CS4 - Southeast Bank of Texas in the Financial Crisis Finance Essay

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CS4-Southeast Bank of Texas in Financial Crisis
The Southeastern Bank of Texas was founded in 1950 by John F. Greff as a regional bank in Texas, USA. In 1980, it was among the local banks that performed well in the southeastern United States, surviving the real estate crisis of that time. After John's retirement in 1983, his son Irwin took over as the majority shareholder. Irwin led the bank to increase its assets from $60 million in 1983 up to $400 million by the end of 2009 (Pozen & Schneider 1). Furthermore, Greff's family was the largest shareholder, with a 30% stake. However, there were other shareholders from Houston and Dallas. The banks CEO Allan Russel had predicted an imminent crisis due to the Bear Sterns collapse, which caused the U.S Stork market to lose 40% of its stock value (Pozen & Schneider 2). In March 2009, the bank was faced with a challenge due to several choices they had to make in the wake of new reforms that were to be implemented from the financial crisis. The bank's FDIC and the Temporal Liquidity Guarantee Program and the Capital Purchase Program were to be performed due to the 208 financial crisis (Pozen & Schneider 2). Therefore, the bank's CEO Allan Russel and the Chief Marketing Officer Manuel Mayerson came up with recommendations to help the bank cope with the crisis.  
The Temporal Liquidity Guarantee Program (TLGP) was established by the Federal Deposit Insurance Corporation (FDIC) during the 2008 financial crisis. The TGLP aimed at decreasing the cost of bank funding so that banks' lending to businesses and customers would normalize. Therefore, several financial institutions, such as banks and holding companies, were eligible for guarantees on new issues of senior unsecured debt up to June 30, 2012, from FDIC. (Pozen & Schneider 3) The FDIC provided three different initiatives: a guarantee of new issuance for the expiring of short-term debt, interest-bearing accounts, and noninterest-bearing accounts. Furthermore, the Capital Purchase Program (CPP) allowed direct investment into eligible financial institutions. These included public and private companies in the U.S, holding companies, savings associations, and government regulated banks. Additionally, CPP outlined restrictions for all banks under the programs (Pozen & Schneider 3). These restrictions included the payment of dividends on other shareholders, pursuing a...