Monday, July 13, 2009

Obama Rules Grease Skids for PEU Capitve Banks

Private equity underwriters (PEU's) are the salve for America's sick banking system. The FDIC proposed rules governing private equity purchases of distressed banks. They started tough, but look for powder puff final rules.

Presidents Bush and Obama relaxed rules governing PEU purchase of banks, without having to become bank holding companies. Obama wants to loosen more rules to favor bank buyers. His plan calls for:

"Permitting banks to expand across state lines improves their geographical diversification and, consequently, their resilience in the face of local economic shocks," the Obama Financial Regulatory Reform Plan states. "Competition through interstate branching also makes the banking system more efficient." To make it palatable to states, however, the plan removes federal preemption of state regulatory power.

So private equity controlled banks could add services in states where they have a concentration of affiliates? A captive bank could cater to PEU owned firms. The Carlyle Group has hundreds of affiliates. They could steer lots of corporate business to BankUnited. Funny, that's BankUnited's new market strategy. To think they can chose a state regulator over federal to boot! Let the Obama good times roll....