It is a wonderful news for job market. Everything is fine. half the population are doing their best to fail the bank while the other half are doing their best to clean the mess. Viola, full employment. Let the good time roll.
Many Regional and Community banks are leveraged 200%, 300%, and 400% of assets in CRE and other real estate related loans. Highest concentration in history.
Only 150 bank failures over the next three years. How about 150 bank failures by the end of the summer....maybe in FL and CA alone.
By the time this is over we could be down to 10 National banks....how many failures would that be?????????????
Purchased Veribanc late last Fall and reviewed; since my bank wasn't in their regional ratings for best banks was on cusp of moving to one that was.
Then found out - here - about FDIC reports online and did final review. My original bank was actually better capitalized and with much smaller exposure than what I was going to.
Just read someone today, believe on Mish, who said that it's no longer the statement that matters, but the balance sheet.
This raises a real government/regulatory issue. If the FDIC is gearing up for bank failures--and every indication says they are, what do they know that we don't know? If the level of fear in the government is such that they actually acknowledge there's a problem, who is going over what information? Why is this information not freely available? Which banks (there's even a number: 150) are going to go belly up? Is that the only number of banks, and if so, why? If we get into a "nobody could have foreseen this" moment, why should we think that there are only 150 banks on the blocks? Why not 250, or 600? And who exactly, came up with that number? Of these 150, how many are the size, scope, and market cap of, say, Citibank? Now that would make news.
HIGHLY recommend you read the Economist "Wall Street" on news stands Wed or Thurs. Bloody good...if you want to see eversions here is a link...DO READ the comments once you clicked to the stories!
FFDIC/others,
What do these FDIC agents do? Do they sit and wait for the banks to start collapsing or do they start taking preemptive steps to avoid a failure (merger)?
Just read someone today, believe on Mish, who said that it's no longer the statement that matters, but the balance sheet.
Cashflow Statement are better yet though I struggle with understanding any of the statements from financial companies - too weird for a mfg guy like me.
If we get into a "nobody could have foreseen this" moment, why should we think that there are only 150 banks on the blocks? Why not 250, or 600? And who exactly, came up with that number? Of these 150, how many are the size, scope, and market cap of, say, Citibank? Now that would make news.
I'm sorry - 150 is all this administration has budgeted for bank failures next year so that's all they can have for now. The other banks will have to wait. [/sarcasm]
Regional banks in Florida with heavy loans in CRE are safe. They are going to get at least 10% of their money back and that`s a lot of money. Good for them!
Just take a gander at J.P. Morgan's leverage ($1.6 trillion in assets backstopped by $0.1 trillion in equity), note that they have $0.5 trillion in consumer loans outstanding, are party to $77 trillion in derivative contracts (before BS), and you see that they will be toast within one-to-two years, at most.
Repeat the exercise for BofA, Golden Schmucks, et al. All results the same: extraordinary leverage on falling assets.
everything is fine. the fed auctions $75B on Thursday for the TSLF, in exchange for MBS. Then we're off to the races for the quarter end dress up! bank failures, pssshhaww!
Ah, we need a wager board, to track awgee's boasts and mine.
C'mon, CR, give us a wager board!
We have one here at home: a whiteboard, in which my wife, kids, and I noted prices for homes, gold, S&P, and certain stocks, and made our small bets on what they will be in Dec.
OT: gold is telling us to be wary of predicting that we're past the mid-point of anything. Just a very few trading days after commodity prices were "gutted" it is back to $950. That is a bad sign I think. The bounce they engineered kicked the shorts out of the financials and etfs, pushed the dollar up above 100 yen again and knocked down oil and wheat, so gold should have stayed down for at least a few weeks to a few months of bad news and a financial failure -- but here it is, reformed from molten blobs like the terminator. A lot of money must be concerned about another shoe drop.
hmmmm. that could be material information containing a pretty strong signal. is increasing bankruptcy staff about 50% a major change for that division? anybody know what staff levels in that department have been for the past years so we can compare the new level to the old level? is there some other innocuous reason for the increase? how many BKs can each employee handle, on average, per year? if we can estimate that we can get an idea what the dept is gearing up to handle. that doesn't guarantee a huge increase in BKs though....the employees may sit idle or operate at far below their capacity for years to come. we'll see. but if anyone has more color on this situation please chime in. thanks.
Read most of the articles and then went to the comments as you suggested. Were you principally interested in sharing the Institutional Risk article linked with a comment?
XXXX DRUDGE REPORT XXXXX FRI NOV 09, 2001 11:43:35 ET XXXXX
Curious confusion swirls around former first daughter Chelsea Clinton's upcoming essay for TALK magazine describing exactly where she was on Terror Day in New York City.
Breaking her media silence once and for all -- Chelsea writes in great detail about her personal experience on the morning of September 11.
But, the DRUDGE REPORT has learned, her account now sharply conflicts with her mother's version of Chelsea's New York adventure.
Appearing on NBC's DATELINE, Sen. Hillary Clinton told how daughter Chelsea cheated death on that fateful morning.
