About the FHLB that’s part of the government’s bank support now
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That article is behind a pay wall. This article may be to the same point.
But there is another explanation for why banks prefer to borrow from their FHLBanks. Unlike the Fed, the FHLBanks have no “skin in the game” when they lend to their members. When an FHLBank member bank fails, the offending FHLBank suffers no loss. Moreover, when a member fails, the offending FHLBank steps in front of all other creditors, including the Fed, to recover on its loan
Because of their risk-free position, the FHLBanks do not truly underwrite loans. Rather, they take orders for loans. The only variable is the amount of collateral and the haircut on the loan, not the ability of the borrower to repay.
As a reminder, the FHLBanks lend taxpayer-supported funds, that is, funds that could not have been raised but for the implied guaranty of the taxpayers.
Contrast this approach to lending at the Fed’s discount window. The Fed, like all other creditors, takes a back seat to the FHLBanks when one of its borrowers defaults. It loses money. This gives it substantial skin in the game.
The FHLBanks have turned their obliviousness to credit risk into a talking point for their own benefit. They boast: “The FHLBanks have never incurred a loss on an advance in their more than eight decades of existence.”
Oh really? Tell that to Sen. Sherrod Brown (D-Ohio), chairman of the Senate Committee on Banking, Housing and Urban Affairs. Brown recently wrote to the FHLBanks’ regulator, the Federal Housing Finance Agency, stating, “The FHLBank System was created to provide liquidity to sound institutions to facilitate lending. It was not structured to be a lender of last resort — or of next-to-last resort — for struggling institutions.”
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Non paywall link: https://archive.ph/U8php
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don’t think this one was public
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Our regulators at the FDIC know best
https://www.wsj.com/us-news/fdic-toxic-atmosphere-strip-clubs-lewd-photos-boozy-hotel-12c89da7
If you haven’t puked off the roof, were you ever really a FIS?”—referring to a bank examiner-in-training.
The agency’s IG report in 2020 cited a survey the IG conducted in 2019 that found 8% of more than 2,300 respondents said they had been sexually harassed. Some 38% of those harassed said they didn’t report the incidents for fear of retaliation
Not to worry, all employees were equally welcome to go out and party at strip clubs after a long days work, and if they didn’t, their promotion prospects suffered.
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Ah that explains a lot. So contrary to popular belief, the FDIC were not just asleep at the wheel during the last bank runs. They were also busy partying and sexually harassing women employees to continue propagating the old boys club financial world culture. Makes sense.
That statement says it all: “To ensure we are living up to our values, we will continue to conduct periodic reviews of our programs and policies.” In regular English, that means: “Damn, we got caught with our literal pants down. Find the moles! And let’s find ways to cover our tracks better next time.”
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Weren’t these the same guys with tons of porn on their computers in mid-oughts?
ETA: It was the SEC … SEC Absorbed With Porn During Economic Crisis | Judicial Watch
And how do you know they identified as women or old boys? 
Just kidding.
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NYCB took over the failed SBNY under the FDIC supervision. Earnings didn’t go so well.
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To be fair a lot of that (at least so they claim) is due to the asset purchase making them a bigger category bank and they needed to take a hit to get into compliance with the rules.
Which makes sense, since even if getting those assets at a good price, they still need to book additional loan loss reserves to put their ratios back in line.
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Nothing to see here, it’s all fine.
- FED’S BARR: EXAMINERS CONDUCTING ADDITIONAL EXAMINATIONS OF FIRMS WITH LARGE UNREALIZED LOSSES OR OTHER VULNERABILITIES.
- FED’S BARR: BANK SUPERVISORS ARE ISSUING MORE FINDINGS AND DOWNGRADING BANK RATINGS AT A HIGHER RATE IN THE PAST YEAR.
- FED’S BARR: BANK SUPERVISORS ARE CLOSELY FOCUSED ON COMMERCIAL REAL ESTATE RISKS.
- FED’S BARR: THE FED IS STILL EXPLORING WHETHER TO REQUIRE TEMPORARY HIGHER CAPITAL AND LIQUIDITY REQUIREMENTS FOR FIRMS WITH TROUBLE MANAGING RISK.
