subcontractors liability insurance

Articles | Graham & Dunn PC
Keep track of all the latest Graham & Dunn articles.

• The Scrambled Banking World: Where Do We Go From Here?
  

  By Stephen M. Klein
  September 15, 2008
  
  The Fall of the Giants
  During the last few weeks we have seen the demise of financial giants Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers, Merrill Lynch, AIG, WAMU and now Wachovia, in the first “open bank” assistance by the FDIC since 1992.  Wall Street has been brought to its knees.  Goldman Sachs and Morgan Stanley have become bank holding companies to access more stable funding sources.  As a result, the world financial markets are also in chaos, as evidenced most recently by the $16.4 billion investment by Belgium, the Netherlands and Luxembourg in Fortis, Belgium's largest financial services firm.

  What's Next?
  One would think that the passage of the Federal Financial “Bailout” Legislation is a foregone conclusion.  However, as we are finalizing this article, the House just shot down the proposal and the U.S. stock market is in a free fall, down 700 points!  Clearly it is not a panacea, but a beginning.  The mechanics of this plan will evolve as it unfolds.  Whether this will do the trick is unknown.  Hopefully, it will serve to stabilize the financial markets and provide some level of confidence to investors and bank customers and encourage banks to start lending again.  Undoubtedly, Secretary Paulson is attempting to apply the lessons learned from Japan's government nonintervention policy.  The key is to put a floor on the real estate market so an economic recovery can begin.

  Your Bank
  We have been meeting with management and boards of banks throughout the West.  The clear message is to focus on (1) ASSET QUALITY, (2) Liquidity and (3) Capital.  They are all intertwined.  Your ability to sell OREO or negotiate on other troubled loans, in part, will depend on your capital and liquidity positions.  Carefully monitoring and proactively addressing your loan problems is critical.  Many banks have expressed their intention to “de lever” their balance sheets.  Growth no longer is a priority.  Also, positioning for backup funding sources is a critical step in these uncertain times.  Finally, capital is precious and scarce.  So, many banks have determined to preserve capital by reducing or eliminating their cash dividends.  While raising capital is challenging, several banks have pursued various alternatives from offerings to existing shareholders, “friends and family,” and private placements.  Private equity may also be an alternative to consider, albeit an expensive and dilutive one.

  The Regulatory Challenge
  One can only imagine what the regulators are thinking.  The FDIC over the last week alone had to deal with the failures of the largest thrift and fourth-largest commercial bank in the country.  We are hearing that examinations are harsh, with double downgrades and resulting enforcement actions not uncommon.  Regulatory requests for capital plans abound.  Clearly, it is much better if your bank has addressed this before the regulators visit.  It has to be an overwhelming task for the regulators, given their reduced resources and the breadth of the problems.  It is sort of like trying to contain a California wildfire with the Santa Ana winds blowing.

  Your Board
  Understandably, Boards of Directors are getting rattled by what they see going on around them.  It is critical that management keeps them informed and explains where things are, the bank's alternatives and recommended course of action.  The use of your outside advisors to guide you through the process and help put things in perspective and stabilize matters is important.  However, ultimately, it is up to management to make the tough decisions and execute whatever strategy is adopted.

  The Future
  Hopefully, the “bailout” legislation will stop the hemorrhaging, but there still will be bleeding.  It appears that any economic recovery will be an 18 month to two year process.  The universe of banks will shrink.  The fourth quarter results of this year will be telling after the effect of auditors, examiners, lower appraisals on OREO and goodwill write downs are digested.  While things appear grim, your bank must set a course, follow it and be flexible enough to adjust quickly to these uncertain and precarious times.  A good plan and some luck will go a long way to helping you to survive this unprecedented financial crisis.

  For more information on this topic, please contact Stephen M. Klein (206.340.9648 or sklein@grahamdunn.com).
• Banking On The Precipice
  

  By Stephen M. Klein
  September 15, 2008

  Introduction
  For those of you who follow our Cyber-Grahams, since December we have issued a series of articles on the changing banking world.  Well, we clearly are approaching a turning point with the failure of Freddie Mac and Fannie Mae and its impact on many banks is being felt nationwide, including here in the West.

  What's Going On?
  Many banks are struggling with credit issues, increasing loan loss reserves, OREO, declining earnings and stock prices, Freddie and Fannie stock investments and the resultant need for more capital.  The bad news is that capital is brutally hard to get, and at what price?

  The Regulatory Quandary
  The regulators find themselves in an impossible position.  As a former regulator, I can relate to that uncomfortable feeling.  They are concerned about sharply declining real estate values and what that means for banks' loan portfolios.  They don't want to miss anything in their exams, and, for the most part, seem pretty stringent and immovable in their positions.  Hence, exam downgrades and administrative actions abound.

  M&A - The Last Man Standing
  With the potentially devastating capital impact of the Fannie and Freddie takeover on many banks' investment portfolios, they're now in need of capital or a merger partner.  The capital markets have virtually dried up, and what is available is unbelievably pricey and dilutive.  Deals are almost non-existent as the pool of eligible buyers diminishes daily.
  
  The Solution
  The regulators will soon be faced with a choice: do they protect the insurance fund at all costs or do they try to save the banking industry as we know it.  Unless global strategic thinking and reasonable tolerance and forbearance are exercised by the regulators, I think the banking industrycould be in jeopardy.  Clearly, they can't bring enforcement actions against all banks or close all the banks.  There has to be a cooperative attitude to work with the banks and give them an opportunity to work through this unprecedented economic downturn.
  
  What Can You Do?
  Well, being proactive, creative, flexible and patient is about all you can do.  Identify your bank's challenges, put a plan in place to promptly address them, communicate it to your regulators and shareholders and go about the business of executing your plan.  At the core of many plans will be “downsizing” or “rightsizing,” expense control and private stock investments.

  Conclusion
  We clearly are in unprecedented times, with the environment around us changing literally daily.  This will be a period where the strong can survive and others may sell or otherwise disappear.

  Postscript
  Subsequent to drafting this Cyber-Graham, over the weekend, the Lehman Brothers bankruptcy, Merrill Lynch sale to Bank of America, the AIG financial crisis, and the "Consortium of 10" all transpired.  We are clearly in uncharted waters.  Will the government take the right steps to avoid a meltdown in the banking and financial markets?  This is a critical question.  Obviously, the government called Lehman's "bluff" for financial assistance and lost as Lehman filed for bankruptcy.  Where this is headed is unclear since we obviously have not bottomed out yet.  One thing is certain, we can not panic.  We all must work through this together with the government and the financial sector partnering in the solution.
  
  
  For more information on this topic, please contact Stephen M. Klein (206.340.9648 or sklein@grahamdunn.com).

• Glacier Bancorp to Acquire Bank of the San Juans
  

  By Stephen M. Klein and Kumi Yamamoto Baruffi
  August 20, 2008

  Yesterday, our client, Glacier Bancorp (Nasdaq: GBCI), headquartered in Kalispell, MT, annou