Investors Circle Ailing Banks, Fed Sets Limits

Don Ipock for The New York Times - First National, with its boarded-up second story and $17 million in assets, is worth about a third of what its owner, a New York investor, paid for an Upper East Side town house in 2006. It is an unlikely launching pad for a new American banking empire.










No one seems to want to own a business in this dusty, windswept corner of rural America, population 370, with its crumbling sidewalks and boarded-up storefronts.

Except, that is, for J. Christopher Flowers, a media-shy New York billionaire who last year bought the First National Bank of Cainesville, one of the United States’ smallest national banks. Mr. Flowers, a private equity manager, has no particular love for rural Missouri; in fact, he has never set foot in Cainsville. Rather, he wants to use the national bank charter he picked up in this farm town to go on a nationwide buying spree.

Vultures do serve a purpose. He is going in where no one else wants to go, because there are opportunities to make money, without question.

With that charter in hand, Mr. Flowers plans to take over a handful of large struggling banks, casualties of the economic crisis. In some cases, he hopes, the federal government will help.

Yet he is counting on the government's help, not exactly the swashbuckling entrepreneur going in alone, taking risks, betting on his own savvy.

But Mr. Flowers, whose investments in banks overseas have made him one of the richest men in America, has run into a major obstacle in the United States: the Federal Reserve, and its very notion of what a bank should be.

Good question.