A look at the week past

News analysis by Tim Holland

With the President and First Lady off on the grand tour of Europe, much financial news slipped by un-noticed last week. The stock market did get some attention, since it was advancing, but the market anticipates or reacts to economic news it doesn’t create it, which is why, since banks and financial service companies are at the heart of our current problem, watching what the Federal Deposit Insurance Corp. (FDIC) has been doing is critical.

Yes, another bank did fail - the 21^st this year. The FDIC closed Omni National Bank, Atlanta, GA with the deposits being moved to SunTrust Bank in Atlanta. As no buyer for the bank was immediately found, SunTrust Bank will operate the six former branches of the bank on behalf of the FDIC until April 27, 2009. Omni had branches in Georgia, Florida, Illinois and Texas.

The FDIC also issued its list of enforcement actions. The notice is published on a one month delay basis so the data refers to actions taken in February 2009. The most telling section is the “Final Orders Issued Pursuant to Section 8(b), 12 U.S.C. #1818(b). This is commonly called the “Cease-and-Desist” order. Such an order, as the one issued to First Bank of Beverly Hills, Calabassas, CA, is one in which the bank is charged with unsafe or unsound banking practices such as “operating a bank with inadequate capital in relation to the kind and quality of assets held by the bank.”

The bank is then charged to take immediate action to increase its primary capital and has 60 days to do so and must, within 30 days, arrange to sell or merge the bank with another institution or group of investors acceptable to the regulators.

As an indication of the problem facing the banking industry and the FDIC, 21 banks were issued “Cease and Desist” orders during the month of February, while only three banks managed to have themselves removed from the list.