Article

2009-08-02 Economy

Guaranty Bank is hardly a household name. But the Austin, Texas-based thrift's looming failure is shaping up as a big headache for bank supervisors -- not to mention a black eye for Carl Icahn and others in the smart money set.

Guaranty (GFG) could be soon seized by the government in what would be the biggest bank failure in a year that has already had 64 of them. Last week, the bank warned investors to expect a federal takeover after regulators forced a writedown of its risky mortgage investments and a bid to raise new capital failed.

Guaranty has $13.4 billion in assets and operates 160 branches in Texas and California -- two of the three best banking markets in the nation, thanks to their size and population growth.

But the bank's capital problems and its smallish, scattered network of branches could detract from Guaranty's appeal, making it tough for regulators to find a buyer quickly -- or without substantial federal subsidies.

"This may not be closed as quickly as you think, since it will require bids and rebids," said Miami banking consultant Ken Thomas.

Posted by Fred 2009-08-02 00:00|| || Front Page|| [11128 views ] Top

#1 I have seen some concern that in mid-September there is going to be a banking crisis, because the "close five banks a week" soft landings done so far this year are going to suddenly turn hard, with lots of banks closing, exceeding the ability of the FDIC to quickly clean up the mess.

The "bad case" is a national bank holiday in the last week of September, lasting from 4 - 9 days including two weekends. So once again, the advice is to have a few thousand dollars in a safe place at home, so you don't get caught short.

Economically, it is expected to be a hard fall, which could turn into a "third wave" drop of the stock market, which is typically the worst drop in a recession.

Posted by Anonymoose 2009-08-02 10:34|| 2009-08-02 10:34|| Front Page Top

#2 I'd say we are about June 1930 on the Great Depression timeline.

Posted by phil_b 2009-08-02 12:52|| 2009-08-02 12:52|| Front Page Top

#3 The good thing is that no country is on the gold standard so it's easy to offset deflation (from bank collapses).

The bad thing is that it's too tempting for governments to ruin the economy by borrowing and inflating.

Posted by Bright Pebbles 2009-08-02 13:18|| 2009-08-02 13:18|| Front Page Top

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