Protectionism rising despite G-20 vows on trade

WASHINGTON (AP) -- Leaders of the world's 20 top economies vowed to resist protectionism last November and again in April as they charted a joint strategy for confronting the worst global downturn in generations. As they meet again, they'll get this progress report: Most of their economies are on the mend -- and trade tensions and protectionism are on the rise.

A U.S.-China spat over Chinese tires and American chicken exports is just the latest example of how hard it has been to live up to those lofty fair-trade pledges. Nearly all 20 nations whose leaders meet next week in Pittsburgh have violated the no-protectionism pledges made earlier in Washington and London, according to reports from international monitoring groups.

As economies escape the grips of recession, the pressure to work together appears to be lessening.

National self-interest is reasserting itself. That includes a desire to protect battered home industries from overseas competition as governments look toward the day when they can dial back stimulus measures such as extra government spending and low interest rates.

Also, participants are arguing over issues such as proposed limits on bankers' compensation, how far to go with international financial regulation and alarming recession-fueled budget deficits, especially in the U.S.

Standing back from the cliff, the world leaders are shifting their focus.

The words are starting to heat up a little bit. I think they're starting to get a little frustrated that the urgency is being lost -- that crisis feel," said Heather Conley, an assistant deputy secretary of state for Europe in the Bush administration and now a scholar at the Center for Strategic and International Studies.

Yet economists say pulling together is extremely important now to keep still-fragile recoveries from being derailed.

"It is very important that, as they unwind, they don't do it in a haphazard fashion, that they think about it and work together so that everybody knows what everybody else is doing," said Colin Bradford, a former World Bank economist who is now a scholar on global finance at the Brookings Institution.

"You've got a sequence of meetings going on, coordinated action instead of everybody shooting from the hip," Bradford said.

In London in April, the leaders renewed a pledge they made in November to "refrain from raising new barriers to investment or to trade in goods and services (or) imposing new export restrictions." They said that pledge was good until the end of 2010.

But the Geneva-based World Trade Organization issued a report this week that cited "continued slippage toward more trade restricting and distorting policies." It listed 91 new potentially protectionist measures by G-20 members just between the April summit in London and the end of August, 15 of them by the United States.

Global Trade Alert, a trade watchdog group with ties to the World Bank, separately said more than 100 "blatantly discriminatory measures" are poised to be implemented by G-20 nations.

Trade warfare of the 1930s is widely blamed for prolonging and expanding the Great Depression.

President Barack Obama pledged to avoid "self-defeating protectionism" in continuing the effort to get the U.S. and other major world economies back on their feet. Still, he told a Wall Street audience on Monday, "no trading system will work if we fail to enforce our trade agreements."

Steps taken by the United States widely seen by other nations as protectionist include "Buy American" provisions in the Obama administration's $787 billion stimulus package, restrictions keeping Mexican trucks off most U.S. roads and provisions of auto bailouts requiring vehicles benefiting from the program to be built in the United States.

China has funneled its extensive stimulus spending to Chinese-only companies and enterprises. Russia plans sweeping tariff increases. Japan is taking steps that will further restrict food imports. And South Africa is changing its purchasing rules to favor domestic producers.

The U.S. continues to press its claim that the European countries subsidize Airbus, winning a preliminary ruling from a WTO panel earlier this month. European countries have counter claimed that the Pentagon and NASA are effectively subsidizing rival aircraft manufacturer Boeing, with a ruling expected early next year.

Mike Froman, a White House adviser on international economics, said there's no doubt that since the London meeting in April "the situation has changed dramatically. ... Then people thought we were perhaps on the edge of depression. And now I think we're debating the pace of recovery."

Froman said Obama would emphasize that governments should make plans for winding down stimulus measures but it is still "too early to execute on those exit strategies."

Finance ministers of the 20 countries meeting in London two weeks pledged to maintain stimulus measures -- for now. But some European countries, particularly Germany, are not that keen to keep up high levels of spending.

