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What makes Columbia bank so special?
The interview with David Berry reported in the March 12 edition of the Herald (Could have American Marine Bank been saved?) was well presented and informative, but it also gave rise to unanswered questions. It left the reader with the impression that although the dealings with American Marine Bank may have been legal, they did not seem overly ethical and were completely devoid of mercy. Of course, that is the way of all government bureaucracies that cast regulations, which are then administered without grayscales by personnel who are strictly limited to the letter of the law.
Berry said the bank worked closely and in a compliant manner with the Washington Department of Financial Institutions and the bank’s methodology was transparent. So why did the Federal Deposit Insurance Corporation threaten the bank with legal action and punitive penalties for violations of the law which effectively forced them to remain silent about the bank’s seizure? Was the seizure really a punitive action taken against the bank because their loan portfolio was directed to the real estate market rather than to business development, as implied in the report? Remember, the buzz word from the feds has been that “banks have been making small business loans.”
Berry defined the result of the problem, not the cause, which is as the report quoted the FDIC, two out of three banks are having problems with their loan portfolios. This problem is the direct result of the devaluation of the real estate market, brought on by the policies of the Congressional finance committees of both the House and the Senate, which was exacerbated by the Fannie Mae and Freddie Mac debacles. The TARP, which was funded to prevent the collapse of the banking system, was used to bail out large financial companies leaving the community banking system in the lurch. Why, when one branch of federal oversight creates a dilemma in the banks, is another branch of that same government seizing these banks, literally by the hundreds?
The information in the article described the bank’s dilemma. The FDIC made the bank write down the book value of the loan collateral because of the aforementioned devaluation of the real estate market. This adversely affected the bank’s reserve fund requirements giving justification for the FDIC to seize the bank. After the seizure, ownership of the bank was immediately given to Columbia State Bank in Tacoma. It was stated that the nonperforming loans at the bank amounted to $29 million. The FDIC also gave Columbia bank $40 million to cover those loans. Why was Columbia bank so favored and not AMB? What was absolutely startling was one of the properties with the nonperforming loans, White Horse, was immediately transferred (through purchase) to the Suquamish tribe following the seizure.