Thursday, August 20, 2009

Guaranty Bank: OTS Closes the Barn Door

by Calculated Risk on 8/20/2009 10:37:00 PM

It has been widely reported that the assets of Guaranty Bank (Texas) will be seized Friday by the FDIC and sold to Banco Bilbao Vizcaya Argentaria SA of Spain.

Meanwhile the OTS issued a Prompt Corrective Action (PCA) to Guaranty yesterday. Maybe they didn't get the memo ...

Also, from the WSJ: In New Phase of Crisis, Securities Sink Banks

Guaranty owns roughly $3.5 billion of securities backed by adjustable-rate mortgages, with two-thirds of the loans in foreclosure-wracked California, Florida and Arizona, according to the company's latest report. Delinquency rates on the holdings have soared as high as 40%, forcing write-downs last month that consumed all of the bank's capital.

Guaranty is one of thousands of banks that invested in such securities ...
It's not just their own bad loans (usually C&D and CRE) taking down the local and regional banks, but also bad investments in securities based on other bank's bad loans. From the article:
One banking lawyer who asked not to be identified describes the result as a "wonderful chain of stupidity."
I'm not sure it is so "wonderful" ...