Former North Fork CEO John Kanas predicts 1,000 bank failures over the next two years.
Speaking on CNBC’s Squawk Box, Kanas said:
Many of these [failed] institutions nobody has ever heard of. They’re smaller companies spread around the country. Some of them are private. It augurs poorly for smaller business mangers…small banks tend to lend money to mum and pop operations — it exacerbates the problem for small business borrowers.
He adds: “Government money has propped up the very large institutions as a result of the stimulus package…there’s really very little lifeline available for the small institutions that are suffering.”
Kanas is one of the few private equity investors to take over a failed bank from the FDIC. He’s now Chairman and CEO of BankUnited, which he acquired in partnership with Blackstone, Carlyle, Centerbridge and WL Ross. The failure cost the FDIC $4.9 billion in May.
The FDIC announced new rules this week to encourage similar private investments in trouble banks. But the three-year, 10 per cent capital requirement may scare investors away.
Here’s the CNBC clip:
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