Is America’s “socially responsible bank” also one of the country’s most fiscally irresponsible banks?
Just over ten years ago Amalgamated Bank was in dire financial condition and barely managed to escape closure after being warned by both the Federal Deposit Insurance Corporation (FDIC) and New York State Banking Department that it was dangerously undercapitalized.
Could history be repeating itself?
Just this week the Wall Street Journal detailed how Amalgamated Bank could suffer the same fate as Silicon Valley and First Republic Bank if customers make a run for their money and the Bank’s unrealized losses become real.
Since March 31, Amalgamated Bank’s market value for its bonds have tanked by $129 million and the market value of its loans decreased by $387 million. The total unrealized losses – $517 million – nearly equal the Bank’s total equity total of $519 million.
Worse yet, a majority – 62% – of the Bank’s deposits were uninsured at the end of the first quarter of this year, a figure the Wall Street Journal noted was abnormally high for the banking industry.
This wouldn’t be the first time the Bank made irresponsible investments that jeopardized its solvency and customers.
In 2011, Amalgamated suffered $150 million in losses after it purchased over $200 million in high-risk mortgage loans. The substantial losses on risky loans was not the Bank’s only misfire, they also lost nearly $60 million betting on the disastrous AOL Time Warner merger.
The banking misfires by Amalgamated led to its union owner – SEIU affiliate Workers United – selling off 40% of its ownership to two private equity investors to save the Bank.
Given the current situation at the Bank, Workers United and Bank leadership will remain on edge given the state of the U.S. economy and any possible rate increases by the Federal Reserve.
If one thing is certain, Amalgamated Bank’s financial position will be something to watch as the Federal Reserve remains aggressive on raising interest rates while it attempts to push inflation back down to 2%.