Some really outstanding reporting by Columbian reporter Courtney Sherwood about the failure of Bank of Clark County, the first Washington bank seized by the state since 1993. Well worth a full read if you are trying to understand how a smaller bank got into such serious trouble. For starters, the bank began making riskier loans starting in 2005, according to The Columbian.

Another factor that seems to be worth focusing on is the issue of brokered deposits, which are (of all things) deposits made by brokers on behalf of clients, usually those seeking a higher rate of return. As Sherwood notes in her article, the FDIC has rules about this sort of thing.

With its core deposits falling, the Bank of Clark County appears to have sought out even more of the risky brokered deposits it had come to depend on. Over three months, it brought in $28.7 million this way, and brokered deposits climbed to 35.7 percent of all deposits.

Mounting loan troubles may have triggered an FDIC rule that forbids banks with lower capital ratios from taking on any more brokered deposits, though there’s not yet enough public data about the bank’s finances to be certain.

If I understand correctly, one reason brokered deposits can be risky is that large dollar amounts can quickly be pulled out of a bank when, for example, brokered CD’s expire and investors chase higher returns elsewhere. In other words, the use of brokered deposits is part of the mix, but too heavy a reliance can be dangerous.

The underlying cause of the failure, of course, was a collapse in real estate values. While it wasn’t a Southern California scale bubble, it was still a speculative bubble fueled by lax lending standards in the house buying, selling and financing industry. As we move forward, state and federal regulators (not to mention lawmakers) are going to have to come to grips with what worked and what didn’t work in terms of oversight.

Allrighty then.

Chief Justice John G. Roberts was ushered into the Map Room of the White House on Wednesday night to re-administer the oath of office to President Barack Obama because the original oath on Tuesday had a word out of sequence.

White House spokesman Robert Gibbs said the move was made out of “an abundance of caution” in consultation with White House Counsel Greg Craig. Obama’s second swearing-in, devoid of the pomp of the initial event, took place at 7:35 p.m. in the presence of a few aides and a press pool. The chief justice was wearing a court robe. “Are you ready to take the oath?” Roberts said. “I am,” Obama said, “And we’re going to do it very slowly.”

No word on whether Obama was wearing a flag pin while holding his birth certificate.

That’s really strange, although someday it will make a great trivia question I suppose.

I love it when a politician immediately does what they said they will do. In this case, new Superintendent of Public Instruction Randy Dorn is wasting no time doing away with the much-despised Washington Assessment of Student Learning. (Say it out loud–WASL. Now you hate it too.)

From The Seattle Times:

No changes can be made to the WASL for this school year due to time constraints, Dorn said, but beginning in spring 2010, he plans to replace the WASL with two tests. In grades 3-8, students would take the Measurements of Student Progress (MSP). In high school, they would take something called the High School Proficiency Exams.

One way he plans to cut costs is to offer the tests via computer, rather than just on paper and pencil.

Niki Sullivan over at the TVW blog notices something interesting in the official SPI Question and Answer document, and provides a link to the PDF document using some kind of fancy mouse-over deal. The something interesting is that Dorn is claiming he can change the testing system under existing law and the Legislature can request input.

Sounds fun!

There’s a lot of detail to wade through, of course, and Sullivan slyly notes she is checking into how much requesting Legislators might imagine can be done…

If a person swears on a Bible to “preserve, protect and defend the Constitution of the United States, so help me God,” and the US has laws saying that people must obey international laws against torture, then wouldn’t part of defending the Constitution include at least looking into reasonable suspicions that torture was official policy?

I mean, this is a matter of law, not a matter for the Washington, D.C. press corpse to decide, much as they might try.

And yes, someone saying something other than “yeah!” is horrible and mean and a sign of being a mean person. I’m arguing against torture out of spite and horribleness. Get off my lawn and don’t torture people!

But I am going to watch the concert ball on the tee-vee, if Sally “DC is a small town” Quinn isn’t providing commentary.

I heard Sting is a last minute addition, which sounds kind of cool, if true.

Get your Obama hat on, or whatever the kids are saying. Bring me a Werther’s.

ABC has been discussing on-air that Sen. Ted Kennedy, D-Mass., may have suffered some kind of seizure during the inaugural luncheon at the Capitol.

Reports are not clear about Kennedy’s condition, although a few moments ago President Barack Obama expressed concerns about “Teddy,” stating that while today is a joyous day, it’s also a somber day and that “part of me” is with Kennedy.

Somber indeed.

UPDATE–Noon PST– ABC is reporting that Kennedy did, in fact, suffer a seizure and that Sen. Robert Byrd, D-West Virginia, was so distraught that Byrd required assistance. ABC is showing the occasional shot of an ambulance outside the Capitol. Readers will recall that Kennedy was diagnosed with a brain tumor last year.

