A grim reminder

Published 8:25 pm Saturday, September 24, 2011

In case there was any question about it, the effects of the recession, of the failed housing market and of the nation’s banking debacle continue to linger — even in Virginia and even right here at home in Suffolk.

When state regulators showed up at Bank of the Commonwealth locations around Hampton Roads on Friday to take the keys to the doors and the combinations to the safes, they put an end to a long, painful process that had cost the bank’s investors millions of dollars and — if not for the Federal Deposit Insurance Corp. — could have cost depositors even more.

As with so many of the bank failures the nation has seen in recent years, the culprit was bad loans. But looking even deeper, one must consider that someone had to approve those bad loans, despite the likely evidence that they were risky at the time of that approval. And, as we’ve seen in other cases in the “too-big-to-fail” banking industry, there likely was a corporate philosophy of unchecked greed that encouraged approving even the riskiest of loans.

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As it turns out, Bank of the Commonwealth was not too big to fail. Its board — unable to find investors willing to pour money into a hole that was swallowing the bank, unable to pawn those bad loans off on other financial institutions and unable to come up with any other solutions — finally was unable to fend off the inevitable.

The good news is that depositors were protected from the results of the failure. The FDIC did its job, and when all is said and done this failure will have cost American taxpayers very little, compared to the bailouts and stimulus programs that have been designed to save some of the nation’s biggest institutions during the past few years.

But Friday’s surprise announcement by the State Corporation Commission that the bank’s assets had been seized — including a branch right here in Suffolk — was a grim reminder that even here we are not isolated from the most extreme examples of the economic uncertainty that pervades our nation.