Ex-bankers forming 'blind pools' to bid for failed banks
Filed under: Company News, Economy, Investing, Goldman Sachs
In August, the FDIC reluctantly made it easier for private-equity groups to buy failed banks after the number of problem banks rose to 416 at the end of June. I say reluctantly because the FDIC prefers to sell failed banks to people with a track record in the banking industry. Now there are some new kids on the block creating stiff competition for the the private equity firms -- former bank executives working with Wall Street firms to form "blind pools" to buy failed banks. That's good news for everyone but the private-equity firms. Not only will former bankers be more attractive as buyers to the FDIC, the private-equity firms expect the blind pools to drive up prices, making the purchase of failed banks less attractive. Even when the FDIC agreed to make it easier for private-equity firms to buy failed banks, it added a caveat to prevent them from quickly flipping the banks: It required investors to maintain a bank's minimum capital levels for three years.
There were 120 failed banks as of Nov. 6, and the FDIC is finding it harder and harder to find buyers for them. That's why it needed to open the door to private investors, and now seems to have put out a welcome mat for these blind pools. The former bankers with money from the blind pools get banking charters as bank holding companies; then, they are ready to start bidding on banks.
One example of such a holding company is NBH Holdings Corp., which was created when former executives of Citizens Financial Group raised $1.15 billion in a private placement. Seventy investors agreed to the blind pool, which means they have no say over what the firm decides to buy. NBH doesn't have a banking charter yet, but has submitted an application to become a bank holding company.
According to The Wall Street Journal, another group trying to form a bank holding company includes a trio of banking veterans: former J.P. Morgan Chase & Co. Chief Executive William Harrison, former Wachovia Corp. CEO Robert Steele, and former Hibernia Corp. CEO Herb Boydstun. Wall Street firms such as Goldman Sachs (GS) and Deutsche Bank AG (DB) are forming investment pools to fund acquisitions by former bankers.
Billionaires are getting in on the action as well. For example, financial executive Andrew Beal got approval to form a bank that could acquire a failed or failing Florida bank. He hasn't won a bid for a bank yet, but his application to the Florida Office of Financial Regulation on Oct. 19 was given an emergency order of approval on Nov. 5, quickly clearing the way for him.
Beal could acquire many Florida banks. Forbes ranked him the 52nd-richest American in 2009 with a net worth of $4.5 billion. He is chairman, CEO and sole shareholder of Plano, Texas-based Beal Financial Corp., which owns the Beal Banks in Plano and Las Vegas. His existing banks operate as wholesale banks. They acquire unappealing loans from their originators at a discount, and work to make money on them. They don't make loans directly to consumers and don't offer checking accounts.
Private-equity firms are well known for buying up companies, selling off their assets to raise cash, and flipping them after their value has been destroyed. Clearly, the FDIC doesn't want to risk making a bad situation worse by allowing a lot of banks to be bought up cheaply by private-equity firms that have little interest in running banks long term. Ex-bankers using "blind pools" may not be the FDIC's first choice of buyers, but they are probably a better choice than many private-equity firms.
Lita Epstein has written more than 25 books, including Reading Financial Reports for Dummies and The Complete Idiot's Guide to the Federal Reserve.



























Reader Comments (Page 1 of 2)
11-13-2009 @ 3:13PM
mark said...
Looks like the greedy bastards did.n't steal enough before retiring and see an oportunity to get back in the business with thier big retirement bucks
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11-13-2009 @ 3:13PM
hotrodqd said...
if we can acess fines to citizens and jail them for not having govt mandated healthcare ...when can we do the banks and lenders the same way for not apporoving or giving out loans to those who need it ??? how many homes saved ? bankruptcies averted ? jobs saved ?
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11-13-2009 @ 2:41PM
hotrodqd said...
why did they get bailoutts and not save consumers ? oh thats right ......credit ratings assets or what ever hmmmm but record bonuses profits and earnings
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11-13-2009 @ 2:44PM
AL said...
