The difficulty sorting the good banks from the bad -- because the value of the unpaid loans is nearly impossible to measure -- also has hurt bank stocks overall, driving some regional banks' shares to record lows in recent weeks.
That has made it harder for financiers like John Delaney to find the money they need to lend to businesses.
"Three or four years ago, I didn't need a bank to finance a business. I could just go to the capital markets. That was the best source of financing," said Delaney, CEO of Maryland-based CapitalSource. "Now those markets are so profoundly troubled that anyone wanting to get funding there is going to have to pay more, and they're probably going to find that there are more restrictions too."
When Fremont Investment & Loan in Brea nearly collapsed after seeing more than $3 billion in subprime mortgages go into default, CapitalSource worked with regulators to obtain an industrial banking charter, enabling it in July to buy Fremont's 22 branches and, most crucially, about $5 billion in deposits.
So far the deal has paid off. In seven weeks, the new CapitalSource Bank has brought in more than $70 million in new deposits and more than 1,000 new customers. Its stock price has been relatively stable while other banks have seen their values fall off a cliff. It is working with state and federal regulators to switch from an industrial charter to a general bank charter.
One of the main reasons?
"Checking accounts. That's the biggie," said Tad Lowrey, the bank's president. "If you build a checking base you can cross-sell other products to customers, and it's tougher for them to leave."
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william.heisel@latimes.com
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Times staff writer Ken Bensinger contributed to this report.
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