Obama to impose tariffs on Chinese tires

Obama imposes tariffs on Chinese tires for 3 years

• By Jennifer Loven, AP White House Correspondent
• On Friday September 11, 2009, 10:12 pm EDT

WASHINGTON (AP) -- President Barack Obama has slapped punitive tariffs on all car and light truck tires entering the United States from China in a decision that could anger the strategically important Asian powerhouse but placate union supporters important to his health care push at home.

Obama had until Sept. 17 -- next week -- to accept, reject or modify a U.S. International Trade Commission ruling that a rising tide of Chinese tires into the U.S. hurts American producers. A powerful union, United Steelworkers, blames the increase for the loss of thousands of American jobs.

The federal trade panel recommended a 55 percent tariff in the first year, 45 percent in the second year and 35 percent in the third year. Obama settled on slightly lower penalties -- an extra 35 percent in the first year, 30 percent in the second, and 25 percent in the third, White House press secretary Robert Gibbs said Friday.

"The president decided to remedy the clear disruption to the U.S. tire industry based on the facts and the law in this case," Gibbs said.

By taking "this unprecedented action, the Obama administration is now at odds with its own public statements about refraining from increasing tariffs above current levels," said Vic DeIorio, executive vice president, GITI Tire (U.S.), the largest manufacturer of tires in China.

The decision comes as U.S. officials are working with the Chinese and other nations to plan an economic summit of the Group of 20 leading rich and developing nations in Pittsburgh, to be held Sept. 24-25. China will be a major presence at the meeting, and the United States will be eager to show it supports free trade.

Many of the nearly two dozen world leaders Obama is hosting have made strong statements critical of countries that protect their key industries. Obama, too, has spoken out strongly against protectionism, and other countries will view his decision on tires as a test of that stance.

Governments around the world have suggested the United States talks tough against protectionism only when its own industries are not threatened. U.S. rhetoric on free trade also has been questioned because of a "Buy American" provision in the U.S. stimulus package.

The decision could have ramifications in other high-priority areas, too.

The White House badly needs Chinese help to confront climate change, nuclear standoffs with Iran and North Korea and global economic turmoil. China is the world's third-largest economy and a veto-holding member of the United Nations Security Council.

Beijing says the duties would be a violation of global free-trade principles and has complained about U.S. protectionism.

And Roy Littlefield, executive vice president of the Tire Industry Association, which opposes the tariff, said it would not save American jobs but only cause tire manufacturers to move production to another country with less strict environmental and safety controls, less active unions and lower costs than the United States.

At the same time, Obama needs support from unions -- also a key backer of the Democratic Party in elections -- as he makes a high-stakes push for national health care legislation.

To reach a compromise on health care, Obama may need concessions from pro-labor Democrats who support a strong stand against China.

The steelworkers union brought the original case in April, accusing China of making a recent push to unload more tires ahead of Obama's expected action. The union says more than 5,000 tire workers have lost jobs since 2004, as Chinese tire overwhelmed the U.S. market.

The U.S. trade representative's office said four tire plants closed in 2006 and 2007 and three more are closing this year. During that time, just one new plant opened. U.S. imports of Chinese tires more than tripled from 2004 to 2008 and China's market share in the U.S. went from 4.7 percent of tires purchased in 2004 to 16.7 percent in 2008, the office said.

"When China came in to the (World Trade Organization), the U.S. negotiated the ability to impose remedies in situations just like this one," U.S. Trade Representative Ron Kirk said. "This administration is doing what is necessary to enforce trade agreements on behalf of American workers and manufacturers. Enforcing trade laws is key to maintaining an open and free trading system."

The new tariffs, on top of an existing 4 percent tariff on all tire imports, take effect Sept. 26.

Obama's action marks a shift from the Bush administration, which was routinely criticized for being too delicate in confronting Beijing's alleged trade violations. Obama promised during his presidential campaign that he would do it differently.

For the Chinese government, the tire dispute threatens an economic relationship crucial to China's economic growth. There was speculation before the decision that new tariffs could produce public pressure on Beijing to retaliate, potentially sparking a dangerous trade war.

Soaring Chinese imports of American chicken meat already have been mentioned by Chinese state media as a possible target. Beijing also could sell some of its extensive holdings of U.S. Treasury debt, which could unsettle markets.

