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Friday, July 3, 2009

John Warner Closes After 142 Years, then Opens the Next Day


It's business as usual, with its ups and downs in DeWitt County. The venerable John Warner Bank of Clinton, Illinois has closed after 142 years of continuous operations. Though the Warner family sold the bank a few years ago, John Warner and the Warner family were pioneers in Central Illinois and set the standard for high quality financial service during their tenure.

Here's the Pantagraph:
John Warner Bank, a fixture of downtown Clinton since 1867, was closed by state regulators Thursday in what apparently was the first area bank failure in this recession.

Acting as receiver for the bank, the Federal Deposit Insurance Corporation arranged for State Bank of Lincoln to assume bank deposits. Warner facilities will reopen today as branches of the Lincoln bank.

The Illinois Department of Financial and Professional Regulation, Division of Banking, closed the bank, but deposits still are insured, an FDIC statement said.

Drive-up customers pulling up after the regulators moved in reacted positively to the news, FDIC spokeswoman Roberta Valdez said.

"We told them no one lost any money, and it's business as usual," Valdez said.

Customers should notice no change in the transfer because checks, ATM cards and online banking services will remain the same, said Steve Aughenbaugh, State Bank of Lincoln president, in a statement issued late Thursday afternoon.

Warner was among six Illinois banks, all controlled by one family, taken over by the FDIC on Thursday.

The founding Warner family of Clinton sold the bank in 2003.

The closings bring to 12 the number of Illinois banks closed this year.

As of April 30, Warner had total assets of $70 million and total deposits of approximately $64 million.

In addition to assuming all the Warner deposits, the Lincoln bank agreed to buy about $63 million of assets. The FDIC will retain the remaining assets for later disposition.

The cost of the bank failure to the FDIC's insurance fund is estimated to be about $10 million.

An FDIC team and a state regulator went into Warner at closing time at 3 p.m. Thursday to initiate the transition, Valdez said.

"Obviously, it was a shock, a trauma" to employees, she said.

Forty people from the FDIC's Dallas office will work through the weekend with bank employees to complete the transition, including balancing all accounts and inventorying all loans, Valdez said.

"They've jumped right in - they're troupers," she said the bank's 26 full- and part-time employees.

The Clinton bank was going to be closed today for the holiday, but the Lincoln bank decided to open the Clinton bank facilities after all, said Valdez.

**
Not to make this blog useful whatsoever, but any ideas on why the JWB failed? DeWitt County has seen this type of economy before, took a swing at a long ball, spit on the ground, and went on with things. Why the quick trip to the showers this time?

45 comments:

Anonymous said...

Excellent coverage wapella.com. I have no insights to offer on your provocative question.

I see the New York Times today also ran a small story on JWB's demise. Nearby in the NYT was another critical story to the readers of this blog: the passing of Ms. Mollie Sugden, 86, who portrayed TV's memorable Mrs. Slocombe with a variably-hued coif.

I am now back in the land of the free where wapella.com is not censored by government hacks suppressing our precious freedom of expression. Viva la revolucion!

HG

Anonymous said...

John, didn't you predict this sort of thing with your fiat money discussion a while back?

A lot of the stuff you said has come true.

There was a lot of foresight in what was said back then.

R

Anonymous said...

CDO's

Anonymous said...

It was earlier reported that JWB was undercapitalized and on a watch-list as to the adequacy and soundness of its assets. Management blamed declines in investment values caused by disturbances in the financial markets. Evidently, recent, partial improvements didn't help.

Anonymous said...

Interesting to note that other banks owned by the same individual were also closed.

Anonymous said...

Are Cdos *carl deans onions*?

ATD said...

Happy 4th everybody - glad to hear HG is back in the land of red, white and blue. I too was sorry to hear about the passing of Mollie Sugden - Mrs. Slocombe on "Are you being served?" Her pink coif was my favorite.

I suppose it is anyone's guess about JWB although toxic assests come to mind. It is amazing how a bank can be closed after 142 years and the situation is corrected from 3:30 p.m.one day till opening the next day.

Anonymous said...

I know the theory, but when you send JWB checks to out-of-area creditors who've heard about the failure (it's all over the Internet), but aren't up to speed with all of the FDIC procedures and reassurances, wouldn't they naturally be a little skittish? All a credit card issuer has to do is diddle around for a couple of days to rake in a late charge.

Anonymous said...

