SILVER STATE BANK:

Bank failure hits resident hard

Life savings tied up in closure of Silver State Bank

Thu, Oct 16, 2008 (12:02 a.m.)

Federal Deposit Insurance Company

The collapse of Henderson-based Silver State Bank in September affected hundreds of depositors and creditors, but perhaps none more devastatingly than J. Shannon Swann.

Swann, a Boulder City resident, lost hundreds of thousands of dollars, the majority of her life savings, when the bank collapsed, based on what she said was bad advice from representatives of Silver State.

Swann said she moved all of her deposits, which were spread across several banks, into several separate accounts at Silver State with the promise of a 5 percent interest rate on her deposits. The Federal Deposit Insurance Corp. insured each depositor for up to $100,000, and she said, she kept each account under $100,000 because she was told the $100,000 limit was per account, not per person.

But when the FDIC closed Silver State and Nevada State Bank purchased its deposits and assumed control of its accounts, Swann was declared an uninsured depositor for everything beyond the $100,000 limit.

"'Uninsured depositor' rubs me the wrong way," Swann said. "I didn't default on my house loan — I just got some bad information."

FDIC spokesman David Barr said he regularly sees cases like Swann's.

"It's unfair that it does happen, but it does seem to be something we see almost every time a bank fails," he said.

Though the corporation has education programs for bank employees, with the sheer number of employees and the turnover rates, Barr said, it's not possible to reach everyone.

The FDIC requires each insured institution to post signs telling depositors about the $100,000 limit at every entrance and at every station where deposits are taken, Barr said, but in the end, the burden falls on the customer to be careful. The FDIC has depositor information available online at www.fdic.gov or by phone at (877) ASK-FDIC, he said.

"Hopefully this is something that will cause other depositors to realize that, as with any other investment advice, you need to verify it," Barr said.

Though Congress voted earlier this month to temporarily extend the insurance limit to $250,000 per depositor until the end of 2009, the move will not help Swann, because it is not retroactive. Swann said she has written to congressional representatives, senators and even President George W. Bush to look for help.

"I'm writing to everybody I can think of because it's just not right that we suffer because we have incompetent people working in a bank," Swann said.

Though Barr said there is no recourse that guarantees Swann and other uninsured depositors will recover all their funds, the FDIC's rules allow for them to recover at least a portion. Swann has been declared a receiver of Silver State assets, and as such is guaranteed to recover 10 percent of her lost money through the FDIC.

The rest of Swann's money, Barr said, will trickle in over the next several years as Silver State's assets are sold off. As the money comes in, Barr said, it will be used to pay off all of Silver State's creditors, with the uninsured depositors being first in line. Only if and when they are all paid off will other creditors, such as businesses and shareholders, begin to receive any money, Barr said.

"From that standpoint, the uninsured depositors are sitting in a better position than the other creditors," he said.

Barr said he has seen the asset sales recover anywhere from 40 percent to 100 percent of the uninsured deposits, but it is too early to tell how much they will recover in this case.

Jeremy Twitchell can be reached at 990-8928 or jeremy.twitchell@hbcpub.com.

Discussion: 8 comments so far…

By annienonymouse

10/16/08 at 5:18 a.m.

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I'm blessed because I live paycheck to paycheck. Lucky me.
By azsk8fan

10/16/08 at 6:45 a.m.

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Maybe the gov. should take some of our bail-out money that was going to the banks and give this woman her money back - ya, like that's gonna ever happen right? Needless to say this is an issue I'll never have to worry about but all the same this woman did manage to save and it's a shame now that she loses it. When the banks lose the gov. gives it back - when the people lose - well that's just tough (I guess) at least the government seems to think so.
By homer

10/16/08 at 8:18 a.m.

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Silver State Bank's executives took nice golden parachutes on the way out, I wonder how much Andrew McCain (John McCains son) took with him wwhen he high tailed it to Phoenix to work for his stepmother at the beer distributorship?
By Hingreed

10/16/08 at 10:05 a.m.

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Once again I agree with Azsk8fan. Some of the bailout money should be used to help people like this lady. Crappy advice from bank salespeople trying to make comission steered her wrongly. I feel for her.

-Hingreed
By JoeF

10/17/08 at 7:57 a.m.

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$1 million to each citizen would have cost the government just $300 million. But then, what would wall street do?
By azsk8fan

10/17/08 at 11:08 a.m.

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Let Wall Street figure it out.
By vegasmisty

10/17/08 at 8:32 p.m.

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I agree with homer.

McCain wants us to believe he is different than others and will clean up Washington YET his son was at that bank for only 6 mos. got his parachute and fled like a criminal in the night when he saw the end for that bank coming. He left around Aug. and it was closed/failed within a month or so.

And do we hear anything on the MSM about this?

NO! Because how could someone running for Pres. have ads showing HIS son was one of those CEO's that helped a bank fail and start the domino effect of the bank/economy crisis while his daddy was suspending his campaign looking like he gave a damn.
By frankenbooger

10/21/08 at noon

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I know this column is a few days old, but JoeF - $1 million to each citizen would only cost the government $300 million? I think your math is a bit off. With a US population of over 300 million, it would cost more than $300 TRILLION to give everyone $1 million. $300 million would give every citizen just under one dollar.