!! History Commons Alert, Exciting News

Context of 'May 1, 2009: 30th US Bank Failure of 2009 as Federal Regulators Seize Atlanta-Based Silverton'

This is a scalable context timeline. It contains events related to the event May 1, 2009: 30th US Bank Failure of 2009 as Federal Regulators Seize Atlanta-Based Silverton. You can narrow or broaden the context of this timeline by adjusting the zoom level. The lower the scale, the more relevant the items on average will be, while the higher the scale, the less relevant the items, on average, will be.

The 23rd largest commercial bank in the country gets a package of $1.5 billion in financial assistance, in exchange for close supervision of its operations by the Federal Deposit Insurance Corporation (FDIC). The aid consists of a $1 billion bank line of credit from the Federal Reserve, a $325 million loan from the FDIC written as a subordinated note to be paid off after five years and interest-free for the first year, and $175 million in other notes to a group of commercial banks. The following year, as regulators and the banking industries search for a response to a rising incidence of bank insolvency, the First Pennsylvania agreement will be seen by some as a model. [Wall Street Journal, 6/8/1981]

Entity Tags: Federal Deposit Insurance Corporation, First Pennsylvania Bank, Federal Reserve Board of Governors

Timeline Tags: Global Economic Crises

Rep. Fernand J. St. Germain (D-RI), with 28 co-sponsors, introduces HR 6267, the “Net Worth Guarantee Act” officially entitled “A bill to revitalize the housing industry by strengthening the financial stability of home mortgage lending institutions and ensuring the availability of home mortgage loans.” [Library of Congress, 5/19/2008] As introduced, the bill would create a fund for loans to those troubled banks and savings and loans institutions that would have to be put into receivership if their condition deteriorates to a small degree from the bill’s qualifying requirements. The provisions are as follows:
bullet Amendments to the Federal Deposit Insurance Act (which regulates the Federal Deposit Insurance Corporation, FDIC), the National Housing Act (which regulates the Federal Home Loan Bank Board, FHLBB), and the Federal Credit Union Act (the National Credit Union Administration Board, NCUAB) so that the regulated bodies can guarantee the net worth of qualified insured institutions.
bullet Requirements that a qualifying depository institution be one that is threatened with insolvency, as measured by very low net worth and a recent trend of losses; that the institution be one that mainly serves the residential mortgage industry, as measured by the share of its loans or other assets that are held in or collateralized by residential mortgages or real estate; and that it continue in this service under the net worth guarantee, as measured by the share of its new deposits that it devotes to certain types of mortgages.
bullet Rules for determining the initial amount of the guarantee, and for either extending or phasing out the assistance to a given institution. Extensions after two years are to be contingent upon a showing that “certified continued earnings losses are caused by general market conditions and not by the actions of the institution.”
bullet Creation of a Net Worth Guarantee Account in the US Treasury in the amount of $8.5 billion to cover the payment of any guarantees.
bullet A sunset date for new extensions of guarantees.
bullet An oversight process in which the three bank regulating bodies report quarterly to Congress on their activities in granting guarantees, and the comptroller of the currency provides semiannual audits. [Library of Congress, 5/14/2008; Library of Congress, 5/14/2008]
Fate in the House - The Net Worth Guarantee Act passes the House of Representatives on May 20, 1982, with amendments that extend the coverage to qualifying State-chartered commercial banks, and qualifying national banks whether or not they are members of the FDIC; that add investment in residential housing co-operative stock and mortgages on multifamily rental projects to the qualifying activities for sustaining the guarantee; that alter the exit path from the program; that add compliance with community credit provision requirements under the Community Reinvestment Act of 1977; that make the Treasury senior to holders of existing subordinated debt of any guaranteed bank that later winds up in receivership; and that clearly give the sunset date as September 30, 1984. [Library of Congress, 5/14/2008; Library of Congress, 5/14/2008; Library of Congress, 5/14/2008]
Eventual Fate - With substantial amendments that address other banking regulatory issues besides the net worth of depository institutions, the bill finally passes the Senate under several short titles, of which the primary is “Depository Institutions Amendments of 1982,” superseding S.2879 sponsored by Sen. E.J. “Jake” Garn. The bill is enacted with the signature of President Ronald Reagan on October 15, 1982 as the Garn-St. Germain Depository Institutions Act of 1982. [Library of Congress, 5/14/2008]

Entity Tags: Charles Schumer, Steny Hoyer, Fernand J. St. Germain

Timeline Tags: Global Economic Crises

Silverton Bank, a commercial bank that provided major wholesale banking services to client banks, is shuttered by regulators, making it the 30th US bank to fail in 2009. Based in Atlanta, it is the sixth Georgia bank to close this year and is taken over by the federal Office of the Comptroller of the Currency, which appoints the Federal Deposit Insurance Corp. (FDIC) as receiver. Silverton was a correspondent bank that did not take public deposits or make consumer loans, but provided credit card operations, investments, and loan purchases to client banks. At its closure, the bank’s total assets are approximately $4.1 million and total deposits are about $3.3 billion. The FDIC says it has created Silverton Bridge Bank N.A. to manage bank business and minimize disruption to customers over the next 60 days; the FDIC estimates it will cost the Deposit Insurance Fund $1.3 billion.
Consequences of Collapse - The failure’s impact is expected to ripple through the banking industry and industry experts believe it will have catastrophic consequences for banks across the Sun Belt, potentially impacting hundreds of bank balance sheets. Founded in the mid-1980s, Silverton provided credit and deposit services for other banks, acting as a middleman for fiduciary services for 1,500 small US banks in 44 states. Services included federal funds repayments, a check clearinghouse, and loans to bank holding companies, directors, and executives. Local bank attorneys describe Silverton as a mini-Federal Reserve for community banks.
Other Banks Also Closing - As the deepening recession makes it more difficult for consumers and businesses to pay their loans, local banks have closed in droves. So far, on nearly every Friday this year, there has been at least one bank failure. During the third week in April, while banks prepared for the Obama administration’s ‘stress tests,’ four regional banks closed. Despite federal commitment of amounts in the trillions to increase liquidity as well as jumpstart the economy, the speed of bank failures has accelerated. In 2008, a total of 25 banks failed, yet, in the first four months of 2009, 30 banks have failed. Prior to Silverton’s closure, American Southern Bank in Kennesaw, Georgia, was the last FDIC-insured bank to fail; it was shut down on April 24. [Marketwatch, 5/1/2009; CNN, 5/1/2009; Associated Press, 5/1/2009]

Entity Tags: Silverton Bank, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency

Timeline Tags: Global Economic Crises

Ordering 

Time period


Email Updates

Receive weekly email updates summarizing what contributors have added to the History Commons database

 
Donate

Developing and maintaining this site is very labor intensive. If you find it useful, please give us a hand and donate what you can.
Donate Now

Volunteer

If you would like to help us with this effort, please contact us. We need help with programming (Java, JDO, mysql, and xml), design, networking, and publicity. If you want to contribute information to this site, click the register link at the top of the page, and start contributing.
Contact Us

Creative Commons License Except where otherwise noted, the textual content of each timeline is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike