Colonial BancGroup Is No More
The economy isn’t fixed yet, and it’s taken another big bank with it.
This time it’s Colonial BancGroup, based out of Montgomery, AL, and now the 5th largest bank failure in our country’s history. And what brought it down? Real estate, of course. They were a big lender to developers in Florida and Nevada, and we all know what’s been going on with real estate in those two states.
This now means that more than 70 banks have been closed since the beginning of the year, but Colonial BancGroup, which was in 5 states, is the largest, with over $25 billion in assets being transferred to another banking institution, BB&T Corp. This one’s costing the U.S. Federal $2.8 billion; how does that feel? Anyway, on Monday, 346 banks will open up with a new name and a new owner, and if patterns continue, many of those banks will be closed within six months.
And to add to all of this, Colonial has been under a criminal investigation by the Justice Department in connection with alleged accounting irregularities at its division in Orlando, FL, and a civil probe by the SEC concerning accounting issues and the bid for federal bailout funds. Then it got worse when a federal court in Miami froze $1 billion of their assets due to a lawsuit filed by Bank of America (what, them again?), who sued saying Colonial appeared on the verge of collapsing and an emergency order freezing assets was needed. Turns out they were right.
By the way, this wasn’t the only bank closed today. The FDIC also announced that Dwelling House Savings and Loan Association, a small bank in Pittsburgh, was closing, with about $3 million of its assets being transferred to PNC Bank.
And so it continues,…