Controversy has accompanied Verizon Wireless' latest Droid phone ad that mocks Apple Inc.'s iPhone, but never actually mentions its rival.
The ad starts with a group of mesmerized people looking at a phone that is behind a glass case and asks, "Should a phone be pretty? Should it be a tiara-wearing, digitally clueless beauty pageant queen?”
Then it says the Motorola Droid, which uses Google Inc.'s (NASDAQ:GOOG) Android operating system, is "racehorse-duct-taped-to-a-Scud-missile fast."
It also shows what some critics are portraying as an anti-gay image of a group of fashionably dressed (and partially undressed) male statues getting hit with tomatoes.
The ad can be viewed on YouTube by clicking here.
A post by Kara Swisher on the Wall Street Journal's All Things Digital blog slams the ad and is headlined, "Is the new droid ad anti-women and anti-gay or just plain idiotic? Actually all three!
VentureBeat rated the ad "just plain clueless," especially for "likening the Droid phone’s speed to that of the Scud missile, a not-very-fast Russian rocket used by Saddam Hussein’s regime no faxing 1 hour payday loans. A Scud killed 28 Americans at an airbase in Saudi Arabia in 1991. Other Scuds have killed lots more civilians in the Middle East."
Not all of the reviews have been negative, with many focusing on the cool look and humor of the spot.
But while saying he liked the ad, Stuart Turton of PC Pro wrote, that "when stripped to its barebones (the ad) actually says that the Droid is uglier than an iPhone, and… erm… well, that’s it. Funnily enough, it appears that by criticising the iPhone for placing style before substance, Verizon’s done exactly that."
Verizon's other Droid ads resulted in legal challenges by the iPhone's exclusive U.S. service provider, AT&T Inc., which were recently dropped. In those, Verizon took aim at AT&T's service and likened the iPhone to a misfit toy in a holiday-themed video.
No faxing fast cash advance gets you cash fast and easily.
Shares in banks, builders and companies part-owned in the Middle East fell around the world on Thursday and investors sought safety in government bonds on worries about Dubai’s ability to pay its debts.
Sterling fell as exposure focused on UK banks, and euro zone government bond futures hit their highest level since late April, breaking out of the trading range that has been in place since June as risk aversion prompted by the crisis kicked in.
“The Dubai story is weighing heavily on stock markets and people are looking to safe-havens so there’s some flight to quality again,” said Charles Berry, a trader at LBBW.
The euro broke above 91 pence for the first time in a month to hit a high of 91.29 pence.
“There are concerns regarding the extent of the exposure of the UK banks to Dubai, hence sterling is coming under pressure,” said Ian Stannard, currency strategist at BNP Paribas.
European bank shares fell over 3 percent on concern about potential exposure. Dubai said on Wednesday that two of its key firms, Nakheel and Dubai World, plan to delay repayment on billions of dollars of debt.
Companies where Middle Eastern investors own big stakes, such as the London Stock Exchange were also hit by concern the holdings could be cut to meet obligations at home.
By 1020 GMT the DJ Stoxx European bank index .SX7P was down 3.5 percent at 221.7 points.
The fall was led by HSBC, Standard Chartered, Barclays, Deutsche Bank and Royal Bank of Scotland, whose shares all fell over 4 percent.
In Seoul, shares in construction issues fell, with Samsung C&T leading losses as investor concerns focused on Dubai’s once booming construction sector.
A Samsung C&T spokesman said that the company was currently working on a $350 million project awarded by Nakheel in 2007.
“So far, we have not had any problems with the project,” he said.
Shares in Hyundai Engineering & Construction were down 4.41 percent and Samsung Engineering fell 2.16 percent as of 0458 GMT.
Nakheel’s NAKHD.UL Islamic bond prices extended losses, falling 12 points to 72, their lowest since February, according to Reuters data.
DEBT DELAY
Efforts by US regulators to move privately traded derivatives to central clearing houses are unlikely to be a cure-all for the industry, and may increase systemic risk if exposures are dispersed among too many counterparties.
