Bank failure bug will likely bite SC

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Bank regulators are notorious for keeping mum on which institutions they plan to seize until after the deed is done, and for good reason.

They seek to avoid panicking bank customers, which might provoke a run on the institution, in which confidence falters and individuals may try to withdraw their money, which would precipitate an all-out collapse.

That’s why nearly all bank seizures take place on Fridays, so regulators can use the entire weekend to make the transition from the old failed institution to the succeeding one, nearly always a bank that has been lined up ahead of time to assume deposits and non-troubled assets. An excellent article on what happens when a bank fails can be found here.

In most cases, except for the change in the name of the institution, the average customer won’t even know their bank was closed if an announcement wasn’t made by the Federal Deposit Insurance Corp., according to FDIC spokesman David Barr. 

While there have been a number of bank failures throughout the US over the past six months, including a half dozen in nearby Georgia, it’s been somewhat surprising that none as yet have taken place in South Carolina.

In fact, the last failure to occur in the Palmetto State happened in 1999, when the old Victory State Bank was seized by regulators.

It would be irresponsible to speculate on which SC banks might be candidates to go under, and likely frowned upon by federal authorities, but the odds are that at some point before too long, a South Carolina bank is going to join the list of failed institutions, as well.

It’s not voluntary if they make it mandatory

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Here’s a copy of a letter George Mason University Economics Department Chairman Donald Boudreaux sent CBS Radio regarding a story about a Department of Agriculture proposal to have meat processors put country-of-origin labels on their products.

Boudreaux, of Cafe Hayek, points out in the CBS report that “Agriculture secretary Tom Vilsack said that the program is voluntary, but could become mandatory if meat processors don’t comply.”

To which Boudreaux adds: “It’s clear that if Mr. Vilsack were an armed robber he’d assure persons looking down the barrel of his gun that he seeks only voluntary compliance with his requests that they had over their money and jewels – but also that he’ll shoot those persons who reject his requests.”

Indeed, isn’t this the type of volunteerism that made Soviet Russia such a hotbed of happiness and freedom for seven decades?

Remembering a great man: George Washington

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One of the unfortunate things about the way history is taught in public schools today is that while Abraham Lincoln is deified, George Washington seems all but forgotten.

Many Southerners, and some historians, still hold a grudge against Lincoln, but that’s a matter for another day. What’s particularly troubling is the degree to which George Washington has been pushed aside.

Just the idea that we as a nation would go from celebrating Washington’s Birthday (and Lincoln’s) separately to lumping all the presidents into a single day is troubling enough. Does a man of Washington’s stature really deserve to included with the likes of Ulysses S. Grant and Warren G. Harding, afterall?

But if you ask many Americans today about Washington’s contributions to this country, their responses rarely go beyond the fact that he was the first president and a general during the Revolutionary War? And, of course, plenty of schoolkids will also include tidbits like he chopped down a cherry tree and owned slaves.

The fact is, Washington is the greatest American ever, bar none. Consider:

  • During the Revolutionary War, he held together a rag-tag army and a fragile nation for seven years amid threats of disintegration and collapse, all while battling the most powerful country in the world.
  • After the war, he retired to private life at Mount Vernon, instead of assuming control of the new-found nation. That move caused King George III to utter: “If he does that, he will be the greatest man in the world.”
  • He presided over the convention that drafted the Constitution in 1787.
  • He was the nation’s first president, but avoided joining a political party.
  • When his second term ended, he retired to Mount Vernon and the life of a gentleman farmer.

Washington, of course, lived more than 200 years ago and many today have a difficult time understanding the challenges he faced in getting our fledgling nation on the right track. 

But instead of the news media holding Lincoln and FDR out as role models for President Obama, it would be nice if some publication somewhere looked back at the man who did more than anyone else to put this country on the path to success.

US Cotton production expected to fall in 2009

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US producers plan to plant 8.11 million acres of cotton this spring, a 14 decrease from last year and a continuation of a trend that began in 2007, according to Southeast Farm Press.

The figures comes from a National Cotton Council survey mailed to producers in mid-December. The Council held its 71st Annual Meeting in Washington, DC, earlier this week.

Based on survey results, all four US regions show intended upland cotton planting area decreases compared with last season, according to the National Cotton Council. 

The West and Mid-South show the largest percentage drops of 31 and 23 percent, respectively. Smaller reduction of 18 and 9 percent are expected in the Southeast and Southwest, respectively.