"She had gone on what she thought would be a great jog," Hillary Clinton explained. "She was going down to Battery Park, she was going to go around the towers. She was going to get a cup of coffee and - that's when the plane hit!"
Hillary's dramatic story about her daughter's close call with the Twin Towers became a media sensation.
"At that moment, she was not just a Senator, but a concerned parent," TODAY show's Katie Couric told viewers.
But now, in her own words, Chelsea does not mention a jog. Does not mention her plans to go to Battery Park, around the towers -- only to be stopped by a coffee break.
In fact, Chelsea writes that she was at her friend's apartment on Park Avenue South -- miles from Ground Zero -- when she learned of the attacks!
"I stared senselessly at the television," Chelsea writes.
Calls to Senator Clinton went unreturned on Friday.
Filed By Matt Drudge
Reports are moved when circumstances warrant DRUDGE REPORT 2010® for updates
(c)DRUDGE REPORT 2001
Can I assume that most local and regional banks passed through virtually all of their residential mortgages to the money center banks and didn't keep any equity tranche MBS, so will be failing because of their commercial exposure? If that's the case, I imagine it won't start to get really hairy for 6-9 months at least, but I'm asking, not saying. Anyone?
Have you seen me in the words of Bill "that woman" Clinton? George "WMD" Bush? No. You have not and will not see me for awhile."
-Credibility
Everyone in this country is responsible for allowing the most important leaders in the U.S. government to lie straight to our faces about practically everything. At the same time we believed their lies, we diminutively let these "leaders" remain completely unresponsive to our own words and desires.
Balance sheets are as easy to cook as income statements... a lot of assets are mark to fantasy unless they trade heavily - even for industrial companies their asset side is a guess at best.
But the money counts pretty cleanly - you either have it or you don't. A lot of these companies were train wrecks on their cashflow statements LONG before it was ever apparent & admitted on the balance sheets or income statements... borrowing cash like crazy to meet current requirements because the assets were 'temporarily illiquid'.
I don't say ignore balance sheets - just don't trust them. Cash flow is the hardest to cheat - if its bad the others are too, just not admitted. If it isn't bad the company may still be eventually be in trouble - but companies don't go broke in the short run if they are full of cash - its when the cash starts evaporating that the balance sheet & income issues become 'noticed'.
Everyone in this country is responsible for allowing the most important leaders in the U.S. government to lie straight to our faces about practically everything. At the same time we believed their lies, we diminutively let these "leaders" remain completely unresponsive to our own words and desires.
In the words of Chicagoans 'everywhere'... who cares as long as the garbage gets picked up & the pot holes get fixed.
The mistake the current crop of pols is forgetting - to pick up the garbage & patch the pot holes.
When L. William "Bill" Seidman was FDIC Chairman he often said this division known as "DRR" within FDIC should always maintain a staff compliment of at least 400 full time employees mostly in Dallas. Seidman said that DRR was like a Fire Department - trained and staffed to respond to bank failures at a moment's notice. After Seidman left the FDIC the FDIC continued RIFs and this division in Dallas has only about 220 employees to handle bank failures nationwide and many of those do not handle bank closings. As many of you know in 2005 I along with more than 50 other FDIC DRR employees were hit with a RIF after working 15-19 years for FDIC during the 80s banking & S&L crisis. About fifty of us all over fifty years of age in 2005 promptly filed an age discrimination suit which was certified by a DC court (Judge Urbina) as a class action. Discovery has just been completed. The FDIC elected to to depose former employees because it did not want additional information entered into the offical record. We expect that Judge Urbina will order mediation. A trial date at the earliest might be in September 2008 but I doubt that it will come that soon. The FDIC has said it will not negotiate until summary judgment. Below is a link to our 2005 Complaint. This 2005 should never have been conducted by the FDIC and we pray the DC court agrees. http://www.roselawyers.com/docs/amendedcomplaint.pdf
Agree assets are hard to value, but quality of assets is critical. The liabilities are usually pretty easy - deposits, loans.
Banks can attract deposits by raising rates for deposits, and have FDIC protection. They can also be de leveraging. A bank can have great cash flow and insolvent.
"not nearly enough" - On that note, dryfly, I'm extremely pessimistic that the Bush Administration is going to do anything to add to the FDIC's war chest or support any legislative moves to provide it with additional help, such as a RTC-like helpmate. They are too stuck on their ideological high horse to countenance the idea. This worries me because triage is always most effective in mitigating the damage if done early.
REBear - FDIC has various specialist. Some are investigators who sue directors of failed banks and investigate what caused the bank to fail. Some handle the asset side in liquidation. Some handle the claims for insured and uninsured depositors. And, some work with the examiners division to yes try and prevent failures or plan a merger with a healthy financial institution. You can review some of the job postings at fdic.gov to get an idea of some of the requirements. The jobs are pretty intense and nobody sits around much at least not for long. There are also a pack of lawyers both inside and outside counsel.
