(CNNMoney.com) -- When regulators announced last Friday they had seized control of the relatively unknown Silverton Bank, its collapse struck many as just another minor casualty in the ongoing economic crisis.
But the demise of the Atlanta-based bank could have broad implications for the entire industry, given Silverton's unique role as a so-called "bankers' bank".
Unlike the 31 other banks that have failed so far this year, Silverton did not take deposits from, or make loans to consumers. Instead, its primary purpose was to offer a variety of services such as check clearing and credit card operations to community banks around the country that find it too costly to do this on their own.
Silverton also often acted as the lead banker on some syndicated commercial real estate loans, a business that helped contribute to its failure.
All told, Silverton serviced approximately 1,400 community banks in 44 states, according to the Federal Deposit Insurance Corporation, making it one of the largest of the 20 or so "bankers' banks" in the country.
But even as regulators attempt to smooth the transition for Silverton's clients, many community banks will suffer as a result of its collapse.
Arguably among the hardest hit will be the hundreds of community banks that were shareholders in Silverton's holding company. Their stakes have been completely wiped out as a result of the failure. Most bankers' banks are cooperatively owned by their community bank customers.
The total dollar impact may be tough to discern at this point, but some individual banks are already warning that they are on the hook for millions as a result.
Nashville-based Pinnacle Financial Partners (PNFP), for example, revealed last week that it would write off $21.55 million in its second-quarter results as a result of the Silverton failure.
Banks that participated on some of the troubled commercial real estate loans that Silverton helped generate may also find themselves at risk, notes Chris Cole, a vice-president and senior regulatory counsel for the Independent Community Bankers of America.
In addition, the institutions that relied on Silverton on a daily basis for services now have to deal with the disruption of finding a new provider.
"There will be some pain," said Cole.
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Wednesday, May 6, 2009
Wells Fargo freezes pension plan, cuts 548 jobs
(Reuters) - Wells Fargo & Co (WFC.N) on Wednesday said it is freezing its cash-balance pension plan for all employees, and has issued layoff notices to 548 workers in uptown Charlotte, North Carolina, the former home of Wachovia Corp.
The moves will reduce costs, spokeswoman Mary Eshet said. Wells Fargo bought Wachovia for $12.5 billion at the end of 2008, and has said it expects about $5 billion of annual cost savings related to the merger, with job cuts beginning this quarter. It has not said how many jobs it plans to cut.
Wells Fargo said it will maintain its 401(k) retirement plan, under which the San Francisco-based bank matches employee contributions for up to 6 percent of total pay. Many other large companies have also cut back traditional pension plans.
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The moves will reduce costs, spokeswoman Mary Eshet said. Wells Fargo bought Wachovia for $12.5 billion at the end of 2008, and has said it expects about $5 billion of annual cost savings related to the merger, with job cuts beginning this quarter. It has not said how many jobs it plans to cut.
Wells Fargo said it will maintain its 401(k) retirement plan, under which the San Francisco-based bank matches employee contributions for up to 6 percent of total pay. Many other large companies have also cut back traditional pension plans.
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Fiat's Marchionne says he will lead Chrysler: report
(Reuters) - Fiat SpA (FIA.MI) Chief Executive Officer Sergio Marchionne plans to take the top spot at Chrysler LLC after the automaker emerges from bankruptcy, he told Bloomberg in an interview on Wednesday.
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House panel to ask BofA CEO to testify: report
(Reuters) - Bank of America Corp's (BAC.N) chief executive and top federal officials will be asked by a Congressional panel to testify next month about claims that the bank was pressured by the government to complete its purchase of Merrill Lynch & Co, the Wall Street Journal reported on Wednesday, citing a person familiar with the investigation.
Investigators with the U.S. House Committee on Oversight and Government Reform spent the last week looking at documents and notes from telephone conversations involving Federal Reserve officials, the Journal reported the person as saying.
Their findings suggest "there's fire there," the newspaper quoted the source as saying.
The panel is chaired by New York Democrat Edolphus Towns, who could not be immediately reached for comment. A Bank of America spokesman declined to comment
Lawmakers on the House panel have not yet determined which U.S. officials will be called to testify under oath, the person familiar with the investigation told the Journal.
Top Treasury and Fed officials could be called to appear under oath, according to the Journal, citing the person familiar with the investigation.
The probe could touch a number of prominent government officials. In addition to former Treasury Secretary Henry Paulson, and Fed Chairman Ben Bernanke, top aides for each could also face scrutiny as part of the investigation, the newspaper said on its website.
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Investigators with the U.S. House Committee on Oversight and Government Reform spent the last week looking at documents and notes from telephone conversations involving Federal Reserve officials, the Journal reported the person as saying.