Associated Press writer Foster Klug contributed to this report.

Millions of Seniors to Receive Smaller Social Security Checks in 2010

Group to Call for Emergency COLA Legislation

By: PR Newswire | 02 Sep 2009 | 09:04 AM ET

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WASHINGTON, Sept 02, 2009 /PRNewswire-USNewswire via COMTEX/ -- Millions of seniors will receive smaller Social Security checks next year, and none of the 37 million seniors who receive Social Security will get an increase, according to an August forecast from the Congressional Budget Office (CBO). The CBO is also forecasting a zero COLA for 2011.

In June, The Senior Citizens League (TSCL) became the first national group to call for an Emergency COLA for 2010. Since then, Sen. Bernie Sanders (I-VT) announced plans to introduce an Emergency COLA bill, expected later this month.

Next year would mark the first time since automatic Cost of Living Adjustments (COLA) went into effect in 1975 that seniors would fail to get an increase.

Since automatic raises were established, seniors have never failed to receive an annual increase of less than 1.3 percent.

Millions of seniors will receive cuts due to the soaring costs of prescription drug plans, which many beneficiaries have automatically deducted from Social Security checks.

"Just as more seniors than ever before are slipping into poverty and filing bankruptcy, the government thinks it's acceptable to eliminate COLAs and cut benefits," said Daniel O'Connell, chairman of The Senior Citizens League. "We wholeheartedly support any effort in Congress that would provide seniors with an Emergency COLA next year." Almost 70 percent of beneficiaries depend on Social Security for 50 percent or more of their income. Social Security is the sole source of income for 15 percent of beneficiaries.

See "Night in America," our latest video about seniors at risk, at www.YouTube.com/SeniorCitizensLeague.

Proponents of a zero COLA argue for its fairness in a deflationary period. But they do not mention that the way the COLA is calculated does not accurately track senior costs. TSCL supports a change in the Consumer Price Index (CPI) used to determine the COLA.

The government currently calculates the COLA based on the CPI for Urban Wage Earners and Clerical Workers (CPI-W), a slow-rising index that tracks the spending habits of younger workers who don't spend as much of their income on health expenditures.

However, the government does track the spending patterns of older Americans, and has done so since 1983 with the CPI for Elderly Consumers, or CPI-E. By tying the annual increase in the COLA to the CPI-E, seniors would see much needed relief in their monthly checks. For example, a senior who retired with a monthly benefit of $676 in 1984 would have received $17,596 more throughout their retirement with the CPI-E.

TSCL supports two CPI-E bills in the current Congress: H.R. 2429 and H.R. 2365, as well as any impending Emergency COLA legislation.

The Coming Deposit Insurance Bailout

wsj

Another lesson that federal guarantees aren't free.

Americans are about to re-learn that bank deposit insurance isn't free, even as Washington is doing its best to delay the coming bailout. The banking system and the federal fisc would both be better off in the long run if the political class owned up to the reality.

We're referring to the federal deposit insurance fund, which has been shrinking faster than reservoirs in the California drought. The Federal Deposit Insurance Corp. reported late last week that the fund that insures some $4.5 trillion in U.S. bank deposits fell to $10.4 billion at the end of June, as the list of failing banks continues to grow. The fund was $45.2 billion a year ago, when regulators told us all was well and there was no need to take precautions to shore up the fund.

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Associated Press

FDIC Chairman Sheila Bair

The FDIC has since had to buttress the fund with a $5.6 billion special levy on top of the regular fees that banks already pay for the federal guarantee. This has further drained bank capital, even as regulators say the banking system desperately needs more capital. Everyone now assumes the FDIC will hit banks with yet another special insurance fee in anticipation of even more bank losses. The feds would rather execute this bizarre dodge of weakening the same banks they claim must get stronger rather than admit that they'll have to tap the taxpayers who are the ultimate deposit insurers.

It isn't as if regulators don't understand the problem. Earlier this year they quietly asked Congress to provide up to $500 billion in Treasury loans to repay depositors. The FDIC can draw up to $100 billion merely by asking, while the rest requires Treasury approval. The request was made on the political QT because, amid the uproar over TARP and bonuses, no one in Congress or the Obama Administration wanted to admit they'd need another bailout.