Doubtful that a human ever sees which bank a check is from, outside of the merchant who takes it.

Auto processes on the mag numbered things, then scanned and autopresented.

Anonymous said...

Did CD O'Thorp sell peaches or onions?

Anonymous said...

I don't think it was john who had the foresight, he was more pro central bank in the fiat discussion.

Maybe it was Joe with the foresight?

Anonymous said...

The Great American Bubble Machine

Matt Taibbi on how Goldman Sachs has engineered every major market manipulation since the Great Depression


The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.

Any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain — an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.

They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. They've been pulling this same stunt over and over since the 1920s — and now they're preparing to do it again, creating what may be the biggest and most audacious bubble yet.

The basic scam in the Internet Age is pretty easy even for the financially illiterate to grasp. Companies that weren't much more than pot-fueled ideas scrawled on napkins by up-too-late bong-smokers were taken public via IPOs, hyped in the media and sold to the public for megamillions. It was as if banks like Goldman were wrapping ribbons around watermelons, tossing them out 50-story windows and opening the phones for bids. In this game you were a winner only if you took your money out before the melon hit the pavement.

It sounds obvious now, but what the average investor didn't know at the time was that the banks had changed the rules of the game, making the deals look better than they actually were. They did this by setting up what was, in reality, a two-tiered investment system — one for the insiders who knew the real numbers, and another for the lay investor who was invited to chase soaring prices the banks themselves knew were irrational. While Goldman's later pattern would be to capitalize on changes in the regulatory environment, its key innovation in the Internet years was to abandon its own industry's standards of quality control.

Anonymous said...

Goldman's role in the sweeping global disaster that was the housing bubble is not hard to trace. Here again, the basic trick was a decline in underwriting standards, although in this case the standards weren't in IPOs but in mortgages. By now almost everyone knows that for decades mortgage dealers insisted that home buyers be able to produce a down payment of 10 percent or more, show a steady income and good credit rating, and possess a real first and last name. Then, at the dawn of the new millennium, they suddenly threw all that shit out the window and started writing mortgages on the backs of napkins to cocktail waitresses and ex-cons carrying five bucks and a Snickers bar.

And what caused the huge spike in oil prices? Take a wild guess. Obviously Goldman had help — there were other players in the physical-commodities market — but the root cause had almost everything to do with the behavior of a few powerful actors determined to turn the once-solid market into a speculative casino. Goldman did it by persuading pension funds and other large institutional investors to invest in oil futures — agreeing to buy oil at a certain price on a fixed date. The push transformed oil from a physical commodity, rigidly subject to supply and demand, into something to bet on, like a stock. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.



The history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled-dry American empire, reads like a Who's Who of Goldman Sachs graduates. By now, most of us know the major players. As George Bush's last Treasury secretary, former Goldman CEO Henry Paulson was the architect of the bailout, a suspiciously self-serving plan to funnel trillions of Your Dollars to a handful of his old friends on Wall Street. Robert Rubin, Bill Clinton's former Treasury secretary, spent 26 years at Goldman before becoming chairman of Citigroup — which in turn got a $300 billion taxpayer bailout from Paulson. There's John Thain, the asshole chief of Merrill Lynch who bought an $87,000 area rug for his office as his company was imploding; a former Goldman banker, Thain enjoyed a multibillion-dollar handout from Paulson, who used billions in taxpayer funds to help Bank of America rescue Thain's sorry company. And Robert Steel, the former Goldmanite head of Wachovia, scored himself and his fellow executives $225 million in golden-parachute payments as his bank was self-destructing. There's Joshua Bolten, Bush's chief of staff during the bailout, and Mark Patterson, the current Treasury chief of staff, who was a Goldman lobbyist just a year ago, and Ed Liddy, the former Goldman director whom Paulson put in charge of bailed-out insurance giant AIG, which forked over $13 billion to Goldman after Liddy came on board. The heads of the Canadian and Italian national banks are Goldman alums, as is the head of the World Bank, the head of the New York Stock Exchange, the last two heads of the Federal Reserve Bank of New York — which, incidentally, is now in charge of overseeing Goldman.

But then, something happened. It's hard to say what it was exactly; it might have been the fact that Goldman's co-chairman in the early Nineties, Robert Rubin, followed Bill Clinton to the White House, where he directed the National Economic Council and eventually became Treasury secretary. While the American media fell in love with the story line of a pair of baby-boomer, Sixties-child, Fleetwood Mac yuppies nesting in the White House, it also nursed an undisguised crush on Rubin, who was hyped as without a doubt the smartest person ever to walk the face of the Earth, with Newton, Einstein, Mozart and Kant running far behind.