Most Southeastern states, the National Cotton Council reported, expect to see significant declines in cotton acreage in 2009:

  • South Carolina plans a cutback of 18 percent as growers shift primarily to soybeans.
  • Alabama reports a projected reduction of 33 percent;
  • Virginia anticipates a 23 percent decline;
  • Georgia expects cotton production to be off 17 percent;
  • North Carolina plan a cutback of 12 percent;
  • Florida was the only Southeastern state to indicate an upland expansion, with an increase of 3 percent expected for 2009.

Globally, world cotton production is projected to fall 4.3 million bales to 105.5 million bales – the smallest crop since 2003, according to National Cotton Council Economist Dr. Gary Adams.

South Financial falls below $1 level

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Oh, how the mighty have fallen.

The South Financial Group, South Carolina’s largest state-based financial services company, closed Thursday at less than a dollar a share as the Greenville-based bank company’s free-fall accelerated.

South Financial, the parent of Carolina First Bank, closed trading at a stunning 95 cents a share, down 28 cents for the day, or nearly 23 percent. Compare that to just a year ago, when South Financial hit a high of $16.29.

The past 12 months have been difficult for South Financial. Last month, it announced it lost $319 million during fourth quarter 2008 and $569 million during the year as a whole. In addition, the entire banking sector as a whole has staggered over the past few months.

South Financial has been stung by the slumping Florida real estate market. It received a $347 million bailout by the US Treasury Department last year.

Earlier this month, South Financial named Lynn Harton chief executive and president. Harton replaced founder Mack Whittle, who left the company last year after receiving a hefty golden parachute.

Kim Jong Il secures nomination, thanks voters

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In an absolutely unsurprising turn of events, Kim Jong Il has secured a nomination as a candidate to the North Korean 12th Supreme People’s Assembly.

The North Korean dictator was jubilant in the “faith” shown in him by his constituents.

“I extend my searing thanks to the entire electorate of the country for expressing their deep trust in me,” he said in a prepared statement.

According to The Times of London, He went on to add: “I will repay the high expectations of the entire electorate by devoting everything to making the fatherland powerful and prosperous and to making people happy by being around our soldiers and people at all times.”

(Editor’s note: what more could possibly be done to make the Fatherland any more powerful and prosperous? And what citizen doesn’t in their right mind doesn’t like being around soldiers, especially when they’re being held against their will in famine-ridden police state where early death is seen as a blessing?)

Before anyone gets their hopes up about democracy somehow infiltrating that miserable little country, The Times offers this pertinent bit of background on the North Korean legislative body in question:

“The Supreme People’s Assembly is not one of the world’s livelier or more competitive legislatures. Its 687 members meet only twice a year for a few days at a time, and approve without demur the proposals put before them. Its members come from several parties, but none that disagree with the line of the Korean Workers’ Party. All candidates have to be approved in advance by a body called the Democratic Front for the Reunification of the Fatherland, and debate or dissension are unknown.”

For those of you keeping score at home, voting will take place March 8. The early money looks for Kim Jong Il to retain his seat.

SCBT suffers slings and arrows of down market

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The new year hasn’t been a happy one for SCBT Financial stockholders. They’ve seen SCBT shares fall from nearly $34 on the first trading day of the year to just over $21 as of Wednesday. That’s a drop of approximately 37.5 percent in less than two months.

The plunge accelerated Wednesday as SCBT lost $1.38 before closing at $21.09. At one point, it dipped as low as $20.75, a 52-week low, before rebounding slightly.

While bank stocks around the country are taking a beating, SCBT’s free-fall is somewhat surprising. Unlike many South Carolina bank companies, the parent of South Carolina Bank & Trust managed to turn a profit last year, even if earnings were down from 2007.

SCBT posted net income of $3.5 million for the three months ending Dec. 31, 2008, compared to $5.1 million for the same period in 2007. For all of 2008, it earned $15.8 million, compared to $21.6 million the previous year.

While SCBT did receive nearly $65 million in federal bailout money earlier this year, that doesn’t fully answer questions as to what’s been driving the bank company’s stock price into the ground in 2009.

SCBT shares are still well above those of such local competitors as South Financial Group, First Financial Holdings and First Community Corp., but a 37.5 percent drop in a matter of weeks is the kind of thing that leaves brokers and investors alike scratching their heads and wondering if it isn’t time to get out of the banking sector all together.

Yet another SC bank posts bleak figures for 2008

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More bad news for yet another South Carolina bank company: Provident Community Bancshares announced Wednesday that it lost $1.4 million during fourth quarter 2008, and added that it has received preliminary approval to receive more than $9 million in bailout funds from the federal government.