Their findings suggest "there's fire there," the newspaper quoted the source as saying.
The panel is chaired by New York Democrat Edolphus Towns, who could not be immediately reached for comment. A Bank of America spokesman declined to comment
Lawmakers on the House panel have not yet determined which U.S. officials will be called to testify under oath, the person familiar with the investigation told the Journal.
Top Treasury and Fed officials could be called to appear under oath, according to the Journal, citing the person familiar with the investigation.
The probe could touch a number of prominent government officials. In addition to former Treasury Secretary Henry Paulson, and Fed Chairman Ben Bernanke, top aides for each could also face scrutiny as part of the investigation, the newspaper said on its website.
Raed more here
S.Africa banks stable but households a risk: c.bank
(Reuters) - South African banks remain well capitalised and stable despite a recent deterioration but high levels of household debt pose a potential threat to the financial system, the central bank said on Wednesday.
The Reserve Bank said in its latest Financial Stability Review local banks had been largely protected against the direct effects of the global financial crisis.
However, spill-over effects from the global turmoil had hit the local stock market, portfolio investment flows had reversed and bad loans had increased over recent months.
"South African banks maintained levels of capital well in excess of the already prudent regulatory environment, and their degree of leverage as well as off-balance sheet risk exposures were much lower than those of the failed banks of other countries," it said in the twice-yearly report.
South Africa's banks have avoided the worst of the international credit crunch, partly due to exchange controls that limited outside exposure, and fairly conservative lending practices.
The downturn has hit the broader economy, though, knocking manufacturers and miners, with the economy likely to already be in its first recession in 17 years.
The central bank has responded by cutting its repo rate by 350 basis points to 8.5 percent since December to try and boost growth and the government and its utilities are to spend 787 billion rand over the next three years on infrastructure.
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The Reserve Bank said in its latest Financial Stability Review local banks had been largely protected against the direct effects of the global financial crisis.
However, spill-over effects from the global turmoil had hit the local stock market, portfolio investment flows had reversed and bad loans had increased over recent months.
"South African banks maintained levels of capital well in excess of the already prudent regulatory environment, and their degree of leverage as well as off-balance sheet risk exposures were much lower than those of the failed banks of other countries," it said in the twice-yearly report.
South Africa's banks have avoided the worst of the international credit crunch, partly due to exchange controls that limited outside exposure, and fairly conservative lending practices.
The downturn has hit the broader economy, though, knocking manufacturers and miners, with the economy likely to already be in its first recession in 17 years.
The central bank has responded by cutting its repo rate by 350 basis points to 8.5 percent since December to try and boost growth and the government and its utilities are to spend 787 billion rand over the next three years on infrastructure.
Read more here
Tuesday, May 5, 2009
Porsche, Piech Families Said to Discuss Volkswagen Combination
(Bloomberg) -- Porsche SE’s controlling shareholders, the Porsche and Piech families, plan to meet in Salzburg, Austria today to hash out how to combine the sports-car maker with Volkswagen AG and reduce 9 billion euros ($12 billion) of debt, according to two people familiar with the matter.
The proposals under consideration include merging the carmakers and finding an investor to buy a stake in the combined company or selling the Porsche AG automotive unit to Volkswagen in return for cash and shares, said one of the people, who declined to be identified because the talks are private.
“Structural changes in Porsche’s makeup are inevitable,” said Marc-Rene Tonn, an analyst at M.M. Warburg in Hamburg. “No one at the Porsche-Piech families is under any illusions about the size of the debt.”
The Porsche and Piech families together control half of Stuttgart, Germany-based Porsche, which has accumulated 51 percent of Volkswagen since 2005 to protect ties to the company, its largest supplier. Porsche Supervisory Board Chairman Wolfgang Porsche has struggled to raise financing to increase the stake to 75 percent and is at loggerheads with Ferdinand Piech, his counterpart at Volkswagen, about how to unite the companies.
Volkswagen spokesman Michael Brendel and Porsche spokesman Frank Gaube declined to comment on the meeting.
The Porsche and Piech families failed to reach an agreement on how to lower Porsche’s debt and combine the automakers at a gathering on April 29, one person said. Hans Michel Piech, Hans- Peter Porsche and Oliver Porsche may join Ferdinand Piech and Wolfgang Porsche at today’s meeting, the person said.
Arab Investors
Porsche CEO Wendelin Wiedeking is pushing a proposal to merge the two carmakers and allow Arab investors to bid for a stake, a person said. The plan may also require members of the Porsche and Piech families to acquire new preferred shares, the person said.
