deja vu," says Richard Newsom, a retired West Coast bank and thrift regulator.

United Commercial Bank grew from the ashes of United Bank, a San Francisco thrift that failed in the mid-1980s as a result of "reckless construction lending," Newsom says.

Likewise, the FDIC cited commercial real estate and construction loans as a cause of United Commercial Bank's failure, along with "alleged fraud."

Fraud and CRE in the same cause of death? Fantastic.

In November 2008, UCBH got a $300 million investment from the TARP-funded Capital Purchase Program. Then-Treasury Secretary Henry Paulson stressed that this was a program only for "healthy" banks, but UCBH had already posted a small loss for the third quarter that ended in September 2008.

Although companies had to be recommended for the program by their primary regulators, ultimately it was up to the Treasury to approve or disapprove TARP investments.

Can someone please be sure to write off that particular $300 million in TARP money? I'd hate for any Treasury mathletes to mistakenly apply that towards the "deficit paydown" they are planning for any TARP money they manage to get back.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.


Osprey said...

This whole banking bs has been frustrating. I went through the Banking Crisis, Oil Bust, & Ag Crisis beginning in mid-1980s as an external bank auditor. Nothing has really changed, except the banks got bigger because that's what the FDIC wanted.

Prudent, conservative bankers are penalized and furious. I don't blame them. One of the "beginnings of the end" was the FDIC & other regulators going to "risk-based examinations" in the 1990s. This translates to "doing less examining". The regulators had no clue the banking system was about to implode and now CYA saying they didn't have "systemic risk authority", which they always had. What a joke...


Skeptical CPA also has lots of stuff on the magic of bank accounting. I'm not sure at what point we say "enough is enough" but apparently we haven't yet reached critical mass and will continue band-aiding things together until the entire thing implodes.

I guess that is the fundamental economic model from which this country is built otherwise why would we keep up such behavior?

You call it "frustrating" but I'd say "nauseating" is more the word. And it continues...

Anonymous said...

The people running the bank were crooks. Plain and simple. If a society can afford to put a cop on every street corner, there probably won't be any muggings. The reality is that no free society can afford to do so (and any free society should not want to do so). If you put a crook in charge of running a bank, guess what? He's probably going to rob the place. The wheels of justice turn slowly but they do turn.... especially in an election year when a bra'tha' has to make some hay while the sun is shinin'. Barry is slipping so were I his advisor, I'd be telling him to go for broke... start aiming for some high dollar targets and put some heads up on pikes.... Time to get down with your funky self and rev up the Dept. of Justice. It is a target rich environment, just tell Holder to start pointing that fucking bazzooka at a few assholes who deserve it and let 'em have it right between the eyes. Take 'em down and let the chips fall where they may... kill 'em all and let God sort 'em out.... But, I'm not his advisor.

Anonymous said...

“Hundreds of banks have failed in the financial crisis and the regulators need to blame someone,” attorney Steven Bauer told Bloomberg News. “Thomas Wu is counting on our justice system to clear his good name.”

yeah, yeah, yeah... prisons are full to the gills with nothing but innocent people... cry me a river.