Countrywide Bank in default and could take 80% of FDIC funds in one go

[Biggs]

sorry no link on this one, however, it is cl;early important, also note that this is a different Countrywide from Countrywide Financial that had all the problems last year at the start of the credit crunch


Countrywide Banks 'D' rating by Standard and Poor -default-this last Thurday could take 80% of FDIC funds all by itself.
This will cause fees to other member banks to increase dramatically

2008-04-05 21:00:48 (updated)
Los Angeles Business Journal

Countrywide bank is Insolvent (This is the California based banking franchise-not the Mortgage company)
Their losses alone could wipe out 80% of the FDIC, never meant to handle this kind of large scale fraud and default

Countrywide has book equity of $15 Billion however, their HELOC exposure alone probably wipes this out. Despite having reserves of $3.2 Billion for loan losses:

-44% of the $34.1 Billion in HELOCís on their 12/31 Balance Sheet has a LTV ratio of 90% or higher. If you assume a 10% decline in housing prices this creates a $15 Billion charge.

-Another 30% of the $34.1 Billion in HELOCís have a LTV between 80-90%. In the first quarter alone, asking prices for CFCís REO portfolio in FL and CA declined by 10%. With 50% of their portfolio in FL and CA, if we assume a 20% decline in these two states, this adds another $5 Billion charge.

-Not on their balance sheet at is another $40 Billion in HELOC's theyve sold over the last two years. A large portion of these loans will probably be put back to them with delinquency thresholds being exceeded. Look for a significant increase in their HELOC portfolio which could double the $20 Billion in charges shown above.

This analysis doesnít even look at their Alt-A exposure. Look for B of A to tell the Fed by the end of the month they are walking away from the deal. It will be interesting to see if the Fed is as eager to oversee another shot-gun wedding ala BSC and JPM with taxpayer money.

[larsonstdoc]

   WELL,  THIS IS THE NEXT SHOE TO DROP!  STORE FOOD IF YOU CAN.

[bluecommie]

I always wondered if the FDIC could even handle multiple bank collapses.

Well, now I know.

[sid]

FDIC generally only covers the first 100,000 bucks in your account, does not cover the entire loss of all bank accounts if the bank crashes.  The FDIC may, indeed, pay out much less than the losses of the bank. 

If your bank has a million customers then the total FDIC liability is limited to a million 100,000 dollar payments to depositors, and that assumes that each customer has the max in his account;  There will probably be some with less than that.

So as long as you keep only a hundred thousand in each of your accounts, you will probably be OK even if the losses that bank are great.

You may be covered to a higher limit deending on a number of factors.  Look here http://www.fdic.gov/edie/ to see if you can be covered to a higher limit, maybe up to 250,000.