Moody’s downgraded three major banks, saying it was less likely the U.S. government would come to their rescue in the event of a new problem in the financial system. Worries about banks, their fading political support, and their potential exposure to sovereign debt helped drag world stock markets lower this week.
Bank of America is taking a page from the FDIC’s playbook in the way it is packaging and selling a portfolio of troubled loans. With its market capitalization having fallen below $64 billion, the bank says issuing new stock is not an option, so it has no choice but to continue to sell assets to raise capital.
A billion-dollar bank failed tonight in Virginia, and a quarter billion-dollar bank in California. The Virginia bank closed by state regulators was Bank of the Commonwealth, based in Norfolk, with 21 branches. North Carolina-based Southern Bank and Trust Company is assuming the deposits and purchasing 94 percent of the assets. Bank of the Commonwealth had been listed as critically undercapitalized by the Fed since July. The SEC and a federal grand jury had been investigating the bank after the abrupt departure of its president in December. The bank had lost $100 million to bad loans since 2008.
In California, state regulators closed Citizens Bank of Northern California, with 7 branches. Its deposits and assets are going to Tri Counties Bank.
The NCUA placed Chetco Federal Credit Union, of Oregon and California, into conservatorship. In conservatorship, a credit union continues to operate with management support from the NCUA. The credit union has 32,435 members.