First, generic reporting (with only passing mention of Central Bank, Stillwater, MN); here, with this being the entire short item:
The Federal Deposit Insurance Corp said Commerce Bank of Southwest Florida, based in Fort Myers, Florida, was closed and that Central Bank of Stillwater, Minnesota, will assume all of the deposits.
The FDIC did not give a reason for the failure, but small banks are collapsing almost every week, taken under by portfolios of deteriorating loans originated during the credit boom.
The FDIC has said bank failures will remain elevated through next year, as the recovery of the banking industry lags the healing of the overall economy.
Commerce Bank had assets of $79.7 million and total deposits of about $76.7 million, the FDIC said. The FDIC and Central Bank entered into a loss-share transaction on about $61 million of Commerce Bank's assets
The sole branch of Commerce Bank will open on Monday as a branch of Central Bank.
The failure is expected to cost the FDIC's insurance fund $23.6 million.
The fund's balance went negative as of the end of the third quarter, but the FDIC has plenty of access to funding, including a $500 billion line of credit with the U.S. Treasury Department.
The agency earlier this month approved a plan to have banks prepay three years of industry fees to give the FDIC cash to handle the cost of bank failures.
The FDIC has estimated the total cost of failures will be $100 billion from 2009 through 2013.
The agency will hold a briefing next week to reveal bank industry earnings for the third quarter. It also will provide an update about the state of the insurance fund and how many banks are on the FDIC "troubled bank list."
The FDIC said 416 banks were on that list as of the end of the second quarter. Most banks on the list do not fail, the agency has said.
[emphasis added] Two separate things need emphasis; first, the Treasury, taxpayer money, stands behind the bankrupt fund as guarantor, with the fund insolvent as of August this year so that it's using borrowed taxpayer Treasury money from September onward to cover whatever part it eats from a failure and work-out takeover contract [that's twenty million estimated for the Riverview Community Bank, Otsego, MN, and twenty-three million for the Florida bank failure].
Second, the fund is being replenished by tithing healthy banks, with the cost, clearly, to be passed onto us, consumers, the public. So whether the FDIC fund is temporarily insolvent, or made solvent out of further stressing other banks to cover for mismanaged or unlucky failures, the public, us, we cover the hit - at least in two twenty million dollar instances happening weeks apart.
Consumer-depositors put money in banks where no or small rates of return apply, but, in turn, there is no dollar-for-dollar risk as with other investments promising potentially higher yields. In such risk-averse positioning, taking the lesser yield in return for insurance amounts to depositors indirectly "buying" the insurance at the depositor level for their deposited money, via accepting a lesser return.
In any economically realistic anaysis, it is not banks gratuitiously insuring depositor cash with FDIC, and anyone implying that is probably motivated in part by total child-like unsophisticated misunderstandings, or by deception and a willingness to mislead.
As a related interesting point of emphasis there are conflicting arguments possible on whether bank payments into the FDIC insurance pool should be risk measured vs. coverage measured; with that situation currently but quietly in the news.
Risk generally would be proportional to a bank's assets, (its outstanding performing loans, its unperforming loans, its foreclosure positions in litigation, and its foreclosed real property holdings held pending liquidation (and lease income from foreclosed property with performing lessors a factor since many commercial and industrial site deals involve long-term leases to occupying firms so that all firm costs can be expensed in the year paid, and amortization of the property over its "useful life for tax accounting purposes" stays with the title holder - so who "owns" what with 99-year leases)).
Coverage is for deposits, since FDIC covers first dollar [no deductible] up to $250,000 depositor money at risk in any of its insurance arrangements. So the payout exposure [apart from the risk of failure] is based on the amount of deposits a bank holds.
The simplest of arguments is that a bank fails when its assets fail, independent of amounts of deposits, and FDIC payout only happens when there is a failure, so that risk of failure - the asset based assessment for pool payments is favored as a fairer measure under such thought. I.e., failure is independent of pool coverage exposure, and is an operational-management risk of any banking institution.
That is not merely a hypothetical debate. Instead, it practically relates to which kinds of banks pay differning amounts into the FDIC coverage pool - a quite practical matter for each participating bank. Reuters coverage of that situation is here, and here, with the Wall Street vs. Main Street characterization arguably applying. And with the proposal being a three-year prepayment being tithed against the banking community to reestablish a solvent pool, and that to be done soon, the question of what's a fair share for bigger banks to pay should be expected to at some point be publicly debated.
...........................
