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There remains an issue about what to do with troubled banks, and the regulations over who can own banks and at what percentages only add more questions rather than answers. FDIC Chairman Sheila Bair and other regulators are still trying to craft a formal policy on how to deal with private equity and the ownership of banks. Depending upon what is ultimately decided, it might even allow the “brokers gone bankers” of Goldman Sachs Group Inc. (NYSE: GS) and Morgan Stanley (NYSE: MS) to become bank owners rather than just being classified as bank holding companies but not being bankers because that was convenient during the financial meltdown. It will also allow private equity firms such as The Blackstone Group LP (NYSE: BX), Carlyle, and others to get more proactive in deciding which troubled banks they are interested in even before it is known that these troubled banks are formally up for grabs.
BankUnited (NASDAQ: BKUNA) was the runner-up in the race for the most expensive seizure in recent years, and it was a private equity consortium including Wilbur Ross, Carlyle, and others which won the bid for the remaining assets in the bank. IndyMac was also taken over by J.C. Flowers. What is interesting is that regulation over control and ownership allowances by private equity firms remain cloudy when you consider the hundreds of troubled banks, the jurisdictions and regions in which they operate, and which agencies are in charge of them. A recent report from the FDIC noted that more than 300 banks could still fail in the near-term and the FDIC has a board meeting today on certain regulations that prevent banks from past practices in aiding to their own destruction at the expense of the FDIC.
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