Monday Morning Cup of Coffee

A look at stories across HousingWire’s weekend desk…with more coverage to come on bigger issues: Regulators closed seven banks Friday — all based in the state of Illinois — at a total cost to the Federal Deposit Insurance Corp. (FDIC) Deposit Insurance Fund (DIF) of nearly $974m. The Office of the Comptroller of the Currency (OCC) closed Rockford-based Amcore Bank. Chicago-based Harris National Association paid the FDIC a 0.01% premium to assume all of the $3.4bn in deposits and agreed to purchase essentially all of the failed bank’s $3.8bn in assets. The 58 locations of Amcore Bank reopened as locations of Harris National Association and the estimated cost to the DIF is $220.3m. The Illinois Department of Financial and Professional Regulation — Division of Banking closed the remaining six failed banks, including Chicago-based Broadway Bank. Chicago-based MB Financial Bank did not pay a premium to assume all of the $1.1bn in deposits and essentially all of the of the failed bank $1.2bn in assets. The four Broadway Bank branches reopened as MB Financial Bank locations. The estimated cost to the DIF is $394.3m. MB Financial also did not pay a premium to assume all of the $492m in deposits of Chicago-based New Century Bank and will assume essentially all of the failed bank’s $485.6m in assets. The three New Century branches reopened as locations of MB Financial and the estimated cost to the DIF is $125.3m. Wheaton-based Wheaton Bank & Trust will pay a 0.4% premium to assume all of the $438.5m in deposits and agreed to purchase all of the Naperville, Ill.-based Wheatland Bank’s $437.2m in assets. The one location of Wheatland Bank reopened as a location of Wheaton Bank & Trust and the estimated cost to the DIF is $133m. Northbrook-based Northbrook Bank and Trust paid the FDIC a 0.4% premium to assume all of the $171.5m in deposits and agreed to purchase all of Chicago-based Lincoln Park Savings Bank’s $199.9m in total assets. The four branches of Lincoln Park Savings Bank reopened as locations of Northbrook Bank and Trust, and the estimated cost to the DIF is $48.4m. Itasca-based First Midwest Bank paid the FDIC a 1% premium to assume all of the $127m in deposits and agreed to purchase essentially all of Peotone-based Peotone Bank and Trust’s $130.2m in assets. The two branches of Peotone Bank reopened as First Midwest Bank locations and the estimated cost to the DIF is $31.7m. Oak Brook-based Republic Bank of Chicago paid the FDIC a 0.00013% premium to assume all of the $74.5m in deposits of Chicago-based Citizens Bank & Trust Company of Chicago. However, the FDIC will retain most of the failed bank’s $77.3m in assets for later disposition. The one branch of Citizens Bank reopened as a location of Republic Bank and the estimated cost to the DIF is $20.9m. Ahead of a scheduled Tuesday hearing, the Senate Permanent Subcommittee on Investigations released internal e-mails (download here) from Goldman Sachs (GS) that detail conversations among executives about profits made during the collapse of the housing market. “Of course we didn’t dodge the mortgage mess,” one message attributed to Goldman CEO Lloyd Blankfein said. “We lost money, then made more than we lost because of shorts.” “Investment banks such as Goldman Sachs were not simply market-makers, they were self-interested promoters of risky and complicated financial schemes that helped trigger the crisis,” said Sen. Carl Levin (D-MI), the subcommittee chairman. “The 2009 Goldman Sachs annual report stated that the firm ‘did not generate enormous net revenues by betting against residential related products.’ These e-mails show that, in fact, Goldman made a lot of money by betting against the mortgage market.” Blankfein and other Goldman executives are scheduled to testify at the hearing Tuesday. In an interview with the Los Angeles Times, Goldman expressed concern that the Senate subcommittee “seems to have reached its conclusion even before holding a hearing,” Goldman spokesman Lucas Van Praag said. “In its statement, the US Senate subcommittee has cherry-picked just four e-mails from the almost 20-million pages of documents and e-mails provided to it by Goldman Sachs.” The Federal Reserve’s $1.25trn mortgage-backed securities (MBS) purchase program has come to an end, and now the Fed must decide if it wants to divest itself of these holdings, and how it can do so without causing disruption to the fragile economic recovery. According to a report in The Wall Street Journal, the sale of the Fed-held MBS won’t happen soon. Markets will be on watch for any indication of the Fed’s intentions, but it’s possible the Fed won’t signal its intentions on the matter in its statement following a meeting scheduled for Wednesday. “The sheer size of the portfolio makes these decisions so key. The Federal Reserve Bank of New York estimates Fed purchases of mortgage and Treasury bonds pushed long-term interest rates down about half a percentage point,” the report said. “The mere announcement of sales could have the opposite effect, as investors price in future sales.” That sentiment was echoed in this week’s “Securitized Products Weekly” commentary from JP Morgan Chase (JPM). While most of the Fed’s emergency programs were meant to be very short-term, analyst Matthew Jozoff wrote he doesn’t believe the Fed will be winding down the MBS purchase program by selling MBS anytime soon, but rather will let runoffs reduce their holdings over time. Jozoff said the continued fragility of the housing market, the difficulty of instituting a sale program, the expectations that paydowns alone will shrink the holdings by about $100bn a year, and that selling opens the door for questions about the gain or loss of the program and its ultimate cost are all reasons the Fed will be reluctant to sell those assets. “Ultimately, while we believe it’s unlikely that the Fed will sell mortgages this year, it’s possible that they use the roll market at some point as a ‘baby step’ in monetary policy,” Jozoff wrote. Write to Austin Kilgore. The author held no relevant investments.