Banking Law

As those of us dumb enough to have money invested in stocks and/or stock mutual funds watch Wall Street lemmings swim out to sea to drown, other investors believe the time is right to start cherry-picking whatever flesh remains on dead carcasses, including those of failed banks. Noted vulture contrarian investor Wilbur Ross anticipates that as many as 1,000 banks will fail during the current adverse economic cycle, and he's kinda happy about it.

The billionaire investor, who made his fortune making investments on distressed industries, said the closures will create opportunities for investors, CNBC said, adding that he is looking at picking up smaller distressed institutions.   

"I do think a lot of the regional ones will (close), just as they did in the last savings and loan crisis in the 1990s," the website quoted Ross saying.   

Ross said there will be too many people willing to provide capital to the large financial companies, making them less of a bargain than smaller banks, according to the website.

Well, I guess "too many people" weren't willing to provide capital to a "large financial company" with a name that rhymes with "Seaman," but I see his point. In addition, while last year I was getting calls from "dent-and-scratch" funds looking to pick up troubled debt portfolios for a song, lately I've been getting calls from commercial real estate investors who are interested in looking at the real estate assets that have been taken back (or are about to be taken back) by lenders, who are interested in funding the "bad bank" in "good bank/bad bank" structures, and some who are even interested (like Mr. Ross) in exploring recapitalization of "good" (albeit "troubled") banks.

Other players in the distressed bank game want to pick up portfolios of bad assets from the FDIC (at a very "reasonable" price, of course) and others with expertise in working out troubled commercial real estate assets (some of them who honed their skills in the savings and loan meltdown of the late 1980s and early 1990s) want to counsel banks on how to deal with such assets in a way that limits the pain and maximizes the ultimate recovery (for a "reasonable fee," naturally).

One man's nightmare is another man's sweet dream, eh? Where some hear a clarion call for fresh capital, others with that capital hear a "carrion call" to start feasting on the roadkill of a free market that went just a wee bit wild.