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NYCB reported quarterly results. The CEO is out, they wrote down their assets by $2.5B (mostly those crappy NY rent controlled assets they got from taking over the failed SBNY) and correspondingly lost about 25% of their shareholders equity, and admitted they had real problems running their bank!
as part of management’s assessment of the Company’s internal controls, management identified material weaknesses in the Company’s internal controls related to internal loan review, resulting from ineffective oversight, risk assessment and monitoring activities. Although assessment of the Company’s internal controls is not yet complete, the Company expects to disclose in the 2023 Form 10-K that its disclosure controls and procedures and internal control over financial reporting were not effective as of December 31, 2023. The Company’s remediation plan with respect to such material weaknesses is expected to be described in the 2023 Form 10-K.
The stock lost another -20% in late trading, from high $4s to high $3s.
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NYCB look out below
https://www.wsj.com/finance/new-york-community-bancorp-seeks-cash-infusion-6e4c0083
- NEW YORK COMMUNITY BANCORP TUMBLES 40% AND IS HALTED AS TROUBLED BANK REPORTEDLY IS SEEKING A CASH INFUSION.
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I don’t know how bad their balance sheet looks but it doesn’t sound like their situation is very hopeful. Instead of a cash infusion, I wonder if other banks would not rather let it fail to later scoop them up on the cheap after FDIC intervenes.
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Isnt that what got NYCB in trouble to begin with?
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They took over SBNY but I don’t know what part that played into their current predicament. Some of the reports sounded like their own internal loan review process was responsible for their weak balance sheet. Could be both actually. They may have had faulty loan risk assessment and oversight which they also used to evaluate the quality of the loans of SBNY before purchasing them.
So I’m surprised that they managed to secure cash this quickly since it sounds to me like due diligence on the part of those bailing it out should have been rather lengthier than usual considering this sequence of events.
Private sector bailout - NYCB raised $1B in new equity. Guess they live to fight another day.
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Nothing to see here
- FDIC ADDS EIGHT BANKS TO ‘PROBLEM BANK’ LIST, TOTAL ASSETS AT PROBLEM FIRMS RISE TO $66.3 BILLION
- FDIC SAYS SHARE OF UNPROFITABLE INSTITUTIONS INCREASED TO 10.9%, HIGHEST LEVEL SINCE Q4 2017
- FDIC SAYS 70% OF QUARTERLY PROFIT DECLINE DUE TO SPECIFIC, NON-RECURRING LARGE BANK…
- FDIC SAYS OVERDUE CRE LOANS ARE HIGHEST SINCE 2014
- FDIC SAYS LATE CREDIT CARD PAYMENTS ARE HIGHEST SINCE 2011
and Fed comments
- POWELL: EXPECTS THERE TO BE BANK FAILURES FROM CRE
- FED’S POWELL: I EXPECT THERE TO BE BANK FAILURES FROM CRE. BUT NOT BIG BANKS, THERE ARE MORE SMALL AND MEDIUM SIZED BANKS WITH BIGGEST EXPOSURE.
- POWELL: CRE ISSUES NOT FIRST ORDER RISK FOR BIG BANKS
and from the investors in NYCB, who paid $2 and got various sweeteners too, they’re doing fine with the stock back around $4. Just a quick double and then some.
- MNUCHIN: IT’S MY CURRENT INTENTION TO STAY AND RUN MY BUSINESS
- MNUCHIN: VIEWS NYCB AS A 3- TO 5-YEAR TRANSACTION
- MNUCHIN: BIGGEST PROBLEM IN PORTFOLIO IS NEW YORK OFFICE LOANS
- MNUCHIN: GOING TO RETAIN EARNINGS, BUILD RESERVES WHEN NEEDED
- MNUCHIN: NYCB WAS VERY SMART TO AVOID BAD SIGNATURE LOANS
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Is this the first time Fed acknowledged the potential problems in CRE? People in RE have been speculating about this for almost 2 years. The loans are on about a 5-year cycle and the time to refi them from the bottom into the current, much higher (and likely unaffordable for many) rates is coming soon.
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Better late than never?
- THE FDIC PROPOSES A BANK MERGER GUIDANCE THAT IF ADOPTED WOULD ADD SPECIAL SCRUTINY IF MERGED BANKS WOULD BE BIGGER THAN $100 BLN.
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