Advanta Files for Protection, Bank May Face Takeover

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Source: bloomberg

Nov. 9 (Bloomberg) -- Advanta Corp., the small-business credit-card issuer that cut off almost 1 million accounts as defaults soared, filed for bankruptcy and said its undercapitalized banking unit may be turned over to regulators.

The lender sought court protection from creditors because Advanta won’t be able to meet its obligations even with almost $100 million in cash and equivalents on hand, the Spring House, Pennsylvania-based company said yesterday in a statement. While the firm’s bank isn’t covered by the filing, the unit may be put into a receivership run by the Federal Deposit Insurance Corp., the statement said.

“The economic debacle over the last two years devastated Advanta’s small-business customers and Advanta itself,” Chief Executive Officer Dennis Alter said in the statement. He’s waiving his salary and bonus, the statement said.

Advanta, the 15th-biggest card issuer by purchase volume last year, is the industry’s biggest to fail since the recession began. The company said in August it would dismiss about half the staff, leaving fewer than 200, after write-offs more than doubled in June to 56.95 percent. That was five times the industry average as measured by Fitch Ratings for that month, when write-offs at all card companies climbed to 10.79 percent.

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Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=aGn6SxlHfgwE&pos=7

[Angry Dragon]

1. So it is okay

to give money to corporations too big to fail and then let the smaller ones fail??

Sounds like a plan to me.

Everyone needs to remember that Bush was in charge when this was happening. Remind the republicans this.

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2. they obviously didn't bribe the right people

well, they probably bribed the republicans, who aren't in a position to save them now.

i'm no fan of advanta, but am definitely concerned about both cit and advanta going under, which means BAAAAAD news for small businesses in need of credit.

[DJ13]

5. Thats the plan

The TBTF banks end up getting even bigger taking over the assets of the smaller banks.

Think of it as a business plan where they can grow with little expense, and no risk because the government backstops the bad debt they acquire.

[Dr.Phool]

3. Advanta wasn't the tightest ship on the sea of finance.

Ever wonder how dogs get credit cards. Outfits like Advanta.

Back in '95, when I got my first computer, During Windows setup, he entered my company name as "Murder Inc." I started getting mail to this non-existent company, and then Advanta started sending credit card solicitations to it. They even had a nice, pretty picture of what the card would look like.

I wondered if someone would actually send out a credit card to Murder Incorporated. I filled out the application, listing zero assets, zero sales and zero income. Sure enough, here came my Advanta Mastercard for Murder Inc., with a $17,000 credit limit.

The first place I used it was in a casino restaurant in Atlantic City.

And, they wonder about defaults? At least my balance was zero when they closed the accounts.

[WriteDown]

4. On the other hand....

My dog was able to buy me a nice pair of gloves last year with his credit card. :)

[Angry Dragon]

7. You lucky dog

[Angry Dragon]

6. I do not get the feeling that the small ones

tried to bribe anyone. I think they were the ones that got caught with the most undesirable junk stuff(forgot the name for these).

I question whether we have the right person overseeing the accountability of the bank bailout. Transparency is not there as we were told it would be.

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9. person, yes. powers, no.

a good regulator needs regulations with teeth.
THAT is what we lack.

[FarCenter]

8. A lender cant stay in business by losing 57 cents of every dollar lent.

The company said in August it would dismiss about half the staff, leaving fewer than 200, after write-offs more than doubled in June to 56.95 percent.