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TEXT OF STORY
Kai Ryssdal: Somewhere out there today, some bank manager someplace is about to have his Friday afternoon completely wrecked. Fridays are when federal regulators come in and close down troubled banks.
Miami-based BankUnited went belly up after filling up on risky adjustable rate mortgages a couple of years ago. The FDIC took it over, sold it off to a group of private equity firms a year and a half ago. Today, those investors said they’re ready to take the bank public again.
Marketplace’s Janet Babin reports.
Janet Babin: Usually, profitable banks absorb other banks. But the government sold BankUnited to a group of private equity firms, for about $900 million. In the first half of this year, the new owners made more than $100 million in net income. Not a bad return on investment in 18 months.
BankUnited’s buyers included heavy hitters like Blackstone and the Carlyle Group.
Jack Ablin: The FDIC handed Carlyle a multimillion dollar gift.
That’s Jack Ablin, chief investment officer of Harris Private Bank in Chicago. He says the government’s Federal Deposit Insurance Corporation was supposed to make sure the investors shored up the bank’s value. But instead:
Ablin: Most of the heavy lifting was done by the FDIC. They handed off, guaranteed the first 80 percent of the downside and virtually handed the buyer pretty much a clean slate.
It cost the government $5 billion to unload the bank. But it could have been worse — it could have been stuck with billions more in losses.
But the FDIC set up some limits: The private equity firm had to hold onto the bank and run it. Now that the bank is going public, the investors have a chance to recoup their money, and then some.
Sharyn O’Halloran: That’s exactly what you want.
Sharyn O’Halloran is a political economist at Columbia University.
O’Halloran: They held the bank for 18 months, they shored up its capital reserves. It wasn’t a run on the bank, they did add value to it.
When the IPO goes forward, it’ll be the first failed bank bought by private investors after the meltdown to go public.
In New York, I’m Janet Babin for Marketplace.
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