By comparison, Provident earned $213,000 during fourth quarter 2007. For all of 2008, Provident lost $397,000, compared with a profit of $2.2 million for the same period in 2007.

Provident’s stock is trading just above its 52-week low of $6.17 a share. The company’s stock has traded as high as $18.50 over the past year.

Provident is just the latest in a long line of SC bank companies to belly up at the government trough to receive federal dollars, part of the US Treasury Department’s bailout program. Other institutions taking part include The South Financial Group, First Financial Holdings and SCBT Financial Corp.

Provident, the Rock Hill-based parent of Provident Community Bank, saw its non-performing assets jump sharply during 2008, from $3.2 million to $16.7 million, with bank officials attributing the increase to the downturn in the residential housing market.

Provident cuts its quarterly dividend sharply, from 11 1/2 cents a share to 3 cents a share, it announced.

Jim Crow: Your government at work

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Jeff Jacoby, who at times seems The Boston Globe’s only sane voice outside the paper’s sports pages, has an important column that looks at the Jim Crow legislation that blighted the South for more than half of the 20th Century.

Jacoby points out that it wasn’t white businessmen who specifically made segregation the law of the land in the Deep South, but government.

“… it wasn’t an overwhelming grassroots demand for segregation that institutionalized Jim Crow. It was government, often riding roughshod over the objection of private-sector entrepreneurs,” he writes.

“Far from craving the authority to relegate blacks to the back of buses and streetcars, for example, the owners of municipal transportation systems actively resisted segregation. They did so not out of some lofty commitment to racial equality or integration, but for economic reasons: Segregation hurt their bottom line. It drove up their expenses by requiring them – as the manager of Houston’s streetcar company complained to city councilors in 1904 – “to haul around a good deal of empty space that is assigned to the colored people and not available to both races.” In many cities, segregation also provoked blacks to boycott streetcars, cutting sharply into the companies’ profit.”

Jacoby notes a study published in the Journal of Economic History, in which economist Jennifer Roback shows that in one Southern city after another, private transit companies tried to scuttle segregation laws or simply ignored them. Consider:

  • In Jacksonville, Fla., a 1901 ordinance requiring black passengers to be segregated went unenforced until 1905, when the state Legislature mandated segregation statewide. The new statute “was passed by the Legislature much against the will of the streetcar companies,”  according to Jacoby.
  • In Alabama, the Mobile Light and Railroad Company reacted to a Jim Crow ordinance by flatly refusing to enforce it. “Whites would not obey the law and were continually . . . refusing to sit where they were told,” the company’s manager told a reporter in 1902, writes Jacoby.
  • In Memphis, the transit company defiantly pleaded guilty to violating a Tennessee segregation statute, explaining that it believed the law went against the wishes of the majority of its patrons, according to Jacoby.
  • In Savannah, the local black paper wrote that streetcar officials “are not anxious to carry into effect the unjust laws. . . requiring separate cars for the races,” since it would put them “to extra trouble and expense,” Jacoby adds.

Eventually, politicians got their way and blacks were officially relegated to second-class status across the South, and in some other parts of the country, for the next 60-plus years.

The fact that the political class led the charge toward Jim Crow doesn’t diminish the culpability of all who went along with it, of course, but it does serve to point out the dangers of what can happen when the political class overrides the wishes of the private sector.

South Financial: inching toward oblivion?

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The term penny stock is often applied to small public companies that trade for less than $5 a share, but given the current economic downturn, it may be necessary to revise that description.

The South Financial Group, however, appears intent on literally becoming a penny stock. While it’s the largest financial services company based in South Carolina, its stock hit another new low on Tuesday, dipping as low as $1.29 a share before ending the day at $1.31. That represented a drop of 11 cents, or 7.75 percent, from Monday.

That’s got to be particularly troubling to shareholders considering that within the past year, South Financial has traded as high as almost $17 a share and as recently as November 2005, it sold for more than $30.

The past year has been a nightmare for the Greenville-based company, begun in 1986. Last month, South Financial announced it lost $319 million during fourth quarter 2008 and $569 million during the year as a whole.

South Financial, the parent of Carolina First Bank, has been particularly hurt by the slumping Florida real estate market. It received a $347 million bailout by the US Treasury Department last year.

Founder Mack Whittle left the company last year, after receiving a hefty golden parachute that attracted the attention of regulators and SC Gov. Mark Sanford.