But this subterfuge can't last. Eighty-four banks have already failed this year, and many more are headed in that direction. The FDIC said it had 416 banks on its problem list at the end of June, up from 305 only three months earlier. The total assets of banks on the problem list was nearly $300 billion, and more of these assets are turning bad faster than banks can put aside reserves to account for them. The commercial real-estate debacle is still playing out at thousands of banks, even as the overall economy bottoms out and begins to recover.

Meantime, even as it "resolves" and then sells failed banks, the FDIC is also guaranteeing the buyers against losses on tens of billions of acquired assets. This is known in the trade as "loss sharing," which is another form of taxpayer guarantee that taxpayers aren't supposed to know about. Most of the losses won't be realized if the economy recovers. But this too is a price of taxpayers guaranteeing deposits. Even as Treasury and the press corps broadcast that the feds are making money on TARP repayments, these guarantees go largely unnoticed.

FDIC Chairman Sheila Bair continues to say that deposits will be covered up to the $250,000 per account insurance limit, and of course she's right. But we wish she'd force Congress—and the American public—to face up to the reality of what deposit insurance costs. Amid the panic last year, Congress raised the deposit limit from $100,000. While this may have calmed a few nerves—though the worst runs were on money-market funds, not on banks—it also put taxpayers further on the hook.

The $250,000 limit was supposed to expire at the end of 2009, but in May Congress extended it through 2013, and no one who understands politics thinks it will return to $100,000. The rising bank losses mean that the FDIC's ratio of funds to deposits is down to 0.22%, far below its obligation under the insurance statute to keep it between 1.15% and 1.50%.

Rather than further soak capital from already weak banks, the FDIC ought to draw down at least $25 billion from its Treasury line of credit. Ms. Bair is going to have to ask for the cash sooner or latter, and she might as well do it before the fund hits zero and we get another round of even mild depositor anxiety. We suppose Congress could raise a faux fuss, but these are the same folks who ordered the FDIC to broaden the insurance limit. They need to face the political consequences of their promises.

Estimate for 10-Year Deficit Raised to $9 Trillion

August 26, 2009

By JACKIE CALMES

WASHINGTON— The nation’s fiscal outlook is even bleaker than the government forecast earlier this year because the recession turned out to be deeper than widely expected, the budget offices of the White House and Congress agreed in separate updates on Tuesday.

The Obama administration’s Office of Management and Budget raised its 10-year tally of deficits expected through 2019 to $9.05 trillion, nearly $2 trillion more than it projected in February. That would represent 5.1 percent of the economy’s estimated gross domestic product for the decade, a higher level than is generally considered healthy.

The Congressional Budget Office, which unlike the administration did not account for the president’s policy proposals in its latest report, increased its projection of deficits over the next decade. Absent any changes in law, it said the deficit would rise to $7.1 trillion, from $4.4 trillion in March.

The C.B.O. did analyze the president’s budget in June and concluded his proposed tax cuts and spending would push deficits through 2019 above $9 trillion. While the administration now agrees with that figure, technical data in the new C.B.O. report suggests that if it were to review the Obama budget now, it would project deficits through 2019 above $10 trillion, analysts speculated.

Anticipating that the deficit figures will stoke the debate over the costs of Mr. Obama’s effort to overhaul health care, the administration was quick to say that much of the projected deficit was a legacy of the Bush administration and that the Obama administration was committed to restoring budget discipline when the economy recovers.

“Over all, it underscores the dire fiscal situation that we inherited and the need for serious steps to put our nation back on a sustainable fiscal path,” Peter R. Orszag, the president’s budget director, wrote on his agency’s Web site.

As the president has argued before, Mr. Orszag said that rising deficits make an overhaul of the health care system essential, because the government’s ballooning costs for Medicare and Medicaid are “the key driver of our long-term deficits.”

Congressional Democrats echoed that argument in statements reacting to the budget reports. But Republicans concluded otherwise.

