"Flashback: Another Example of How Washington Helped Decapitalize the Banking Industry
Thanks Alberto for the tip. "
Here's Wilbur Ross:
"NEW YORK (CNNMoney.com) -- Billionaire investor Wilbur Ross, known for his investments in distressed companies in the steel, automotive industries, said it is only a matter of time before his firm acquires a bank.
"We will end up with a bank, there is no doubt about that," Ross, the chairman and CEO of WL Ross & Co., said in an interview Tuesday.
Ross, a major player in the private equity industry, said that his plans to purchase a depository institution were delayed last year after the government moved to inject capital into the nation's banking system as part of a broader effort to halt the financial crisis.( WHY? )
He estimated that the rescue package delayed his investment anywhere between six to twelve months( WHY? ), and suggested that his firm might look to buy a commercial bank or thrift institution.
Ross made a string of investments across the financial services sector last year, including the purchase of H&R Block's (HRB) subprime mortgage servicing unit last spring for $1.3 billion and the acquisition of bankrupt American Home Mortgage Investment Corp.
But some of those bets have backfired. Last February he plowed $250 million into the bond insurer Assured Guaranty (AGO) at around $21 a share. The company's market value has been nearly cut in half since then.
Still, acquiring sources of deposits has become a top priority for banks and other financial institutions in the past few months since credit has gotten harder to come by as a result of the ongoing crisis. Private equity investors like Ross have also expressed a desire to buy banks as well.
"What is important is to get access to a stable, low-cost source of funding," Ross said. "That is what we are interested in."
Faced with a quickly rising tide of bank failures, banking regulators have relaxed restrictions about who can buy a depository institution in the hopes of coaxing outside investors to take part in the bidding.( THAT'S TRUE. I'VE POSTED ON THIS.)
Last Friday, a group of private investment firms, including buyout shop J.C. Flowers & Co and hedge fund Paulson & Co.( APPARENTLY PAULSON CAN DO WHAT ROSS CAN'T ), struck a deal with the Federal Deposit Insurance Corp. to buy failed mortgage lender IndyMac for $13.9 billion.
As part of the deal, the buyers will take responsibility for the first 20% of losses, and the FDIC will cover the majority of additional losses.
Last week's IndyMac announcement is particularly noteworthy since there have only been a few investments made in banks by private equity firms and other distressed investors in recent months -- and many of those deals have quickly soured.
Most notably, private equity firm TPG made a disastrous investment in Washington Mutual, the savings and loan that collapsed in September. It was the largest bank failure in history. WaMu was subsequently sold( WHERE WAS ROSS? ) to JPMorgan Chase (JPM, Fortune 500).
But Ross said it would make more sense if private equity firms are allowed to take full ownership of a bank instead of just a small stake.
"Private equity is not passive. We are not minority investors. We are control investors. That is the whole theory of private equity - adding value through better management," he said. 
In an exclusive interview with CNBC.com, Wilbur Ross, chairman and CEO of WL Ross & Co., says he sees possibly as many as a thousand bank closures in the coming months. And this will create opportunities for investors.
"I do think a lot of the regional ones will (close), just as they did in the last savings and loan crisis in the 1990s," Ross said. (Watch the full CNBC.com exclusive interview with Wilbur Ross on the left)
Ross says he will be looking to pick up smaller distressed institutions. "There will be opportunities, but we will need federal assistance in them( WILL YOU WILBUR? ), because what we're mainly looking for is stable sources of deposits( FDIC ), not so much the loan portfolio."
Ross feels that there will be too many people willing to provide capital to the large financials, which makes them less of a bargain than smaller banks.
When asked about his views on Bank of America's purchase of Merrill Lynch , Ross said that he didn't think that Merrill was in that dire a position.
"I think people in general felt better about Merrill's situation than about Lehman. I think ever since John Thain came in, he's done a wonderful job trying to fix what was a very difficult situation," Ross said.
He also noted that this was really now the second successful turnaround for Thain. "He (Thain)saved Merrill, went into BoFA ... Temasek, for example, went into something like a $5 a share profit out of this. So it's not a tragic ending."
"It will be very interesting to see where Thain ends up in the Bank of America hierarchy," Ross added.
"By Will McSheehyApril 16 (Bloomberg) -- Billionaire financier Wilbur Ross Jr., who made his fortune turning around distressed steel and textile companies, plans to seek about $4 billion from investors including Arab sovereign funds to buy U.S. depositary banks.
