Holiday Wrap-up: Two More Banks ClosedGlobal Governments Step up Efforts to Jump-Start Markets As the U.S. financial market prepared to reopen on Monday (a state and federal holiday), depositors of two banks were set to meet their new institutions.
The Federal Deposit Insurance Corporation (FDIC) announced late Friday the closings of Main Street Bank of Northville, MI., and Meridian Bank of Eldred, IL. Deposits from both banks were acquired by other institutions, and the FDIC promises a seamless transition for depositors. Still, these closures are the 14th and 15th bank closings of the year. Only three banks closed in all of 2007.
Main Street Bank, with $98 million in total assets, was closed by the Michigan Office of Financial and Insurance Regulation, with the FDIC named as receiver. To protect the depositors, the FDIC quickly approved the assumption of all Main Street deposits by Monroe Bank & Trust, Monroe, Michigan.
The failed bank's two offices were to reopen this past Saturday as branches of Monroe Bank & Trust.
According to an FDIC press release, Monroe Bank & Trust agreed to pay a total premium of 1 percent for the failed bank's deposits. In addition, Monroe Bank & Trust will purchase approximately $16.9 million of Main Street's assets, and have a 90-day option to purchase approximately $1.1 million in premises and fixed assets. The FDIC will retain the remaining assets for later disposition.
The FDIC estimates that the cost to its Deposit Insurance Fund will be between $33 million and $39 million.
Main Street Bank is the first bank to be closed in Michigan since New Century Bank, Shelby Township, Michigan, in 2002.
Meridian Bank, with $39.18 million in total assets, was closed by the Illinois Department of Financial Professional Regulation-Division of Banking, with the FDIC named receiver. The FDIC immediately approved the assumption of all the deposits of by National Bank, Hillsboro, Illinois.
Meridian's four offices in Altamont, Carlyle, and Eldred were to reopen for normal hours on Saturday, October 11, and the Alton office will reopen Tuesday, October 14, as branches of National Bank.
National Bank will purchase approximately $7.55 million of Meridian's assets, according to an FDIC press release, and did not pay a premium for the right to assume all of the failed bank's deposits. The FDIC will retain the remaining assets for later disposition.
The FDIC estimates that the cost to its Deposit Insurance Fund will be between $13 million and $14.5 million.
Meridian Bank is the first bank to be closed in Illinois since Universal FSB, Chicago, Illinois on June 27, 2002.
Governments Investing in Banks
Looking to jumpstart skittish financial markets worldwide, several major nations on Monday took action to bolster confidence in their banking institutions.
In the UK, according to news reports, the British government pledged to spend up to 37 billion pounds ($63.95 billion) investing in major UK banks, including Royal Bank of Scotland and HBOS.
France announced it will create a 40 billion euro ($54.89 billion) fund to invest in its banks, and Italy and Germany were expected to announce similar plans.
Meanwhile, in the U.S., the Federal Reserve announced early Monday morning a new agreement with major global central banks to help jump-start the stalled credit market.
The Fed partnered with the Bank of England (BoE), the European Central Bank (ECB), the Bank of Japan, and the Swiss National Bank (SNB) to announce:
"The BoE, ECB, and SNB will conduct tenders of U.S. dollar funding at 7-day, 28-day, and 84-day maturities at fixed interest rates for full allotment. Funds will be provided at a fixed interest rate, set in advance of each operation. Counterparties in these operations will be able to borrow any amount they wish against the appropriate collateral in each jurisdiction. Accordingly, sizes of the reciprocal currency arrangements (swap lines) between the Federal Reserve and the BoE, the ECB, and the SNB will be increased to accommodate whatever quantity of U.S. dollar funding is demanded. The Bank of Japan will be considering the introduction of similar measures.
Fed Approves Wells Fargo/Wachovia Deal
The Federal Reserve Board on Sunday announced its approval of the application of Wells Fargo & Company to acquire Wachovia Corporation and its subsidiary banks, as well as the nonbanking subsidiaries of Wachovia Corporation.
Late last week, after a week of tug-of-war over the failed bank, Wells Fargo rival Citigroup announced it was stepping out of contention for Wachovia's banking assets.