The Federal Deposit Insurance Corp. has made its first foray into the commercial mortgage-backed securities market, the Wall Street Journal reported, by selling off about $400 million worth of commercial loans divided into bonds. Real estate investor LNR Property scooped up the riskiest layers of the bonds, originally collected from 13 failed banks. Traditionally the FDIC sold loans mostly in the form of distressed mortgages but with increasing demands for CMBS the agency wants to get into the act. The federal government actually pioneered the CMBS market in the early 1990s when the Resolution Trust Corp. sold off commercial mortgage bonds in an effort to get rid of its portfolio. [WSJ]

The Federal Deposit Insurance Corp. is planning to sell $1.12 billion worth of commercial and residential real estate loans from failed banks in a sealed-bid auction, Bloomberg News reported. The agency plans to conduct separate residential and commercial sales, it said in a preliminary announcement yesterday. The $773 million residential portfolio, which includes acquisition, development and construction loans with collateral in 41 states and concentrated in Florida, Michigan, Utah, Arizona and Indiana, will be divided into northern, southeastern and western pools for the sale, the FDIC said. The $351 million commercial portfolio, of which 88 percent of the is backed by properties in Florida, Utah, Nevada, Michigan and Arizona, will be split into two pools: northern and western, and southeastern. Bids are due Nov. 16, and winning bidders will share ownership and proceeds of the debt with the FDIC. [Bloomberg]

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Two more U.S. banks failed last Friday, bringing the tally to 279 collapsed institutions since Sept. 25, 2008, when Washington Mutual went under in the largest bank failure ever recorded. During that time period, the financial industry’s assets have diminished by 4.5 percent. According to the Wall Street Journal, the effects of the wave of bank failures over the last two years — which Standard & Poor’s says is far from over — will have a lasting effect on credit, customers and the economy. In addition to lost jobs and tightened lending standards, fewer competitors means that the remaining banks have the freedom to offer lower interest rates on savings accounts, further squeezing struggling American consumers. “When we step back and look at this financial disaster 10 years from now, the destruction of capital in our economy as a result of what we’ve endured will be the single greatest lasting impact on recovery and how the economy performs in the future,” said Howard Headlee, president of the Utah Bankers Association. [WSJ]

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A Cherry Hill, N.J. bank was closed by the Federal Deposit Insurance Corporation Friday, the same day that a Pennsylvania-based bank purchased the faile [more]

From left: Nouriel Roubini, Sheila Bair, Bernie Madoff, Jamie Dimon

Nouriel Roubini ranks first among “scientists and thinkers” on Time magazine’s list of the most influential people of 2009, but columnist Joel Stein begs to differ. “You predicted the housing bubble before it happened?” he wrote. “Well, that might make you the least influential person in the entire world. I predicted the Yankees need a set-up man. I guess I’m an influencer too.” Also of note on Time’s annual list: CEO Jamie Dimon of JPMorgan Chase, No. 13 among “builders and titans;” the FDIC’s Sheila Bair and Ponzi schemer Bernie Madoff, coming in at 14th and 20th, respectively, on the same list; and architects Elizabeth Diller and Ricardo Scofidio of Diller Scofidio + Renfro, 10th among “artists and entertainers.” [more]

The former president of the Park Avenue Bank, Charles Antonucci,
has been arrested on charges of self-dealing, bank bribery,
embezzlement, and fraud on the New York State Banking Department, Federal Deposit Insurance Corporation,
and the Troubled Assets Relief Program. The office of the United States attorney for the Southern District will be
announcing the charges at a press conference at 1 p.m. On Friday,
federal and state regulators shut down the Park Avenue Bank and
sold its deposits to Valley National Bank. TRD [more]

Donald Glascoff’s (left) Park Avenue Bank has been shut down with its deposits sold to Valley National Bank, headed by Gerald Lipkin (right)

Federal and state regulators have shut down the Park Avenue Bank and sold its deposits to Valley National Bank, marking the second seizure and asset sale of a New York City bank in two days. The State Banking Department closed the bank citing ineffective management and inadequate capital as well as a high volume of non-performing loans. “We determined that the management team’s inability to address the
problems in the consent order led to the bank being critically
undercapitalized,” said Richard Neiman, supervisor of the state Banking
Department. “This issue coupled with the high volume of non-performing
loans held by Park Avenue meant that the bank could no longer operate
in a safe and sound manner.” The FDIC entered into a loss-share transaction on $379.8 million of Park Avenue Bank’s assets. Park Avenue Bank reported assets of $520.1 million and deposits of $494.5 million, according to the FDIC. The bank’s four branches will reopen as branches of Valley National Bank. Last night, state regulators shut down and sold the assets of LibertyPointe Bank, the struggling lender owned by Brooklyn-based developer Shaya Boymelgreen. Asked whether the collapse of two small New York banks was a start of a new trend, FDIC officials acknowledged that commercial real estate lending is playing a larger role in bank failures. [more]

Developer Shaya Boymelgreen

The New York State Department of Banking shut down developer Shaya Boymelgreen’s struggling LibertyPointe Bank, and the Federal Deposit Insurance Corporation sold its assets to Wayne, N.J.-based Valley National Bank, marking the first New York state bank seizure this year. The shut down — which will cost the FDIC $24.8 million — comes nine months after federal and state regulators issued a cease and desist order against the lender for using unsound banking practices, including operating with an excessive amount of commercial real estate loans. “It is a top priority of the New York State Banking Department to
protect the deposits of consumers of New York State banks and ensure
the safety and soundness of the banking system in the state,” said
Richard Nieman, state superintendent of banks, in a statement. Valley National Bank officials said the bank assumed about $200 million
in deposits and received about $180 million in loans, which are subject
to a loss-share agreement with the FDIC. The bank also received $20
million in cash and other assets. [more]

A Manhattan-based real estate fund has filed a breach of contract suit against the troubled Park Avenue Bank and asked for a restraining order to block any further attempts to forgive delinquent loans. Park Avenue Funding, which filed suit Thursday in New York State Supreme Court, asked for a restraining order to prevent the bank from settling any more loans that it claims would threaten more than about $3.9 million it has invested in the bank.
“[Park Avenue] Funding is concerned that the bank will again breach its obligations as servicer of the participation loans in an effort to improve its equity capital and appease the FDIC by reducing its concentration in commercial real estate loans,” the lawsuit says. The Federal Deposit Insurance Corp. and the New York State Department of Banking issued cease-and-desist orders against the bank in February 2009, alleging the bank engaged in risky lending practices. [more]

State Sen. Daniel Squadron has criticized the FDIC’s decision to leave its home at 20 Exchange Place for the Empire State Building.

From the January issue: Resilient. That’s the word for Lower Manhattan’s commercial real estate
market for the past 12 months. In the aftermath of the greatest
financial meltdown in recent history, Lower Manhattan boasts the lowest
vacancy rate of any market in the city at 7.3 percent, according to CB
Richard Ellis data for November. Midtown and Midtown South had rates of
10.2 percent and 9.8 percent, respectively, in the same month. Sounds like good news, right?
Not so fast. There’s a looming cloud.
“In many instances it is always calm before the storm,” said Hal Stein,
who heads up Newmark Knight Frank’s Downtown office. “Here is the
issue: [In 2010] there is going to be substantial space hitting the
market from some of the financial firms and that is going to be a
telltale sign.”