FDIC Has Small Banks in Bailout Limbo
Thousands of banks have applied for a piece of the $700 billion bailout. So far the government has doled out checks to around 400. The problem: The Federal Deposit Insurance Corp., the regulator that oversees the program, lacks the manpower to process all that paperwork. "With some of these smaller banks there are unique issues," says David Barr, an FDIC spokesman. "[They] take a little more time."
Meanwhile, smaller lenders remain in limbo. Thomas Wiley Jr., president of Coastal Bank in Savannah, Ga., says he's been waiting for months. A couple of weeks ago regulators asked Wiley for more information before they could make a decision. "I'm a little resentful," says Wiley, who wants to use the money to bolster his capital. "I simply want to know where we stand."
Patrick Fahey, CEO of Frontier Financial (FTBK), can't afford to wait for a response. Frontier, one of the largest banks in Washington State, has been slammed by souring commercial loans and needs extra cash. Fahey hired investment bankers to look for private equity investments as an alternative. "We can't sit here and wonder," he says.
What's in a Tainted Name?
The Lehman Brothers brand isn't entirely dead. At least one offspring of the failed investment bank is still up and running: Lehman Brothers Bank, a lender that operates mainly online and has one branch, in Jersey City, N.J. The bank didn't file for bankruptcy with its corporate parent on Sept. 15. Consumers can apply for Lehman-branded credit cards with an introductory interest rate of 1.99% or refinance their home mortgages at the financial institution.
Borrowers aren't exactly rushing to sign up with the bank, though. Assets have fallen to $7.2 billion in September, from $17 billion a year ago. Lehman Bank, which has filed a $2.19 billion claim against its former corporate parent over some loans, doesn't give much indication about its heritage—besides the obvious familial link in the name. There's not even a mention of the bankruptcy filing on the bank's Web site. Lehman Brothers Bank declined to comment.
Getting a Grip
What's $787 billion between friends? As the economy swoons from one crisis to the next, it's getting hard to comprehend all that government spending. Daniel Clifton, a policy analyst at research firm Strategas Research Partners, puts the mind-boggling numbers into context using the latest stimulus, the $787 billion package designed to jump-start the economy and boost consumer spending.
What else costs $787 billion?
— 3.9 million homes at the median U.S. price of roughly $200,000
— 300 million checks for $2,623—one issued to nearly every American
— 7.7 million scholarships to private four-year universities or around 30 million to public universities
— 27.7 million cars at the average U.S. price tag of $28,400
— 4 months of federal tax holiday
— 10 most valuable sports franchises—with $773 billion left over