Anonymous said...

Rubin was the prototypical Goldman banker. He was probably born in a $4,000 suit, he had a face that seemed permanently frozen just short of an apology for being so much smarter than you, and he exuded a Spock-like, emotion-neutral exterior; the only human feeling you could imagine him experiencing was a nightmare about being forced to fly coach. It became almost a national cliché that whatever Rubin thought was best for the economy — a phenomenon that reached its apex in 1999, when Rubin appeared on the cover of Time with his Treasury deputy, Larry Summers, and Fed chief Alan Greenspan under the headline the committee to save the world. And "what Rubin thought," mostly, was that the American economy, and in particular the financial markets, were over-regulated and needed to be set free. During his tenure at Treasury, the Clinton White House made a series of moves that would have drastic consequences for the global economy — beginning with Rubin's complete and total failure to regulate his old firm during its first mad dash for obscene short-term profits.


After the oil bubble collapsed last fall, there was no new bubble to keep things humming — this time, the money seems to be really gone, like worldwide-depression gone. So the financial safari has moved elsewhere, and the big game in the hunt has become the only remaining pool of dumb, unguarded capital left to feed upon: taxpayer money. Here, in the biggest bailout in history, is where Goldman Sachs really started to flex its muscle.

It began in September of last year, when then-Treasury secretary Paulson made a momentous series of decisions. Although he had already engineered a rescue of Bear Stearns a few months before and helped bail out quasi-private lenders Fannie Mae and Freddie Mac, Paulson elected to let Lehman Brothers — one of Goldman's last real competitors — collapse without intervention. ("Goldman's superhero status was left intact," says market analyst Eric Salzman, "and an investment-banking competitor, Lehman, goes away.") The very next day, Paulson greenlighted a massive, $85 billion bailout of AIG, which promptly turned around and repaid $13 billion it owed to Goldman. Thanks to the rescue effort, the bank ended up getting paid in full for its bad bets: By contrast, retired auto workers awaiting the Chrysler bailout will be lucky to receive 50 cents for every dollar they are owed.

Immediately after the AIG bailout, Paulson announced his federal bailout for the financial industry, a $700 billion plan called the Troubled Asset Relief Program, and put a heretofore unknown 35-year-old Goldman banker named Neel Kashkari in charge of administering the funds. In order to qualify for bailout monies, Goldman announced that it would convert from an investment bank to a bank-holding company, a move that allows it access not only to $10 billion in TARP funds, but to a whole galaxy of less conspicuous, publicly backed funding — most notably, lending from the discount window of the Federal Reserve. By the end of March, the Fed will have lent or guaranteed at least $8.7 trillion under a series of new bailout programs — and thanks to an obscure law allowing the Fed to block most congressional audits, both the amounts and the recipients of the monies remain almost entirely secret.

Anonymous said...

Converting to a bank-holding company has other benefits as well: Goldman's primary supervisor is now the New York Fed, whose chairman at the time of its announcement was Stephen Friedman, a former co-chairman of Goldman Sachs. Friedman was technically in violation of Federal Reserve policy by remaining on the board of Goldman even as he was supposedly regulating the bank; in order to rectify the problem, he applied for, and got, a conflict-of-interest waiver from the government. Friedman was also supposed to divest himself of his Goldman stock after Goldman became a bank-holding company, but thanks to the waiver, he was allowed to go out and buy 52,000 additional shares in his old bank, leaving him $3 million richer. Friedman stepped down in May, but the man now in charge of supervising Goldman — New York Fed president William Dudley — is yet another former Goldmanite.

The collective message of all of this — the AIG bailout, the swift approval for its bank-holding conversion, the TARP funds — is that when it comes to Goldman Sachs, there isn't a free market at all. The government might let other players on the market die, but it simply will not allow Goldman to fail under any circumstances. Its edge in the market has suddenly become an open declaration of supreme privilege. "In the past it was an implicit advantage," says Simon Johnson, an economics professor at MIT and former official at the International Monetary Fund, who compares the bailout to the crony capitalism he has seen in Third World countries. "Now it's more of an explicit advantage."


