Ranieri Hit by Credit Crunch

Lewis Ranieri, one of the pioneers behind mortgage-backed securities, is the latest casualty of the credit crunch.

Franklin Bank Corp., formed by Ranieri in 2002, was taken over by the Federal Deposit Insurance Corp., and its deposits handed over to Prosperity Bank, the FDIC said in an e-mailed statement yesterday. The failed bank's 46 offices will open as branches of Prosperity, the FDIC said.

Ranieri, 61, a former Salomon Brothers vice chairman, formed Franklin in 2002 and over the next four years expanded the bank's lending operations. While Franklin avoided the subprime mortgage market, his firm was burned by loans to builders in California, Arizona, Florida and Michigan, where foreclosures are among the highest in the U.S. In November 2006 and again a year later, he predicted the market would get worse.

"The subprime crisis has spread to other sectors of the housing market,'' Ranieri said in a conference call a year ago. It's ``having a significant effect on housing and builders."