Las Vegas man shut down 13 Nevada banks during recession

Updated September 20, 2018 - 7:15 am

On a late Friday afternoon, George Burns walked into Carson River Community Bank to shut down his seventh bank in Nevada in 20 months.

As commissioner of the state’s Financial Institutions Division, it was Burns’ job to deliver the news to bank owners and employees that their institution could not be saved.

The collapse of Lehman Brothers a decade ago this month triggered the worst financial crisis since the Great Depression. And it toppled Nevada banks like dominos.

Burns would have to close 13 state-chartered banks between 2008 and 2013 as mounting real estate defaults and a run on deposits left them with too little cash to meet their obligations.

Those failures wiped away more than half of Nevada’s chartered banks. No other state lost as many by percentage.

But closing Carson River on Feb. 26, 2010, was one of the more unpleasant experiences for Burns during the crisis.

As he entered the bank, he recognized the teller at the customer line. It was the very woman who taught him how to balance a teller draw when he began his banking career in Nevada in 1979.

“The toughest thing for me was that every bank I was dealing with during the financial crisis had people in it that I either worked for or with during my career. Having to go in and place them under enforcement actions and having to eventually show up on a Friday afternoon to close their doors was very, very difficult,’’ he said.

Though the failed lenders were taken over by competitors and depositors were made whole, hundreds of people lost their jobs. Owners completely lost their equity.

Deposits lent out out

When Burns became commissioner in 2007, Nevada banks lent out, on average, 95 cents for every dollar of deposits they received. Some were lending more than they had in deposits.

Much of it went to the state’s red-hot real estate sector, including loans for land purchases and development, which carry higher risk.

Banks that lend out between 80 and 85 cents for every dollar of deposits they receive are typically considered sound if the loans are diversified among various segments of the economy.

Lending out a higher portion of deposits can increase profitability, but it also raises the risks of bankruptcy, especially when an economic downturn triggers a run on deposits.

“The overall theme of Nevada bank failures was not due necessarily to a lack of capital, but rather a lack of liquidity. They could not meet the demand for withdrawals from depositors. If they cannot pay out their depositors, they are no longer viable,” Burns said.

Burns had seen this circus before with the savings and loan crisis of the 1980s and early 1990s that devastated the financial industry in Texas and other Southwest states.

“The S&L crisis was basically the same as the banking crisis of ’08 of getting way overextended in land loans and development loans,” he said.

However, many bankers operating in Nevada in 2008 had never experienced a major downturn, he said, and that blinded them to potential risks of lending out 100 percent of deposits and concentrating them into real estate.

“If all of their experience had been in banking and lending in an upswing economy, which for decades was the case here in Nevada, particularly in southern Nevada, then the understanding that there could be a downturn was not prominent in their minds,” he said.

Late nights

Burns said he was sometimes working 14 to 18 hours a day and on weekends during the darkest days of the crisis.

The Financial Institutions Division increased examinations of banks from once every 18 months to once a quarter or once a month as needed. Some troubled lenders were being monitored on a daily basis.

He requested and received permission from the Nevada Legislature to hire 10 more examiners to cope with the increased burden.

Nevada State Bank Chairman Dallas Haun recalled speaking with Burns on a regular basis during those days. His bank took over two of the failed banks and managed the shutdown of a third.

“George and I worked pretty closely together for two to three years. Let’s face it, he had a tough situation. I thought he stepped up,” Haun said.

After the dust settled in 2013, depositors in the failed Nevada banks had lost only $9.3 million out of $5.05 billion, or 0.2 percent. The majority of that was lost by corporations, not individuals, Burns said.

The Federal Deposit Insurance Corp. backstopped $1.7 billion, or more than one-third of the combined deposits in those failed banks.

Fresh memories

Burns said Nevada bank executives and directors are some of the most experienced today because they weathered the financial storm.

They have learned firsthand the dangers of having loans exceeding deposits, high concentrations of loans to one sector and low or no down payments. They know that assets, such as home prices, don’t always go up, he said.

Burns is concerned, though, that the next generation of Nevada bank leaders will forget these lessons in the inevitable quest for profits.