That leaves only the wrap-up. Involving Mary Kiffmeyer.In responding to a letter to the editor, here; Rep. Kiffmeyer puts herself on record publicly in a responding letter, here, and in relevant part she wrote:
I am writing in response to the DFL activist, Tom Beckfield's, letter to the editor which was filled with many inaccuracies and false insinuations.
Normally I would refrain from bothering to respond to such an obviously outrageous tale but, out of regard for the truth, respect for you the readers and respect and admiration for all our friends and neighbors that were also associated with that local bank, I will comment on a few items and stand up for what's right.
I personally did not own or operate a bank nor do I own a "holding company". My husband Ralph and I, along with over 85 other small investors from the community put money into a start-up community bank in 2003 by purchasing shares of stock, a bank that ultimately failed due primarily to these adverse economic times that we are all struggling with. Regarding an alleged $20,000,000 bail out, there was none. Also, since the bank paid premiums into the FDIC insurance fund, as all banks do, there is no loss to taxpayers of any kind.
Readers wanting a full picture should read both letters.
Earlier this year Mary Kiffmeyer in required reporting to a state board declared herself to be "owner" of the bank and writer Beckfeld in his letter was entitled to rely on her truthfulness and her being sophisticated enough to know what "owner" means.
http://www.cfboard.state.mn.us/eis/rpdetail/rp602_5409.html
Now, in light of the quoted Kiffmeyer letter quibbling over detail, and fleshing out a story different than the earlier self-characterization as "owner" we can let that question pass as less important than other things.
As to the Otsego bank's pre-failure status before its closure by regulators, Kiffmeyer had signed a binding document mere weeks before the Halloween failure-closure [regulatory ceasation of prior ownership with FDIC appointed as receiver, and then a different bank stepping in to share mop-up along with FDIC being widely reported as ending up eating an estimated twenty million of that hit], and she signed that early October document between the Federal Reserve Minnesota branch and her bank holding company, signing as holding company president, board member, and shareholder authorized in advance by the fiirm's board to bind the holding company by her signature alone, and it was that very holding company that owned all of the bank's stock. Moreover, FDIC documents, as Crabgrass reported, now show the holding company business address to be identical to the Kiffmeyer business address she reported early in the year to the state board, and which is also her campaign headquarters address.
Yet Kiffmeyer wrote the editor and readers, " ... out of regard for the truth, ... I personally did not own or operate a bank nor do I own a "holding company". My husband Ralph and I, along with over 85 other small investors from the community put money into a start-up community bank in 2003 by purchasing shares of stock, a bank that ultimately failed due primarily to these adverse economic times ...".
Out of regard for the truth, I in that position would not have shaded it so coarsely, nor left out so many big chunks of truth, truth for which we all should have regard.
...........
The document Kiffmeyer signed in early October this year is online - it was stated on its face to be a regulatory Agreement between AMERICAN EAGLE FINANCIAL CORPORATION, Otsego, and FEDERAL RESERVE BANK OF MINNEAPOLIS; promising insiders (including Kiffmeyer) would not remove further cash from the venture, and promising compliance with a 04/07/09 FDIC order requiring additional capital and other adjustments needed because of failures of bank management to have acted prudently but rather in a way that imperiled the soundness of the bank and the integrity of depositer money it managed, at least as far back as this spring: See, the Fed - holding company promises the Kiffmeyer interests made:
http://www.federalreserve.gov/news...//enf20091019a1.pdf
See, also, the earlier multipage characterization of mismanagement in the FDIC Cease and Desist order it stipulated to follow:
http://www.fdic.gov/bank/individual/enforcement/2009-06-02.pdf
Indicia of ownership and control are objective, and in this instance evidence as set out above exists to contradict self-serving carefully couched statements within the Kiffmeyer letter.
The objective regulatory documents are something Kiffmeyer cannot credibly dispute, and her letter goes on and on, as if they never existed as evidence, or were not something readers, in fairness, would expect her to address.
Most importantly, the Kiffmeyer bank failed from mismanagement not because of the economy tanking, a fact clear in light of Bank of Elk River in the identical market locale continuing to prosper from the 1880's onward, it being in that interval a prudently managed operation whereas the Kiffmeyer bank lasted a mere six years.
Kiffmeyer's denial of such things must be weighed in light of objective factual proof contradicting her. Beyond that, the dissembling about the public somehow not being hit with mop-up costs is to me the most offensive shaded statement Kiffmeyer makes, in that the Beckfeld letter [you can read it] never mentions it as a "taxpayer" bailout, only calling it a "bailout," with Kiffmeyer in her writing denying FDIC would eat twenty million, while being, herself, the first one to introduce the hair-splitting "taxpayer" terminology as a straw man propaganda tactic - build a straw man and destroy it instead of addressing the substance of the contention - that the public actually suffers indirectly the $20 million that FDIC indicated it expected it would have to absorb, i.e., that the public pays no matter how Rep. Kiffmeyer splits hairs off the head of "taxpayers."
