Corus Bank Shut Down - $16 Trillion in Govt/Fed Programs

A: One of the remaining biggies was just shut down. Check in with Bill over at Calculated Risk as he covers all these bank failures individually, along with commentary. Bill is wicked smaaat!

From the FDIC, "MB Financial Bank, National Association, Chicago, Illinois, Assumes All of the Deposits of Corus Bank, National Association, Chicago, Illinois":

Corus Bank, National Association, Chicago, Illinois, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with MB Financial Bank, National Association, Chicago, Illinois, to assume all of the deposits of Corus Bank, N.A.

As of June 30, 2009, Corus Bank had total assets of $7 billion and total deposits of approximately $7 billion. MB Financial Bank will pay the FDIC a premium of 0.2 percent to assume all of the deposits of Corus Bank. In addition to assuming all of the deposits of the failed bank, MB Financial Bank agreed to purchase approximately $3 billion of the assets, comprised mainly of cash and marketable securities. The FDIC will retain the remaining assets for later disposition. The FDIC plans to sell substantially all of the remaining assets of Corus Bank in the next 30 days in a private placement transaction.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $1.7 billion. MB Financial Bank's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to alternatives.

Seems like minimal damage to the DIF fund. One concern floating around while stocks ride the rally wave further is how will the street react if/when the FDIC needs a new round of funding? Watch out for reactions if the FDIC needs to tap into more credit with the US Treasury. I think there is under $30bln left in the reserves and as Rolfe at Reuters points out:

"The issue is the liquidity of their assets. A huge chunk of their balance sheet is made up of assets received from failed banks. REO, toxic loans, etc. That’s not cash they can use to finance bank seizures and sales. If they run out of cash, they may have to borrow from Tim Geithner."

Lets be real here. The credit markets and equity markets are reacting 'strong like bull' to any news that is even remotely negative. Its all about momentum and trading off the dramatic improvement in credit given the $16 Trillion and 30 credit facilities and programs put into place by our Government, the FDIC, and the Federal Reserve - of which just over $3 Trillion has been used so far.

No way they use it all and a wind down of programs is expected sometime in 2010; but you can see the bazooka brought out to fight this episode of debt destruction. The question that matters most is when perception changes and confidence changes ever so slightly - and what changes it. One sign will be a reversal in credit markets and if/when equities selloff on positive news that we know is coming.

Via Tom Joyce's latest presentation from Deutsche Bank Securities - "One Year After the Shocks of September 2008: Over $16 Trillion in U.S. Government Programs" - View Larger Image



Yes, unprecedented actions were taken to save our banking system and yes it is having an effect on our dollar, credit & equity markets. I'll try to get more info from that report up here next week.