I ran across this material loss review of a failed bank, the National Bank of Commerce, in Berkeley, Illinois from 2009. That’s NBC as opposed to PNBC. It makes very good reading and helps explain why it is so easy for some banks to go broke. It also makes it easy to see why our government can go broke. Read the review here.
We can see, after such an audit, that everyone at the bank is forgiven, the OCC (Office of the Comptroller of the Currency), the oversight for the national banks, is forgiven, and the OIG, along with everybody else involved, realizes that making loans without adequate risk management and capital in place can be risky. Imagine that. So the bank is closed. The OCC does a study, and the OIG moves on to audit the next failed institution.
The audit from the National Bank of Commerce took 41 pages, apparently because of the material loss. Most of the failed bank reviews in 2012, that I have read, are only 7 pages. They cost the Deposit Insurance Fund less than $150M, so be brief. Short and sweet.
There are several significant differences in the Berkeley bank and CFNB. The main one seems to be that NBC, the Berkeley bank, bought loans in commercial real estate rather than making them. And I don’t know anything about any material loss.
Without knowing the real inside information, one could easily imagine CFNB going through a similar progression. Maybe a good insight as to what might be going on in similar banks.
I have added a link in the FYI link on the right hand side to the OIG site.
Several of the banks in these audits made the same bad decisions as did PNBC. It wasn’t their fault either. Closed. Study done. Move on.
An audit of the Solyndra $500+ million loan is part way down on the 2012 list. Treasury concluded that it was rushed in its consultation with Solyndra. Really? Not their fault.
One wind farm in LaSalle County seems to be doing ok with its $32M award. The report says, “Our audit objectives were to assess the eligibility and accuracy of that award by determining whether (1) the property existed, (2) the property was placed into service during the eligible timeframe, and (3) the award amount was appropriate.” Amazing. What happens to the money if the property hadn’t existed? It’s a wonder.