Barley writes:
HIGHLY recommend you read the Economist "Wall Street" on news stands Wed or Thurs. Bloody good...if you want to see eversions here is a link...DO READ the comments once you clicked to the stories!
tj&b, actually FDIC does have a legal department called Open Bank Enforcement where they prepare cease & desist orders, memorandums of understanding, civil money penalties and removal orders whereby bankers can be removed from office and prohibited for a lifetime from working for a fiancial institution again. These removals are made public by all the regulators with those powers and are available for your review at the internet sites for each banking regulator. However, the FDIC is understaffed and now overworked in this division as well.
Justin writes:
OT: gold is telling us to be wary of predicting that we're past the mid-point of anything. Just a very few trading days after commodity prices were "gutted" it is back to $950.
I'd be a lot more concerned about gold to fall further this weeks than any future bank failure.
O-Joe
The FDIC's chief operating officer John Bovenzi - quoted in CR's link to 'USAToday' received a large EOY 2005 bonus for the September 2005 RIF which eliminated my job and reduced FDIC's salary, benefit, and lease expenses. Bovenzi is quoted as saying "we want to make sure that we're prepared..."
I recently commented to my FDIC contact that, had the turf war between the OTS and the FDIC not existed and Superior Bank had been shut down sooner than the 10 years that the FDIC spent "monitoring" it, I may not not be in my current situation. I never received a reply...
Mike Dillon, I attended the sudden 2001 closing of Superior Bank in fact it was my first time in the Chicago area. I had to rush up there from Dallas. None of the regulators believed that the Pritzker family would walk away from their own bank but they did leaving the FDIC suddenly holding the bag. There are hundreds if not thousands of sore spots from Superior. As we often said at the FDIC, "We should write a book."
...the realization that they'll be hiring unemployed mortgage brokers
Interesting reaction - let's see what the FDIC requires for its Corporate Employee Program (not much work at the FDIC over the last decade, unlike the two preceding it). As noted from the site, 'New entry level employees will be appointed at the grade CG-7 as Financial Institution Specialists for a three-year excepted service internship, with potential conversion to a permanent Financial Institution Specialist position with the FDIC. -
Education-Based Requirements
Applicants who qualify for hire based on education must receive their degrees prior to initial appointment. ....
To qualify for the entry level on the basis of education, you must meet one of the following two requirements:
Completion of all requirements for one full academic year of graduate education. This education must include major study in accounting, banking, business administration, commercial or banking law, economics, finance, marketing, or other related fields. This graduate education must include at least 24 semester hours in business administration, accounting, finance, marketing, or economics with at least six semester hours of accounting (these six semester hours of accounting may have been earned at the undergraduate level),
OR
Completion of all requirements for a bachelors degree for which the major study is in accounting, banking, business administration, commercial or banking law, economics, finance, marketing, or other fields related to the position, which includes a minimum of 24 semester hours in business administration, finance, economics, marketing, or accounting subjects, with at least six semester hours in accounting with Superior Academic Achievement (SAA).
Does this sounds like your typical unemployed mortgage broker? And if you don't like education, here are the experience based qualifications-
'To qualify for a grade CG-7 Financial Institution Specialist job:
You must have one year of experience which demonstrated skill in gathering and analyzing financial data; interpreting balance sheets and income statements; and using a variety of software applications.... Examples of qualifying specialized experience include:
Work requiring a thorough knowledge and application of commercial accounting or auditing principles and practices (but less than full professional accounting knowledge) with a financial institution.
Examining or auditing such financial institutions as savings and loan associations, savings or commercial banking institutions or trust companies, farm credit associations, or Federal or State credit unions.
Professional accounting or auditing work that provided a broad knowledge of the application of accounting or auditing principles and practices.
Work that provided a thorough knowledge of Federal and State laws applicable to the type of financial institution involved (e.g., savings and loan associations, Bank for Cooperatives, savings or commercial banks, investment institutions, etc.), and of the operations and practices of such institutions.'
Still doesn't sound like a typical Californian unemployed mortgage broker.
Maybe a dawg can learn a new trick, and first read the information at FDIC: Careers at FDIC - Corporate Employee Program before simply giving another one of those well founded opinions, the sort which no one can refute to their owner's satisfaction.
But let's read a bit more -
'Career Advancement
New entry level employees will be appointed at the grade CG-7 as Financial Institution Specialists for a three-year excepted service internship, with potential conversion to a permanent Financial Institution Specialist position with the FDIC.
Employees who successfully complete the three-year internship and either finalize commissioning or demonstrate a high potential for successfully completing commissioning will be converted to permanent career appointments....
As part of the CEP, along with an examination commission, the FIS will acquire a certification in resolutions and receiverships (R&R). Upon commissioning and completion of the R&R certificate, employees are promoted to the CG-11. Following one year at the 11 level, and upon completion of a second certification of expertise in a specialization in risk, compliance or R&R areas, the Corporate Employee will be eligible for promotion to the CG-12 level, which is the full performance level for the Financial Institution Examiner position.'
Interesting - it only takes the FDIC 4 years to adequately train one Financial Institution Examiner. This doesn't remind me of mortgage brokers, it reminds me of the federal government, the one I grew up with in the 1970s, when a Republican administration was creating the Environmental Protection Agency and using price controls to battle inflation, followed by a Democratic Administration that battled inflation by appointing Volcker to the Fed and following Friedman when deregulating the airline and trucking industry. And where the actual people doing the actual work of government were generally competent professionals with solid educations.
