Bloomberg: Marijuana-reeking Tour Bus, Red Ferrari are FDIC Crisis Booty
Marijuana-Reeking Tour Bus, Red Ferrari Are Fdic’s Crisis Booty
Dec. 22, 2009 (Bloomberg) — The financial crisis that popped the real estate bubble and pushed U.S. bank failures to a 17-year high landed the Federal Deposit Insurance Corp. a rapper’s tour bus that reeked of marijuana.
“It smelled so bad of pot after one tour that they had to completely pull out most of the interior and replace it,” said Jerry Jenkins, who sold the bus at Penny Worley Auctioneers after the FDIC acquired it in the collapse of an Atlanta bank. “By the time we got it, it was almost brand-new.”
Worley Auctioneers, based in Maineville, Ohio, has the FDIC to thank for the bus, not to mention a red 2001 Ferrari, an eight-foot palm tree and stacks of unwanted office furniture — the detritus of 140 banks closed by the agency this year. Worley Auctioneers, Rick Levin & Associates and Tranzon Asset Strategies, the three firms hired by the FDIC to sell furnishings from shuttered branches and warehouses stuffed with repossessed collateral, are having a banner year.
The FDIC has reaped $6.2 million from the sale of so-called other assets in 2009, six times the total last year, according to the agency. While that’s a sliver of the $38.3 billion of failed bank assets that the FDIC held as of Sept. 30, any cash is useful after the surge in crippled lenders sent the FDIC’s deposit insurance fund into the red.
“Business has been good,” said Penny Worley, who opened her firm in 1993. “This can be a daunting task, because there are so much and so many different things. There’s an occasional Dali. There are rare gold coins.”
ATM Machine, Microwaves
Worley’s Web site offers a snapshot:
- Laptops, desk chairs and an ashtray, complete with stubbed-out cigarettes, from First Priority Bank of Bradenton, Florida, which failed in August 2008, and Freedom Bank, also in Bradenton, shut three months later.
- A Diebold ATM machine — empty, presumably — courtesy of Cooperative Bank of Wilmington, North Carolina, shuttered in June 2009.
- Ten refrigerators, plus assorted toasters and microwave ovens, from Vineyard Bank, the Rancho Cucamonga, California- based lender that lost more than $100 million last year as builders defaulted on construction loans. It was shut in July.
Then there was the tour bus, acquired by Omni National Bank in repossession from a leasing company before the Atlanta-based lender went bust in March, Jenkins said. The vehicle, which sported 12 coffin-like bunks, each with flat-panel televisions, sold for $310,000 to a company in Nashville, Tennessee, that leases buses to touring musicians.
Financial assets such as real-estate loans are sold separately through auctions that can involve complex financing and profit-sharing arrangements. “Other assets” sales are as straightforward as old-fashioned live auctions.
When the electronic hammer comes down, a process conducted online, the deal is done and the auctioneers try to get the merchandise, and the customers, out the door as swiftly as possible. “PLEASE DO NOT BID if you are unable to remove your items during the scheduled removal times,” the auction company warns bidders.
“People get what we call auction frenzy,” Jenkins said. “We don’t want to give them a week to think about it afterwards, so items usually have to be picked up within one day.”
Most come prepared. That was the case with the Ferrari, a 360 Spider F1 with 27,363 miles that sold earlier this year. The buyer paid $61,000 for a car that New Frontier Bank of Greeley, Colorado, had repossessed from an auto dealer that had defaulted on a loan. The buyer arrived on a red-eye flight, paid cash, and drove away, Jenkins said.
New Frontier, which cost the insurance fund $670 million, also left the FDIC with a 1,000-horsepower drag-racing Chevrolet pickup truck, and almost 1,000 milking cows. Sales from assets of other failed banks have included armored trucks, industrial equipment and Thomas H. Benton lithographs. The palm tree fetched $105.
The savings-and-loan and banking crisis of the 1980s produced even more unusual auctions, said Tom Moran, the FDIC’s resolutions and closing manager, based in Dallas. Back then, the FDIC ended up with items that ranged from yachts, antiques and luxury homes to paintings and sculptures, he said.
“I personally went in and found safety deposit boxes with things like collector-type guns,” Moran said.
Some of the one-of-a-kind items can provide special challenges. The FDIC is trying to unload a framed 10-by-70-foot watercolor mural by California artist Millard Sheets, Moran said, a sort of graphic history of California. It was seized when PFF Bank and Trust, a $3.7 billion bank in Pomona, California, failed in November 2008, leaving the insurance fund with $700 million in losses.
“It’s framed right to the wall, and we’re not sure how to get it off and protect it,” Moran said. “This is going to take a unique-type buyer.”
To contact the reporter on this story: James Sterngold in New York at firstname.lastname@example.org