Ross, 70, will talk with Gulf investors in Abu Dhabi next week about 100 to 200 so-called thrift banks, he said in a phone interview from New York today. He said some of the lenders are good investments, even after a mortgage-market slump led to $245 billion of asset writedowns and credit losses at the world's biggest banks.
Regional depositary banks have ``more narrowly defined'' problems and ``a more stable base of deposits'' than cross-border lenders such as Citigroup Inc. and UBS AG, Ross said. He plans to package U.S. thrift bank acquisitions ``as a finished product'' to sovereign wealth funds( THEY'RE DOING WELL NOW ), he said.
Flush with cash from record oil income, Gulf funds are among investors that committed at least $59 billion in the past year to shore up banks including Citigroup and Merrill Lynch & Co. Abu Dhabi's sovereign fund, the world's richest with estimated assets of $875 billion, agreed to invest $7.5 billion in Citigroup in November. Qatar's fund will spend as much as $15 billion on bank stakes, the Gulf state's prime minister said in February.
Thrifts Are `Vulnerable'
Thrifts are ``particularly vulnerable because their portfolios tend to be so real estate-oriented,'' and so can be bought ``at a very attractive price,'' Ross said today. Acquired banks could be combined with a mortgage business to provide stable funding for home loans that are ``essential'' to the U.S. economy even if ``singularly unprofitable'' right now.
Depositary banks are regulated by the Federal Deposit Insurance Corp. and can accept consumer deposits. The FDIC insures deposits at 8,534 banks and savings associations in the U.S., more than 90 percent of which are community-based banks. Thrifts can be savings and loans, credit unions or savings banks.
Each thrift acquisition would probably be valued at around $500 million, Ross said. His buyout company, WL Ross & Co., may invest about $2 billion of its own money in the acquisitions. The firm has ``relations and existing investments'' with some Gulf sovereign wealth funds, he said, without providing names.
Washington Mutual Inc., the biggest U.S. savings and loan institution, on April 8 said it got $7 billion from a group of investors led by David Bonderman's TPG Inc. after losses on subprime loans erased 74 percent of its market value.
`Less Than Satisfactory'
Citigroup stock has slumped 24 percent since it announced Abu Dhabi's investment on Nov. 26. Merrill Lynch is down 16 percent since Kuwait's fund said it bought $2 billion of convertible securities Jan. 15.
``Some of the initial forays have been less than satisfactory, at least on a temporary trading basis, so there is obviously a degree of caution,'' by Gulf funds, Ross said.
Investors like Ross can profit from a decline in value of financial-services companies amid the U.S. subprime crisis, said Steven Kaplan, a professor of finance at the University of Chicago's business school.
``Financial companies have declined in value a lot,'' Kaplan said in a phone interview today. ``I'm sure many of them deserve to have declined. But some of them probably haven't, and those are the ones he's going after.''
Ross is already betting on the mortgage-servicing industry, which processes loan payments and forecloses on bad mortgages. Servicing companies can gain value during housing slumps because borrowers are less likely to move or refinance, making the stream of fees paid by a mortgage owner last longer.
Acquisitions
Ross is seeking to acquire H&R Block Inc.'s mortgage- servicing unit for $1.1 billion. His AH Mortgage Acquisition Co. this week closed its purchase of an American Home Mortgage Investment Corp. subsidiary. That transaction was valued at about $500 million last year.
Ross's firm joined with Richard Branson's London-based Virgin Group Ltd. earlier this year to bid for U.K. lender Northern Rock Plc. The bank was taken over by the U.K. government instead. The collapse of the U.S. subprime mortgage market lifted the cost of credit around the globe and led to a run on Northern Rock last year.
Ross said today that the Northern Rock bid provided ``knowledge we'd like to put back to work'' if the right opportunity arises in the U.K. mortgage market.
Ross is scheduled to speak at a conference in Abu Dhabi April 21 organized by the Asian Venture Capital Journal."
So, since April of last year, Wilbur Ross has been looking into buying a bank. Since then, a number of banks have been sold. Others have failed. What he's looking for is a total collapse of the market. He sees 1000 banks failing. Whenever an investor telegraphs his intentions like this, please take it with a grain of salt. He might buy a bank next week, or never.
Finally, I have posted a fairly large number of quotes now, from billionaires to some of the best investors in the world, who have said that investors are waiting on and want government intervention, even though some of these sources don't. Yet, that doesn't qualify as evidence, but one blowhard investor trumpeting on in public for eight months about his buying a bank constitutes proof. Really?
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