U.S. Bank Stocks and the Subprime Crisis

Content

1. Introduction

2. The Subprime Crisis
2.1. The Risk Types Involved
2.2. The Role of the Players
2.2.1. Rating Agencies
2.2.2. Mortgage Brokers and Lenders
2.2.3. Special Investment Vehicles
2.2.4. Central Banks
2.2.5. Financial Institutions
2.3. Impact on Earnings and Stock Prices
2.4. The Bailouts
2.4.1. Bear Stearns
2.4.2. Fannie Mae and Freddie Mac
2.4.3. Lehman Brothers Holdings Inc
2.4.4. American International Group
2.4.5. Washington Mutual
2.5. The Broadening of the Crisis

3. The Design of an Event Study
3.1. Basics
3.2. History of Event Studies
3.3. Experimental Design
3.4. Use of Daily Data
3.4.1. Returns
3.4.2. Non-normality
3.4.3. Simple Linear Regression
3.4.4. Variance Estimation
3.4.5. Non-synchronous Trading
3.4.6. Clustering
3.5. Abnormal Returns
3.5.1. Mean Adjusted Return Model
3.5.2. Market Adjusted Return Model
3.5.3. Capital Asset Pricing Model
3.5.4. OLS Market Model
3.5.5. Scholes - Williams Procedure
3.5.6. Dimson Aggregated Coefficients Method
3.5.7. Cumulative Abnormal Returns
3.6. Significance of Abnormal Returns
3.6.1. Parametric T ests
3.6.1.1. Cross-sectional Independence
3.6.1.2. Cross-sectional Dependence (Crude Adjustment)
3.6.1.3. Standardized Tests
3.6.2. Non-parametric Tests
3.6.2.1. The Rank Test
3.6.2.2. The Sign Test

4. Results of the Event Study
4.1. Estimated Abnormal Returns
4.1.1. Release of the Third Quarter 2007 Earnings
4.1.2. Release of the Fourth Quarter 2007 Earnings
4.1.3. Release of the First Quarter 2008 Earnings
4.1.4. Release of the Second Quarter 2008 Earnings
4.2. Diagnostics
4.2.1. Test for Normality of Arithmetic Returns
4.2.2. Test for Normality of Abnormal Returns
4.2.3. Autocorrelation of the Stocks
4.3. Results of Significance Tests of Abnormal Returns
4.3.1. Significance, Event of Third Quarter 2007 Earnings Releases
4.3.2. Significance, Event of Fourth Quarter 2007 Earnings Releases ..
4.3.3. Significance, Event of First Quarter 2008 Earnings Releases
4.3.4. Significance, Event of Second Quarter 2008 Earnings Releases

5. Summary

6. Literature

Abstract

This paper examines if U.S. American banks that announced write-offs in their quarterly reports, due to the so-called subprime crisis, show abnormal returns in relation to the S&P 500 index in 4 different time periods. The basics and the history of event studies are mentioned and different methods to determine abnormal returns and how to test the significance of abnormal returns are explained. The event study of this paper is evaluated with the market adjusted returns model and Ordinary Least Squares market model. The estimated abnormal returns are then tested on significance with parametric and non-parametric tests. Besides that, this paper also gives a summary about the subprime crisis, the role of players, the sources, the complexity and the broadening of the crisis.

Figures

Figure 1: S&P/Case-Shiller Home Price Index

Figure 2: U.S. mortgage related security prices

Figure 3: Interbank spreads in basis points

Figure 4: Weekly stock chart, The Bear Stearns Companies Inc

Figure 5: 2 year weekly stock chart Fannie Mae

Figure 6: 2 year weekly stock chart Freddie Mac

Figure 7: 2 year weekly stock chart Lehman Brothers Holdings Inc

Figure 8: 2 year weekly stock chart American International Group Inc

Figure 9: 2 year weekly stock chart Washington Mutual Inc

Figure 10: Performance of S&P 500, DAX and Hang Seng 2007 and 2008

Figure 11: Performance of S&P 500 index in event study period

Figure 12: Abnormal returns of 3rd qtr. 2007 earnings release event

Figure 13: Cumulative abnormal returns of 3rd qtr. 2007 earnings release event.

Figure 14: Abnormal returns of 4th qtr. 2007 earnings release event

Figure 15: Cumulative abnormal returns of 4th qtr. 2007 earnings release event.