“While the U.S. health care system does need to be reformed, we cannot ignore the fiscal realities of our situation,” Senator Judd Gregg of New Hampshire, the senior Republican on the Senate Budget Committee, said in a statement. “We must proceed with extreme caution before putting in place a huge and costly new program that will threaten our economy and the future of our children,” he added.

The budget updates from the White House and Congress, required each summer by law, incorporate economic data from last winter that turned out to be worse than either public or private forecasters expected as the year began, and also reflect the costs since then of spending and tax cuts to stimulate the economy and bail out the financial, auto and housing sectors.

Amid signs that the downturn has hit bottom and a slow recovery was under way, one lagging indicator troubles Democrats. The administration now projects that while the economy will return to growth later this year, though more slowly than it forecast in February, the unemployment rate will top 10 percent before employers start rehiring. That would be up from 9.4 percent in July, and a sharp jump from the 8 percent that the administration forecast earlier.

The relative good news was that the administration and Congress’s budget office reduced their projected deficits for the current fiscal year that ends Sept. 30.

Each agency now says that the fiscal 2009 deficit will reach $1.6 trillion, or 11.2 percent of G.D.P., the highest level since World War II. Previously the administration projected $1.8 trillion, or nearly 13 percent of G.D.P.; the Congressional office had projected $1.7 trillion.

The reduction for just this year is largely because of lower-than-expected costs for rescuing financial institutions and because some banks repaid money from the $700 billion bailout program that began in the last months of the Bush administration.

When Mr. Obama took office, his budget office projected it had inherited a deficit for 2009 of $1.3 trillion; the C.B.O. estimated $1.2 trillion.

Since then, the administration and Democratic-controlled Congress have enacted a $787 billion stimulus package, though less than half of that will be disbursed this fiscal year, as well as supplemental spending for the wars in Iraq and Afghanistan and bailouts for two automakers.

Also, the recession has reduced anticipated revenue from taxpayers, and increased spending for safety-net programs like jobless benefits and food stamps.

The budget reports underscored another factor that increasingly is driving up deficits: the cost of interest on the expanding federal debt, which is the accumulation of all annual deficits. The debt, which was 33 percent of the G.D.P. when the decade began, would reach 68 percent by 2019.

The House Republican leader, Representative John A. Boehner of Ohio, said in a statement, “the Democrats’ out-of-control spending binge is burying our children and grandchildren under a mountain of unsustainable debt.”

Administration officials countered that they were restoring pay-as-you-go budget rules that Republicans had shelved when they were in power, though Democrats would exempt major items. Democrats also said that while they are trying to offset the costs of health care changes, Republicans in the Bush years cut taxes, waged wars and created a Medicare drug benefit, all by deficit financing.

“It’s fairly clear that responsibility for these numbers doesn’t lie with Barack Obama but with the policies that were in place before him,” said Stan Collender, a longtime budget analyst at the consulting firm Qorvis Communications. He said either Mr. Bush or Senator John McCain, Mr. Obama’s Republican rival in 2008, would have increased the deficit comparably this year with more war and stimulus spending.

But, he added, “regardless of who’s to blame, it’s undeniably Barack Obama’s problem now.”

The administration, with backing from many economists, has said it would not try to cut the short-term deficits until the economy recovers enough that businesses and consumers resume their spending and investment. But Mr. Orszag said the administration, in next year’s budget, would propose savings other than in health care to arrest long-term deficits.

His office’s budget report also said that “the president is committed to addressing the shortfall in the Social Security system.”

BB&T buys Colonial bank; 4 other banks fail

Southern regional bank Colonial BancGroup sees rival grab its branches and deposits.

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By Chris Isidore and Julianne Pepitone, CNNMoney.com writers

Last Updated: August 15, 2009: 12:11 AM ET

DID YOUR BANK FAIL?

• For more information visit www.fdic.gov
• Don’t panic – your savings are insured
• Keep paying your loans – the terms remain the same.
• The FDIC will notify you by mail about your accounts/loans.
• Contact the FDIC with any questions until further notice
• If your bank is purchased, you will be contacted by your new bank.

