Claremont Insider: A Not-So-Golden Dream

Saturday, November 22, 2008

A Not-So-Golden Dream

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It's beginning to look a lot like 1994, at least in terms of the economy, housing, and unemployment in the Southern California exurbs....


PFF Bank & Trust
and Downey Savings yesterday became the 21st and 22nd banks to be taken over by the Federal Deposit Insurance Corporation this year, the LA Times reported.

The FDIC, as is their usual practice, moved in late Friday afternoon and took over both banks. PFF's proposed merger with FBOP Corp. appeared to be falling apart, so the FDIC brokered another buyout by Minneapolis-based U.S. Bank.

U.S. Bank will take over both PFF and Downey Savings. The Times article gave the specifics:
PFF, short for Pomona First Federal, specialized in loans to Inland Empire developers and home builders, running up $289.5 million in losses in the January-September period.

"The closing of these two thrifts once again demonstrates the tremendous impact of the housing market distress on the state of California," John Reich, director of the Office of Thrift Supervision, said in a statement announcing the seizure of the institutions.

Downey Financial Corp., parent of Downey Savings, was founded in 1957 by developer Maurice McAlister, a bass fisherman and nickelodeon collector who built shopping centers that included Downey branches. Co-founder Gerald McQuarrie died 15 years ago. McAlister remained chairman until July, when Downey's problems were already apparent.

PFF was the oldest banking outfit in Southern California, founded in Pomona in 1892 to serve towns in what was then the citrus belt. Parent PFF Bancorp Inc., based in Rancho Cucamonga, had hoped to sell itself to Oak Park, Ill.-based FBOP Corp., which owns California National Bank and other community banks.

The Times had a separate blurb that reported the takeover should be seamless, and customers should see no disruption in service:
The Federal Deposit Insurance Corp. said the 213 branches of the two organizations would reopen as branches of Minneapolis-based U.S. Bank under their normal business hours, including those with Saturday hours. Depositors automatically will become depositors of U.S. Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain insurance coverage.

Customers of both banks should continue to use their existing branches until U.S. Bank can fully integrate the deposit records of the organizations, regulators said. Over the weekend, depositors can access their money by writing checks or using ATM or debit cards.

One reason for the Friday takeovers is to allow a weekend transition period, which also gives bank customers time to let the news sink in. The Times listed the FDIC's call center phone numbers for information about the two banks:
PFF Bank - (800) 930-6827
Downey Savings - (800) 930-5169

The hours for the phone lines this weekend are today from 8am to 6pm PST, Sunday from noon to 6pm, and daily from 8am to 8pm after that.

The Times also noted that the FDIC's website also has separate pages with information for PFF and Downey Savings.


The LA Times also carried a front page article today on the rising unemployment rates in the Inland Empire. The Times reported that unemployment in the region that includes San Bernardino, Riverside, and Ontario reached 9.5% in October, the highest level here in 13 years and the highest current unemployment rate of any U.S. metropolitan area.

Like the PFF troubles, the local unemployment problem is linked to the housing market crash, as the Times noted:
Ignited by the collapse of the local housing market, which decimated the construction and lending industries, the wave of unemployment has trickled into almost every area, including retail, manufacturing and local government.

The region's troubles are set against a backdrop of growing unemployment throughout the nation. The U.S. Department of Labor reported last week that a growing number of jobless Americans are turning to government assistance. The number of workers collecting unemployment insurance payments has now reached a 25-year high at 3.95 million.

Meanwhile, the percentage of people unemployed in the Inland Empire has more than doubled from a year ago, and some experts predict the situation will worsen before it improves.

"It's a perfect storm," said Brad Kemp, director of regional research for Beacon Economics, which recently conducted the second annual Inland Empire Economic Forecast Conference.

"It was one of the fastest-growing places in America," he said. "And when you have that kind of growth, you have the potential for loss."

The downturn has all but erased the glow of optimism the Inland Empire enjoyed only two years ago, when newly minted mansions and an array of upscale retailers fashioned parts of the region into a more affordable Orange County in the making.

In many cases, those developments are now symbols of the decline, from the sparsely populated outdoor malls to the rows of repossessed homes -- victims of housing price plunges of 35% in Riverside and 37% in San Bernardino in the last year.

All over, there are signs of reversed prosperity.

Ontario International Airport went from setting growth records to losing about a third of its airline traffic in the last year. To curtail costs, buildings and a parking lot were closed. And at night, one of its unused runways shuts off its lights.

So, we're back to 1994 or back to 1982. Or 1932. The more things change, they say. Boom gives way to bust, with each successive era erasing the preceding one from the collective memory.

One begins to wonder if Joan Didion's essay "Some Dreamers of the Golden Dream," about a 1965 murder in the San Bernardino Valley, was written in the mid-1960's or yesterday:
This is the country in which a belief in the literal interpretation of Genesis has slipped imperceptibly into a belief in the literal interpretation of Double Indemnity, the country of teased hair and the Capris and the girls for whom all life's promise comes down to a waltz-length white wedding dress and the birth of a Kimberly or a Sherry or a Debbi and a Tijuana divorce and a return to hairdresser's school. "We were just crazy kids," they say without regret and look to the future. The future always looks good in the golden land, because no one remembers the past. Here is where the hot wind blows and the old ways do not seem relevant, where the divorce rate is double the national average and where one person in every thirty-eight lives in a trailer. Here is the last stop for all those who come from somewhere else, for all those who drifted away from the cold and the past and the old ways.