Two More Failed Banks; Auto Bailout Decision AwaitedTwo more banks have failed and been closed by banking regulators. The Haven Trust Bank, Duluth, GA, was shut down by the Georgia Department of Banking and Finance, while Sanderson State Bank, Sanderson, TX was closed by the Texas Department of Banking. In both cases, the Federal Deposit Insurance Corp. (FDIC) was named receiver.
In the case of Haven Trust, Branch Banking & Trust (BB&T) of Winston-Salem, NC assumed all of the failed bank's deposits, including those exceeding the insurance limit.
Haven Trust was the 24th bank to fail this year had total assets of $572 million and deposits of $515 million. BB&T assumed all of the deposits for $112,000. It also bought $55 million of the failed bank's assets. The FDIC estimates that the cost to the Deposit Insurance Fund will be $200 million.
In the case of Sanderson State Bank, the Pecos County State Bank, Fort Stockton, TX will assume all of the failed bank's deposits.
Sanderson State, the 25th bank to fail this year, had total assets of $37 million and deposits of $27.9 million. The Pecos County State Bank will assume all of the deposits for a .55 percent premium and will also purchase $3.8 million of assets. The FDIC estimates the cost to the Deposit Insurance Fund will be $12.5 million.
Bush To Be Swift on GM, Chrysler Bailout Decision
President George Bush has signaled that his administration may use money from the $700 billion economic bailout fund to keep GM and Chrysler out of bankruptcy. Bush says a decision will not be a long process because of the fragility of the U.S. automakers' position.
If an agreement isn't made soon, GM, the world's largest automaker, and smaller Chrysler could be only weeks from bankruptcy. GM has lost nearly $73 billion since 2004 and has faced a 22 percent drop in U.S. sales in 2008. GM posted losses of $4.2 billion in the third quarter.
The Bush administration agreed Dec. 12 to consider dipping into the Trouble Asset Relief Program (TARP) funds after the Senate failed to reach a compromise on $14 billion aid package.
A report from the Center for Automotive Research shows that 2009 job losses from an automaker failure in 2009 would total 2.5 million to 3.5 million, including 1.4 million from industries not directly tied to manufacturing.
Expect Fed Rate Cut This Week
An expected rate cut from the U.S. Federal Reserve had interbank lending rates falling on Monday, as investors look to see what more official actions will be taken to help bolster the financial services industry. This is after Friday's announcement by European Union leaders of plans for a stimulus package worth about $265 billion in response.
Interest rates are at 1 percent in the U.S., and analysts note that it will make little difference if the Federal Reserve cuts the rate by 50 basis points or 75 basis points, as market investors are now focusing on what will happen now that conventional monetary policy has nearly run out of options.
Nearly 2 Trillion In Home Value Lost
There are 11.7 million American households that owe more on their mortgage than their homes are worth, says Zillow.com, a real estate website. U.S. homes lost more than 2 trillion in value in 2008, and home values decline 8.4 percent during the first 9 months of 2008, compared to the same time in 2007.
With foreclosures reaching record levels and the larger economic problems still emerging, Zillow says there are further challenges to the real estate market. Zillow says the U.S. housing market, suffering the worst downturn since the Great Depression, has to contend with a large supply of unsold homes, tighter lending standards and record foreclosures pushing down home prices.