NEW YORK (CNNMoney.com) -- Troubled Colonial BancGroup will be bought by rival BB&T Friday, the government said after state regulators closed the bank whose assets had been frozen by a federal judge.

The Montgomery, Ala., bank, which has 346 branches spread across Florida, Alabama, Georgia, Nevada, and Texas, is the sixth largest bank failure in U.S. history and by far the largest failure of 2009.

With $25 billion in assets and $20 billion in deposits, Colonial is 100 times larger than the typical bank to have failed this year.

BB&T (BBT, Fortune 500) will buy $22 billion of Colonial's assets, as well as its deposits and branches, leaving the remaining assets in the hands of the Federal Deposit Insurance Corp.

BB&T, based in Winston-Salem, N.C., is also a regional banking power, with 1,500 branches across the Southeast. It is also a major mortgage lender.

Most customers of Colonial should not be affected by the closing. The FDIC, the federal agency that has protected bank deposits since the Great Depression, will guarantee account balances up to $250,000.

But home buyers and those who want to refinance their mortgages could end up paying somewhat higher rates, even if they have never heard of Colonial, said Guy Cecala, publisher of trade publication Inside Mortgage Finance.

Cecala said Colonial was a significant player in the sector of the business known as "mortgage warehouse" lending, which provides financing needed by mortgage brokers and non-bank lenders to make home loans.

"The more firms like this that get out, the more dependent we get on large banks, and less competition there is. That's never a good thing," he said. Warehouse lending used to be a huge source of funds for home loans, according to Cecala, but the mortgage defaults and declining home prices of recent years has decimated the business.

"The warehouse lending market is now so fragile and so small, it doesn't help when we lose anybody," he said. "We have only a cup of water where we used to have a bucket of water."

Trust fund hit: The failure of Colonial is another blow to the FDIC trust fund, which has had to cover 77 bank failures so far in 2009 -- including four more late Friday (see below).

The fund took a $35.1 billion hit in 2008, and an additional $4.3 billion decline in the first quarter of this year, leaving it with assets of only $13 billion as of March 31. But most of last year's decline was due to $25 billion the agency set aside to cover future losses.

"The past 18 months have been a very trying period in the financial services arena," said FDIC Chairman Sheila Bair, in the Colonial failure release. "Our industry funded reserves have covered all losses to date. In fact, losses from today's failures are lower than had been projected.

Little more than a year ago, bank failures were relatively rare, with only four occurring in the first six months of last year. The collapse of IndyMac, a major mortgage lender, in July 2008, signaled a rash of failures to follow. IndyMac cost the FDIC about $10.7 billion by itself, and is the most expensive failure in history.

Colonial will likely be one of the most expensive bank failures, according to Chip MacDonald, a banking lawyer at Jones Day, given its active position in mortgage warehouse lending across the Southeast.

The FDIC said Colonial's closing will cost the Deposit Insurance Fund $2.8 billion. "That's a significant share of the FDIC fund," he said.

It is now a rare Friday night that the agency does not seize the assets of a newly failed bank. And the number of banks judged as troubled has soared to 305 as of March 31, up from only 90 a year earlier. Those 305 problem banks on the FDIC's confidential list have combined assets of $220 billion.

The trust fund that covers the deposits is paid by banks, and the weaker banks have seen those premiums rise about 14% in the last year. The agency has also announced a special one-time assessment on bank assets that will raise $5.6 billion for the fund this September. But those funds will come from money that the banks will not lend out to businesses and consumers in hopes of reviving the economy.

Legal problems: MacDonald said that Colonial is also unusual because of the allegations of criminal wrongdoing at the bank.

Colonial disclosed on Aug. 4 that federal agents had executed a search warrant at its mortgage warehouse lending offices in Orlando, Fla. It also had been forced to sign a cease and desist order with the Federal Reserve and regulators at the end of last month related to its accounting practices and recognition of losses, which limited its abilities to make dividends or other payments to investors.

The agents who searched its offices came from the Special Inspector General for the Troubled Asset Relief Program, even though Colonial never received TARP funds.