Figure 16: Abnormal returns of 1st qtr. 2008 earnings release event

Figure 17: Cumulative abnormal returns of 1st qtr. 2008 earnings release event

Figure 18: Abnormal returns of 2nd qtr. 2008 earnings release event

Figure 19: Cumulative abnormal returns of 2nd qtr. 2008 earnings release event

Figure 20: Cumulative abnormal returns, market adjusted return model

Figure 21:Cumulative abnormal returns, Ordinary Least Squares market model.

Tables

Table 1: Foreclosures in the U.S. 2008

Table 2: Central bank interventions 2007

Table 3: Changes of the Discount and Federal Funds rate 2007 and 2008

Table 4: Write-downs and stock performance examples

Table 5: Results Jarque-Bera test, kurtosis, arithmetic returns

Table 6: Jarque-Bera test, excess kurtosis, abnormal returns ARM

Table 7: Durbin-Watson test for autocorrelation, last 600 returns

Table 8: Significance tests of abnormal returns, event window 3rd quarter 2007

Table 9: Significance tests of abnormal returns, event window 4th quarter 2007

Table 10: Significance tests of abnormal returns, event window 1st quarter 2008

Table 11: Significance tests of abnormal returns, event window 2nd quarter 2008

Abbreviations

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1. Introduction

Since mid 2008, the financial crisis of 2008/09 has a fixed place in economic history. This financial crisis has its roots in the subprime crisis of 2007/08. Overall risks to financial stability have increased sharply since July 2007 as the subprime crisis started to alienate financial institutions, homeowners, investors and governments. A crisis that originated in a small segment of the U.S. mortgage market has spread to the cross-border credit and funding markets worldwide during the year 2008. Credit crunches are threatening the economic growth and economies all over the world face massive downturns and many are falling into a recession. Stock prices worldwide are moving down and are reaching multi-year lows. Financial institutions are writing off huge amounts of money, governments and central banks are injecting billions of U.S. Dollars into financial institutions and economies to prevent and/or mitigate the damage.

In chapter 2, this paper describes the subprime crisis in detail, how it all started and why. The effects of a sharp rise of delinquencies and foreclosures to the prices, guarantors and holders of mortgage backed securities, collateralized debt obligations and credit default swaps are shown. The complexity of such debt securitization products and of special purpose vehicles is mentioned. The role of rating agencies, financial institutions, other lenders, monoline guarantors and central banks is avowed. The arising problems for financial institutions, their losses and the story of the bailouts of nearly bankrupt banks are illustrated.

Concerning that, this paper examines if U.S. American banks that announced write­offs in their quarterly reports, (from the third quarter 2007 to the second quarter 2008) due to the subprime crisis, show abnormal returns in relation to the S&P 500 index. In chapter 3 the history and the basics of event studies are mentioned. Solutions for different arising problems with daily data in event studies are presented. The different methods to determine abnormal returns and how to test the statistical significance of abnormal returns with parametric and non-parametric tests are explained.

The research question of this thesis is therefore:

Are abnormal returns due to the announced write-offs of the analysed banks measurable and statistically significant?

To answer the research question, the event study of this paper is evaluated with the later explained market-adjusted returns model and the Ordinary Least Squares market model. The estimated abnormal returns are then tested on statistical significance with parametric and non-parametric tests.

The results of the event study are presented in the first part of chapter 4, beginning with the determined abnormal returns of the analysed banks in the selected periods and an interpretation of the outcome. In the second part, the outcomes of the tests for statistical significance of the abnormal returns are presented and construed. The research question of measurable and significant abnormal returns is answered in this chapter. The paper closes with a brief summary and a concluding discussion in chapter 5.

2. The Subprime Crisis

A very low interest rates environment in the first part of the decade, where the Fed funds rate was 1% in June 2003 and increased slowly from June 2004 until June 2006 to a rate of 5.25%, has spurred increases in mortgage financing and a substantial increase in house prices as shown in figure 1. This encouraged investors to seek instruments that offer yield enhancement. Subprime^[1] mortgages offer higher yields than standard mortgages and were in demand for securitization. The demand for increasingly complex structured products or vehicles, which embed leverage within their structure, exposed investors to greater risk of default. Because of rising house prices and low interest rates the risk of default was not seen as excessive.