Regulators around the world are pushing for the majority of contracts in the $450 trillion over-the-counter derivatives markets to be cleared through central counterparties, as futures and options contracts have been for years, in order to reduce the systemic risk posed by the web of connections between large financial institutions.
If there are too many clearing houses though, regulators run the risk of increasing the systemic risk posed by OTC derivatives trading, said Darrell Duffie, professor of finance at Stanford University.
“A clearing house through its opportunity to net across many asset classes and dealers can lead to a very substantial reduction in risk and also a very big increase in efficiency,” Duffie said.
“However, that only works if you have very few clearing houses,” he said. “Many clearing houses could be very bad. You would have increased counterparty exposure and excessive use of collateral, with multiple points of failure. This could add systemic risk.”
Clearing the majority of derivatives through one counterparty is advantageous as market participants can offset all contracts in which they owe or are owed money against each other, a process known as netting.
The amount of collateral needed to back their exposures would also be radically reduced in this scenario.
Creating too many clearing houses, however, increases the amount of exposure a participant could have to a failed dealer, as it would be spread across several entities payday cash loans.
There are currently at least five clearing houses in the U.S. and Europe that clear or plan to clear credit default swaps, contracts that are used to insure against a borrower defaulting on their debt.
Other clearing houses clear, or plan to clear, other derivatives, including contracts in the $414 trillion OTC interest rate derivatives market.
REDUCING RISKS
Debate has increased recently over whether central clearing will successfully reduce risk posed by OTC derivatives, as some participants fret that difficulties in determining appropriate capital requirements for certain contracts could make concentrating exposures in clearing houses risky.
To some, CDS contracts are too risky in or outside of central counterparties.
David Einhorn, president of Greenlight Capital, said at a recent investment conference that CDSs cannot be made safer and should be banned, citing the “anti-social” incentives to let companies fail that may motivate protection holders who also own corporate debt.
“The reform proposal to create a CDS clearing house does nothing more than maintain private profits and socialized risks by moving the counterparty risk from the private sector to a newly created too-big-to-fail entity,” he said.
Dow Chemical Co and Shenhua Group, China’s largest coal miner, will reportedly move ahead with their planned $10 billion coal-to-chemical project in Shaanxi province after a delay of at least one year.
Top executives from the companies, senior officials in Shaanxi province and representatives from the U.S. Embassy in China attended a cornerstone laying ceremony on November 3, the China Chemical Industry News reported on Thursday.
The Yulin project in northern Shaanxi aimed to install 23 units that include a 3.32 million tonne-per-year methanol facility for ethylene and propylene, which are used for making various plastics and chemical products.
“The feasibility study of the project has entered the stage of applying for an approval from the central government,” the newspaper said, citing an unnamed local government official advanced payday loan.
The feasibility study was previously planned to be completed in 2008.
An assistant president with Shenhua who is based in Beijing declined any knowledge of the project, and officials at Dow Chemical in China could not immediately be reached.
Dow sold off $3.4 billion in assets this year to boost its bottom line and reduce debt. The chemical firm also cut costs by laying off thousands of workers and shutting several plants.
Shenhua is the parent of Hong Kong-listed China Shenhua Energy.
(Reporting by Jim Bai and Chen Aizhu; Editing by Ken Wills)
Last time we checked in with Debra Killian, the co-founder of Charter Oak Lending Group in Danbury, Conn. was fighting for her company’s life.
In 2004, 10 employees — or one-third of the mortgage broker’s staff — left to work for CTX Mortgage, a much larger rival. Killian claimed the employees stole 150 pending loans, worth nearly $1 million in fees, along with customer lists and boxes of confidential files. Between 2004 and 2005, Charter Oak’s revenues plummeted from more than $3.5 million to $300,000.
Charter Oak sued CTX and the 10 defectors, claiming conspiracy, unfair trade practices and misappropriation of trade secrets. Four years and some $500,000 in legal bills later, the verdict arrived in July: Charter Oak lost on all counts.