Colonial applied for TARP assistance but had been told it needed to be able raise an additional $300 million in private capital to be eligible for the federal assistance. On March 31 Colonial announced it had found such an investor in Taylor, Bean & Whitaker Mortgage Co., a major non-bank mortgage lender based in Florida. But that deal collapsed, and TBW halted operations on Aug. 5 as its offices were also searched by federal agents.

The bank had issued a statement to investors in November saying it had applied for TARP and had no reason to believe its application was being processed through the normal channels. After it later disclosed the need to raise the additional $300 million in capital to get TARP, it was hit by a shareholder suit.

Colonial could end up as the second-most expensive bank failure, according to Chip MacDonald, a banking lawyer at Jones Day, given its active position in mortgage warehouse lending across the Southeast.

"It's probably going to be cheaper than IndyMac, but my guess is it could be $5 billion to $7 billion," he said. "That's a significant share of the FDIC fund."

The sale of Colonial to BB&T also comes a day after U.S. District Judge Adalberto Jordan ruled in favor of Bank of America (BAC, Fortune 500), which had requested a temporary restraining order to keep Colonial from liquidating or transferring assets worth $1 billion.

"Viewing Colonial's contractual breach in conjunction with the fact that Colonial is on the brink of collapse and is suspected of criminal accounting irregularities, the potential for immediate substantial injury to Bank of America is clear," the judge said in his order.

The lawsuit that prompted the order was filed by Bank of America. It involved more than 6,000 mortgages issued by its subsidiary and held in trust by Colonial. According to the motion, Bank of America is owed more than $1 billion in assets, but Colonial had failed to pay the amount owed.

Last month, the bank said in a statement that it had "substantial doubt about Colonial's ability to continue" due to uncertainties about its ability to increase its capital levels.

Shares of Colonial (CNB), which fell 80% in 2009, were not trading Friday. But shares of BB&T (BBT, Fortune 500) gained nearly 9% on the report of the acquisition.

Four other banks fail: Late Friday, the FDIC also said that four other banks had failed. Outside of Colonial, the largest collapse of the day was Community Bank of Nevada in Las Vegas, which went under with assets of $1.52 billion and total deposits of about $1.38 billion. Its failure will cost the FDIC's Deposit Insurance Fund an estimated $781.5 million

The Nevada bank did not find a buyer, leaving the FDIC in control of its assets. The agency immediately created a new institution, the Deposit Insurance National Bank of Las Vegas, which will remain open for approximately 30 days to allow depositors access to their insured deposits and give them time to open accounts at other insured institutions. Banking activities, such as direct deposit, writing checks, and using ATM and debit cards, will continue normally through the transition.

Dwelling House Savings and Loan Association in Pittsburgh closed its door for the last time Friday. The FDIC said PNC Bank will assume control of its assets. It was the first Pennsylvania bank to fail this year.

As of March 31, Dwelling House held assets worth $13.4 million and total deposits of $13.8 million. The FDIC estimates that this closure will cost the its insurance fund $6.8 million.

MidFirst Bank of Oklahoma City assumed all deposits of two failed Arizona banks, Union Bank in Gilbert and Community Bank of Arizona in Phoenix. Community Bank of Arizona had assets of $158.5 million and total deposits of approximately $143.8 million. Union Bank had assets of $124 million and total deposits of approximately $112 million.

The two failures, the first in Arizona this year, will together cost the FDIC's insurance fund around $86.5 million.

The 77 bank failures so far in 2009 has more than tripled last year's total of 25.

AP NewsBreak: US bought oil stolen from Mexico

MEXICO CITY (AP) -- U.S. refineries bought millions of dollars worth of oil stolen from Mexican government pipelines and smuggled across the border, the U.S. Justice Department told The Associated Press -- illegal operations now led by Mexican drug cartels expanding their reach.

Criminals -- mostly drug gangs -- tap remote pipelines, sometimes building pipelines of their own, to siphon off hundreds of millions of dollars worth of oil each year, the Mexican oil monopoly said. At least one U.S. oil executive has pleaded guilty to conspiracy in such a deal.

