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.
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.