I'll admit, most of them lacked the flair of the real go-getter types, who can play bridge while millions of their dollars disappear. And billions of other peoples' money.
Bank size should be limited via regulation. No single bank should be allowed to become To Big Too Fail. Banks could then be allowed to fail. A fairer, healthier system.
I don't think size is the proper metric, it should be complexity times size. Walmart is simple, large, and wouldn't endanger the system if it went toes up tomorrow. BSC's failure was deemed unacceptably dangerous.
Assets managed in nearly 10,000 hedge funds totaled $2.16 trillion as of Dec. 31, estimated researchers at Credit Agricole Structured Asset Management in a new report.
The Depository Trust & Clearing Corporation (DTCC) announced today it cleared and settled more than $1.86 quadrillion in securities transactions in 2007.
At the end of 2007, J.P. Morgans exposure totaled $77.2 trillion in notional value, exceeding that of any other commercial bank, while Bear Stearns had $13.4 trillion in notional value.
Granted, the combined total exposure if the acquisition goes through could amount to less than that, since derivatives involving the two banks themselves would be cancelled. And with over-the-counter derivatives totalling a notional $516 trillion at the end of June 2007, according to the Bank for International Settlements.
In a research report it published last week, Bear said its more than 5,000 derivative counterparties and more than 1,000 futures counterparties were among the reasons the Federal Reserve and Treasury Secretary Henry Paulson felt compelled to find a buyer for the bank rather than see it go belly-up. Counterparties to these contracts are mostly banks, but also include hedge funds and insurance companies.
Sen. Hillary Clinton wants Alan Greenspan on her high-level emergency group to deal with high-risk mortgages even though she admitted yesterday that she never understands what hes saying, a reference to Greenspans vaguely worded Fed speak that he used in his 18-year tenure as chairman of the Federal Reserve.
Just today Cees Bruggemans, chief economist at First National Bank in South Africa said in his online newsletter: "The US banking system is currently a slaughter house, where arriving cows are fearfully mooing as they are driven to the slaughter pens. Get the picture?"
He mentions some of the options for the "good guys" to do and remarks that they should be done:
"now and not after all the cows have been professionally sliced and diced like so many extinct derivatives.
So this is an endgame, in which the good guys are supposed to do the right things, and do it timely."
Thanks for the great blog! I really learn a lot and stand amazed.
Yes, Bush did not manage to totally destroy civil service. He did manage to appoint a huge pack of incompetents and crooks to leadership of agencies though.
What Are Pensions Worth?
First, employers had to put retiree benefits on the balance sheet. Soon they could be required to trot out the details of their plan assets in fair value.
Ralph Cramdown Can I assume that most local and regional banks passed through virtually all of their residential mortgages to the money center banks and didn't keep any equity tranche MBS, so will be failing because of their commercial exposure?
No. Most banks do have RE consumer portfolios. Home equity loans, HELOCs, etc. I've only run into one bank that did not do consumer RE lending, but they sold out on caution anyway because of their commercial tie-ins in the area.
Needless to say, the second lien losses in a declining home value market can be ferocious. It's one thing to have written a 100% mortgage on a home. If you foreclose, you may lose 30-40% on average as long as you aren't writing dingbat subprimes. Now imagine a portfolio of HELOCs in a down market. Your loss severity may be something like 80-90%.
The second line of losses in the current downturn will normally be small commercial on businesses that are related to consumer spending/mortgages. In places like some areas of Florida, there are huge drops in spending in dealerships for boats/cars, for example. I assume the same is true in areas of CA, AZ, etc.
Then there are expected C&D loan losses.
A huge amount of small commercial loans are actually secured by the borrower's homes. They are business purpose loans, so they do not show up in the consumer RE numbers, but they are secured by a home.
Imagine being into a building contractor for tools, truck, materials, operating cash, which line is secured by his home, in one of these areas in which the home market is deeply impacted. You've got loss of income (30-40%) plus loss of collateral value. You probably had title to vehicles, plus UCCs on tools and materials, plus the mortgage or DSD on the home. All of that collateral is depreciating in some of these boom-bust areas.
Almost nothing has been written about smaller banks' exposure to home equity, HELOCs and small commercial RE secured, but the potential losses at all but the most cautiously run banks are quite large and can take many banks out.
150 bank failures seems an underestimate. The estimates of actual losses on the housing market's downturn all seem woefully inadequate to me.
The lending environment has been so loose that better loans were hard to find. Unfortunately many financial institutions were competing with the non-bank financials, and ended up writing some ugly stuff. If they went for return they got into the higher risk seconds. If they went for safety they have low NIMs, and therefore are more sensitive to significant downturns.
The bank may lose $1.15 a share, compared with an earlier estimate of 28 cents, reflecting potential writedowns on leveraged loans and collateralized debt obligations of $13.1 billion, Whitney said in a note to investors dated yesterday. She cut her full-year estimate to a loss of 15 cents a share from a profit of 75 cents.