On Tuesday, the U.S. Homeland Security department is scheduled to return $2.4 million to Mexico's tax administration, the first batch of money seized during a binational investigation into smuggled oil that authorities expect to lead to more arrests and seizures.

"The United States is working with the Mexican government on the theft of oil," said Nancy Herrera, spokeswoman for the U.S. Attorney's office in Houston. "It's an ongoing investigation, with one indictment so far."

In that case, Donald Schroeder, president of Houston-based Trammo Petroleum, is scheduled to be sentenced in December after pleading guilty in May.

In a $2 million scheme, Herrera said, Schroeder purchased stolen Mexican oil that had been brought across the border in trucks and barges and sold it to various U.S. refineries, which she did not identify. Trammo's tiny firm profited about $150,000 in the scheme, she said.

Schroeder's attorneys said in an e-mail that neither they nor their client would respond to AP's requests for comment.

Bill Holbrook, spokesman for the National Petrochemical & Refiners Association, said a single indictment against a small company should not be used to smear the reputation of the entire U.S. oil industry, "and is not indicative of how domestic refiners operate."

But in Mexico, federal police commissioner Rodrigo Esparza said the Zetas, a fierce drug gang aligned with the Gulf cartel, used false import documents to smuggle at least $46 million worth of oil in tankers to unnamed U.S. refineries.

Mexico froze 149 bank accounts this year in connection with that crime, which continues at a record rate, according to Mexico's state oil monopoly Petroleos Mexicanos, or Pemex.

In a surprising public acknowledgment, Mexican President Felipe Calderon said last week that drug cartels have extended their operations into the theft of oil, Mexico's leading source of foreign income which finances about 40 percent of the national budget.

"These are Mexican resources, and we do not have to sit back or turn a blind eye," Calderon said. "This is our national heritage and we must defend it."

Highly sophisticated thieves using Pemex equipment "are basically working day and night, seeing how they can penetrate our infrastructure," said Pemex spokesman Carlos Ramirez. The thieves, operating in remote parts of the country, have even built tunnels and their own pipelines to siphon off the product, he said.

How much of the stolen oil is crossing into the U.S., and how much of the theft is at the hands of cartels? So far, nobody knows.

"These questions are really the center point of all of this," Ramirez said.

He said cartels in northern Mexico are responsible for most of the theft, though he said there may well be internal operatives at Pemex stealing as well. Last week, police raided Pemex offices looking for insider misconduct.

Trammo, the sole company named in court records so far, is dwarfed by any refiner most people have heard of. It sells some 2.1 million barrels a year.

Major refiners such as San Antonio-based Valero Energy can produce more than that in a single day, buying crude from tankers or pipelines, and none has been implicated in buying stolen oil.

"It is Exxon Mobil's policy to always obey relevant laws, rules and regulations everywhere we operate," said spokesman Kevin Allexon. Shell Oil Co. said it abides by all laws.

Various kinds of petroleum products, including gasoline, are being stolen and sold to gas stations and factories in Mexico, said Ramirez, adding that service stations in at least two states have been shut down recently for selling stolen gas.

The thefts are a devastating blow to Pemex, which saw production fall 7.5 percent in the first half of the year.

So far this year, Pemex is aware of 190 different thefts, almost half in the Gulf state of Veracruz. Ramirez said Pemex is using hidden cameras, extra guards and additional investigators to catch the thieves, but the problem is still spreading: So far this year, oil theft is up 10 percent, and have been confirmed in 19 states, up from 13 in 2008.

And oil theft experts say that just like drugs, the crimes will be tough to stop as long as there's money to be made.

"U.S. refineries willing to buy stolen crude don't care where it comes from. Once the product is at their doorstep, the deal is done, and they can pay pennies on the dollar without taking the risk of getting it across the border," said Kent Chrisman, director for global security with Oklahoma City-based Devon Energy.

Chrisman, a former Secret Service agent, recently teamed up with Texas law enforcement agents to bust a ring of thieves in that state.

Oil theft in general is a relatively new problem, Chrisman said, "but we've seen a big spike in recent years because oil prices went up. Every year it seems to get worse and worse. It's a profitable business."