The Federal Deposit Insurance Corp. has shut down Silverton Bank, the failed Atlanta “bank of banks,” instead of selling it to private-equity investors, according to a person familiar with the situation.
…[blogger comment: here is the key to this article] Because Silverton doesn’t have retail deposits, its closure doesn’t present the same problems that the shuttering of a more traditional bank would. Small community banks, which are Silverton’s main customers, can take their business elsewhere.
Although the bank does not have retail deposits, the bigger impact is on the borrowers at the smaller community banks that were Silverton’s clients. When the FDIC closes down operations, it literally freezes all of the outstanding loans. We are starting to see the full impact of that here in the Portland areas. Borrowers with the “frozen” loans are stuck between a rock and a hard spot. They can’t do anything with the asset secured by the loan until FDIC does something. Borrowers are having a very difficult time getting any information from FDIC with regard to what they can do with these properties. Bad situation.