Return of the Mac: A Recipe for Buying and Selling America's Failed Banks

Two of the America's top banking regulators - the OCC (Office of the Comptroller of the Currency) and FDIC (Federal Deposit Insurance Corporation) have widened the pool of buyers for failed banks by opening up bidding to both investor groups and individuals.

The bidding process was previously opened only to chartered banks and savings institutions but now virtually anyone can put up money to buy a bank. Open Sesame!

The recipe appears to have worked, with IndyMac being sold to a private group of investors (which included Michael Dell) for $13.9bn. (The Federal government took control of IndyMac in July 2008, a historical move documented in this CNN report entitle "The Fall of IndyMac"). The article also covers the rise of IndyMac and its asset class of "Alt A" loans (which has more relaxed documentation requirements than "A-paper" - considered to be "prime" lending).

FDIC puts 117 banks on the watchlist

FDIC (Federal Deposit Insurance Company) that insures deposits (generally up to a value of $100,000) has put 117 banks on their watchlist, for deficiencies in finance, operations or management that threaten their viability as a business. FDIC publishes its watchlist on a quarterly basis.

Failure to administer corrective action results in the bank being sold or taken over by FDIC, or combination of both (FDIC can take over a bank and then sell its assets e.g. takeover of IndyMac Bancorp (US mortgage lender) following its failure in July 2008.

To put this into perspective, during the S&L crisis of the late 80s and early 90s, about 1500 banks were on the watchlist (about 12 times as many as presently).