Fast-forward to today. It's early June in Washington, D.C. Barack Obama, a popular young politician whose leading private campaign donor was an investment bank called Goldman Sachs — its employees paid some $981,000 to his campaign — sits in the White House. Having seamlessly navigated the political minefield of the bailout era, Goldman is once again back to its old business, scouting out loopholes in a new government-created market with the aid of a new set of alumni occupying key government jobs.

Gone are Hank Paulson and Neel Kashkari; in their place are Treasury chief of staff Mark Patterson and CFTC chief Gary Gensler, both former Goldmanites. (Gensler was the firm's co-head of finance.) And instead of credit derivatives or oil futures or mortgage-backed CDOs, the new game in town, the next bubble, is in carbon credits — a booming trillion- dollar market that barely even exists yet, but will if the Democratic Party that it gave $4,452,585 to in the last election manages to push into existence a groundbreaking new commodities bubble, disguised as an "environmental plan," called cap-and-trade. The new carbon-credit market is a virtual repeat of the commodities-market casino that's been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. Goldman won't even have to rig the game. It will be rigged in advance.

Anonymous said...

It was just about a year ago that we had the fiat money discussion here is something our mod said.

JB Powers said...
"How are banks taking risks with other peoples money when they just create the money from debt?
Exactly what risk is involved in that?"

If people do not pay back their loans for one reason or another, the bank goes bankrupt, and its owners lose their equity. The depositors lose what they have in the bank above some insured level as well.

Higher leveraged banks..."banks that create money from debt" (Bear Stearns for example) have a bigger risk of going bankrupt than lower leveraged banks (John Warner Bank for example). If you want the kind of returns Bear Stearns was promoting, and they had some great years, you were subject to the risks that came to play recently.

But Bear Stearns is pretty much gone and JWB is still going, so the rules of risk vs. return still seem a sound way of judging an investment.

JBP

July 16, 2008 7:03 PM

Anonymous said...

I take back my comment about John being pro Central banking, i went back and read the fiat stuff. John was just trying to explain they way things were.

He should have used 1st National as an example of a well run bank and not Warner, who would have thunk it?

Anonymous said...

That Matt Tiabbi article is better when read in full in the latest issue of Rolling Stone.

I think he even talks about corn and soy beans.

Anonymous said...

We will all pay (or be robbed by) the hidden tax called inflation.

The deflation we see now is so the Big Boys can acquire the assets.

If the inflation starts too soon then the Big Boys get hurt because people can pay off their debts with inflated dollars.

JB Powers said...

Point taken
Jbp

Anonymous said...

CDT was known as the Peach King of DeWitt County for a few years. The man knew his peaches, even if the peels were always Maroon colored.

Anonymous said...

Taibbi's article is good, but re: the housing bubble, he fails to mention the House and Senate Banking Committees', aka Barney Frank and Chris Dodd, et al, strong-arm tactics re: forcing lenders to loan money to anyone who possessed the capability to fog a mirror. Welfare and unemployment checks were allowed as "income" on loan docs...laughable, but not funny.

RIP Mollie Sugden. What a fine comedienne she was!

SoCal

Anonymous said...

Taibbi's article is way to long for blog consumption. I encourage censorship in this case.

SoCal, no complaint here about extra light being shined on Sen. Dodd or Rep. Frank. This is a common theme of my Republican friends. I encourage you and them to shine the same light in the same breath on the SEC, and Republican cheerleading of the "ownership society" nurtured by home ownership, etc., or risk having your voice diminished by its unevenness.

HG

Anonymous said...

I think he does in the full article.

Anonymous said...

Tiabbi spares no one his rath, dem or repub.

Anonymous said...

Dear Anon,

I've two distinct beefs here that I think you are conflating:

1. Taibbi is too long-winded, even though he may be even-handed.

2. My good friend SoCal is blessedly brief, but could be a little more even-handed.

HG

Anonymous said...

He's smarmy too.

Anonymous said...

It is idiotic to argue over republican and democratic party policies.
They are one in the same.

How long will people play the blame game while they both rob us blind?

Anonymous said...

I tend to agree that it is a general waste of time to argue Dem vs. Rep....

I give bonus points to any party member who actually acts like a grown up....bbd

Anonymous said...

