[Marxism] FDIC shutters Silver State Bank of Nevada

[Greg McDonald <sabocat59@xxxxxxx>]

FDIC shutters Silver State Bank of Nevada
Son of presidential nominee John McCain was reportedly former board  
member; closing marks the 11th bank failure this year.
Last Updated: September 6, 2008: 7:31 AM EDT

WASHINGTON (AP) -- Regulators on Friday shut down Silver State Bank,  
saying the Nevada bank failed because of losses on soured loans,  
mainly in commercial real estate and land development.

It was the 11th failure this year of a federally insured bank.

Nevada regulators closed Silver State and the Federal Deposit  
Insurance Corp. was appointed receiver of the bank, based in  
Henderson, Nev. It had $2 billion in assets and $1.7 billion in  
deposits as of June 30.

Andrew K. McCain, a son of Republican presidential nominee John  
McCain, sat on the boards of Silver State Bank and of its parent,  
Silver State Bancorp, starting in February but resigned in July  
citing "personal reasons," corporate filings with the Securities and  
Exchange Commission show. Andrew McCain also was a member of the  
bank's audit committee, responsible for oversight of the company's  
accounting.

The younger McCain, who is the chief financial officer of Hensley &  
Co., the beer distributorship of which Cindy McCain is chairwoman, is  
the Arizona senator's adopted son from his first marriage.

Andrew McCain's position on the Silver State board and departure were  
first reported Friday by The Wall Street Journal online.

Silver State Bank ran into difficulty because of a substantial amount  
of "poor-quality loans primarily related to real estate development"  
in southern Nevada and other distressed markets, FDIC spokesman David  
Barr said.

"When the housing market slowed down, people who bought raw land to  
build new homes didn't need that land so they couldn't do anything  
with it and repay their loans. So those loans went bad," Barr said.

Silver State Bancorp recently reported a net loss for the second  
quarter of $73.2 million, or $4.84 a share, compared with net profit  
of $6.2 million, or 44 cents a share, in the same period last year.

Construction and development loans have been the fastest-growing  
category of troubled loans for U.S. banks, and many banks have heavy  
concentrations of them in their lending portfolios, according to the  
FDIC. Some small banks are considered especially vulnerable.  
Delinquent loan payments and defaults by commercial and residential  
developers have surged to the highest levels since the early 1990s -  
the latter part of the savings and loan crisis.

The FDIC said Silver State Bank's insured deposits will be assumed by  
Nevada State Bank of Las Vegas. Its branches will reopen Monday as  
offices of Nevada State Bank in Nevada and National Bank of Arizona  
in Arizona.

The agency said depositors of Silver State Bank will continue to have  
full access to their deposits.

The 11 failures so far this year compare with three for all of 2007,  
and federal banking officials have said that more banks are in danger  
of collapse.

Silver State Bank has operated 13 branches in the greater Las Vegas  
area and four in the greater Phoenix-Scottsdale area of Arizona as  
well as loan offices in Nevada, Utah, Colorado, Washington, Oregon,  
California and Florida.

The FDIC estimated its resolution will cost the deposit insurance  
fund between $450 million and $550 million.

Regular deposit accounts are insured up to $100,000.

There were about $20 million in uninsured deposits held in roughly  
500 accounts at Silver State that potentially exceeded the insurance  
limit, the FDIC said.

Concern has been growing over the solvency of some banks amid the  
housing slump and the steep slide in the mortgage market. The  
pressures of tighter credit, tumbling home prices and rising  
foreclosures have been battering many banks, large and small, across  
the nation.

The largest bank failure by far this year has been that of savings  
and loan IndyMac Bank, which was seized by regulators on July 11 with  
about $32 billion in assets and deposits of $19 billion.

The seizure of Pasadena, Calif.-based IndyMac, which was the largest  
regulated thrift to fail in the United States, prompted hundreds of  
angry customers to line up for hours in Southern California to demand  
their money. IndyMac also was the second-largest financial  
institution to close in U.S. history, after Continental Illinois  
National Bank in 1984.

The FDIC has been operating the bank, now called IndyMac Federal  
Bank, under a conservatorship.

The FDIC plans to raise insurance premiums paid by banks and thrifts  
to replenish its reserve fund after paying out billions of dollars to  
depositors at IndyMac. The fund, currently at $45 billion, is  
expected to take a hit from IndyMac of $4 billion to $8 billion.

Federal officials expect turbulence in the banking industry to  
continue well into next year, and more banks to appear on the FDIC's  
internal list of troubled institutions.

Of the 8,500 or so FDIC-insured banks in the country, 117 were  
considered to be in trouble in the second quarter -- the highest  
level in about five years and up from 90 in the first quarter. The  
agency doesn't disclose the banks' names.

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