Two closing thoughts, Kiffmeyer terming Beckfeld, (who I witnessed assisting the 2008 IP Barkley effort), a "DFL activist" is as disingenuously argumentative as it is to begin things by interjecting, "Normally I would refrain from bothering to respond to such an obviously outrageous tale," when the clear reason she wrote was precisely to address the prior letter.
Starting with inflamatory and accusatory language about one questioning her conduct, while saying no reply was needed, yet with it clear that the entire point of Kiffmeyer's letter-to-the-editor writing was to reply --- all of that is pure politician bunk, and detracts from more cogent and well stated points of argument by descending into name calling from the start, as if that is a true form of self-defense.
There's nothing at all "obviously outrageous" in calling a public official to task over error and omission in duties that either Kiffmeyer was capable of performing but arguably was grossly negligent in attending to, or duties that were beyond Kiffmeyer's capabilities and which she, accordingly, should never have taken on as a director and hence a management person of a bank, (and president and director of a bank holding company).
BOTTOM LINE THERE: People ineptly not knowing what they are doing in banking is in its own way as dangerous as children playing with matches. People negligently handling understood banking board supervisory duties is much like parents inattentive to children playing with matches.DISCLOSURE: I know Tom Beckfeld, and consider him somewhat of a remote friend, although we have differed over substantial political beliefs in the past, while agreeing on other things. I would never question his honesty or integrity, nor his honest commitment to things he believes in.
I do not know Mary Kiffmeyer, and can only judge her by her extensive public record - and clearly, I am far less than impressed.
__________________
If any reader wants to consider other parts of the Beckfeld and Kiffmeyer letters, (relating to things that an audit reported during the Kiffmeyer tenure as Secretary of State), please send an email or add a comment.
I have not discussed that aspect of the two letters, but will, if requested to by a reader.
_________UPDATE_________
I am in error. Double checking the Sherburne County Citizen website, there were three letters, not merely two, the third being dated Nov. 21, and included with others, this link, it stating:
TO THE EDITOR:
Rep. Kiffmeyer's letter last week stated that inaccurate and false claims were made about her.
She said: "I personally did not own or operate a bank nor do I own a "holding company". The report she filed with the campaign finance board on 01/06/09 of the year she listed herself as owner of the bank. http://www.cfboard.state.mn.us/eis/rpdetail/rp602_5409.html
Mary Kiffmeyer the president and director of American Eagle Corporation, signed the written Agreement by and between AMERICAN EAGLE FINANCIAL CORPORATION Otsego, Minnesota and FEDERAL RESERVE BANK OF MINNEAPOLIS, Minnesota on Oct 9th 2009 of this year. http://www.federalreserve.gov/newsevents/press/enforcement/enf20091019a1.pdf
She was also listed as a member of the board of directors of the bank.
My statement of the bank being owned and operated by her is based on these facts.
The bank was only one of five in the state to have this action taken against it so to blame it entirely on the "economic times" make one wonder why so few banks went through this.
The "bogus travel" statement: According to the Legislative auditor's report: For 17 events we reviewed, the public purpose of the trip was not adequately identified. These events included travel between the airport and home, various receptions, celebrations, and charity events."
Having taxpayers reimburse her for participating in celebrations and charity events was what I considered "bogus travel expenses". She stated there was "none".
The $190,000 in overpayment to staff: "These higher compensation rates resulted in over $190,000 in overpayments during the audit period" (2005-2006) http://www.auditor.leg.state.mn.us/fad/pdf/fad0716.pdf
She stated that "compensations were corrected and repaid..." The overpayments were not repaid and the corrections were made after she left office.
A local bank was in trouble for a long time and there was little or no reporting on it. The depositors were protected because of a government program that provided a safety net and that program worked. Sometimes safety nets are a good thing.
Tom Beckfield,
Big Lake, MN.
NOTE: I was aware Beckfeld [aka Beckfield per the news publishing] was preparing to submit a reply to the Kiffmeyer response.
I was unaware until double checking that there was a reply letter that had actually been published.
From reading it, it is clear that it overlaps my thoughts at the end of the main post but goes beyond them to discuss mismanagement questions during Mary Kiffmeyer's Secretary of State tenure, including objective audit results which arguably presage current parallel mismanagement questions regarding the banking fiasco.
So, three letters, so far, not merely two; and it remains to be seen if Kiffmeyer has more to add.