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Regulators are considering putting American International Group Inc. into conservatorship while the Federal Reserve is in talks about a “loan package” as time runs out for the insurer to raise cash, according to three people briefed on negotiations involving U.S. and state officials. Executives from AIG, bankers and Treasury and Federal Reserve officials were meeting today at the New York Fed, said two of the people, who declined to be named because the talks are private. Treasury spokeswoman Michele Davis declined to comment. David Neustadt, a spokesman for New York State Insurance Superintendent Eric Dinallo, had no immediate comment. More

First Priority Bank was shut down by regulators on Friday, making the small Florida lender the eighth bank failure in the U.S. so far this year. SunTrust agreed to take on the deposits of First Priority, the Federal Deposit Insurance Corporation said in a statement late Friday. The six branches of First Priority will reopen on Monday as branches of SunTrust, it added. At the end of June, First Priority had $259 million in assets and total deposits of $227 million. There were roughly $13 million in uninsured deposits held in about 840 accounts that potentially exceeded insurance limits, the FDIC estimated. However, this amount will probably change after the FDIC gets more information from customers. SunTrust also bought about $42 million of the failed bank’s assets. The FDIC sold another $14 million of First Priority’s assets to LNV Corporation, a unit of Beal Bank Nevada. The FDIC said it will keep the remaining assets and sell them later. This bank failure will cost the FDIC’s insurance fund $72 million, the regulator estimated. More

Says trading firm attempted to ‘bang the close’ by amassing large positions just before markets closed, but overall effect on oil prices small.

NEW YORK (CNNMoney.com) — The government charged an oil trading firm Thursday with manipulating oil prices, the first complaint to be announced since the regulators began a new investigation into wrongdoings in the energy markets. The Commodity Futures Trading Commission accused Optiver Holding, two of its subsidiaries, and three employees, with manipulation and attempted manipulation of crude oil, heating oil and gasoline futures on the New York Mercantile Exchange. “Optiver traders amassed large trading positions, then conducted trades in such a way to bully and hammer the markets,” CFTC Acting Chairman Walt Lukken said at a press conference. “These charges go to the heart of the CFTC’s core mission of detecting and rooting out illegal manipulation of the markets.” More

KANSAS CITY, Missouri (Reuters) - Securities regulators from several U.S. states raided the St. Louis headquarters of Wachovia Securities, part of Wachovia Corp, on Thursday as part of a broad investigation into questionable practices involving auction rate securities, Missouri officials said. Missouri Secretary of State Robin Carnahan’s office said the “special inspection” at the Wachovia division, the former A.G. Edwards, concerned the $330 billion auction rate securities meltdown. It said regulators were looking for information about Wachovia Securities sales practices, internal evaluations of the auction rate securities market, and marketing strategies. In addition to securities regulators from Missouri, regulators from Illinois, Massachusetts, New Jersey, Pennsylvania and other states were part of the team entering Wachovia Securities’ headquarters, the officials said. More
Also See: FBI investigates IndyMac for mortgage fraud
21 corporate fraud probes of investment banks

NEW YORK (Reuters) - Shares in major U.S. banks plunged on Monday amid fears about the sector’s stability following Friday’s seizure by regulators of IndyMac Bancorp Inc., once one of the nation’s largest mortgage lenders. Shares of Washington Mutual Inc and National City Corp, which have significant exposure to mortgages, plummeted, leading both to issue statements intended to reassure investors and depositors. Also hurting Washington Mutual shares, Lehman Brothers Inc analyst Bruce Harting wrote that the largest U.S. savings and loan could face $26 billion in losses, with $21 billion from mortgages. More

IndyMac Bank on Friday night became the biggest savings – or thrift – bank to fail in US history and the latest victim of the credit crisis as regulators closed down the troubled mortgage lender. The closure came after it was no longer able to meet continued demands by customers for their deposits. Regulators said the bank was in an “unsafe and unsound condition”. Regulators said the California-based bank, with assets of $32bn, is the second largest US financial institution to be closed down, ranking only behind the $40bn Continental Illinois National Bank & Trust Company, which closed in 1984.

The Office of Thrift Supervision (OTS), the bank’s main regulator, said ”the immediate cause” of the closing was the deposit run that began and continued following the release of a letter from Charles Schumer, the New York senator, expressing concerns about the bank’s viability. According to data from the FDIC, resolution of IndyMac is expected to be among the most expensive rescues of its insured institutions, costing an estimated $4bn-$8bn. More

NEW YORK (Reuters) - Mortgage lender IndyMac Bancorp Inc was taken over by the Federal Deposit Insurance Corp on Friday, becoming the second-largest financial institution to be closed in U.S. history. Banks are not able to file for bankruptcy protection as other corporations may choose to do if they became insolvent. Rather, the FDIC has special powers to oversee the liquidation of assets from failed banks and thrifts and/or search for a buyer for that bank. Congress first gave the FDIC receivership power in the 1930s, after thousands of bank failures in the Great Depression highlighted the difficulty in efficiently liquidating the assets of a failed bank and returning deposits to customers. The following explains how the receivership process works today: More

(Bloomberg) — IndyMac Bancorp Inc., battered by the mortgage crisis, will cut more than half its workforce and said it’s been unable to raise new capital as losses mount. IndyMac will slash its workforce by 53 percent to 3,400 employees and curtail lending, the Pasadena, California-based company said on its Web site. Regulators have advised IndyMac that it’s no longer “well capitalized” and the bank said that it will report a wider loss in the second quarter than in the previous period. We don’t expect to be able to raise capital until there is more stability and less uncertainty in the housing and mortgage markets,” Chief Executive Officer Michael Perry said in the statement. IndyMac, which was the second-biggest independent U.S. mortgage lender last year behind Countrywide Financial Corp., has lost almost $900 million in the prior three quarters amid tumbling home prices and record foreclosures. The company is focusing on mortgages that can be sold to government-sponsored Fannie Mae and Freddie Mac. More

CNN — FEDERAL regulators investigating possible price manipulation of crude oil are likely looking at what role collapsed energy giant Enron may have played, a former commission member told CNN Friday.

In an interview on “American Morning,” Michael Greenberger, who once headed the Commodity Futures Trading Commission’s Division of Trading & Markets, said, “Almost certainly what they’re looking at is as a result of Enron pushing for having energy futures contracts being done outside of the United States’ regulatory purview.

“There is a theory that has gained momentum among economists and market observers that the price of crude oil is being driven up not by supply/demand principles in whole, but by speculators who are using what are called dark markets, markets that can’t be watched by the public or regulators, to manipulate the price of crude oil and, therefore, gasoline and heating oil in an upward direction,” he said.