Peregrine Financial founder Russell Wasendorf Sr. used customer funds as collateral for loans he took out from U.S. Bank, according to a lawsuit filed by Commodities Futures Trading Commission against the bank. If this were true, it would mean the bank took accounts belonging to one customer and used them for the benefit of another customer, and that would be every bit as serious as it sounds. However, we don’t yet know what documents are in the evidence against the bank, and a case like this can easily take a decade to be resolved in the courts.
The permanent austerity in Europe and the United States, undertaken to fund the bank bailouts of the past six years, is a disaster for younger workers. Look at workers under 25, and whole countries start to disappear. Spain and Greece are in the worst condition, with unemployment rates over 50 percent for workers under 25, but among the major countries in Europe, only Germany and the United Kingdom can claim a rate below 25 percent. The United States is faring better than Europe in this regard, but even here, the rate is a disastrous 16 percent. It will be hard to bridge the cultural gap that is developing between the generation that held jobs almost at will, roughly the older half of workers in these countries, and the younger workers among whom only the more fortunate can hold any job at all. Now the financial gap between generations will be growing larger as the U.S. Congress has voted to double student loan interest rates next month. Already banks are reluctant to make house and car loans to workers who hold unpaid student loans, and with workers paying twice as much in interest charges on student loans, their access to any other credit, beyond credit cards, may be delayed by years. Student loans are currently the only form of consumer credit that is growing rapidly in the United States.
Another Capital Bancorp Ltd. bank was shut down last night after the bank holding company’s legal challenge was denied. This time it was the FDIC liquidating 1st Commerce Bank, with a single location in North Las Vegas. One wonders if any more of Capital Bancorp Ltd.’s banking subsidiaries are not legitimately solvent, but hanging on only by procedural maneuvers. As for 1st Commerce Bank, its $20 million in deposits were transferred to California-based Plaza Bank in a deal that the FDIC estimates will cost it nearly half that amount.
Nevada had more than its share of bank failures with the rapid decline of real estate values around the periphery of Las Vegas, but it has fared better lately, with no banks failures for two years before this week.
Tonight the O.C.C. closed Mountain National Bank, which had 12 branches in Tennessee and $373 million in deposits. First Tennessee Bank is assuming the deposits and purchasing the assets. The failed bank had struggled for years with its commercial real estate portfolio. It had been operating under a series of regulatory orders since 2009.