New York Community Bank raises over $1bn

The guy who led the US Treasury under ex-president former President Donald Trump is taking a stake in a troubled regional US bank.
The guy who led the US Treasury under ex-president former President Donald Trump is taking a stake in a troubled regional US bank.

The guy who led the US Treasury under ex-president former President Donald Trump is taking a stake in a troubled regional US bank.

New York Community Bank announced that it had raised more than $1 billion, with former US Treasury Secretary Steven Mnuchin’s Liberty Strategic Capital among the group of firms involved.

Addressing Confidence Issues

The bank’s move aims to bolster confidence after facing pressure due to risks associated with its property loans. Its share price has plummeted over 60% since late January, following the revelation of unexpected losses.

Leadership Changes and Capital Infusion

Last week, the bank disclosed “material weaknesses” in its loan review processes and underwent leadership changes. 

Joseph Otting, a former bank regulator, was appointed as the new chief executive, marking the third leadership change since January.

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Growth and Regulatory Compliance

New York Community Bank has expanded rapidly from a local lender to a major player in mortgages and property loans. 

It purchased some holdings of Signature Bank last year, leading to increased regulatory obligations and contributing to the disclosed losses in January.

Steven Mnuchin’s Involvement

Mnuchin’s private equity firm, Liberty Strategic Capital, committed $450 million to acquire a stake in the bank. 

Mnuchin emphasized the firm’s awareness of the bank’s credit risk profile and expressed confidence in the bank’s capital position following the investment.

Industry Challenges

The bank’s struggles are closely monitored, as analysts predict potential issues for other lenders with exposure to office and apartment property loans. 

A significant percentage of loans in the US are tied to properties valued lower than their outstanding debt, exacerbated by the pandemic-induced decline in property values and rising borrowing costs.

Gary Monroe

Gary Monroe is a seasoned contributor to the Los Angeles Business Magazine, where he offers insightful analysis on local business trends and economic developments. With a focus on Los Angeles' dynamic commercial landscape, Gary's articles provide valuable perspectives for entrepreneurs and business professionals in the city.

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