Whitney, 38, correctly predicted two months in advance that Citigroup Inc. would reduce its dividend to preserve capital. Her downgrade of Citigroup helped spur selling that erased almost $500 billion in value from the nation's stock market on Nov. 1. In the note, she also lowered U.S. industry-wide estimates for first-quarter earnings by an average of 84 percent.
This will not be our last reduction in 2008,'' Whitney wrote in the note.We anticipate further downside to both estimates and stock prices.''
I think Downey Savings and Loan in Southern California must be on the list of 150. They reported a $200 million loss in 4Q2007 and the numbers for 2008 look worse. Their earnings include a lot of Neg Am interest too. I expect them to lose over $1 billion in 2008. I don't see how a bank with $13 billion in deposits can survive a loss that large.
This was what i tried bringing up to CR. if reserves are 51B then how in heck to they propose to issue 220B to primary's? they have 700 BB if they took all the recerves from every bank in vault not needed to cover local obligations.
I could undertand offering more than you have cause "theoretically" you could get the treasury to print more.
However the terms were extended beyond 28 days which means, like basic credit cards, we are talking unsecured (MBS) secured loans. Of money they do not actually have on HAND.
Which means on the books they are using the in vault funds across america.
We seem to have two topics going here: lying leaders and failing banks. The two may be related nonetheless. Leaders lies may have created a nurturing soil for failing banks. Anyhoo, Hillary C., I think, has probably long just invented her past to suit her taste. She also never told people she failed her DC bar exam until years later. One devious woman, IMO.
Now, on topic. I went to Bankrate.com to look for the 1 star (lowest rated) banks in California. Got Indymac and another one, Fremont something. I would think 1 star rated banks would be the most likely candidates for failure.
Actually, I will disagree with somethine as simplistic as just looking at either a cash flow statement or a balance sheet. You have to dig hard to figure out the meaning of each and the inter-relationships. Also leverage (in amy amount even if it sounds excessive) isn't a bad thing or a good thing. Many of you act as if leverage is just bad period. It isn't. It is, however, if the right circumstances come along and force you to de-lever in a short time-frame.
To know if a bank is in danger you have to take a look at on-going operations and the cash it throws off. For example, the IBs toss off a lot of cash. So far, even with the horrid write-offs they have still been able to show a profit. Then you have to look at how they are throwing off cash, and which businesses are going to suffer in the downturn. For example, M&A fees are going to decline, but other fees will rise. In a regular bank, some loans will turn non-performing, but those may be off-set with new business and increased fees.
So what you are looking for is a bank sitting in the perfect storm. It's fees are dwindling, the cashflow has (in the past) come from a place that is now deteriorating, and the number of non-performing assets loss can't be offset. Go look at Nations Bank or IndyMac if you want to do some due dilli and you'll get the trick. Those two are zombies right now.
Charlie, I think most of the shorts against Downey (myself included) have been waiting for the day that DSL announces their insolvency. Tinfoil hat wearers (again, myself included) would argue that the announcement of the bank's demise seems more predicated on all the major holders propping up the stock price until they can get out from under it.
My guess is that it implode much like like Seattle's old Kingdome a few years back, but without outside warning. I guess the better analogy is an earthquake-prone zone; you know it's going to happen, but exactly when?
with the highest concentration coming from states such as California and Florida where an overheated real estate market is in a fast freeze
Keep in mind that some banks who could experience problems in those states are not based in those states. Obvious examples are the really big banks (BoA, etc) and less obvious are the regionals who might have HQs in nearby states. Keep that in mind when looking at the various reports. Where the bank is based does not equal where they have exposure.
Both California and Florida have economic underpinnings apart from real estate.
California has tech, financial services, entertainment, agriculture, and shipping/international trade.
Florida has tourism, retirees, agriculture, mining, and international trade.
Michigan, Ohio and Indiana have none of the above. There is nothing to keep these states from free-falling. The last viable industries they have left are government and higher education.
a little thought experiment: what happens if CA experiences 7.0 earthquake is SF or LA, and category 4 or 5 hurricane hits FL in the same year? Both involve heavy Fed assistance...is their slack in the system to provide relief/repair, or do both these states become the 9th ward? I agree that inherently both CA & FL have diversity financially, on the other hand, Fed Gov manages the other risks...
what happens if CA experiences 7.0 earthquake is SF or LA, and category 4 or 5 hurricane hits FL in the same year?
Honestly, what happens if an asteroid hits us? A more apt thought-experiment would be to look at the profits of various banks, their outstanding loan exposure by segment, and their last quarter revenue by segment to see if losses can be offset and by how much. Diversified lending portfolios can withstand shock better than high exposure in one area. What you are likely to see is that smaller banks took on too much risk in one area, leaving them screwed in the current market. I think that's why the FDIC is bracing. It isn't the big guys, although some are sure to do the dirt nap. It's the number of smaller ones that bet the farm of RE (commerical and residential) and just lost.