AMAZING! The banks and Wall Street and those crooked bastards are forming a pool to buy banks eh? All on your bailout money to boot. They shouldn't be permitted to buy a damn thing, but ought to be jailed for FRAUD. Of course if we put them in jail, we would have to put all of CONGRESS behind bars as well. The little people are only good enough when the big boys, lie, cheat and steal, but they truly look down the end of their noses any other time. The rich in this country got rich off the backs of the working man, something the rich never did was work.
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11-14-2009 @ 2:03PM
Tom said...
You are right on! What is further astounding is that the right wing media (AM talk radio & Fox) are right there grinding out the propaganda so the little guy will vote for those who will continue and perpetuate systems which advantage the wealthy.
11-13-2009 @ 2:50PM
Sandy said...
those failed banks if they received tax money BELONG TO THE TAX PAYERS not bankers! DOESN'T ANYONE SEE THE SCAM HERE?
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11-13-2009 @ 7:19PM
teltech543 said...
Two bank closures for friday the 13th. I was hoping for more. This sucks. Something has to start the SECOND GREAT DEPRESSION. I was hoping it was going to be massive bank closures this last two months. Oh well. Maybe some of these hard hit states will start going bankrupt. That should edge us into a depression.
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11-13-2009 @ 9:46PM
pat said...
After making a living stealing for their life; bankers are in it just for the game. What a zero life, when you retire from stealing, you come back just for the thrill.
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11-13-2009 @ 10:14PM
sexybeagle said...
Just like drugs . Just say NO to banks ! That's why I'm joining a credit union
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11-14-2009 @ 12:04AM
Rhett said...
It never end with these freakin crooks....They get richer while we go down the g damn toilet!They go bankrupt left and right.Credit card company even worse,jack up your rates ect and send people over the edge!
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11-14-2009 @ 7:16AM
NOENERGYFUTURES said...
GREAT SCAM...MAKE THE BANKS FAIL, GET THE TARP MONEY, BUY THE BANKS FOR 10 CENTS ON THE DOLLAR..HERE IS WHAT I'M DOING...IN THE LAST 4 WEEKS I HAVE PAID OFF THREE SMALL CREDIT CARDS AND CLOSED THE ACCOUNTS...TARGET, MACYS AND JUNIPER (BARCLAYS BANK OF DELAWARE) THEN TOLD THEM TO STICK THEIR LOW CREDIT LINES AND FEES WHERE THE SUN NEVER SHINES...IF I WANT SOMETHING I WILL USE MY DEBIT CARD AND PAY CASH. EVER NOTICE ALL THE CROOK BANKS ARE ALL LOCATED IN SOUTH DAKOTA OR DELAWARE????
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11-14-2009 @ 8:50AM
jdleap said...
There is a HUGE movement in this country against banks and a HUGE movement towards credit unions. Pay Cash, do not borrow money, and for the sake of the country DO NOT USE CREDIT CARDS!
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11-14-2009 @ 9:47AM
Ron R said...
Don,t worry the CHAIN has been broken for ever, and a lot of these old crooks that still think they can rip off the public are in for a awaking..Guys like Buffet are OLD and will be dieing soon and they will take there making billions of the backs of the poor hurt people days will be gone soon. All these guys are old the old boys club will be dropping like flys, on a zapper. They do not have others ready to take there places with all the new laws that will come out of all this. The Fat Cats are ending up in jail, with nothing buy the hundreds, and the fat cat politcicians are ending up there also. When all the dust settles and these crooks are dead of old age, the market will be run at its true count. The public average Joe isn,t to happy either and the internet conecting millions will see that the hate for these ccrooks will keep going. People will not fall for these guys so easy any more..SO THER OUT OF BUSSINESS..with the housing bubble busting they COOKED THERE OWN GOOSE..NOW every Law informent agency is crarling up the butts, looking to knock them down..and they will. When all the dust settles it will be a better America to live, and invest in..so hold on to your cash and wait, it will payoff big in the long run, after all the dead wood and crooks are dead or kicked out of bussiness.
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11-14-2009 @ 10:02AM
Ron R said...
