PFF and Downey Savings banks get taken over

November 21, 2008 12:00:00 AM PST
Two more California banks are out of business, but your money is safe. Late on Friday federal regulators shut down PFF Bank and Trust, which operates in Southern California, and Downey Savings and loan, which has branches throughout the Bay Area.

The bottom line is what led to the banks' collapse was too many of those bad home and construction loans. Now you'll find U.S. Bank's logo on both Downey Savings and Pomona First Federal, or PFF's home page on the internet.

The Minneapolis-based bank bought the two collapsed savings and loans on Friday after the FDIC temporarily took them over on Thursday.

"They probably decided that the bank could not continue to operate in a normal way, basically the equity was wiped out and the bank would run into bankruptcy, so they decided to take over and look for a buyer. They found a buyer relatively quickly, and that was U.S. Bank," said Marco Pagani, from San Jose State University.

The two Southern California-based banks have suffered heavy losses this year. Downey lost $547.7 million because of risky mortgages, while PFF, which specializes in loans for home builders, lost $289.5 million.

The deal the F.D.I.C. brokered is similar to the one it created for Washington Mutual. In that case, the feds acted as a mediator for J.P. Morgan Chase. Experts predict another 100 or more regional banks will fail this year and next. Pagani says none of them will likely get any of the $700 billion bailout money because they're too small and too far gone.

It'll be business as usual at the Cupertino branch Saturday, meaning it'll open at 9 a.m. Customers can still use the ATM and come into the branch to talk to the normal tellers they are used to. There should not be any interruption in their service for customers.

If your bank fails, is your money safe?

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