Bank saved by private equity firm

One and a half years ago, bank United was sold to private equity firms by the FDIC for 900 million dollars. in the first half of this year they made 100 million dollars which is a remarkable ROI. Today the new owners said that they are ready to make bank United public again. This will be the first failed bank bought by private investors, to go public.

Holding Banks Accountable

Interview with Peter Swire, law professor at Ohio State University:
Peter Swire says that a way to hold banks more accountable so a bailout is not needed again in the future is to have top officials in banks sign their names to say that they have the system back under control and operating smoothly. The idea is that if they have them personally certify the banks operations, they will be more diligent to see that the bank is operating appropriately.

(What would the penalty be if an official signed their name and did not have the banking under control for their company? They're needs to be a harsh penalty to for this to work.)

Foreclosure Mess

Gist: President Obama will not pass a bill that both the House and the Senate passed. It is a bill that would require state courts to recognize foreclosure documents that were notarized in other states. This would make it harder to challenge foreclosures when the documents were put together out of state--as they often are.

Furthermore, more than half of the mortgages in this country are in an electronic tracking system called MERS (Mortgage Eletronic Registration System). It was set up by banks who wanted to be able to trade mortgages more easily. MERS' role in the foreclosure process is now in doubt. The legal system will be tested on whether MERS has the authority to foreclose on a home, or not.

Mortgage Companies Review Foreclosures

According to realty market, a research firm, 1 of every 4 houses sold in the 2nd quarter of this year is in some stage of the foreclosure process. J.P. Morgan is stopping the foreclosure process on 50,000 homes to check on paperwork. They say employees may have signed documents that they were not authorized to sign. Other mortgage companies are doing this as well. The review should only take a few weeks and most likely, any errors that may be found will be minor and no one will get their homes back if they were foreclosed on.

(Depending on how long this actually takes and how many mortgage companies do this, could this make the recovery of the property market to take longer than necessary?)

TARP Expires

TARP, the Troubled Asset Relief Program, passed by Congress in late 2008 expired on October 3, 2010. The entire value of TARP was 700 billion dollars. The reason it was created was because mortgages and other bank assets were losing value fast in 2008. The idea was for the government to buy these "toxic" assets from the banks so the banks could have nice, clean balance sheets and would continue doing their job. That is, lending money. In the end, only 475 billion of TARP was used. Also, not all of the TARP money was given to banks. Some was given to the automobile industry and other industries where relief was needed. 

(It seems that a large part of the economic problem right now is that banks are unwilling to lend money. How can TARP be viewed as a success if it did not prevent what it was supposed to prevent?)

Wholesale credit union is taken over by the government

Gist: The government is stepping into help wholesale credit union. Credit union is one part of banking industry that will not do anything stupid with your money. However, it seems to be wrong now. The federal regulator took over three institutions that are wholesale credit union last week. Those credit unions took people’s money to bad investments. Now the credit union industry will pay for the cost of resolving those wholesale credit unions. However, the fact that mortgage-backed securities and toxic assets are still out there and banking industries are still working their way through financial system. The good news is the worst of the problem loans now seems to start stabilized.