Private Equity, Venture Capital, Finance News and Assistance

If you think Fannie Mae (FNM) or Freddie Mac (FRE) are under-capitalized, then how about this very rough, and very non analytical back of the envelope capitalization for the Federal Deposit Insurance Corporation [FDIC] insurance deposit fund? Combined Deposit Insurance Fund Balance - $52.8 billion (before Indy Mac (IMB) failure). Insured Deposits - $4.4 trillion. Reserve Ratio - 1.19%.

Press release from the bank:

Mitsubishi UFJ Financial Group and Morgan Stanley Obtain Key Regulatory Clearances

$9 Billion Investment by MUFG Will Further Bolster Morgan Stanley's Strong Capital Position

How do companies with such great assets go belly up within days once a cascade of bad things start happening? At the outset of 2008 we had five major independent investment banks and now we have two (Goldman Sachs (GS) & Morgan Stanley (MS)). A core reason is that the leveraged finance business model is a very poor one. It allows you to make a killing when times are good, but on the flip side it can bankrupt you within days when the tide turns. That is not a risk-reward scenario that companies should embrace.

On Friday, the FDIC closed and facilitated the sale of two CA savings banks, Downey Savings and Loan, the bank unit of Downey Financial Corp (NYSE:DSL) and PFF Bank and Trust, Pomona, CA. All deposit accounts and all loans of both banks have been transferred to U.S. Bank, NA, lead bank unit of US Bancorp (NYSE:USB). All former Downey and PFF Bank branches reopen for business today as branches of U.S. Bank.

After a cold streak in early August where it missed closing banks two Fridays in a row, the Federal Deposit Insurance Corporation is en fuego. It has closed U.S. banks three of the last three Friday nights, including tonight's announcement that Silver State Bank (SSBX) of Henderson, NV, joins the list.

Here’s a snippet from KeyCorp’s most recent 10-Q  filed on May 6, 2008 for the period ending March 31, 2008.

Another bank just bit the dust. Nevada based Silver State Bank was closed down by Nevada regulators due to bad loans. The Federal Deposit Insurance Corporation [FDIC] was named as receiver. Andrew K. McCain, son of Republican presidential candidate John McCain, was on the bank's Board of Directors until July. According to the FDIC, this is the seventh bank failure for the third quarter, an increase of 250% over the second quarter, and the quarter isn't even over yet.

SOUTH JORDAN, Utah----HEADWATERS INCORPORATED announced today that it has completed an amendment to its senior secured credit facility to provide additional flexibility for capital leases and sale-leaseback transactions and to temporarily reduce the required fixed charge coverage ratio, increase the total indebtedness to EBITDA ratio, and reduce the senior indebtedness to EBITDA ratio.

The US title insurance industry is feeling the squeeze from the subprime mortgage meltdown and subsequent decline in housing prices.Fitch Ratings says the industry’s risk-adjusted capital [RAC] position at year-end 2007, showed a significant decrease: the title industry’s RAC ratio is at its lowest since the RAC Model was first introduced in 1997.