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The La Coste National Bank, La Coste, Texas, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Community National Bank, Hondo, Texas, to assume all of the deposits of The La Coste National Bank. La Coste is approximately 15 miles west of San Antonio, TX.

The sole branch of The La Coste National Bank will reopen on Monday as a branch of Community National Bank. Depositors of The La Coste National Bank will automatically become depositors of Community National Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers should continue to use their existing branch until they receive notice from Community National Bank that it has completed systems changes to allow other Community National Bank branches to process their accounts as well.

This evening and over the weekend, depositors of The La Coste National Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of December 31, 2009, The La Coste National Bank had approximately $53.9 million in total assets and $49.3 million in total deposits. Community National Bank will pay the FDIC a premium of 0.51 percent to assume all of the deposits of The La Coste National Bank. In addition to assuming all of the deposits of the failed bank, Community National Bank agreed to purchase essentially all of the assets.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $3.7 million. Community National Bank’s acquisition of all the deposits was the “least costly” resolution for the FDIC’s DIF compared to all alternatives. The La Coste National Bank is the 18th FDIC-insured institution to fail in the nation this year, and the first in Texas. The last FDIC-insured institution closed in the state was Madisonville State Bank, Madisonville, on October 30, 2009.

In an article today we predicted that failures by small banks like these will become more and more common as the coming Commercial Real Estate crash gets close.

From the Wall Street Journal: Greek police say a bomb exploded Tuesday evening outside an office of JPMorgan Chase in Athens, the Associated Press reports. No one was hurt, according to the report.

“It was a time-bomb at JP Morgan’s offices in central Athens,” a police official told Reuters. “The explosion damaged the outside door and smashed some windows.”

A local newspaper reportedly received a warning call prior to the explosion, according to Reuters. Police had cordoned off the area after the newspaper received the warning call.

Police cars, ambulances and fire engines have blocked streets in the upmarket central district of Kolonaki, where JP Morgan’s Greek offices are situated, a Reuters witness said.

News accounts in recent weeks have detailed how Wall Street firms helped Greece doctor its balance sheets to lie to the European Union that it was in compliance with rules governing debts to GDP ratios:

Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and undermining the euro by enabling European governments to hide their mounting debts.

Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning. In early November — three months before Athens became the epicenter of global financial anxiety — a team from Goldman Sachs arrived in the ancient city with a very modern proposition for a government struggling to pay its bills, according to two people who were briefed on the meeting.

The bankers, led by Goldman’s president, Gary D. Cohn, held out a financing instrument that would have pushed debt from Greece’s health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards.

It had worked before. In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means.

Athens did not pursue the latest Goldman proposal, but with Greece groaning under the weight of its debts and with its richer neighbors vowing to come to its aid, the deals over the last decade are raising questions about Wall Street’s role in the world’s latest financial drama.

As in the American subprime crisis and the implosion of the American International Group, financial derivatives played a role in the run-up of Greek debt. Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere.

So a quick followup to the story we had yesterday, about Republican candidate for Texas Governor Debra Medina stating that Houston is technically bankrupt.  Turns out that a few months ago, a group of CPAs sent an open letter to the members of Houston’s City Government, as well as to major US newspapers.

In it, they don’t beat around the bush on their take of the city of Houston’s finances: Turns out, Houston is broke; it just hasn’t acknowledged it yet:

Read the rest of this entry »

“Houston is technically bankrupt”

That was the claim that Republican Gubernatorial candidate Debra Medina made last night at a press meeting after a primary debate.

Who knew?

In the vernacular, they call this “cliff diving”:

Ford Motor Co. on Monday reported a 32.4% drop in December U.S. sales
Chrysler U.S. December sales drop 53%
General Motors Corp. on Monday reported a 31% drop in December U.S. light vehicle sales
Toyota Motor Co. reported a 37% fall
Honda Motor Co. had a 35% decline

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Self-serving ad of the New Year

Would you drive to a restaurant, and ask the host(ess) if it’s a good time for you to eat out?  What do you think they’re going to say?

Wait. You say you think that’s stupid, and who would do that?  Well, apparently the National Association of Automobile Dealers (NADA) thinks that stupid person is you!

For the last few days, they’ve been running full page ads in some newspapers, that claim that “It’s the best time in years to buy a car.”

