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.
John, want to punch-up your post and make it more interesting for us to read? Here’s what you should have done. First, find out exactly what those lower lending practices were. For example, did they sink to giving out stated income loans? Next, go to the bank yourself and inquire about getting one of those old loans. (It’s now the Bank of Umpqua). Pretend to the loan officer you want a stated income, zero down loan. Then report back to us what he says. It will be your first hand account of how things have or haven’t changed.
“Well I can just read what the qualifications for getting a loan at their is bank online or call them, and include that information in my post,” you defensively snort.
True, but it would still leave your post a very dry read. Injecting a first person account would make it interesting!
One problem with this blog is a lack of creativity and new ideas. It relies too heavily on newspapers. You need to think outside of the box.
Troll,
John linked back to the original article, and gave a short synopsis. If you want more detail, you can read the original article. That’s an appropriate format for a blog such as this one, as it highlights the original reporting by an investigative journalist, without trampling on the story by simply re-wording it and passing it off as his own.
Although there would be nothing wrong with adding the items you suggested, I don’t see any reason why you couldn’t do the same in order to ad some substance to your posts. But the results wouldn’t really be news – anybody who knows anything about the current economy and the banking situation knows that banks aren’t offering the “liar’s loans” right now. As a matter of fact, it’s pretty darned hard to get a loan even with good credit and reasonable equity. It WOULD be news if they did, in fact, continue to offer such risky loans, and if they actually made it through the underwriting process and were approved.
Since you seem to be so concerned about how Goldy manages his site, and about the quality of writing among those with posting priviledges here, why don’t you start your own site and see if anyone visits to read your own writings? Then you wouldn’t have to falsely claim as you do in other threads here that you have some ownership interest in Goldy’s site.
Troll, in the midst of his insipid lunacy, makes a valid point here. If the Internet is wiping out the newspaper business, where are current-events related blogs going to get their information after all the much-maligned “dead-trees” publications have disappeared?
Another case in point is the job Blethen’s rag did of exposing the all-too-cozy relationship between Doug Sutherland and the timber companies, and how this contributed to the disastrous flood conditions in southwest Washington and elsewhere. The research to put that series together, not to mention the professional writing, editing and graphic design to make make it accessible and understandable, probably cost something on the order of $100,000–and I daresay, probably had a lot more to do with Sutherland being voted out of office than our collective prattlings here.
It’s the real job of the “fourth estate” to do that sort of thing on a daily basis. For someone running a blog to get lucky with something like the Mike Brown story is laudable, but it doesn’t do the whole job. If online publishing expects to credibly take the place of the print media, it’s going to have to find a way to monetarize itself to pay for a lot more editorial infrastructure.
It’s really risky to lower lending standards at the moment.
US banks corruption is a big lession.
1, 2 – Of all the things the world needs right now, your editorial services rank near the very bottom of the priority list. Oh, and 1 more point — the only thing you’re more full of than yourself is shit.
Banks, and indeed the whole economy, are failing because they’re a house of cards built on a foundation of debt using hot air as collateral.
Banks, and indeed the whole economy, are failing because they’re a house of cards built on a foundation of debt using hot air as collateral.
I’d love to see a blog by Troll. Then I could point my friends to it and say “See – this is why we crushed the right. Retards like this are their best representatives!”