Gerald J. Ford made his reputation — and much of his fortune — buying up damaged banks and thrifts during the savings and loan crisis, fixing them, and selling them for top dollar.
Now, with the banking industry in the throes of its worst crisis since those days, the billionaire investor from Texas is looking to repeat history.
Mr. Ford is the chairman of a newly formed private-equity firm, Flexpoint Ford LLC, that has raised nearly $1.3 billion for the primary purpose of buying hobbled banks and thrifts. With the economy in peril, there is no shortage of institutions that need to be rescued, Mr. Ford said.
"I have been in the business for a long period of time, and I would say it is more troublesome than I have ever seen it," he said in an interview Tuesday. "But that begets some opportunities."
In fact, he said he suspects "the opportunities will outlast the money."
Many banks across the country — especially in areas where real estate prices escalated and then sharply fell — need capital to cushion against further loan losses but are having trouble raising it.
William Ludke, a partner in the Houston office of Bracewell & Giuliani LLP, said Mr. Ford is well known in banking circles and "is going to get some calls" when word gets out that he and his investment partners have more than $1 billion to spend.
Over the last 35 years, Mr. Ford has built three banking companies through about 40 acquisitions. His last major acquisition was in 1994, when he led a group that bought the $15.5 billion-asset First Nationwide Bank, a San Francisco savings and loan. Over the next four years, First Nationwide merged with four other thrifts, including Golden State Bancorp, which it bought in 1998 before taking its name. In 2002 the $60 billion-asset Golden State was sold to Citigroup Inc. for about $5.2 billion.
Mr. Ford, 64, said a key difference between today's financial crisis and that of the late 1980s and early '90s is that there are fewer banks healthy enough to roll up weaker banks. With many of the most acquisitive banks in recent years sorting through their own credit-quality problems, Mr. Ford said he expects more troubled banks to end up in the hands of private-equity investors this time around.
Still, some would-be investors are hesitant to get involved in banking even though they see opportunities. They consider themselves too inexperienced to analyze such a complex industry on their own, observers said.
Mr. Ford's new venture may be an option for them because Flexpoint has the expertise to do the required analysis, and it intends to look for other private-equity partners to contribute cash on some bigger deals.
"It sure helps the industry when you have a guy who has been through more than one down cycle and has enough confidence in the industry to commit this kind of capital to it," said Sandford "Sandy" Brown, a partner in the Dallas office of Bracewell & Giuliani.
Flexpoint has two funds: a larger one with $800 million to invest, of which about two-thirds is intended for financial institutions and one-third for health care; and a smaller fund of $480 million, which would invest solely in financial institutions and likely register as a bank holding company, said Donald J. Edwards, Flexpoint chief executive.
Mr. Edwards said the funds would invest a minimum of $25 million and a maximum of $350 million in each bank. Potential targets would have at least $1 billion of assets and a stable base of core deposits, he said.
Recent changes to bank ownership rules by the Federal Reserve Board mean that the larger fund could take bigger stakes in companies without registering as a bank holding company, he said. The smaller fund would buy a handful of community banks, with a goal of rolling them up into a roughly $3 billion-asset company, Mr. Edwards said.
"We will look at healthy banks, but right now we are spending most of our time figuring out where we can invest in banks that need capital and need help," he said. "Most banks are troubled now and that plays into Jerry's strengths. He's recapitalized many banks in his career."
Flexpoint intends to deploy the entire $1.3 billion within roughly three years. Mr. Ford would not say how long the firm might hold on to its investments, but said he and his partners do not envision changing a strategy that has worked well for them in the past. "We keep them, run them, and then at some point in time if there is a better owner, we [sell] them," he said.