"It was a complete shock," says Killian. "We lost everything that took 10 years to build in one month, because one company stole it. How is that not illegal?"
In his opinion, Connecticut Superior Court judge Vincent Roche wrote that the individual defendants, "independent contractors and ‘at will’ employees not under any contractual restraints with the plaintiff, could seek whatever employment opportunities were available in the marketplace without being conspiratorial about it."
Killian claims that the defendants, who received W-2s and benefits and did not hold their own valid licenses or insurance, were employees, not independent contractors — a point that has driven Charter Oak to appeal the case payday advance.
"The fact that the judge called them ‘at will’ employees and also ‘independent contractors’ — which are mutually exclusive — showed an analysis that was flawed," says New Haven attorney William Gallagher, who is handling the appeal.
A spokesperson for Pulte Homes, which merged with CTX Mortgage’s former parent company, told Fortune Small Business in an e-mail: "We are pleased the judge ruled in our favor in finding that there is no valid claim against CTX Mortgage under Connecticut law. We strongly believe we did nothing wrong and will continue to vigorously defend that position in court throughout the appeal process."
The lesson for other small businesses? Get your paperwork in order.
"Charter Oak didn’t have confidentiality agreements and noncompete contracts," says Milford, Conn., attorney Tim Bishop, who represented Charter Oak in the original lawsuit. "They were a typical small business that grew faster than expected."
President Obama has been steadfast in his pledge that he won’t raise taxes on those making less than $250,000. But that doesn’t mean only high-income households will be subject to higher taxes.
An increasing number of influential Democrats and fiscal-policy experts have signaled that lawmakers will have to get a handle on the deficit. And they recommend seriously considering the creation of a value-added tax (VAT) on top of the federal income tax.
That could mean more money out of everyone’s pockets when buying virtually anything — sweaters, school books, furniture, pottery classes, dinners out.
A VAT is tax on consumption similar to a national sales tax. But it’s not just paid at the cash register. It’s levied at every stage of production. So all businesses involved in making a product or performing a service would pay a VAT. And then the end-user — such as the retail customer — ponies up as well.
No one is suggesting raising taxes or creating new ones before the economy stabilizes.
But Paul Volcker, the former chairman of the Federal Reserve who heads President Obama’s tax reform panel, is advocating a little advance planning.
When it comes to getting control of the country’s debt burden, "I think if we can’t do it on the cost side, we’ve got to go on the revenue side. And it’s too early to do it, but it’s not too early to begin wondering," Volcker said Wednesday in an televised interview with PBS’ Charlie Rose. "You’ve got talk about some tax that hits consumption," said Volcker. "Value-added is one."
John Podesta, the head of the liberal think tank Center for American Progress who headed President Obama’s transition team, also raised the issue of a VAT this week. He noted that the only way to stabilize the debt situation is to reduce spending, reduce the growth in health care costs and add new revenue.
"As progressives we need to debate the policy merits and likelihood of enacting a range of options — including designing a small and more progressive value-added tax, changes to the corporate tax code, and taxing-upper income earners beyond reversing the Bush tax cuts," Podesta said in a statement.
Podesta’s organization, meanwhile, said in a report, "Responsible people know that additional revenue has to be part of the mix even if they believe in lower taxes in general. And those who believe that government investments and spending are critical to our economic and social well-being … recognize that tax increases on the wealthiest and corporations are not going to solve the whole problem."
Where things stand now
President Obama has proposed closing corporate tax loopholes and increasing the tax bite on upper-income households by letting most of the 2001 and 2003 tax cuts expire for families making more than $250,000.
He has also proposed making those cuts permanent for everyone else — which would cost federal coffers roughly $2 trillion in foregone tax revenue over 10 years.
Just how hard would it be to lean only on the top 5% of taxpayers to pay for everything the country has to do in the next 10 years?
"You’d have to hit them hard, raising their top marginal rates by as much as 30 percentage points," said Roberton Williams, a senior fellow at the non-partisan Tax Policy Center. In other words, instead of a top income tax rate of 39.6%, it would have to kiss up to 70%.
