U.S. bank owned by chair of TAU Board of Governors goes bust

U.S. bank regulators shut down Ohio bank AmTrust Bank Friday night. The bank is owned by the family of Robert (Bobby) Goldberg, who is also the chairman of the Board of Governors of Tel Aviv University.

AmTrust has been owned by the Goldberg family since the 1960s and is the fourth largest U.S. bank to fail so far this year.

The Federal Deposit Insurance Corp. took over AmTrust, which is based in Cleveland and has about $12 billion in assets and $8 billion in deposits. The FDIC said the takeover and bailout was expected to cost it about $2 billion.

Earlier last week the bank's parent, AmTrust Financial Corporation, filed for Chapter 11 bankruptcy, leaving the bank for the FDIC to take over.

Goldberg was at the center of a controversy at Tel Aviv University as he led a fight by governors to oust the head of the university's Executive Council, Leora Meridor. A compromise was reached only last week, to scale back some some of the powers of the executive council and give the Board of Governors more say.

AmTrust has 66 branches in Ohio, Florida and Arizona. New York Community Bank has assumed all the operations and deposits of AmTrust.

The bank was closed by the Office of Thrift Supervision, which named the FDIC as receiver. No advance notice was given to the public, as is usual in such cases.

AmTrust was founded in 1889 as Ohio Savings Bank. The bank had been in financial trouble for over a year due to problematic mortgage and construction loans, and has lost about a billion dollars since the second quarter of 2008.

The FDIC also closed three banks in Georgia Friday and two others, bringing to 130 the number of U.S. bank failures this year, amid a climate of economic struggle and deepening loan defaults.

This is the largest number of U.S. bank failures since 1992. In 2008, 25 banks were closed, and only three were shut down in 2007.

The other five banks closed on Friday had assets of less than $1 billion, and the FDIC estimates it will cost about $300 million to salvage them. They are Benchmark Bank of Illinois, Greater Atlantic Bank of Virginia and the three banks in Georgia - Tattnall Bank, Buckhead Community Bank and First Security National Bank.

This year's bank failures have cost the FDIC more than $28 billion so far this year. The insurer expects failed banks to cost it some $100 billion from 2009 through 2013. The FDIC has ordered banks to prepay three years of industry assessments, or about $45 billion, to give it cash to handle the failures.

Goldberg is a past chairman of the Jewish Community Federation of Cleveland and former chairman of the United Jewish Communities. He also served as a member of the Board of Governors of the Jewish Agency for Israel.