Questions about Mutual of Omaha bank purchase deal.

[JDPriestly]

OMAHA, Neb., Jul 25, 2008 (BUSINESS WIRE) ----Mutual of Omaha Bank has agreed to acquire from the FDIC the deposits of the failed Reno, Nev.,-based First National Bank of Nevada and its affiliate, First Heritage Bank of Newport Beach, Calif., the company announced.

The transaction includes all deposits, both insured and uninsured. All former branches of First National Bank of Nevada (also operating as First National Bank of Arizona) and First Heritage Bank will open Monday as branches of Mutual of Omaha Bank, and all depositors will automatically become depositors of Mutual of Omaha Bank, said Jeff Schmid, chairman and CEO of Mutual of Omaha Bank.

Federal regulators on Friday declared First National Bank of Nevada and its affiliates insolvent and the FDIC was named receiver. The FDIC Board of Directors approved the assumption of more than $3 billion in deposits by Mutual of Omaha Bank. FDIC will retain most of First National's loan portfolio. . . . .

http://www.foxbusiness.com/story/mutual-omaha-bank-acquire-deposits-failed-national-bank/

Can someone please explain to me: 1) Does this mean that we taxpayers are funding the assumption by Mutual of Omaha of the assets of the failed banks while ourselves accepting the liability and risk for the bad loans? 2) How was this deal made? Behind closed doors? Were other offers entertained? Is this like a non-bid contract?

Seems to me that if MOO gets the liquid assets, it should have to take the bad loans. Am I wrong to think the bad loans are being shifted to us taxpayers to make good? That stinks to high heaven if I am right.

Can someone please explain?

[Crazy Dave]

1. "Not with my tax dollars"

Everybody says they want the government to help keep homeowners from losing their homes but they don't want the government to use "their" tax dollars to do it.

Then how?

[tularetom]

2. I want to know why Marlin Perkins always sent "Jim" to wrestle the alligators

while he sat there tending the campfire.

[OmahaBlueDog]

4. " ..and now while Jim tries to get the lion cub away from it's mother..

..I'd like to tell you folks at home about Mutual of Omaha Insurance"

I giggle just thinking about it

[OmahaBlueDog]

3. The FDIC is a government backed insurance company

I'm not familiar with the specifics of this deal. In generalities:

The FDIC is a government backed insurance company, so there is no taxpayer outlay. The banks pay in to the FDIC in relationship to deposits; if I recall, a private entity performs a similar function for credit unions.

The federal government looks at assets versus liabilities and decides when a bank is insolvent. They then take over the bank. That said, the government doesn't want to be in retail banking, they are going to attempt to move the assets of the bank (e.g. loans, certificates, etc. ) to another entity who can perform the day to day servicing of that business.

Also remember that the FDIC only pays out to individual depositors with deposits up to (I think it's now $250,000); they don't pay commercial depositors, or those with deposits in excess of the insured amount.

UPDATE

The transaction gives MOOB the insured and uninsured assets (in other words, the FDIC doesn't pay out, but no depositors are left holding the bag)

http://www.centredaily.com/business/story/736573.html

I hope the line about MOOB having $750 in assets is a typo -- otherwise I may open a bank.

[OmahaBlueDog]

5. Here's a more complete explanation

http://news.yahoo.com/s/nm/20080726/bs_nm/banks_fdic_dc

I applaud your skepticism, but it looks to me (at first glance) like this is a win / win. The FDIC avoided having to pay depositors by taking two weak banks and selling them to a stronger, more solvent regional bank. There should be minimal disruption to customers.

Also, I realize my screen name might raise suspicion here. I have no connection whatsoever to Mutual of Omaha or any of their subsidiaries.

[Crazy Dave]

6. Ah...you Omahans are all the same

Just kidding. I graduated from Bryan in '81 :hi:

[2Design]

7. I don't want them to help - they were all irresponsbile from the realtor to the bank

to the borrower who knew they could not afford the house but were specualtating. I did not do the irresponsible thing and yet I lose and they win - go figure - how do we teach values if the value that seems to work is screw the other guy . These ceos and hedge fund guys and wall street and alan greenspan and the busco all are making out like bandits. Why are we funding them? Why don't they have to return their salaries and bonuses - they are all in cohots with each other