Federal Deposit Insurance Corp

Revealing the recession's rising toll on financial firms, the Federal Deposit Insurance Corp. disclosed Friday that it had ordered six more California banks to clean up their acts in February after the agency examined their books and operations.

The Federal Deposit Insurance Corp. plans soon to sign a major lease of office space in Orange County, probably in Irvine, where as many as 600 people would liquidate the assets of troubled banks and thrifts based in California and other Western states. The agency needs 200,000 square feet of space and has looked at locations across Southern California, FDIC spokesman David Barr said. "It's a temporary office -- three to five years is what we're looking at," Barr said Tuesday.

The rules that govern federal deposit insurance are of more than passing interest to Bill Hogle, a 61-year-old Santa Monica retiree. More than half his wealth is tied up in certificates of deposit, and he lives on the income they produce. He knows his money is in different kinds of accounts that make him eligible for more than $100,000 of insurance, and he's been banking on that knowledge. But, in the aftermath of the failure of Pasadena-based IndyMac Bank, we're all increasingly nervous.

Federal regulators seized Downey Savings & Loan and PFF Bank & Trust late Friday, saying hundreds of millions of dollars in bad loans from the housing bubble had rendered the Southern California banking fixtures unsound. The banks' branches will continue operating as usual under the ownership of Minneapolis-based U.S. Bank, one of the country's largest banks, and no depositors will lose any money because of the failures, regulators said. Newport Beach-based Downey lost $547.

Two failed Southern California banks will reopen today under new owners, after the Federal Deposit Insurance Corp. took control of them late Friday. Vineyard Bank of Corona, which has 16 branches, was sold to California Bank & Trust of San Diego, the FDIC said. Separately, Temecula Valley Bank of Temecula and its 11 branches were sold to First Citizens Bank and Trust of Raleigh, N.C.

In a big victory for banks and thrifts, the Federal Deposit Insurance Corp. has backed down from a proposal to set rigid restrictions on real estate lending. Instead, the agency has agreed to issue general guidelines that will give banks more leeway in deciding when to make realty loans, according to regulatory sources. The change came after arm-twisting by Deputy Treasury Secretary John Robson, who feared that the strict underwriting standards proposed in June would worsen the credit crunch.

The Federal Deposit Insurance Corp. said Friday that it and state regulators ordered five more small California banks to clean up their acts in April, part of a campaign of intensified scrutiny amid the bad economy. The cease-and-desist orders, requiring tighter lending policies, stronger management and in some cases new capital, illustrated the recession's outsized grip on California despite its highly diverse economy.

Federal regulators now believe that U.S. bank failures will cost the deposit insurance fund more than $40 billion over the next four years as the economy weakens, a government official said. John Bovenzi, Federal Deposit Insurance Corp. chief operating officer, said the agency's estimate last fall of $40 billion in losses through 2013 probably would be surpassed.

As expected, the Federal Deposit Insurance Corp. more than doubled the amount of insurance on some retirement accounts, raising the ceiling to $250,000 from $100,000, the first increase in more than 25 years. The new limit takes effect April 1. The higher limit will apply to deposits including Keogh accounts, Roth IRAs and 401(k) plans, the FDIC said Tuesday. Insurance on other accounts will remain at $100,000.

The U.S. Senate confirmed the nomination of Texas banker Donald E. Powell for a five-year term as chairman of the Federal Deposit Insurance Corp.

Wall Street executives aren't famous for their humility, but they reached a new level of tone-deaf hubris in their recovery from the collapse of 2008. A number of top banks and investment firms have racked up outsized profits in recent months, sending their bonus checks through the roof. Goldman Sachs, for example, set aside $16.7 billion billion for employee compensation -- and that's just for the first nine months of 2009. This despite the fact that many of the same companies were in danger of going under just a year and a half ago, only to be rescued by federal bailout dollars and extraordinarily generous credit terms from the Federal Reserve.

The Federal Deposit Insurance Corp. plans to seek stakes in the companies bidding for seized banks, aiming to gain when the shares rise and helping recoup the costs of closing lenders. The arrangement would let the agency share any profits from an increase in the buyer's stock after a takeover, said James Wigand, the FDIC's deputy director of resolutions and receiverships. The regulator intends to ask more banks to share any gains after it received $23.3 million from New York Community Bancorp Inc. when the lender acquired the assets of Cleveland-based AmTrust Bank.

The country's banks will prepay three years of industry fees -- about $45 billion -- to give the government cash to handle the rising tide of bank failures, under a rule finalized by the Federal Deposit Insurance Corp. The FDIC would not be able to use the money to bring up the balance of the insurance fund that safeguards bank deposits, but the agency would gain operating liquidity. Banks would not have to book the expense until the insurance premiums came due over the three-year period.

Regulators shut San Joaquin Bank in Bakersfield, marking the 99th failure in the country this year of a federally insured institution. The bank's five branches -- four in Bakersfield and one in nearby Delano -- will reopen Monday as branches of Ontario-based Citizens Business Bank, which is also assuming the failed bank's deposits, under a deal with the Federal Deposit Insurance Corp. With San Joaquin Bank's branches, Citizens, a unit of CVB Financial Corp., will have almost 50 locations, most of them in Los Angeles County.

Five banks in four states were seized by regulators late Friday, pushing the number of bank failures this year to 89. Illinois lenders InBank of Oak Forest and Platinum Community Bank of Rolling Meadows; Vantus Bank of Sioux City, Iowa; First Bank of Kansas City, Mo.; and First State Bank of Flagstaff, Ariz., were seized, and the Federal Deposit Insurance Corp. was named receiver. Closing the lenders, with total assets of $1.1 billion and deposits of $982 million, will cost the deposit insurance fund about $400 million, the FDIC said.

Guaranty Bank, a big Texas lender that succumbed to losses on loans to home builders and mortgage-tied securities, was shut by regulators and most of its operations sold to a major Spanish bank. It was the second-largest U.S. bank failure this year. The transaction approved by the Federal Deposit Insurance Corp. marked the first time a foreign bank bought a failed U.S. bank. The FDIC sold all of the Austin bank's deposits and assets to BBVA Compass, the U.S. division of Banco Bilbao Vizcaya Argentaria, Spain's second-largest bank.

General Electric Co. said that it has begun to exit a program that allows companies to issue debt backed by the federal government, a tool the conglomerate used to raise money during the credit crunch. Fairfield, Conn.-based GE said the Federal Deposit Insurance Corp. had approved its application to begin phasing out participation in the Temporary Liquidity Guarantee Program, which enabled financial companies to issue debt with lower interest rates using the federal government's stable top credit rating.

Two failed Southern California banks will reopen today under new owners, after the Federal Deposit Insurance Corp. took control of them late Friday. Vineyard Bank of Corona, which has 16 branches, was sold to California Bank & Trust of San Diego, the FDIC said. Separately, Temecula Valley Bank of Temecula and its 11 branches were sold to First Citizens Bank and Trust of Raleigh, N.C.

Regulatory reform: An article in Business on Wednesday said that under President Obama's proposal to revamp financial regulations, the Federal Reserve would gain new authority to seize and dismantle large firms in danger of failing. In fact, that power would rest with several agencies working together, including the Fed, Treasury Department and Federal Deposit Insurance Corp.

The Federal Deposit Insurance Corp. said Friday that it and state regulators ordered five more small California banks to clean up their acts in April, part of a campaign of intensified scrutiny amid the bad economy. The cease-and-desist orders, requiring tighter lending policies, stronger management and in some cases new capital, illustrated the recession's outsized grip on California despite its highly diverse economy.