HG, I was only referring to what I saw being left out by Taibbi's article. Yes, I was being brief, and yes there is plenty of blame to go around on both sides of the aisle. I'm not particularly interested in "bipartisanship" or in being "even-handed" in assessing blame, since there is nothing about the Left's current positions that I find myself in agreement with. I self-identify as a fiscal and social Conservative and a constitutionalist...not as a Republican, my friend.

SoCal

Anonymous said...

My dear friend SoCal,

I did not have your patience to wade through the long-winded Taibbi.

I am glad to now hear you feel there is plenty of blame to go around on both sides of the aisle, and encourage you in future postings to reflect that feeling when it is appropriate so that your readers do not become confused.

From your left,

HG

Anonymous said...

Fiat is Fake!!!!!!!

Anonymous said...

I wish I was messanger and all the news was good.

A. Greenspan said...

I've done the damage
The damage is done

Anonymous said...

I had a dream I had an awesome dream.

Dance into the fire said...

The Sacred Why

Anonymous said...

Don't talk to me about being alone!

Anonymous said...

I've got a crummy job.
I'm still the king of me.o

Anonymous said...

The world is not so difficult.

Anonymous said...

I feel like I can fly when I stand next to you.

Anonymous said...

Those who like long-winded web sites can visit

http://business.theatlantic.com/2009/07/matt_taibbi_gets_his_sarah_palin_on.php

for a reply/rebuttal to Mr. Taibbi.

HG

Anonymous said...

O'Reilly just asked why Goldman Sachs doesn't pay any federal income tax.
0 nada none zilch.

B.O. said...

By Bill O'Reilly

I'm going to keep this simple. There is a big con going on, and it is outrageous.

Tuesday night's "Memo" is using some information developed by Rolling Stone magazine, which did a good job on this cap-and-trade deceit.

Cap-and-trade, it's easy. The feds tell heavy industry what they can spew into the air. If a company goes over the emission amount, they must buy so-called carbon offsets from another company. So the companies that keep emissions low make money, and the companies that spew lots of gunk make less money. Of course, the gunk companies will pass their higher costs on to us, but hey, no program is perfect, right?

Now, less gunk in the air is good. A cleaner planet means better health for all of us. But already, India, China, Mexico and other countries have told President Obama they will not limit emissions. They don't really care about global warming. So even if we cap-and-trade all day long, the Earth will continue to be dirty.

But that's not the con. Here it comes. Some big corporations will make billions off this cap-and-trade deal. Let's take one vivid example.

Goldman Sachs is a goliath investment company that pays very little tax. In fact, last year in the teeth of the recession, Goldman made more than $2 billion in profit and, according to the Associated Press, paid its CEO Lloyd Blankfein about $43 million. Let me repeat: Old Lloyd made $43 million bucks in 2008. But Goldman Sachs paid zero in federal income tax. Let me repeat: Goldman made $2 billion and paid nothing in federal tax.

A quick aside: President Obama and the Democrats want to raise taxes on high-earning Americans to pay for health care. But Goldman-Sachs gets a pass.

Back to cap-and-trade. Goldman owns a 10 percent stake in the Chicago Climate Exchange, where the cap-and-trade deals will be made. On each deal a commission will be paid. Goldman Sachs stands to vacuum up money. Did I mention the company pays very little tax?

Also, Goldman employees gave President Obama's campaign close to $1 million. Did I mention that?


Ready for more? Guess who has also invested heavily in cap-and-trade? Hello, Al Gore. He's started a company named Generation Investment Management, which will also profit big time if the cap-and-trade deal becomes law. Since Al Gore launched his global warming crusade, his net worth has increased 5,000 percent to more than $100 million, according to Investors Business Daily. As they say on Wall Street, Mr. Gore is hot. Pardon the pun.

So let's recap. Global warming is bad, but cap-and-trade will not affect it much because China and India will continue to pollute. Big corporations like Goldman Sachs and big guys like Al Gore could make many millions of dollars off cap-and-trade, while the regular folks will pay more for just about everything.

That definitely sounds like change — change Mr. Gore and Goldman Sachs can believe in.

And that's "The Memo."

Anonymous said...

B.O.

Body Odor

Anonymous said...

Six banks, including The John Warner Bank, failed at the same time and all six were owned by the same Campbell Group. In each case the owners made risky investments with the excess capital and obviously lost everything. The State Bank of Lincoln has taken over the former John Warner Bank and will, I'm sure, bring it back to it's former strong position. It's the end of an era for Clinton but the beginning of a new one as well.

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