UPDATE–2:00 PM PST–Reuters has reported, sourcing a hospital spokesperson, that Kennedy is awake and answering questions.

UPDATE–3:09 PM PST– CNN has reported that Kennedy’s seizure was caused by simple fatigue, according to a doctor at Washington Hospital Center, and the senator will be released in the morning.

Daniell Kirkdorffer of On the Road to 2008,, who created and implemented the innovative Pacific Northwest Topic Hotlist, has rather symbolically announced this morning he will stop blogging, although his archives will remain on-line.

The announcement bears a posting time of 12:01 AM this morning. It’s well worth your time to read the whole thing if you have a chance, as Kirkdorffer captures well the reasons regular folks decided they had to do something during the bleakest, darkest days of the Bush administration. I like this bit:

The road to 2008 that I embarked on took me places I did not envision. A single voice in a multitude of blogs meant that I was never likely to be a heavily read blogger at a national level, but my gradual evolution to writing about more local issues was far more about educating myself about them, than it was about finding a mass audience. Instead I soon developed a dialog with fellow local bloggers, and got to meet most of them in person at gatherings such as Drinking Liberally and other organized events. Today I count many of them as friends that I would never have met otherwise, and as I conclude my own blogging activities I have nothing but admiration for their ongoing efforts.

Unpaid, sometimes reviled, often dismissed, political bloggers spend an awful lot of time writing about issues, and rarely is there any payoff for the effort. We champion candidates or policies, some that win election or passage, but many that don’t, and sometimes we’re lucky if we simply help shape the debate, but I cannot imagine a world anymore without blogs, and the collective impact they’ve had on news coverage, information, and the pursuit of the truth in a matter. Left to their own devices the mainstream media would continue to let us down, and we’d have few places to turn to truly understand an issue. With the demise of daily print news, online resources will only continue to grow, and bloggers will be at the forefront of that change. It isn’t a perfect forum, but it is an invaluable one.

Indeed.

Here’s wishing Daniel the very best in everything he does. Well done, sir.

More details are emerging about the failure of Bank of Clark County. In an interesting development, it appears that the total dollar amount of uninsured accounts will be substantially less than the approximately $39 million that was widely report initially. Reported figures are now more in the $10 million range.

Most press accounts describe Bank of Clark County as a “community bank,” which is accurate enough, but it’s important to understand that this bank was essentially set up by and for real estate developers and builders. The bank’s web site disappeared Friday night, but thanks to the Google cache you can peruse the backgrounds of its board of directors.

News accounts tonight suggest the bank was heavily exposed to a collapsing construction and real estate sector, while at the same time it was reluctant to deal with problem properties. A substantial amount of money was withdrawn in the last four days of operation, according to published accounts.

[Read more…]

I can’t get Willamette Week, who broke this story, to load right now, so I’ll link to this Oregonian article that doesn’t even bother to mention Willamette Week!

Mayor Sam Adams acknowledged today that he had a sexual relationship in 2005 with an 18-year-old man he had mentored. He said he lied when asked about it in 2007 and told the young man, Beau Breedlove, to lie about it, too.

Okay, yeah, another politician, another sex scandal. All the points that will now be made are utterly predictable. On the one hand who cares what politicians do in their private lives? On the other hand, he was doing it with a man far younger than himself while serving on the city commission, and then lied about the relationship, portraying it as “mentoring.”

Oh lord. What is it with politicians and their inability to keep their pants zipped? Adams just took office as mayor this month. Bad news for Portland during a tough patch in history. As if any citizens need this kind of distraction right now.

(And that’s real classy, Oregonian, to not even mention your local competitor that ran circles around you.)

Robert Reich has a list of conditions that he thinks should be applied to private sector banks should we wind up creating what he dubs a “Bad Bank” to dispose of all those nasty assets.

Until the taxpayer-financed Bad Bank has recouped the costs of these purchases through selling the toxic assets in the open market, private-sector banks that benefit from this form of taxpayer relief must (1) refrain from issuing dividends, purchasing other companies, or paying off creditors; (2) compensate their executives, traders, or directors no more than 10 percent of what they received in 2007; (3) be reimbursed by their executives, traders, and directors 50 percent of whatever amounts they were compensated in 2005, 2006, 2007, and 2008 — compensation which was, after all, based on false premises and fraudulent assertions, and on balance sheets that hid the true extent of these banks’ risks and liabilities; and (4) commit at least 90 percent of their remaining capital to new bank loans.

In common parlance, force them to behave like banks rather than criminals, while clawing back illegitimate salaries and other earnings.

Or we could just take over all the banks, clean them out and sell them. Things are so bad we might wind up having to do that anyway.