Granted, most stores make that claim at one time or another, but the idiocy of the ads rises to an new level. They are actually encouraging you to get your butt off your sofa, go to your nearest car dealer, and ASK YOUR DEALER IF HE THINKS YOU SHOULD BUY A CAR!

Anyone want to bet that he says “Yes”?

Now, I understand the desperation.  Just in the area where I live (North Texas), which actually has been one of the metropolitan areas that has been most spared by the current economic downturn, new car sales plunged 40% in November ‘08, the steepest one-month decline in 20 years, and a 23-year car dealer closed its doors and laid off its 55 employees 3 days before Christmas. Nationwide, things are probably worse, with 20,000 car dealer employees losing their job in October ‘08 alone, according to the U.S. Department of Labor.

Still, how about not insulting our intelligence?  Asking us to inquire from car dealers whether it’s in our best interest to buy a car is like asking us to trust a mortgage broker on whether we can afford a house: we’re not that stu–.

Never mind.

P.S. You can find the full page ads here.

Wed Sep 12, 2007 8:08 AM ET
By Mike PeacockLONDON, Sept 12 (Reuters) – Central banks are ready to prevent a major financial shock if necessary, Bank of England chief Mervyn King said on Wednesday, as U.S. Treasury Secretary Henry Paulson predicted no quick end to the credit crisis.

But King said ongoing market upheaval was caused by mispricing of risk and central banks had to be wary of moral hazard — encouraging investors to feel they can act without risk by stepping in every time things turn bad.

“If risk continues to be underpriced, the next period of turmoil will be on an even bigger scale,” King said in a submission to the British parliament’s Treasury Committee.

He added: “All central banks are aware that there are circumstances in which action might be necessary to prevent a major shock to the system as a whole.”

Central banks have poured cash into money markets over the past month in an attempt to ease a liquidity crunch, caused by banks’ reluctance to lend to each other due to uncertainty about which is exposed to U.S. subprime mortgage defaults.

The European Central Bank lent banks a record 75 billion euros in extra 90-day refinancing on Wednesday but brought little relief to one of the market segments most under pressure.

Demand for ready cash far outstripped supply with 140 banks bidding for a total of 139.0 billion euros.

Several central banks have also held back on previously predicted interest rate rises while the Federal Reserve is expected to cut next week.

The credit squeeze has convinced many analysts that the Fed will cut interest rates at its Sept. 18 meeting. Fed funds rate futures are pricing in a roughly 70 percent chance of a half-point cut, rather than the more normal quarter. “The growing economic risk, coupled with the de facto tightening in financing conditions, argue for a substantial cut in the federal funds rate target,” Goldman Sachs economists wrote in a client note. (Ed: In other words, cheap money for banks)

When John Talbott’s controversial book, The Coming Crash in the Housing Market, hit store shelves in 2003, the real estate industry – and everyone else who stood to profit from the dizzying rise in U.S. home prices – gave it a hostile reception.

“Real estate agents didn’t like it, mortgage brokers didn’t like it, commercial bankers didn’t like it, Wall Street didn’t like it,” he recalls.

“Even when I went on the talk-show circuit, you could tell the animosity in the anchor who was interviewing me because he had a big home and a big mortgage and didn’t want anybody suggesting prices might go down.”

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NEW YORK (Fortune) — Wall Street loves to talk about letting financial markets weed out the weak. But when the Street itself gets in trouble, it sticks out its little tin cup, asking for help. And gets it.

The subprime-mortgage-market meltdown is a classic example of the way small fry get devoured, but the whales of Wall Street get rescued. Here’s the deal: People with crummy credit who took out mortgages are being allowed to fail in record numbers. The mortgage companies that made those loans are being allowed to fail. The Street itself? It’s bailout city. Even before the Fed made a symbolic half-point cut in the discount rate, it and other central banks from Switzerland to Singapore were trying to rescue the Street by injecting hundreds of billions of dollars into the financial markets and announcing they will put up more, if needed.

Read the rest of this entry »

Financial markets have been clamoring for the Fed to cut its benchmark lending rate at its next rate-setting meeting on September 18.

But Fed policy-makers were clear to state that the central bank was not in the business to bail out investors who took risks.

Speaking in New Mexico, Dallas Federal Reserve Bank President Richard Fisher put it bluntly: “The job of the Federal Reserve is not to bail out risk-takers: You’re a big boy, you take risks, you bear the consequences.”

Reuters, 9/7/2007