Magazine article American Banker

7 Brokers Fueled Empire and Heritage; Group of Middlemen Pumped Deposits into Both Failed Institutions

Magazine article American Banker

7 Brokers Fueled Empire and Heritage; Group of Middlemen Pumped Deposits into Both Failed Institutions

Article excerpt

7 Brokers Fueled Empire and Heritage

Group of Middlemen Pumped Deposits into Both Failed Institutions

The same seven money brokers placed most of the deposits at two institutions that failed within two days of each another earlier this month.

Brokered deposits accounted for about 64% of deposits at Heritage Bank, Anaheim, Calif., and about 85% of deposits at Empire Savings and Loan Association here.

The seven firms, while not the only brokers to place deposits at Heritage and Empire, were the only ones to place funds at both the bank and the thrift.

Heritage had total deposits of $153.5 million when it was closed March 16, and Empire, which was shut two days earlier, had deposits of $308.9 million.

Sources said brokers who funneled deposits to both institutions were: FAIC Securities Inc., Miami; First United Fund Ltd., Garden City, N.Y.; Long Beach Savings & Loan Association, Long Beach, Calif.; First Empire Funding, Huntington, N.Y.; Peninsula Savings and Loan Association, South San Francisco, Calif.; and National Money Market Services and International Investment, both of Irvine, Calif.

Each of the seven brokers verified that they had channeled client funds into federally insured institutions.

Most of the brokers interviewed said they stopped directing funds into Heritage late last year, when they discovered the institution's financial problems. First United, however, declined comment.

"Money Is Money'

Under present practices, all deposits up to $100,000 per accoun placed in a financial institution through brokers are insured. …

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