More Banks Seized by the FDIC

Three More FDIC Bank Seizures

Three banks including the large California Downey Savings and Loan Association Downey has 12.8 billion in assets and is the third larget bank to fail this year. The other two banks being Washington Mutual and IndyMac. All three insitutions were large mortgage lenders focused on the California market. Downey was a major originator of option adjustable-rate mortgages. Option adjustable-rate mortgages allow borrowers to pay minimum payments on their mortgage each month, very similar to a credit card. Unfortunately, this sometimes allows borrowers to borrow more than than can afford, leading to higher incidence of default.

FDIC Chairman Shelia C. Bair has been the creative force behind various loan modifcation programs geared at helping homeowners. Downey along with PFF Bank and Trust, also a California based thrift with 3.7 billion in assets was sold to U.S Bancorp of Minnesota. The company agreed to absorb up to $1.6 billion in loan losses. The FDIC will absorb any additional losses.

U.S. Bancorp also agreed as a condition of the deal to offer loan modifications to Downey and PFF customers under an FDIC formula. Holders of about $1.9 billion in Downey mortgage loans who have fallen behind on their payments would now be eligible for reduced monthly payments to help them avoid foreclosure. The unprecedented move in connection with a bank failure expands the agency's controversial loan-modification program, which is opposed by other parts of the Bush administration.

The third failed bank, Community Bank of Loganville, Ga., was immediately sold to the Bank of Essex in Tappahannock, Va. Regulators have closed 22 banks this year, including 12 in the past three months and five in November.

More Layoffs Expected?

We are no where near the bottom and we all should be adjusting our spending habits and conserving our resources for a bumpy ride. Below are our current expected layoffs:

Company Number of layoffs

Wells Fargo                                        80% wholesale mortgage jobs
Associated Press                                 400
JPMorgan Chase                                  10%
Sun Microsystems                              6,000
Citigroup                                          53,000
BT Group                                           10,000
Circuit City                                         7,300
Deutsche Post                                    9,500
Nortel Networks                                1,300
Motorola                                            3,000
Ford                                             2,260
General Motors                                   1,900
Fidelity Investment                           1,288
Mattel Inc                                         1,000
Goldman Sachs                                  3,200
Merrill Lynch                                  10,000
Bank of America                                 7,500
Barclays                                       3,000
Wachovia                                         6,950
UBS                                                 2,000
Credit Suisse                                    1,500
Applied Materials                               1,800
Morgan Stanley                                4,000