A California bank that received $298.7 million in federal bank bailout money last year has been seized and closed by state regulators, leaving U.S. taxpayers with a significant loss — the bailout program's first — and raising questions about why the lender received government help at all.
United Commercial Bank of San Francisco was closed by the state Department of Financial Institutions late Friday. The state immediately named the Federal Deposit Insurance Corporation as bank receiver.
To protect United Commercial depositors and clients, including hundreds served by branches in Sacramento and Citrus Heights, the FDIC entered into a simultaneous agreement with Pasadena-based East West Bank to assume all of United Commercial's deposits and branches and some of its loans.
United Commercial's 65 branches, including 50 in California, have now reopened as East West branches. Customer deposits were secure and remained FDIC-insured, said Tom Tolda, East West's chief financial officer.
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"We want United Commercial customers to understand that it's business as usual," Tolda said in an interview.
For the FDIC and taxpayers, United Commercial's collapse and absorption by East West wasn't so seamless. The FDIC's own insurance fund will take a $1.4 billion hit.
United Commercial Bank's $298.7 million debt to the U.S. Treasury under the Troubled Asset Relief Program was wiped out and the taxpayers' money was lost, Tolda said.
Treasury injected the money into the bank in November 2008 and in exchange received shares and warrants in UCBH Inc., United Commercial's holding company.
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