The share of subprime mortgages to total originations in the U.S. was 5% ($ 35 billion) in 1994, 7,2% ($ 160 billion) in 2001 and grew to 20,6% ($ 600 billion) in 2006.^[2] Approximately 16% of subprime loans with adjustable rate mortgages were 90-day delinquent or in foreclosure proceedings as of August 2007, roughly triple the rate of mid 2005.^[3]

By May 2008 the delinquency rate was 25% and Ben Bernanke said „conditions in mortgage markets remain quite difficult, and mortgage delinquencies have climbed steeply. The sharpest increases have been among subprime mortgages... Delinquency rates also have increased in the prime and near-prime segments of the mortgage market... foreclosure proceedings were initiated on some 1.5 million U.S. homes during 2007, up 53 percent from 2006, and the rate of foreclosure starts looks likely to be yet higherin 2008...“^[4]

The millions of exotic mortgages (subprime, Alt-A, adjustable rate mortgages and negative amortization), which have started to blow up, have led to a tremendous rise in foreclosures. An estimated one of 464 homes is in one stage of foreclosure in the U.S. In the first two quarters of 2008 there have been 1.448.308 foreclosures. Approximately 15% of all subprime mortgages and 7% of all Alt-A mortgages are in delinquency. This is a rise of more than 50% from 2007 as shown in table 1 below.^[5]

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Table 1 : Foreclosures in the U.S. 2008

The rise of delinquencies on subprime loans was caused by a number of factors, such as the failure of homeowners to make their mortgage payments, primarily due to loss of employment or health related issues, also the poor judgment by either the borrower and/or the lender. Other factors are the unsuitable mortgage incentives such as buy downs and short fixed term adjustable rate mortgages, coupled with rapidly rising mortgage rates.

delinquencies will probably rise further for borrowers who have a subprime mortgage with an adjustable interest rate, as many of these mortgages will soon see their rates reset at significantly higher levels. Indeed, on average from now until the end of next year, nearly 450,000 subprime mortgages per quarter are scheduled to undergo their first interest rate reset../^[6] Last but not least the declining home prices, as illustrated in figure 1, have made refinancing very difficult.

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Figure 1: S&P/Case-Shiller Home Price Index^[7] )

2.1. The Risk Types Involved

Because of innovations in securitization, such as utilization of special purpose vehicles or credit derivatives, it was thought the risks related to the inability of homeowners to meet mortgage payments had been divided broadly. Therefore there are four interlinked risk types involved:

• Credit risk - Would be carried by the bank originating the loan. Because of securitization the credit risk is frequently transferred to third party investors. The rights to mortgage payments have been packed into different complex investment vehicles, generally categorized as mortgage backed securities (MBS) or collateralized debt obligations (CDO). A CDO, essentially, is a rearranging of existing debt, and in recent years more and more of such securities where issued.^[8] In exchange for purchasing MBS or CDO third party investors receive a claim on the mortgage assets and related cash flows, which become collateral in the event of default.

• Asset price risk - Through "fair value" or "mark-to-market" accounting, the valuation of MBS and CDO is complex and a question of interpretation. The valuation is derived from both the collectability of mortgage payments and the existence of a viable market where these assets can be sold, which are interrelated.^[9] Rising mortgage rates have reduced demand for such assets and prices for MBS began to slide as presented in figure 2.^[10] Banks and institutional investors have recognized substantial losses as they revalue their MBS downward. World Bank and IMF staff estimates potential bank losses and write downs to be approximately $ 945 billion as of March 2008.^[11]

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Figure 2: U.S. mortgage related security prices

• Liquidity risk - Many companies count on access to short term funding markets for cash to operate, such as the commercial paper and repurchase markets. To obtain short-term loans by issuing a commercial paper, Companies and structured investment vehicles (SIV) are pledging mortgage assets or CDOs as collateral. Investors provide cash in exchange for the commercial paper, receiving money market interest rates. The ability of many companies to issue such papers has been significantly affected, because of worries regarding the value of the mortgage asset collateral linked to subprime loans.