Rather than such draconian measures, experts say the most effective way to attack annual deficits is through a combination of spending cuts and tax hikes.
In theory, having a VAT might let lawmakers lower personal and corporate income tax rates.
But if the rate of the VAT is set relatively low — say at 5% — and if the rate of government spending continues apace, that might not raise enough revenue to make lower income tax rates a possibility, said Rudolph Penner, a former director of the Congressional Budget Office and now an institute fellow at the Urban Institute, a public policy research group.
"If we vigorously control spending growth or are willing to tolerate a significant, although lower deficit, there would be something left over for tax cuts," Penner said.
Currently, the notion of a VAT is "a non-starter from a political perspective," said William Gale, co-director of the Tax Policy Center, at a Center for American Progress conference this week.
Democrats say it’s regressive, meaning it would hit lower-income people hardest since they tend to spend all of their income on consumption purchases that could be subject to the VAT. Low-tax advocates, such as conservative Republicans, see a VAT — on top of the current tax system — as harmful.
But given the depth of the nation’s fiscal needs, there aren’t many attractive options.
"Tax rates could be raised in the existing system, but that would be extremely inefficient," said Penner in a paper about the VAT. "Tax reform might raise revenues more efficiently, but that is excruciatingly difficult politically."
"That leaves the possibility of a brand new tax, and a VAT is a very likely candidate," he added.
Canada did not follow the U.S. example of financial deregulation that began there in the early 1980s. Ottawa did permit the brokerage and trust sectors to be absorbed by the banks. But the feds maintained strict supervision so Canada is the only major economy in the current crisis in which government has not had to bail out its banks.
By contrast, the United States, epicentre of the latest global crisis, began to dismantle its most critically important regulatory safeguards in 1980. There soon followed the epic savings and loan crisis of that decade.
In the late 1990s, bank lobbyists succeeded in achieving revocation of the FDR-era Glass-Steagall Act, which separated commercial from investment banking. They did this with lavish campaign contributions to key Democrats and Republicans in Congress – assuring lawmakers that they were now more safely spreading risk, when the bankers actually were preparing to accumulate unsustainable amounts of it.
In 2004, George W. Bush’s Securities and Exchange Commission (another FDR creation) decided investment banks, henceforth, should be permitted to regulate themselves. Also, under the so-called Basel II rules that came into effect a few years ago, global banks granted themselves permission to be the sole arbiters of what constituted undue risk.
So, the bomb had been built.
The timer was activated by the "innovation" of derivatives, subprime (junk) mortgages, credit default swaps, collateralized debt obligations and other high-risk instruments. Off-balance sheet repositories for a bank’s dubious assets were such that no additional capital was required as a provision against their going sour. The lax regulatory regime, dating from the Reagan era, neither understood nor tried to regulate the new tricks banks and brokerages were up to.
When the record U.S. housing bubble earlier this decade finally burst in 2006-07, the subprime mortgages and other "toxic waste" on bank balance sheets suddenly had to be written off in the billions of dollars – $41 billion (U.S.) in the case of Swiss banking giant UBS AG alone.
So, Uncle Sam has been obliged to commit an almost unimaginable $9 trillion (U.S.) in taxpayer funds to stabilize America’s troubled major banks. Last fall’s global credit freeze following collapse of brokerage giant Lehman Brothers Holdings Inc. accelerated a U.S. recession that began in December 2007. So far, it has cost about 7.3 million North Americans their jobs.
In financial capitals worldwide, the talk now is how to prevent another crisis, almost certainly more devastating than the last. Now that the largest surviving banks know their institutions are "too big to fail," they have even greater incentive to carelessness – a phenomenon known as "moral hazard."
There is talk of breaking up the biggest banks. After all the forced mergers of weakened banks in the past year, America’s four largest banks now control about 40 per cent of total industry assets, double the portion of 2000.
There is talk of reinstating the separation of commercial and investment banking. Of capping excessive banker pay and "clawing back" bonuses from traders and dealmakers whose investments later go bad.
