FDIC

Debt Collection & Bankruptcy News Roundup, Week of March 7th, 2011

Debt collection and bankruptcy news has been piling up in my queue, and since I can’t hope to give each post the attention it deserves, here is a grand roundup.

And, finally, your daily dose of harassing debt collection calls, thanks to ConsumerESQ:

Banks at Risk of Failure: 702

According to the FDIC, over 700 banks are currently at risk of going under, a huge jump over the last three years, and a bit of a shocker given the size of the federal stimulus. The FDIC has already shuttered 20 banks this year, and there is no sign that things will improve in the coming months.

Banks at risk of going bust tops 700 | CNN Money

Wachovia goes under, bought up by Citigroup

In a deal brokered by the feds, Citigroup has agreed to acquire the majority of Wachovia, the latest bank to fail. From CNN:

Citigroup will acquire the banking operations of Wachovia for $2.2 billion in an all-stock deal, following much speculation over the weekend about the fate of the nation’s fourth-largest bank.

Citigroup buys Wachovia bank assets for $2.2B | CNN

Bailout’s dry run for troubled borrowers?

“The FDIC centers its approach on reducing monthly payments (principal, interest, taxes and insurance) to 38 percent of household income. It works with the first mortgage and with people who are delinquent or approaching a higher interest rate. It’s not charging fees or late charges.

On average, borrowers with modified loans are saving $430 a month, Bair has said.”

Bailout’s dry run for troubled borrowers? | San Francisco Chronicle (Thanks again, Greg!)

If Enough Banks Fail, The FDIC Could Run Out Of Money

Two banks fail, 90 on FDIC problem list

If anyone were still in doubt as to whether or not the United States economy is in recession, the FDIC’s problem list now includes 90 banks at risk of failure. This is not a large number, since there are about 8,500 banks in the country, but it is up from 76 last year.

Historically, only about 13% of banks on the FDIC problem list do fail, and those that cannot correct their problems are either sold to another bank or taken over by the FDIC.

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How much did deregulation contribute to the recession (economic slowdown, whatever)

Deregulation refers to the point at which the U.S. government threw up its hands and said “all right banks, power companies, airlines, etc., do whatever you want!” and the deregulated industries had a big party. Eminent jurist and economic theorist Richard Posner says that might have been a mistake: “a tighter ceiling should be placed on the risks that banks are permitted to take.”

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Alternatives to payday loans: small dollar loans

In what is hopefully the start of something, the Federal Deposit Insurance Corporation (FDIC) announced the selection of 30 banks to participate in a two-year pilot project to help identify best practices in affordable small-dollar loan programs that can be replicated by financial institutions.

“Our goal is to identify small-dollar loan programs that are profitable for lenders and affordable alternatives to payday loans and other high-cost loans that are harming consumers and communities across America,” said FDIC Chairman Sheila C. Bair.

I am glad that Chairman Blair recognized the harm payday loans and other high-cost loans do to consumers and communities.

Key features of a preferred small-dollar lending program may include:

Loan amounts of up to $1,000;

Amortization periods longer than a single pay cycle and up to 36 months for closed-end credit, or minimum payments that reduce principal (i.e., do not result in negative amortization) for open-end credit;

Annual percentage rates (APR) below 36 percent;

No prepayment penalties;

Origination and/or maintenance fees limited to the amount necessary to cover actual costs; and

An automatic savings component.