• Counterparty risk - Major investment banks and other financial institutions have taken significant positions in credit derivative transactions, some of which serve as a form of credit default insurance. Due to the effect of the above risks, the financial health of investment banks has declined, potentially increasing the risk for their counterparties and creating further uncertainty in financial markets leading to a counterparty credit risk component in the interbank market through a significant rise in the rates as shown in figure 3.^[12]

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Figure 3: Interbank spreads in basis points

2.2. The Role of the Players

This section gives a small overview of the different players in the crisis, starting with the rating agencies, as the timely and accurate credit ratings have been central to the crisis. After the following role of mortgage brokers and lenders, the position of the special purpose vehicles is described. The situation of the monoline insurers is discussed next and this section ends with a brief overview of how the most important central banks responded to the crisis.

2.2.1. Rating Agencies

Investors relied on the ratings of the agencies (Standard & Poors, Moody’s and Fitch) for mortgage bonds, asset backed securities issued by SIVs and monoline insurers which insure structured credit products like CDOs. Investors such as pension and money market funds are restricted and can only invest in triple-A assets and have to base their investment decisions on the ratings of the agencies.

No one was expecting the volatility of the rating changes, where a triple-A asset could be downgraded to junk status within a few weeks or days or in some cases dropped to default within a few days, due to a deteriorating housing market. Credit rating agencies are now under scrutiny for giving investment-grade ratings to securitization transactions (CDOs and MBS) based on subprime mortgage loans.^[13]

Various credit enhancements including over-collateralization (pledging collateral in excess of debt issued), credit default insurance, and equity investors willing to bear the first losses gave the reason for higher ratings. After criticism that conflicts of interest were involved, as rating agencies are paid by the firms that sell the debt to investors, the U.S. Securities and Exchange Commission proposed rules in June 2008, that prohibit a credit rating agency from issuing a rating on a structured product unless information on assets underlying the product was available. The rules also prohibit credit rating agencies from structuring the same products that they rate and prohibit gifts from those who receive ratings to those who rate them, in any amount over $ 25. These strict rules also require disclosure by the rating agencies of the way they rely on the due diligence of others to verify the assets underlying a structured product.^[14]

During the end of 2006 and the beginning of 2007 Moody’s and Standard & Poors warned about the percentage of subprime mortgages with full documentation and the deteriorating conditions with downgrades of more than double the number of upgrades. In July 2007 Standard & Poors downgraded $ 7,3 billion of securities sold in 2005 and 2006 and a few weeks later Moody’s downgraded 691 securities worth $ 19,4 billion. In October the ratings on MBS with a value of $ 22 billion were lowered by Standard & Poors followed by downgradings of 16 SIVs with $ 33 billion in debt by Moody’s in November 2007.^[15]

These downgradings were just the beginning of a series of downgradings. In a press release from the 8th of April 2008 of Standard & Poors it is said that almost 93% of the first-quarter downgrades (2.928 of 3.157) can be attributed to stress in the residential mortgage market, affecting CDOs that have direct exposure to downgraded MBS, or in some cases, indirect exposure via tranches of CDO of ABS transactions with exposure to downgraded MBS.^[16]

In April 2008 Moody’s downgraded 1.923 subprime MBS classes the agency downgraded another 510 classes from 64 additional subprime deals and 388 classes from 75 different Alt-A deals. Moody’s also warned of pending downgrades of additional 254 different Aaa-rated Alt-A tranches, worth hundreds of billions of dollars.^[17]

2.2.2. Mortgage Brokers and Lenders

Mortgage brokers do not lend their own money. There is not a direct correlation between loan performance and income. The brokers had no motivation to perform their due diligence and keep track of the borrower’s credit worthiness, as most of the loans stemmed from the brokers were subsequently securitized. That was aggregated by the incentives for brokers for selling complex adjustable rate mortgages with no negative consequences if the loans defaulted within a short period of time.

Distress among mortgage lenders was visible at the end of 2006 as Ownit Mortgage Solutions Inc., the eleventh largest issuer of subprime mortgages, went bankrupt. In the first quarter 2007 the number two lender in the subprime market, New Century, also closed down the business and during 2007 and 2008 some others also failed and went bankrupt. These problems spread from the subprime to other mortgage markets because of the house price decline.