“We never want to be in that position again where one of our bankers is having to be George Bailey in ‘It’s a Wonderful Life’ having to say, ‘Well, I don’t have your money here today, because it’s in Joe’s house and Mary’s house.”

Contact Todd Prince at 702-383-0386 or tprince@reviewjournal.com. Follow @toddprincetv on Twitter.

ad-high_impact_4
Business
Primm’s outlet mall has fallen on hard times
The mall, attached to Primm Valley Resort, opened in 1998. Back then, it was a “textbook, perfect outlet-center location." But now, Primm’s outlet mall has fallen on hard times. Las Vegas Boulevard has endless shopping spots. And there are other outlet malls that don’t require a hefty drive to the state line. Its mortgage-holder foreclosed on the mall in late September.
Las Vegas residents discuss avoiding holiday scams
Las Vegas residents discuss their donation habits and how they avoid giving money to scam charities during the holiday season. (Bailey Schulz/Las Vegas Review-Journal)
Tesla’s Nevada Gigafactory ahead of economic impact expectations
The Tesla Gigafactory’s economic impact on Nevada has exceeded projections, bringing in more than 7,000 jobs. In 2014, Nevada agreed to give the automotive and energy company $1.3 billion in tax abatements. In return, Tesla promised to meet certain requirements in areas like employment and capital investment. As of June, Tesla has brought in a total of $6.05 billion in capital investment, surpassing the $4.95 billion projection. The original contract gave the company until 2024 to make $3.5 billion in capital investments in Nevada. Derek Armstrong, deputy director of the Governor’s Office of Economic Development.
Land sales near the Las Vegas Raiders stadium
Land around the Las Vegas stadium site has been selling for high prices. A few months before the stadium’s groundbreaking, Global Trust Group acquired a 2.5-acre parcel just north of the stadium site. The property sold for $7.25 million, or $2.9 million an acre. Osprey Real Estate Capital and Huntington Hotel Group acquired a 2-acre industrial site just west of the stadium site in late November. The property sold for $6.5 million, or $3.15 million per acre. That's roughly 12 times the average price of land in the valley this year as tracked by Colliers International.
T-Mobile Tech Experience Truck parks in Toshiba Plaza at T-Mobile Arena
The Tech Experience Truck is a state-of-the-art showroom on wheels, with demonstrations that put connected drones, smart cities, augmented/virtual reality and smart tracking. The exhibit shows new wireless technology – including 5G and the Internet of Things (IoT). (K.M. Cannon/Las Vegas Review-Journal)
Steve Siegel, CEO of the Siegel Group, speaks about helping families and other needy residents
Steve Siegel, CEO of the Siegel Group, speaks about helping families and other needy residents to keep them from teetering off into homelessness. Bizuayehu Tesfaye/Las Vrgas Review-Journal @bizutesfaye
Crowds camp out for Chick-fil-A opening
Dozens of customers camped out 24 hours ahead of the 6 a.m. Thursday opening of the new Chick-fil-A on Rainbow Blvd.
Cheapest listings for sale in Las Vegas
Listed for $39,990, 585 S. Royal Crest Circle, Unit #9 is one of the cheapest homes currently listed for sale in Las Vegas. (Caroline Brehman/Las Vegas Review-Journal)
MGM's sports betting deals
MGM Resorts International signed a sports betting sponsorship agreement with the NBA in July It was the first professional sports league to have official ties with a legal sports betting house. The deal came just two months after the U.S. Supreme Court overturned a law prohibiting sports betting in most states. In October, MGM became the first gaming company to sign a sports betting partnership with the NHL. In November, MGM became the first gaming company to sign a sports betting partnership with the MLB. Financial terms of Tuesday’s deal and earlier partnerships have not been announced.
Terry Miller discusses Convention Center
Project Manager Terry Miller explains the phases of Convention Center construction.
Zappos treats their team members on Cyber Monday
