The Federal Deposit Insurance Corporation was set up in 1933 (by that runamok socialist, commie pinko) in the early days of President Franklin Roosevelt's administration. Roosevelt was from New York and was tired of bankers jumping out of office windows in fits of despair and splattering the streets of the City.
The FDIC would collect premiums from member banks (and banks wanted to sign up REAL quick in the Depression days), issue regulations over banks, and backstop depositors' (you know, the customers) accounts up to a certain amount. (This amount rose over the years and is now well over $100,000. You got 100 grand in a bank and it goes under, the FDIC will guarantee the money. So Kossacks, your first 100 big ones (which I KNOW you all have as a rainy day fund) are safe.) They ALSO do other things.....
See, when a bank fails (not enough money on hand, too many loans gone bad, lots of foreclosures, or darker reasons) the FDIC typically forces it to merge, shotgun wedding style, with another nearby bank that is in good shape so the customers can keep on banking locally (and often in the same building. Its just the sign has changed from "Your Friendly ABC Bank" to "Your Friendly XYZ Bank.")
But much to the dismay of the gangster class of capitalists (see Goldman Sachs) the FDIC also has the temerity to keep asking WHY did a given bank fail? What went wrong? And even more galling, WHO DONE IT?
Banksters do NOT like those kind of questions because they can lead to...umm.....UNCOMFORTABLE answers.
And now they have. The Minneapolis Star Tribune has come down with a case of journalism and is reporting the FDIC has probed the reasons for the failure of BankFirst of South Dakota last July. Among other things the bank had made 33 loans totaling $142 million, on which they managed to lose $77 million. (Great ratio that one!)
And NOW, the FDIC has sent "demand letters" to 23 former directors and officers of BankFirst, accusing them of 28 acts of misconduct AND that the FDIC wants the $77 million---from these 23 persons PERSONAL ASSETS! Yep! Sell the yacht. Un-lease the Lexus. Cancel the cruise. Ground the Lear Jet. $77 million: cash, no checks!
The article nicely notes:
"One of the recipients (of a demand letter), Allan Doering, is now chief credit officer at Crown Bank in Edina (old money Mpls. suburb). Doering didn't return phone calls Monday. None of the other former leaders of BankFirst, including John Kimball, a former president, could be reached for comment. Kimball is now chief executive of American Bank in St. Paul" (but not much longer I'll wager!)
Whole article is here:
So over lunch today, offer up a toast to the guardians of the money of the American people, the hard working women and men of the FDIC!
P.S. Since these investigations take time, likely there are MORE "demand letters" and fire sales on yachts coming soon to your area!
Life is still exciting yust southeast of Lake Wobegon!
UPDATE I pulled a quote from the article and boxed it above. A guy named John Kimball is mentioned, now CEO of a bank in St. Paul. Kossack Raptavio below in the comment string noted they BANKED at this bank in St. Paul. Encouraged by us, Raptavio sent a rather pointed email to the bank as reproduced here:
I read in the Star Tribune today that American Bank CEO John Kimball is facing a demand letter from the FDIC for his involvement in the failure of BankFirst in South Dakota, accusing him and other officers of BankFirst of 28 acts of misconduct.
I have been a customer of American Bank for nearly 20 years (back when it was Midway National Bank) and I am deeply troubled that the CEO is facing this inquiry from the FDIC and as someone who has entrusted my money with American Bank for this long, I feel that I and every other customer whose money is entrusted with you deserves some answers and assurances that the bank is not being mismanaged as, apparently, Kimball’s former bank was.
I also am letting you know that if these questions are not answered to my satisfaction or if Kimball does not step down to be replaced by a less ethically clouded individual, I intend to end my banking relationship with American Bank in one week’s time. Further, I intend to inform other American Bank customers with whom I am acquainted as to these developments and will recommend they do the same.
Please respond with an explanation of these developments. Thank you.
Well the power of the might Kossack Nation was strong in Raptavio and said Mr. Kimball personally CALLED Raptavio:
John Kimball called me back. Like, personally.
He definitely assuaged my concerns. He detailed his involvement with that bank (he was brought it to try to repair it when the damage was done, and the ownership wouldn't change course enough to save the bank) and noted the demand letters were sent out "scattershot" (like even an admin assistant got one) and that of the 23 people who got one, about six actually have something to fear.
So I'm adopting a wait and see approach. How about that, eh? Small banks, personal customer service!
But I found the call pretty reassuring. It may well be that Kimball's one of the good guys.
One thing he said I found particularly reassuring. Paraphrasing: Bankers should not be entrepreneurs. Banking should be very boring, and very conservative.
Soo.... let us continue to throw brickbats as needed but let us also AIM!
Thanks for the updates, Raptavio!