After the great depression no one trusted Banks for many yrs, people burried money in cans in there back yards, in there houses..The same thing will happen again..the masses KNOW they have been ripped off, credit cards fees and such, they will start using cold hard cash AND GET TO LIKING IT..with out all those payments to the crooks..The days of the high interest banks, credit cards are comming to a end. The crooked banks did millions of people a FAVOR they tought them that they don,t need all those crappy payments each month, people are living better with out them, and the STRESS is going out of there lives, you will live longer. Banks NEED a heck of a lot of people to make any money, they need millions of loans going out, people are not going to get in that rut any time soon. So that so called credit score will become a JOKE the Banking industry will have to drope it to nothing to MAKE any money, THEY ARE USED TO. The banks and CEO,s will run out of money for there live styles and that score crap will be changed. Im using all cash, i feel great, live a whole lot better the stress each month is not killing me. i even made a joke last month..Millions of USA people are finding out the same, also..Try it you will like it, The gift of life is not now much money you have , ITS HOW WELL YOU LIVE YOUR LIFE A LONG TIME. Thanks crooked banks you showed millions a new way of living, AND I MEAN REALLY LIVING.
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11-14-2009 @ 10:23AM
jd said...
Okay banks are bad, be mad at banks. But who owns the banks? The insurance companies, that's who. You know the folks that cancel you if you are sick. The folks who fight you every step of the way when you make a claim. The folks who own every big building in every major city in America? The insurance companies. Anyone see Travelers ask for a bail out? They own CitiGroup, but it's just a poorly run bycycle shop for them, so Citi gets a bail out, and Travlers makes the money. Primerica they own Smith Barney and Saloman brothers. Prudential they own Bache Halsey Stuart. There once were laws against insurance companies having anything to do with financial markets - we deregulated them all! Good idea huh? The insurance industry spends more on lobbying than all others. They take your premium payments and gamble the money so they can make more. They buy back life insurance from people who went bust and paid into it their whole working lives at 'cash value' which is about ten cents on the dollar. They refuse to cover people from real disasters, which is the purpose of insurance in the first place. The cancel policy owners without warning or reason, they keep raising the deductables and premium rates so we all pay more and more for less and less, they make gigantic profits, and then buy banks and brokerage houses inorder to make more! I hear a lot of fair complaints about banks and Wall St., so why aren't we after the insurance companies who own them all. And why in God's name are they allowed to own them in the first place?? A very wise person once said "follow the money," well the money all came from the real dirt bags in this mess - the insurance companies!
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11-14-2009 @ 12:04PM
sgentilejr said...
LOSERS with no real skills and low paying jobs always blame the banks for their financial problems. Reading these postings it is easy to see who all the losers are by what they post about the banks. That is why none of them use their real name when they post. The one and only mistake the banks made was TRUSTING a bunch of Losers and lending the banks money to a bunch of Failures and Losers who cannot repay what they asked the banks to loan to them. It is all those LOSERS that failed to repay what they borrowed that put the banks into trouble and those Dead Beat LOSERS who caused the bailout mess. Now the Losers are mad that NO bank will lend them any more money or give them any more credit. It is not the bankers fault that YOU are a FAILURE and that YOU are a LOSER.
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11-14-2009 @ 4:22PM
arthur lee davis said...
Sure there probably are a lot of people that are losers, most are that way by no fault of their own . BUT, you are an IDIOT .
`nuff said
11-14-2009 @ 12:48PM
mark said...
These so called "retired bankers" are most likely the ones that engineered the failures, then took a big hefty bonus on thier way out. Now they will hide behind some phoney name and be right back in the business of scaming the public of what little money we still have left to steal. Yeah, I can see it now, there is no doubt in my mind that the banks control the credit unions that score your credit but thier new scam is to charge you to keep tour credit score up that has been lowered for absolutely no reason. Beware of this when you get a call from a bank wanting to charge you a monthly fee to keep your credit rating up. They even want a fee to keep your money safe from someone that steals your identity. I told my bank if they allow some thief to get money out of my account I will go after the bank, not the thief, so they had better take note not to cash any of my checks if there is any possible doubt I didn't write it. That's the damned reason I put my money in thier bank in the first place, the crooked SOBs!
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11-14-2009 @ 3:43PM
Dioniseo Guerra said...
And the rich get richer, and richer, and richer . . .
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11-14-2009 @ 4:21PM
arthur lee davis said...
EXACTLY !