There is a wish among some for greater "harmonization" of regulatory standards among nations, presumably so that there is no repeat of the contagion of U.S. subprime defaults spreading to Europe and Asia pay day loans.
The Canadian experience suggests those measures are unnecessary. The concentration of Canadian financial assets in a handful of institutions makes the Canadian system easier to supervise, the one saving grace of an oligopoly. Commercial and investment banking happily coexist in Canadian banks, as they do in Europe.
Harmonization would be useful in this era of globalization, giving errant bankers no place to hide, but overcoming differing national sentiments puts that goal out of reach for some years yet. Canadian provinces still resist a national securities regulator.
The essential feature of banking in Canada is that strictly enforced regulation, dating from the creation of the Inspector General of Banks in 1924, remains intact.
Initially, it was welcomed in those uncertain times to reassure depositors and to create a "level playing field" in which hyperaggressive bankers could not force prudent ones into a reckless race for assets. Nothing about that regime has changed since.
America enjoyed a golden age of banking lasting about 50 years from the time of Franklin Roosevelt’s mid-1930s imposition of sweeping bank regulations and their vigorous enforcement. The next five decades were marked by no more financial "panics."
None.
As David Ross writes in proposing means of preventing future financial crises in the current Harvard Magazine, "Private financial markets and institutions have always had trouble managing risk – and especially systemic risk – on their own. The long series of financial crises that punctuated American history up through 1933 testifies to this fact, as does the current crisis, which exploded not coincidentally during a period of aggressive financial innovation and deregulation."
FDR was the best thing to happen to U.S. banking. Those 50 golden-age years were marked by lucrative business in credit cards, 401(k)s (RSPs), mutual funds, adjustable-rate mortgages and ATMs. There were no system-wide panics, whereas the failure of one brokerage, Lehman Brothers Holdings Inc., last September froze credit among banks around the world.
It’s not clear what shape financial reform will take. But what’s needed seems clear, starting with a return to more vigilant government oversight of America’s banks and other financial institutions.
U.S. banks should have to double their cash reserves against losses, to 8 per cent of capital. Their leverage ratios should look more like those of Canadian banks, which lend or invest about $20 for every $1 they have in capital. In the U.S., the ratio is closer to $30 and, in Europe, $40 is not uncommon.
Ace business columnist Joe Nocera of The New York Times last week imagined what Obama ideally would say on genuine reform: "If a bank wants to be so large that it is too big to fail, it can do so – but it will have to put up much more capital than a smaller competitor. If a bank wants to dabble in derivatives, it will have to pay a price in higher capital requirements. If a bank wants to invest in risky assets – ditto.
"Banks hate higher capital requirements because they depress profits. So they’ll have to make a choice: risky assets or lower capital requirements. They won’t be able to do both."
There’s really no alternative to watching bankers like a hawk. It’s our only hope of returning to those uneventful years before the safeguards came tumbling down, and bankers assumed a new role as agents of wealth destruction without historical equal.
dolive@thestar.ca
The number of first-time filers for unemployment insurance jumped last week, according to a government report issued Thursday, with the increase exceeding economists’ forecasts.
There were 551,000 initial jobless claims filed in the week ended Sept. 26, up 17,000 from an upwardly revised 534,000 the previous week, the Labor Department said in a weekly report.
A consensus estimate of economists surveyed by Briefing.com expected 535,000 new claims.
"We’ve been holding in a similar pattern the past few weeks, and this could dash some hopes of a quicker recovery," said Adam York, analyst at Wells Fargo.
Ian Shepherdson of High Frequency Economics wrote in a research note that "a correction was overdue" after three consecutive declines in initial claims.
"Progress is slow," Shepherdson said. "There is still no sign of a near-term stabilization in employment."
The 4-week moving average of initial claims was 548,000, down 6,250 from the previous week’s revised average of 554,250.
Continuing claims: The government said 6,090,000 people filed continuing claims in the week ended Sept. 19, the most recent data available. That was down 70,000 from the preceding week’s ongoing claims.
