On May 21, BankUnited FSB became the 34th federally insured institution to be taken over by regulators this year. The takeover will put another major dent in the FDIC’s deposit insurance fund, with estimated costs running a cool $4.9 billion. The BankUnited takeover is trumped only by the FDIC’s $10.7 billion dollar rescue of IndyMac Bank in July 2008.
While the exact causes of BankUnited’s failure remain unclear, one answer may lie in the bank’s heavy trade in subprime loans. According to the Center’s research for Who’s Behind the Financial Meltdown?, BankUnited FSB made almost $4.5 billion in subprime loans from 2005-2007.
Based on the subprime total of #25 on our list, Aegis Mortgage Corp./Cerberus Capital Management, with $11.5 billion in subprime loans, it’s likely BankUnited would have landed among the top 50 in subprime lenders.
The bank’s “troubled asset ratio” may provide another clue to its failure.
American University’s Investigative Reporting Workshop, in cooperation with MSNBC, compiled a troubled asset ratio for banks across the country as part of its BankTracker Investigation. The troubled asset ratio is a measure of the stress that loans have placed on banks; it compares loans not being paid on time and property acquired by the bank against the institution’s capital and loan loss reserves. The higher the ratio, the more stress the bank is under. The typical U.S. bank had a ratio of less than 10; BankUnited had a troubled asset ratio of 251.6 at the end of 2008, according to the Workshop’s data. MSNBC listed this as the third highest ratio of U.S. banks examined.
The Florida bank, which was owned by holding company BankUnited Financial Corp., reopened the day after the takeover with the same name but new ownership. The FDIC sold BankUnited’s banking operations to a private-equity team headed by John Kanas and includes, among others, WL Ross & Co., Carlyle Investment Management, and Blackstone Capital Partners.