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., 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.
Franklin Bank Corp. just Sunday said it had received proposals for
transactions to strengthen Franklin Bank's capital position and was
keeping regulators informed of the talks' progress.
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