The 4-week moving average for ongoing claims fell by 39,250 to 6,154,500 from the prior week’s revised average of 6,193,750.
The initial claims number identifies those filing for their first week of unemployment benefits. Continuing claims reflect people filing each week after their initial claim until the end of their standard benefits, which usually last 26 weeks.
The figures do not include those who have moved to state or federal extensions, nor people whose benefits have expired.
State-by-state data: Two states reported a decline in initial claims of more than 1,000 for the week ended Sept payday loans. 19, the most recent data available. Claims in Kansas fell by 1,545, while Wisconsin’s fell by 1,258.
A total of 12 states said that claims increased by more than 1,000. California reported the most new claims at 5,112.
Fewer layoffs: A separate report from outplacement firm Challenger, Gray & Christmas said its data showed stabilization in the job market.
Monthly layoff announcements fell in September to 66,404 job cuts, down 13% from August. That’s the lowest level since March 2008, and the September figure was 30% lower than the same month a year ago, when employers announced 95,094 job cuts.
It was the fourth consecutive month in which job cuts declined from the year-ago level.
Outlook: Thursday’s government report "shows we still have job losses to come this year," said Wells Fargo’s York.
The rest of 2009’s job losses won’t come near the levels seen during mass layoffs in January and February, York said, and initial claims could fall below the 500,000 mark by year’s end.
High Frequency Economics’ Shepherdson wrote that better economic data in the third quarter should boost the job market.
"It would be very surprising not to see claims falling now," he said.
We want to hear about the most outrageous consumer rip offs and price gouging that you’ve come across. E-mail your story to julianne.pepitone@turner.com and you could be part of an upcoming article. For the CNNMoney.com Comment Policy, click here.
The cacophony of the health care debate, already loud, is likely to become deafening as autumn progresses.
The fate of the various reform proposals is anybody’s guess. But if a bill does pass this year, several measures stand out as most likely to make the final cut.
And many could have a direct bearing on you.
CNNMoney.com consulted a cross-section of leading health care experts to get their take on just what those measures might be.
Their consensus view if a bill passes: Insurers are likely to face new rules about who they have to cover and limits on how much they can charge. Consumers will be able to buy coverage on a new "insurance supermarket." And coverage will be expanded and made more affordable for many.
Here’s a breakdown of some of the specifics.
Putting a tighter leash on insurers
Most of the heart-wrenching stories about the U.S. health care system involve people who need insurance the most but are denied coverage, run out of benefits or simply can’t afford it.
Reform, if it takes place, will attempt to fix that.
"The least controversial part [of the reform debate] and the part that helps everyone are the insurance reforms," said Drew Altman, president of the Kaiser Family Foundation, a health policy think tank.
Insurers would no longer be able to deny coverage to those with pre-existing conditions or charge them more because of those conditions.
Insurers may also be denied the right to cancel, or rescind, a policy when a policyholder has kept up with his premiums.
Reform is also likely to prohibit insurers from charging women, particularly of child-bearing age, higher premiums than men, and from setting a cap on annual or lifetime benefits.
And insurers would also be limited in how much more they can charge older policyholders relative to younger ones. Currently "it’s a wide, wide difference," Altman said, noting that a 62-year-old with a family of four and a household income of $89,000 pays an estimated $20,000 a year — or more than 20% of his gross income — for family coverage. The average for family coverage is just north of $13,000.
But should such a reform go through, it is likely that premiums for younger, healthier workers — who typically cost insurers the least — might go up a little, Altman said.
Creating a new insurance marketplace
Today if you end up buying insurance on your own — that is, not through your employer — you have to do all the heavy lifting yourself. You have to comparison shop for the best price and figure out the extent of coverage different policies offer.
Reform would lift some of that burden by creating an insurance exchange, where you could shop for plans in one place online and insurers could compete for your business directly.
Stuart Butler, vice president of domestic and economic policy studies at the conservative Heritage Foundation, characterized the exchange as a kind of "Travelocity" for health insurance.