On the other hand, Volkswagen Supervisory Board Chairman Ferdinand Piech wants to transfer Porsche’s car unit to VW, a plan opposed by Wolfgang Porsche, according to the person.
Porsche, the maker of the 911 sports car, has been in talks for weeks with Arab investors including Qatar’s Emir Sheikh Hamad bin Khalifa al-Thani, the person said.
Qatar may invest in German carmakers, Qatar News Agency reported on April 28, citing Prime Minister Hamad Bin Jasim Bin Jaber al-Thani. Meetings have been held on the subject, though a decision hasn’t been made, he told QNA. A press officer for the prime minister didn’t respond to calls seeking comment yesterday.
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The proposals under consideration include merging the carmakers and finding an investor to buy a stake in the combined company or selling the Porsche AG automotive unit to Volkswagen in return for cash and shares, said one of the people, who declined to be identified because the talks are private.
“Structural changes in Porsche’s makeup are inevitable,” said Marc-Rene Tonn, an analyst at M.M. Warburg in Hamburg. “No one at the Porsche-Piech families is under any illusions about the size of the debt.”
The Porsche and Piech families together control half of Stuttgart, Germany-based Porsche, which has accumulated 51 percent of Volkswagen since 2005 to protect ties to the company, its largest supplier. Porsche Supervisory Board Chairman Wolfgang Porsche has struggled to raise financing to increase the stake to 75 percent and is at loggerheads with Ferdinand Piech, his counterpart at Volkswagen, about how to unite the companies.
Volkswagen spokesman Michael Brendel and Porsche spokesman Frank Gaube declined to comment on the meeting.
The Porsche and Piech families failed to reach an agreement on how to lower Porsche’s debt and combine the automakers at a gathering on April 29, one person said. Hans Michel Piech, Hans- Peter Porsche and Oliver Porsche may join Ferdinand Piech and Wolfgang Porsche at today’s meeting, the person said.
Arab Investors
Porsche CEO Wendelin Wiedeking is pushing a proposal to merge the two carmakers and allow Arab investors to bid for a stake, a person said. The plan may also require members of the Porsche and Piech families to acquire new preferred shares, the person said.
On the other hand, Volkswagen Supervisory Board Chairman Ferdinand Piech wants to transfer Porsche’s car unit to VW, a plan opposed by Wolfgang Porsche, according to the person.
Porsche, the maker of the 911 sports car, has been in talks for weeks with Arab investors including Qatar’s Emir Sheikh Hamad bin Khalifa al-Thani, the person said.
Qatar may invest in German carmakers, Qatar News Agency reported on April 28, citing Prime Minister Hamad Bin Jasim Bin Jaber al-Thani. Meetings have been held on the subject, though a decision hasn’t been made, he told QNA. A press officer for the prime minister didn’t respond to calls seeking comment yesterday.
Read more here
Monday, May 4, 2009
Banks may need more capital but AIG won't: reports
(MarketWatch) -- The U.S. government may order an estimated 10 banks to boost their capital levels, but beleaguered insurer American International Group Inc. won't need further help from Washington, according to media reports Monday, all citing unnamed sources.
U.S. officials are expected to direct about 10 of the 19 banks undergoing government stress tests to boost their capital, a move they hope will quell fears about the solvency of the financial sector, The Wall Street Journal reported Monday.
The exact number of banks affected remains under discussion, the report said, though possible candidates for capital-raising could include Wells Fargo & Co. , Bank of America Corp. , Citigroup Inc. and several regional banks, the report said, citing sources familiar with the matter.
At one point, officials believed as many as 14 banks would need to raise more funds to create a stronger buffer against future losses, the report said, but that number has fallen in recent days.
If multiple banks are being directed to boost their capital, that could make the process seem less daunting than if the government singled out a few companies as weak, the report said.
Meanwhile, several banks are expected to have shown themselves to hold enough capital to weather a worsening economy, including Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. , it said.
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U.S. officials are expected to direct about 10 of the 19 banks undergoing government stress tests to boost their capital, a move they hope will quell fears about the solvency of the financial sector, The Wall Street Journal reported Monday.
The exact number of banks affected remains under discussion, the report said, though possible candidates for capital-raising could include Wells Fargo & Co. , Bank of America Corp. , Citigroup Inc. and several regional banks, the report said, citing sources familiar with the matter.
At one point, officials believed as many as 14 banks would need to raise more funds to create a stronger buffer against future losses, the report said, but that number has fallen in recent days.
If multiple banks are being directed to boost their capital, that could make the process seem less daunting than if the government singled out a few companies as weak, the report said.
Meanwhile, several banks are expected to have shown themselves to hold enough capital to weather a worsening economy, including Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. , it said.
Read more here
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