Tags: Private | Investors | Buying | Failed | Banks

Report: Private Investors Buying Failed Banks

Tuesday, 01 Jun 2010 09:31 AM

Takeovers of failed banks reportedly suggest that stronger financial institutions and investors see value in failed U.S. banks.

The trend is easing pressure on the FDIC, which has had to shoulder the cost of failures through its deposit insurance fund, causing the fund to sink into the red.

Healthy banks and investors who specialize in buying distressed companies are swooping in, looking to buy lenders inexpensively.

More buyers are showing up at FDIC auctions — and to avoid a bidding frenzy, some are doing deals with little or no government help, the New York Times reports.

“We have been out of the recession long enough that it is starting to filter into the banking system,” FDIC head Sheila Bair said in a recent statement.

Not long ago, analysts predicted that the financial crisis and recession might claim 1,000 of the nation’s 8,100 lenders. Now, they foresee perhaps 500 or 750 failures.

Now, some banking analysts say the worst is over.

“Without a doubt, there is more confidence than a few months ago,” said Bharat B. Masrani, the head of TD Bank’s United States operations. “There is more transparency and confidence in the ultimate losses of these institutions.”

However, bank investor Wilbur L. Ross isn’t worried about running out of failed banks.

“The only question is how much investor demand there will be,” Ross says.

The government's list of troubled banks climbed to 775, the highest level since 1992 in the first quarter, although the pace of growth moderated, CNN Money reports.

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Takeovers of failed banks reportedly suggest that stronger financial institutions and investors see value in failed U.S. banks. The trend is easing pressure on the FDIC, which has had to shoulder the cost of failures through its deposit insurance fund, causing the fund to...
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2010-31-01
Tuesday, 01 Jun 2010 09:31 AM
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