I started working right out of school for the FDIC. I no longer do. They maintain a problem bank list. They know whats goin on and are not sitting around. I can assure you of that. The fed examines banks typically with the state bank examiners, so the state sometimes is the front line. I eas in real estate loan analysis most of my time. The examinations are quite thorough. The FDIC is not the only agency examining banks. Theres is the comptroller of the currency, the fed reserve, thrif supervision and national credit union association which examines the myriad of credit unions. Here are two goo sites to go to. FDIC: Failed Bank List
this site will calculate if your deposits are insured.
The Federal Deposit Insurance Corp. wants to add 140 workers to bring staff levels to 360 workers in the division that handles bank failures, John Bovenzi, the agency's chief operating officer, said Tuesday.
"Hello, I am Apu in Bangalore. Thank you for calling the FDIC Bank Failure Hotline. How may I help you?"
Actually, this isn't a dumb question. Insurers (like the Fed) need to retain a certain amount of capital in case there's an unexpected major catastrophe.
The FDIC is not the only agency examining banks. Theres is the comptroller of the currency, the fed reserve, thrif supervision and national credit union association which examines the myriad of credit unions.
Am I the only one who's less than reassured by the alphabet soup of so-called "watchdogs" on the case here?
At the risk of lapsing into consultant-speak, "responsible" does not equate to "accountable" ...
I lived through 3 major earthquakes in CA. 2 Hurricanes on the East Coast. No astroids. But your point is well taken. My point is that FDIC is under-capitalized in much the same way as the Fed Gov is under capitalized to deal with stress to the system... I'm aware of a lot of mid-size banks over-exposed in CRE where the local effect of mass defaults will lead to their failure. Given the stress, even the well capaitalized banks won't want to be forced to marry their poor ugly cousin with the Fdic giving them away at shotgun...I don't think the FDIC can move quickly enough to seperate the good, bad, and ugly and bring an orderly desolution to a large number of failed banks...this will be so 80s...
Point well taken. In a systemic meltdown aint nobody gonna bail any of us out, unless we are wall street execs. I looked in the paper today for wall stree banker jobs. Couldnt find one. They must be all take
so i'll answer my own question for guys like Seb and Ojoe. "why the Fed of course. lender of last resort!"
i say that will only last so long and i think somebody like Congress will put a stop to that given all the public outcry from guys like Roger, Grant, and Faber. and if not them, the dollar, oil, gold, and short vigilantes like me.
Maybe a dawg can learn a new trick, and first read the information at FDIC: Careers at FDIC home page C...yeeProgram.html before simply giving another one of those well founded opinions, the sort which no one can refute to their owner's satisfaction.
Or maybe the Federal government is giving California $5.7m in emergency funding to retrain unemployed mortgage works in the State. Yes, the usual employment requirements are very high but these are not usual times. We got into this mess by lowering barriers to entry. We look ready to try more of the same to get out.
The bank filures will be held off until November or early next year. The FED will continue to add liquidity to the system by liquidity facilities like TAF and also by interest rate cuts (down to 1.5% IMHO). This will help banks but fuel inflation, commodities, and long term interest rates for mortgages. The consumer will not be helped as the concern is the financial system. Doesn't matter to me as I sold my bonds when the 2 year yield was 1.25% (Crazy!!!) and will be in oil until May as the real estate and economy bust become deeper and more apparent to everyone.
sam writes:
I started working right out of school for the FDIC. I no longer do. They maintain a problem bank list. They know whats goin on and are not sitting around. I can assure you of that.
not sure when you left the fdic sam, but under former chairman powell and the cast of supervision executives that are still in place, exam practices changed significantly. they created something called "merit" and implemented a reward/budget system that greatly curtailed on-site exam acitivity. executive bonuses were geared to reduce exam hours.
in essence, total exam hours are capped via the budgeting process. it is a zero-sum game; should someone determine that more hours are needed at bank A, then those hours need to be cut back somewhere else. this program was dubbed "merit" and some senior examiners were admonished when they spent above budget hours on an exam even though it was warranted.
"merit" was also suppossed to be risk-focused. apparently, the fdic did not think there was any risk in allowing banks to ramp up to record levels of construction lending because at the time these concentrations were growing, the fdic was cutting exam hours. the fdic was essentially performing "drive-by" examinations.
the implementation of merit and a poorly designed pay system contributed to the very poor morale among fdic's examination ranks. many senior, experienced examiners left the fdic as a result and now they have hired some back on a temporary basis. but some are so bitter they will not return.
while fdic chairman bair is attempting to fix the morale problems; changes to date have mostly been cosmetic. a bandaid was put on the compenstation program this past year. while the "merit" program has been axed, it still is a zero-sum game. more budget resources have not been added to the supervision program and the recent annoucement is in resolution/liquidiation. if bair is serious about making changes she will need to reassign or let some of the senior executives go that were asleep at the wheel while excessive risk was being taken and for the morale mess they created.
Now we should be scared.
Bank failures should induce some fear in the market. I bet that BAC drops the CFC bid as a waste of good money after bad, and that Corus is first.
But hey, look at the homebuilders- the recession is over!!!
CFC has over 14k houses to move:
Countrywide Foreclosures (REO) Blog
I like houses, but only if they turn a profit!
Someday this war's gonna end...