Many institutions received margin calls from creditors due to the declining value of mortgages used as collateral. Some originators like Countrywide Financial Inc., Citigroup Inc. and the Mortgage Bankers Association spent funds on lobbying and political giving, inducing legislators to reduce new laws, restricting lending to borrowers, which might have curtailed some of the damage.^[18]

2.2.3. Special InvestmentVehicles

A special or structured investment or purpose vehicle (SIV, SPV) in this context, is a fund which borrows money by issuing short term asset backed commercial papers, medium term notes (MTN) and capital and lends that money by purchasing mainly high rated and long term securities at higher interest.^[19] The capital is usually subordinated debt, which is sometimes tranched and rated. SIVs are a type of structured credit product and they are usually between $ 1 billion to $ 30 billion in size. A SIV has an open-ended structure and intends to stay in business indefinitely by buying new assets when the old ones mature. A variant form of such SIV is the SIV-Lite structure where the capital has a finite maturity. The difference is, that at the launch, the maximum permitted leverage is fixed through the life of the vehicle, which is not the case with a SIV.^[20]

The short-term assets that a SIV issues often contain two tiers of liabilities, junior and senior. The senior debt of the vehicle will retain the highest level of creditworthiness, rated AAA / A-1+. The junior debt is sometimes rated and sometimes not, but when rated, it is usually in the BBB area. There may be a mezzanine tranche rated A. To support their high senior ratings, SIVs are obliged to obtain liquidity facilities, also called backstop lines, from different institutions and highly rated liquid assets that can be sold quickly. This helps to reduce investor exposure to market disruptions that might prevent the SIV from refinancing its debt.^[21]

Many SIVs are sponsored or founded by financial institutions that want to transfer assets from their balance sheet to the SIV and therefore generate products that can be sold to possible investors.^[22] There are some risks that could arise for a SIV. Firstly, the solvency of the SIV may be at risk if the value of the purchased long term assets falls below that of the issued and sold short term securities. Secondly, there is a liquidity risk, as the SIV borrows short term and invests long term, or due diligence is required for some assets and this could increase the length of the selling period. Thirdly, the credit risk, concerning the credit worthiness of the obligors. Fourthly, the market risk, because such types of assets have to be valued in accounting mark-to- market and illiquid assets, mark-to-model and when the SIV is forced to sell assets under unfavorable conditions, this will affect the value of all its assets.^[23]

The MBS held by the SIVs started to decline in value and some ABCP were downgraded or defaulted within days as the credit crisis intensified. A growing number of SIVs turned to their sponsor banks for rescue as they became unable to roll their senior debt. Many banks rescued their SIVs, as HSBC transferred $ 45 billion and Citigroup some $ 49 billion of assets from their sponsored SIVs back to their balance sheets in 2007. In 2008 transactions like bail outs and providing backstop facilities became more and more necessary for the sponsoring banks in order to rescue the rising number of nearly bankrupt SIVs.^[24]

2.2.4. Central Banks

Central banks are primarily required to manage the inflation rate and avoid recessions. They are also the “lenders of last resort” to ensure liquidity. They are less concerned with avoiding asset bubbles, such as the housing bubble and the dot-com bubble. Central banks have generally chosen to react, after such bubbles had burst, to minimize collateral impacts on the economy, rather than trying to avoid the bubble itself. In May 2007 Ben Bernanke did not expect significant spillovers from the subprime market to the rest of the economy and the financial system. As seen at the beginning of this chapter, he knows better in 2008.

In August 2007 the European Central Bank injected € 95 billion and informed banks that they could borrow at the 4% rate without limit. The Bank of Canada stated that it would provide liquidity to support the financial system and markets. Other Central Banks followed and as seen in table 2 below the main Central Banks injected nearly $ 300 billion into the financial market to avoid a liquidity shortage. Institutional investors switched from CPs to Treasuries and others fled out of their holdings and invested $ 42 billion in money market funds between the 16th and 22nd of August. As stated before, prime corporate are using the CP market to finance short term cash needs and this market faced a lack of demand which made it very difficult for borrowers to roll over the debt.^[25]

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Table 2: Central bank interventions 2007

To help the homeowners and the banks and to avoid impacts on the economy the U.S. Federal Reserve has cut the Discount and Federal Funds rate in several steps more than 50% beginning in August 2007 as shown below.^[26]

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Table 3: Changes of the Discount and Federal Funds rate 2007 and 2008

2.2.5. Financial Institutions

A variety of factors have caused the financial institutions to offer high-risk loans to high-risk borrowers: the Increasing liquidity and house prices due to the low interest rates from 2002 to 2004 as well as an interest difference decline between subprime and prime borrowers. The lenders offered also increasingly high-risk loan options and incentives to the borrowers.

