So yesterday we learned that Scott Walker’s biggest funding source is a group of executives from Marshall & Illsley Bank. Two union firefighters withdrew nearly $200,000 of their own savings and Wisconsin voters joined in, removing nearly $600,000 before the branch near the Capitol was closed to avoid a run. Hovering in the background are union pensions with nearly a billion in assets at this bank. Nationally unions have a trillion in investments.
Rather than contrition after being found to be an accomplice in Scott Walker’s robbery of the Wisconsin voters last night the bank has added insult to injury with their response.
So, without further introduction, let’s investigate just what steps need to be taken in order to crash this financial institution.
Banks in America purchase insurance from the Federal Deposit Insurance Corporation. During good times there are a steady trickle of banks that make fatal mistakes. The FDIC swoops in on a Friday, they take control in a well organized process, and the banks reopen the next Monday with someone else operating them. Nobody under the $250,000 limit loses any money, a few branches close as the acquiring operation integrates, and most of the employees continue doing their same job. The shareholders are wiped out and the executives are removed.
This situation is even sweeter for us, because this bank is in the process of being sold. Minnesota’s Public Radio has all of the details, but it’s something only a bank regulation wonk could love, so I’ll try to paraphrase.
The Canadian bank(Bank of Montreal) agreed to buy preferred shares that the U.S. government acquired as part of its bailout of the Wisconsin lender. The transaction is expected to close before July 31.
This is not a done deal. We can get in the middle and wreck it.
Marshall & Ilsley has posted eight straight quarterly losses while Bank of Montreal has reported six consecutive quarters of profit growth, a recent streak unmatched by Canada's five other large lenders.
Bank of Montreal is paying 1.26 times revenue, less than half the 3.17 times revenue for the average purchase of similar- sized U.S. banks, according to Bloomberg data.
Bank of Montreal is a well run operation. Marshall & Illsey is not. This is a distress sale.
Oh, and what’s this? Union busting dirtbag CEO Mark Furlong will REMAIN in charge of the U.S. sided of the operation? You don’t say ...
"We will be a formidable competitor together," Furlong said in an interview. "It gives us a wonderful market share in the Midwest and an opportunity to continue to build that market share through acquisitions and through internal growth."
Bank of Montreal's purchase makes sense in the long term, even though M&I won't show a profit for 18 months to 24 months, Bove said.
Someone needs to hunt up analyst Richard Bove, an uninvolved third party who was called for comment on this merger, and see what he thinks of their chances now.
I know just a little bit about banks but I have been through a couple of bankruptcies of publicly held companies. And the judge will look at all expenses for six months prior to filing. Expenses like … undeserved and unearned bonuses for sleazy executives.
Unless the rules on banks are similar to the rules on public corporation bankruptcy. If we do this right this guy walks away with nothing. Except a gigantic mountain of shareholder lawsuits.
There are two things not to love in this strategy. The first are the 6,000 employees of M&I in Wisconsin, 5,900+ of whom are just like you and me - people with kids and mortgages and stuff who will make over the course of their entire life just a tenth of what Furlong makes for getting fired. I don’t see a way to get at the executives without this collateral damage.
The second is the harm done to small business. When a bank is under stress there are margin calls, operating loans don’t get renewed, and so forth. I would hate to take a hammer to this bank and end up whacking a mom & pop hardware store in the process. Again, I don’t see a way to get at the executives without taking a risk like this.
Mr. Furlong, I’d just like to say ...