It is a wonderful news for job market. Everything is fine. half the population are doing their best to fail the bank while the other half are doing their best to clean the mess. Viola, full employment. Let the good time roll.
I predict a small Maryland bank will fail because of a heavy book of residential construction loans here:
Will First Mariner Bancorp (FMAR) be the next small bank to go bankrupt? « Greg’s Law & Economics Blog
The bank failures are coming.
I think we're just seeing the leading edge of the tsunami of bailoutruptcies... er, bankruptcies.
Many Regional and Community banks are leveraged 200%, 300%, and 400% of assets in CRE and other real estate related loans. Highest concentration in history.
Only 150 bank failures over the next three years. How about 150 bank failures by the end of the summer....maybe in FL and CA alone.
By the time this is over we could be down to 10 National banks....how many failures would that be?????????????
Hope there doesn't turn out to be any correlation there!
Purchased Veribanc late last Fall and reviewed; since my bank wasn't in their regional ratings for best banks was on cusp of moving to one that was.
Then found out - here - about FDIC reports online and did final review. My original bank was actually better capitalized and with much smaller exposure than what I was going to.
Just read someone today, believe on Mish, who said that it's no longer the statement that matters, but the balance sheet.
Boy, are they right.
And I kept it where it is.
Are they like Texas Rangers? "one riot, one Ranger"
This raises a real government/regulatory issue. If the FDIC is gearing up for bank failures--and every indication says they are, what do they know that we don't know? If the level of fear in the government is such that they actually acknowledge there's a problem, who is going over what information? Why is this information not freely available? Which banks (there's even a number: 150) are going to go belly up? Is that the only number of banks, and if so, why? If we get into a "nobody could have foreseen this" moment, why should we think that there are only 150 banks on the blocks? Why not 250, or 600? And who exactly, came up with that number? Of these 150, how many are the size, scope, and market cap of, say, Citibank? Now that would make news.
HIGHLY recommend you read the Economist "Wall Street" on news stands Wed or Thurs. Bloody good...if you want to see eversions here is a link...DO READ the comments once you clicked to the stories!
The Big Picture
FFDIC/others,
What do these FDIC agents do? Do they sit and wait for the banks to start collapsing or do they start taking preemptive steps to avoid a failure (merger)?
Just read someone today, believe on Mish, who said that it's no longer the statement that matters, but the balance sheet.
Cashflow Statement are better yet though I struggle with understanding any of the statements from financial companies - too weird for a mfg guy like me.
REbear: Maybe they try and do their best to make banks fail, that way they'll continue to stay employed!
but - I am also curious to what exactly are these new people doing?
If we get into a "nobody could have foreseen this" moment, why should we think that there are only 150 banks on the blocks? Why not 250, or 600? And who exactly, came up with that number? Of these 150, how many are the size, scope, and market cap of, say, Citibank? Now that would make news.
I'm sorry - 150 is all this administration has budgeted for bank failures next year so that's all they can have for now. The other banks will have to wait. [/sarcasm]
but - I am also curious to what exactly are these new people doing?
Being photographed rolling up their sleeves?
Regional banks in Florida with heavy loans in CRE are safe. They are going to get at least 10% of their money back and that`s a lot of money. Good for them!
DAH is right, it's the balance sheet that counts.
Just take a gander at J.P. Morgan's leverage ($1.6 trillion in assets backstopped by $0.1 trillion in equity), note that they have $0.5 trillion in consumer loans outstanding, are party to $77 trillion in derivative contracts (before BS), and you see that they will be toast within one-to-two years, at most.
Repeat the exercise for BofA, Golden Schmucks, et al. All results the same: extraordinary leverage on falling assets.
The chill that runs up my spine comes from the realization that they'll be hiring unemployed mortgage brokers.
jg - JPM will never go down. Nor Goldman Sachs. The Federal Reserve will keep them alive.
Does anyone know what the FDIC's present reserves are?
everything is fine. the fed auctions $75B on Thursday for the TSLF, in exchange for MBS. Then we're off to the races for the quarter end dress up! bank failures, pssshhaww!
Ah, we need a wager board, to track awgee's boasts and mine.
C'mon, CR, give us a wager board!
We have one here at home: a whiteboard, in which my wife, kids, and I noted prices for homes, gold, S&P, and certain stocks, and made our small bets on what they will be in Dec.
jg - Now I am embarrassed. What boasts have I made? Any I need to retract?
OT: gold is telling us to be wary of predicting that we're past the mid-point of anything. Just a very few trading days after commodity prices were "gutted" it is back to $950. That is a bad sign I think. The bounce they engineered kicked the shorts out of the financials and etfs, pushed the dollar up above 100 yen again and knocked down oil and wheat, so gold should have stayed down for at least a few weeks to a few months of bad news and a financial failure -- but here it is, reformed from molten blobs like the terminator. A lot of money must be concerned about another shoe drop.
hmmmm. that could be material information containing a pretty strong signal. is increasing bankruptcy staff about 50% a major change for that division? anybody know what staff levels in that department have been for the past years so we can compare the new level to the old level? is there some other innocuous reason for the increase? how many BKs can each employee handle, on average, per year? if we can estimate that we can get an idea what the dept is gearing up to handle. that doesn't guarantee a huge increase in BKs though....the employees may sit idle or operate at far below their capacity for years to come. we'll see. but if anyone has more color on this situation please chime in. thanks.