Only some clergy members are acceptable and thus will be promoted by traditional media, and the DFH must understand which kind is acceptable and which kind is not.

After days of controversy and outrage from the religious right, openly gay Episcopal Bishop Gene Robinson opened Barack Obama’s inauguration concert on the National Mall today with a request that the nation pray for “understanding that our president is a human being and not a messiah.”

But only the people AT the concert heard that, because HBO did not televise Robinson’s message. Who engineered this blackout of Robinson? I suspect we’ll hear lots about this in days to come.

Yeah, I know. Fighting over Rick Warren, or religion itself, is generally a waste of energy. Still, nobody can really be surprised that anyone who raises questions about Rick Warren’s batshit insane views is condemned as intolerant, even as a gay bishop is excluded from an inaugural broadcast. The more things change…

It’ll be interesting to see how many columnists get in high dudgeon about Gene Robinson.

Folk you, righties. This land was made for everyone.

So if Bank of Clark County was so well run, why did it fail?

“The bank was heavily involved in the development of the community,” (President of the Columbia River Economic Development Council Bart) Phillips said. “The recession hits, and there are casualties. And this is one of the very unfortunate casualties.”

As the article notes, a lot of Vancouver’s top citizens seem to really like the people who ran Bank of Clark County, which is fine. There’s no reason to think they weren’t good at the business of banking itself.

Plus they love puppies, which is very sweet and utterly beside the point. I get that nobody wants to kick any individuals when they are down, but talk about circling the wagons. Nobody even touches on any of the core financial issues.

There’s almost a sense in the article that the economic calamity now striking us is some vague, mysterious outside force like a natural disaster, rather than the highly predictable outcome of neglect by federal regulators in the financial sector combined with pro-sprawl policies locally. Maybe being too heavily exposed to construction and speculative real estate was considered acceptable best bank practice for the last decade, but it sure in the hell can’t be acceptable going forward if we want to avoid a repeat of this mess.

Easy credit allowed for building booms that led to unsustainable sprawl. People have been trying to point out for a very long time in Clark County that we can’t afford sprawl, either environmentally or economically, but nobody ever listens to the DFH. When your economy is based on growth never stopping, when it stops (as it inevitably must) you are in the deep end of the pool with no water wings.

That’s where we are now. Whether it winds up being a teachable moment for at least some of the bidness guys and gals remains to be seen. The irony is that the local BIAW has the county commission locked up for the next four years, and appears to be taking aim at the Vancouver City Council. So they may actually be able to continue their assault on environmental regulations, but with few people buying much of anything, it starts to look like a Pyrrhic victory.

$20 billion in my hand. Feel more sick and dirty…

You hardly ever hear about one group of atheists hurling artillery rockets or dropping bombs into the neighborhoods of another type of atheist. Strange.

Still, be sure to hate on atheists because it’s customary.

Lots of government people in suits showed up after the Bank of Clark County closed for business this evening. It’s not good.

The Bank of Clark County became the first locally based bank to fail in recent memory, following a ruling by state regulators on Friday that the Vancouver financial institution did not have adequate cash to stay in business. Its two branches will open Tuesday under the control of Umpqua Bank, which has assumed all of its roughly $209 million in insured deposits.

Sounds pretty serious. According to the Columbian, the state closed the bank and FDIC took receivership. The newspaper reports that there is over $39 million in uninsured deposits.

Several top Bank of Clark County executives, including President Mike Worthy, were relieved of their positions on Friday.

The rest of the bank’s 91 employees, based at two branches, will continue to work for Umpqua Bank, which still plans to open a branch next to Esther Short Park this summer.

“Employees heard the news that their bank has inadequate capital and their bank was declared closed, and we walked in the room five minutes later to tell them were taking over,” said Sullivan.

He entered with a phalanx of bankers and regulators in suits and ties that converged on 1400 Washington St. just after the 6 p.m. close of business on Friday.

Bank of Clark County was basically a local bidness guys and gals bank, started by some local movers and shakers in the late 1990’s.

The bank grew quickly as it aggressively courted business borrowers and developers during Clark County’s building boom. But when the housing market soured, so did its finances, as did the finances of most other banks in the region.

Until recently, it was clear that the Bank of Clark County had lost money on construction and development loans, but not how bad things had become.

“The last number of months they saw tremendous decreases in some of the values in their loan portfolio,” said Brad Williamson, director of the state Department of Financial Institutions banking division. “That requires a bank to make tremendous loan loss provisions. If the bank does not have enough in earnings, it comes out of its capital.”

This is quite the blow to certain aspects of the Clark County economy. The credit crunch and housing bubble deflation were already putting a severe strain on developers, and now their main local bank had to be seized by regulators.

It’ll be interesting to see what details emerge.