Zappos rolls out a variety of food, drinks and special activities for all team members at their downtown Las Vegas headquarters for Cyber Monday. (K.M. Cannon/Las Vegas Review-Journal)
Team Hybrid at the 2019-Model Motor Trend International Auto Show
Among the companies showing off the 2019 model cars, Team Hybrid shows off its modified cars. Las Vegas resident David David talks about the team, which is in its ninth year exhibiting at the show, and his show car.
Black Friday Shoppers at downtown Summerlin and at the Arsenal
Black Friday shoppers at downtown Summerlin and at the Arsenal. Bizuayehu Tesfaye/Las Vegas Review-Journal @bizutesfYe
Black Friday shopping in Las Vegas
Black Friday sale shopers express their shopping experience. Bizuayehu Tesfaye/Las Vegas Review-Journal @bizutesfaye
Las Vegas Livestock recycling Strip food waste
Las Vegas Livestock collects and recycles food from many Las Vegas Strip companies. (Nicole Raz/Las Vegas Review-Journal)
Black Friday at Fry's
Shoppers line up for deals early on Black Friday at Fry's Electronics on Las Vegas Boulevard South. (Mat Luschek/Las Vegas Review-Journal)
Black Friday shoppers at Best Buy at 5 am
Black Friday shoppers at Best Buy at 5 am on Nov. 23. (Mat Luschek/Las Vegas Review-Journal
Black Friday - 1am Closing Time
Quiet night.
Black Friday - 12:30am - Best Buy Arroyo Crossing
Sam's Town Holiday Lighting Ceremony
On Wednesday, Nov. 21, 2018, Mystic Falls Park opened with its annual tree lighting ceremony, hosted by Boyd Gaming Executive Chairman Bill Boyd. The attraction features a Winter Wonderland theme and holiday-inspired laser light show, available daily Nov. 23 to Jan. 1. (Mat Luschek/Las Vegas Review-Journal)
What Is A Smart City?
George Karayannis, vice president of CityNow, Panasonic’s smart-city arm, explains. (Nicole Raz/Las Vegas Review-Journal)
Walmart uses virtual reality to train employees
Walmart Academy Facilitator demonstrates the VR training program being used by Walmart stores across the country.
With holidays around the corner, department stores hiring extra staff
J.C. Penny hired 72 seasonal workers this year at the Galleria at Sunset mall in Henderson in order to handle the heavy traffic of the holiday shopping season. (Rachel Aston/Las Vegas Review-Journal)
Startup Weekend fosters new businesses
With the help of entrepreneurial peers and an expert panel of mentors, Techstars Startup Weekend fosters the ideas of attendees into marketable business plans. (Rachel Aston/Las Vegas Review-Journal)
Mecum Car Auction in Las Vegas
The Mecum Auctions is held at the Las Vegas Convention Center. Bizuayehu Tesfaye/ Las Vegas Review-Journal @bizutesfaye
Construction underway for new Google Data Center
Henderson is slated to be home to a new Google data center in December 2020. The Governor’s Office of Economic Development approved $25.2 million in tax abatements for Design LLC, a wholly-owned subsidiary of Google. The company plans to build the data center on 64 acres of land on Warm Springs Road west of Boulder Highway.
Anthony Rufo talks about his new product, an in-home digital companion and monitor.
Anthony Rufo talks about his new product, HAPPIE Home technology, an in-home digital companion and monitor designed for unpaid family caregivers that gives personalized alerts, messages and reminders. Bizuayehu Tesfaye/Las Vegas Review-Journal @bizutesfaye
Holiday parades help bring shoppers to Downtown Summerlin
Sports Town USA floor manager Angela Gardonio talks about the work that goes into the Downtown Summerlin holiday parades and how they benefit her and other businesses there.
Final vote on CG Technology
Final commission vote on the $2 million settlement for CG Technology.
Happie Home Startup Establishing Headquarters In Las Vegas
Digital companion startup company Happie Home is establishing its headquarters in Las Vegas after receiving tax abatements from the Governor's Office of Economic Development on Nov. 15. (Bailey Schulz/Las Vegas Review-Journal)
TOP NEWS
News Headlines
ad-infeed_1
ads_infeed_2
Local Spotlight
Add Event
Home Front Page Footer Listing
Circular
You May Like

You May Like