The just interest adjustable rate mortgages for example that allow homeowners to pay just the interest and not also the principal during an initial period or a payment option loan, in which a lender can pay a variable amount and any interest that is not paid is added to the principal. What also caused trouble are the adjustable rate mortgages with the so-called teaser rates, which are mortgages with very low rates for a certain initial period, after which the interest rates increase significantly resulting in doubling the monthly payment for the borrower.

All these factors, such as continuously watered down mortgage standards, a penal neglect of risk management and the belief to raise profits while passing on the risk to other players have caused this crisis, resulting in huge amounts of write-offs for the financial institutions who lent to high risk borrowers and/or invested in the credit derivatives like CDOs or ABS. These write-offs, or more clearly, the announcements of such write-offs and their effect on the stock prices of the announcing institutions, are the basis of this paper. Some impacts and write-offs are shown in section 2.3. The exceptional events of some failing banks and their bailouts are shown in section 2.4.

2.3. Impact on Earnings and Stock Prices

Many banks, mortgage lenders, real estate investment trusts (REITs), and hedge funds suffered significant losses as a result of mortgage payment defaults or mortgage asset devaluation. As of April 30, 2008 financial institutions had recognized subprime related losses or write-downs exceeding $ 280 billion.

Profits at the 8.533 U.S. banks insured by the FDIC declined from $ 35,2 billion to $ 5,8 billion (a minus of 83,5 percent) during the fourth quarter of 2007 compared to the previous year, due to soaring loan defaults and provisions for loan losses. It was the worst bank and thrift performance since the fourth quarter of 1991. For the whole of 2007, these banks earned $ 105,5 billion, down 27,4% from a record profit of $ 145,2 billion in 2006.^[27] Profits declined from $ 35,6 billion to $ 19,3 billion during the first quarter of 2008 compared to the previous year, a decline of 46%.^[28] Table 4 below shows some financial institutions, their write-downs as of March 2008 and the stock performance from the 19th of July 2007 until the 10th of March 2008.

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Table 4: Write-downs and stock performance examples^[29] )

2.4. The Bailouts

This section shows that not just small banks (which are not mentioned in this paper), but hundreds of mortgage companies and banks shut down their business and failed, are hit by the crisis. There are some very well known names that did not survive the crisis and due to the fact that the crisis is proceeding it looks as if some other well known names will not survive this crisis.

[...]

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^[1] ’ The term „subprime“ refers to mortgagees who are unable to quality mortgage rates (prime rates) because of poor credit ratings or limited credit histories including one or more of the following criteria, payment delinquencies, charge offs, bankruptcies, low credit scores, large existing liabilities and high loan to value ratios. Subprime borrowers have to pay a higher credit rate than prime borrowers.

^[2] cf. Bernanke (2008)

^[3] cf. Bernanke (2007)

^[4] Bernanke (2008)

^[5] cf. Tanzi (2008)

^[6] Bernanke (2007) David Hoffinger

^[7] cf. Standard & Poors (2007), p. 1

^[8] cf. SIFMA (2008), p. 3______

^[9] cf. Gross (2008)

^[10] cf. Dattels (2008), p. 7

^[11] cf. Dattels (2008), p. 10, 11 David Hoffinger

^[12] cf. Dattels (2008), p. 25 David Hoffinger

^[13] cf. Crouhy, Turnbull (2007), p. 9, 10 David Hoffinger

^[14] cf. SEC (2008)

^[15] cf. Crouhy, Turnbull (2007), p. 11

^[16] cf. Standard & Poors (2008)

^[17] cf. Jackson (2008)

^[18] cf. Crouhy, Turnbull (2007), p. 11, 12

^[19] cf. Maier (2008), p. 114 -118

^[20] cf. Crouhy, Turnbull (2007), p. 12 - 14

^[21] cf. Maier (2008), p. 115, 117

^[22] cf. Maier (2008), p. 118

^[23] cf. Crouhy, Turnbull (2007), p. 13

^[24] cf. Crouhy, Turnbull (2007), p. 14

^[25] cf. Crouhy, Turnbull (2008), p. 15, 16, 39

^[26] cf. Federal Reserve Bank of New York (2008)

^[27] cf. FDIC (2008), No. 1, p. 1

^[28] cf. FDIC (2008), No. 2, p. 1

^[29] cf. Hoffinger (2008), p. 11 and 27, 28