Banking Law

If eyebrows were raised by last month's news that BankUnited is planning an IPO, those same eyebrows are likely near the top of the forehead with the more recent announcement that the OTS had approved the declaration of a dividend by the bank. The South Florida Business Journal obtained a copy of the bank's dividend application. Unfortunately for the Journal, the amount of the dividend was redacted from the copy the paper obtained through a FOIA request; however, the amount should be revealed when third quarter earnings are announced.

Inasmuch as the Journal's story also notes that the Bank's investors have earned a 36% ROE in a little over a year since they bought the remnants of the failed BankUnited in an FDIC-assisted transaction, some wags have suggested to me that not only will the dividend be hefty, but that the FDIC was "outfoxed" by the investment group's leader, the legendary bottom fisher Wilbur Ross. As I blathered when the IPO was announced, and as I again bloviate now, it's not the size of the return to the investors but the savings to the FDIC fund of doing the assisted transaction as opposed to liquidating the insolvent thrift (or accepting a competing bid) that's the critical consideration in determining whether this was a good deal for the FDIC. The fact that private equity players make a mint on this particular transaction is not that important to me nor should it be that important to bankers. Players like Ross (and his co-investors like Blackstone and Carlyle) win some and they lose some. If they win this one in a big way, good for them, as long as in doing so, they prevented the FDIC from suffering even greater losses on the disposition or liquidation of the "old" BankUnited. Also, they raised $875 million of new capital to dump into the banking system (and they're raising another $500 million in the IPO). The system needs fresh capital and these guys have it. They also saved some banking jobs by buying BankUnited.

Of course, we appear to be living in an era where a number of people think it ought to be illegal for capitalists to prosper, especially in the banking system, and even more especially where the downside risk is covered by the FDIC. I understand the reasons for that sentiment. I simply don't share it.