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Then, because of the federal restrictions imposed in the April 6 agreement, the bank was unable to seek brokered deposits to build its cash reserves. Plus, other banks continued to close their lines of credit to the Idaho-based bank. "Things just kept getting worse," Covington said.
Covington said he was close to structuring a deal to get a $10 million line of credit as well as a deal to move $15 million in assets off the bank's books. That, he told the Jackson Hole News & Guide , would have taken care of the bank's liquidity problems.
The U.S. Treasury Department's Office of Thrift Supervision said the bank was in "unsound condition and unable to continue operating due to severe liquidity strains, deteriorating asset quality, negative earnings and declining capital with no realistic prospects for raising capital quickly enough to ensure that it can repay all of its liabilities, including deposits."
After closing the bank, the Treasury Department transferred the bank to the Federal Deposit Insurance Corp., which then sold the deposits and some assets to Minnesota-based U.S. Bank. U.S. Bank, with 24 hours to make a decision, agreed to spend $1.47 million to buy $268 million in deposits. Those accounts will remain insured by the FDIC. The FDIC will handle $113 million in brokered deposits.
The FDIC temporarily froze all lines of credit. In Ketchum, the Express reported something of a panic, as merchants dependent upon financing to get them through the spring shoulder season wondered how they will survive. Randy Hall, the mayor of Ketchum, said at least a half-dozen local businesses, already reeling from a difficult winter, were in dire straits.
The Idaho Mountain Express says that Ketchum officials were exploring all options and finding lines of credit to ensure that no other businesses failed.
Summing up the situation, The Express found that the transfer of assets from one bank to another had been relatively seamless. There had been no true run on the bank, and most other normal banking functions continued, thanks to the FDIC guarantees instituted in response to the bank foreclosures of the Great Depression.
"There was no silver lining to this story, but the bank's failure could have been much, much worse," said the paper.
Basalt provides own stimulus package
BASALT, Colo. - Basalt is spending $45,000 in a homegrown stimulus project. Town officials say the program will yield $450,000 in sales for local shops, restaurants and service providers through the summer.
A "rewards card" is the basis of the program. The card gets a stamp for any purchase of more than $10 at participating venues. Once the card is up to $300 in purchases, it can be redeemed for a $30 gift certificate, explains The Aspen Times . "You don't have to be a Milton Friedman to figure this out," said Bill Kane, the town manager.