The U.S. Senate is looking into international money laundering activities that may have occurred at HSBC. The investigation of the bank grew out of its investigation of the illegal drug trade between the United States and Mexico. According to a Reuters report, an investigative report from a Senate panel is expected in the spring.
There are conflicting reports on attempts to negotiate a foreclosure fraud settlement. It appears, though, that the giant banks will ultimately refuse to settle because states are legally unable to provide the scope of legal immunity that the banks are seeking.
The Justice Department today launched a new investigation of mortgage-backed securities with subpoenas to 11 financial institutions, with more to follow in the coming days.
The first billion-dollar bank failure of 2012: Tennessee Commerce Bank, of Franklin, Tennessee. The bank’s holding company last week retracted its 2010 financial statements (and by implication, all its recent reports) and warned about the risk of bankruptcy after discovering problems in its financial records. The problems were discovered in a “forensic review” of its small-ticket specialized equipment portfolio and resulted in $46 million in charges, equal to 4 percent of the bank’s assets.
The bank’s problems may have been more serious than this, though. Tennessee Commerce Bank, along with at least three other banks, was caught up in the Thanksgiving weekend bankruptcy of Citizens Corp., parent company of Financial Data Technology Corp., a transaction processor. Citizens Corp. and a web of affiliated companies had been stung by a series of bungled acquisitions. To finance the acquisition of one troubled bank, Oakland Deposit Bank, the companies had used two banks they owned as collateral, and those banks became assets of Tennessee Commerce Bank (and now, of the FDIC). Another company in the group was a fund for purchasing distressed assets from banks, and it is said to be in severe financial distress itself as a result of its purchases. Citizens Corp. alone owed Tennessee Commerce Bank $17 million, and it is believed that the affiliated companies many also owe the bank substantial sums. That would mean the bank had more than 2 percent of its assets tied up in one financial train wreck, a situation a bank can expect to survive only if little else goes wrong at the same time. And now, with the bank in liquidation, the entire financial empire surrounding Financial Data Technology Corp. could simply crumble. At the least, the FDIC will see if it can take ownership of Financial Data Technology Corp. and its affiliated companies to cover the parent company’s unpaid debts, which now are due to the FDIC.
Tennessee Commerce Bank will reopen on Monday as a branch of Republic Bank & Trust Company, which is taking over the deposits and purchasing 18 percent of the assets. The acquisition gives the Kentucky-based bank its first footprint in the neighboring state of Tennessee. With so many of the failed bank’s assets in legal and accounting limbo, the FDIC is retaining most of the assets for now.
There was a second bank failure in Tennessee, a state that until this point had sidestepped the current wave of bank failures. Knoxville-based BankEast closed. It had 10 branches and $269 million in deposits. It had been operating under a prompt corrective action order since last month. The chairman of BankEast was previously the state’s top bank regulator. U.S. Bank is taking over the deposits and purchasing the assets. In a statement, U.S. Bank says it will keep all of the branches open.
In Florida, First Guaranty Bank and Trust Company of Jacksonville failed tonight. It had 8 locations and $350 million in deposits. CenterState Bank of Florida is taking over the deposits and purchasing the assets. The acquisition represents a geographical expansion for CenterState. CenterState had already agreed to purchase 7 of the failed bank’s branches, but that deal never closed, and could have been blocked by regulators because of the quality of the assets involved. Borrowers had stopped making payments on nearly a third of the bank’s loans.
A smaller bank failed tonight in Minnesota. State regulators closed Patriot Bank Minnesota, in the extended area north of St. Paul that has seen more than its share of bank failures. It had 3 locations and $108 million in deposits. First Resource Bank is taking over the deposits and purchasing the assets.
