Regulators shut banks in Texas, California

By MARCY GORDON

WASHINGTON (AP) - Regulators shut down Houston-based Franklin Bank and Security Pacific Bank in Los Angeles on Friday, bringing the number of failures of federally insured banks this year to 19.

The Federal Deposit Insurance Corp. was appointed receiver of Franklin Bank, which had $5.1 billion in assets and $3.7 billion in deposits as of Sept. 30, and of Security Pacific Bank, with $561.1 million in assets and $450.1 million in deposits as of Oct. 17.

The co-founder and chairman of parent Franklin Bank Corp. (FBTX) (FBTX), Lewis Ranieri, is credited with inventing mortgage-backed securities two decades ago, but apparently was unable to save his own company from getting ensnared in the home-loan bust.

The bank's failure is a bitter irony because it is the mortgage securitization business of which Ranieri is known as a pioneer - the repackaging of home loans as bonds that are sold to investors - that was at the heart of the mortgage and credit crises. Last spring, the audit committee of the company's board found in an investigation certain weaknesses in accounting, disclosure and other issues relating to residential real estate loans.

http://apnews.myway.com/article/20081108/D94AJ5JO0.html

Sphere: Related Content