Any plan on the exchange would have to meet a set of standards in terms of a minimum level of coverage and a minimum level of services covered. And there would be tiers of coverage available above the minimum.
"Who can participate in the exchange differs somewhat among the bills … but likely at least small business and people without access to employer-based coverage or Medicaid," said Karen Davis, president of the Commonwealth Fund, an independent health care research foundation.
Besides providing better consumer protections for individuals and small businesses that buy policies independently, an exchange could help reduce premiums since it would create a broader pool of customers for insurers, and that can reduce their marketing and administration costs, Davis said.
Expanding coverage, making it more affordable
The experts CNNMoney.com consulted were unanimous that reform would include a set of financial subsides for low- and at least some middle-income families buying plans on the exchange.
"They’re absolutely going to have subsidies. The debate is how big they are and how high up the income ladder they go. The fine-tuning is a very big issue," Altman said.
Broadly speaking, such subsidies will be determined on a sliding scale based on an individual’s income. Also, the amount of the premium owed by people who get subsidies will be capped. That cap will be determined by a formula that defines what percentage of that person’s income may be used to pay for premiums.
In addition, reform is expected to expand and standardize eligibility for Medicaid across states.
Altman, Davis and Edwin Park, senior fellow in health policy at the liberal Center on Budget and Policy Priorities, feel confident that there will be a mandate on individuals to buy insurance. But Butler is not so sure.
If there isn’t one, that could change how affordable health insurance is since the cost-effectiveness of various reform measures is based on a mandate being in place.
Currently, the three leading bills under consideration propose an individual mandate. But even its supporters don’t yet agree on what type of insurance a person should be mandated to get, what the penalty should be if he doesn’t, and who should be exempt from the requirement, Park said.
Talkback: What is your biggest complaint against health insurers? E-mail your comments and experiences to realstories@cnnmoney.com and you could be part of an upcoming article. For the CNNMoney.com Comment Policy, click here.
Regulators closed subsidiaries of Irwin Financial Corporation in Kentucky and Indiana Friday, bringing the total number of bank failures this year to 94, according to the Federal Deposit Insurance Corp.
Customers of the bank, however, are protected. The FDIC, which has insured bank deposits since the Great Depression, currently covers customer accounts up to $250,000.
Irwin Union Bank and Trust Company and Irwin Union Bank, F.S.B. operated a combined 27 branches in nine U.S. states. Both banks were run by Columbus, Ind.-based Irwin Financial Corp.
First Financial Bank, NA, which is based in Hamilton, Ohio, will assume all of the deposits of the two banks.
"Since all deposits are being assumed by First Financial Bank, there will be no losses to any depositor," Claude Davis, president and chief executive officer of First Financial, said in a statement.
Irwin Union B&T, of Columbus, Ind., had total assets of $2.7 billion and total deposits of approximately $2.1 billion. Irwin Union, F.S.B., of Louisville, Ky., had total assets of $493 million and total deposits of approximately $441 million.
On Thursday the banks’ parent company, Irwin Financial Corp., said in a regulatory filing that it had "no realistic prospect of achieving the required capital levels," required by its regulators.
The FDIC said customers of the failed banks will be able to access their money over the weekend by writing checks or using ATM or debit cards. Checks will continue to be processed, and borrowers should make their payments as usual.
A total of 94 banks have failed so far this year, with an average of about 10 per month. That’s nearly four times the number of banks that failed in 2008, and it’s the highest tally since 1992, when 181 banks failed.
This year’s failures have reduced the FDIC’s insurance fund to $10.4 billion from $45 billion a year ago. However, the agency has said it has $42 billion available for bank rescues over the next 12 months.
The cost of Friday’s closures to the FDIC is an estimated $850 million.
Earlier Friday, FDIC chairman Sheila Bair said bank regulators will meet at the end of the month to discuss ways to replenish the agency’s funds, including the possibility of borrowing from the U.S. Treasury.
Bair also said the FDIC could use some lesser-known methods to raise money, such as requiring banks to prepay assessments or issuing a note.
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