O/T but what the heck:
Assuming things go to hell, what is the impact of taking most retirement funds out and moving to foreign accounts, perhaps in Northern Rock?
Anticipate that things would really have to be screwed up, but apart from the tax hits, would still have intact buying power. If so, what currency?
Barley:
Read most of the articles and then went to the comments as you suggested. Were you principally interested in sharing the Institutional Risk article linked with a comment?
If so, crap.
XXXX DRUDGE REPORT XXXXX FRI NOV 09, 2001 11:43:35 ET XXXXX
Curious confusion swirls around former first daughter Chelsea Clinton's upcoming essay for TALK magazine describing exactly where she was on Terror Day in New York City.
Breaking her media silence once and for all -- Chelsea writes in great detail about her personal experience on the morning of September 11.
But, the DRUDGE REPORT has learned, her account now sharply conflicts with her mother's version of Chelsea's New York adventure.
Appearing on NBC's DATELINE, Sen. Hillary Clinton told how daughter Chelsea cheated death on that fateful morning.
"She had gone on what she thought would be a great jog," Hillary Clinton explained. "She was going down to Battery Park, she was going to go around the towers. She was going to get a cup of coffee and - that's when the plane hit!"
Hillary's dramatic story about her daughter's close call with the Twin Towers became a media sensation.
"At that moment, she was not just a Senator, but a concerned parent," TODAY show's Katie Couric told viewers.
But now, in her own words, Chelsea does not mention a jog. Does not mention her plans to go to Battery Park, around the towers -- only to be stopped by a coffee break.
In fact, Chelsea writes that she was at her friend's apartment on Park Avenue South -- miles from Ground Zero -- when she learned of the attacks!
"I stared senselessly at the television," Chelsea writes.
Calls to Senator Clinton went unreturned on Friday.
Filed By Matt Drudge
Reports are moved when circumstances warrant
DRUDGE REPORT 2010® for updates
(c)DRUDGE REPORT 2001
Can I assume that most local and regional banks passed through virtually all of their residential mortgages to the money center banks and didn't keep any equity tranche MBS, so will be failing because of their commercial exposure? If that's the case, I imagine it won't start to get really hairy for 6-9 months at least, but I'm asking, not saying. Anyone?
any:
And you're only now surprised by any of this?
"Where am I?
Have you seen me in the words of Bill "that woman" Clinton? George "WMD" Bush? No. You have not and will not see me for awhile."
-Credibility
Everyone in this country is responsible for allowing the most important leaders in the U.S. government to lie straight to our faces about practically everything. At the same time we believed their lies, we diminutively let these "leaders" remain completely unresponsive to our own words and desires.
DAH is right, it's the balance sheet that counts.
Balance sheets are as easy to cook as income statements... a lot of assets are mark to fantasy unless they trade heavily - even for industrial companies their asset side is a guess at best.
But the money counts pretty cleanly - you either have it or you don't. A lot of these companies were train wrecks on their cashflow statements LONG before it was ever apparent & admitted on the balance sheets or income statements... borrowing cash like crazy to meet current requirements because the assets were 'temporarily illiquid'.
I don't say ignore balance sheets - just don't trust them. Cash flow is the hardest to cheat - if its bad the others are too, just not admitted. If it isn't bad the company may still be eventually be in trouble - but companies don't go broke in the short run if they are full of cash - its when the cash starts evaporating that the balance sheet & income issues become 'noticed'.
Watch cash.
Everyone in this country is responsible for allowing the most important leaders in the U.S. government to lie straight to our faces about practically everything. At the same time we believed their lies, we diminutively let these "leaders" remain completely unresponsive to our own words and desires.
In the words of Chicagoans 'everywhere'... who cares as long as the garbage gets picked up & the pot holes get fixed.
The mistake the current crop of pols is forgetting - to pick up the garbage & patch the pot holes.
Does anyone know what the FDIC's present reserves are
If memory serves - 1.2% of insured deposits
Does anyone know what the FDIC's present reserves are
Answer: not nearly enough.
I live in a hurricane zone and the local joke is that you know you are in trouble when you see Jim Cantore reporting from the nearby beach.
Reading that the FDIC is hiring bank failure specialists gives me the same feeling.
Jim
When L. William "Bill" Seidman was FDIC Chairman he often said this division known as "DRR" within FDIC should always maintain a staff compliment of at least 400 full time employees mostly in Dallas. Seidman said that DRR was like a Fire Department - trained and staffed to respond to bank failures at a moment's notice. After Seidman left the FDIC the FDIC continued RIFs and this division in Dallas has only about 220 employees to handle bank failures nationwide and many of those do not handle bank closings. As many of you know in 2005 I along with more than 50 other FDIC DRR employees were hit with a RIF after working 15-19 years for FDIC during the 80s banking & S&L crisis. About fifty of us all over fifty years of age in 2005 promptly filed an age discrimination suit which was certified by a DC court (Judge Urbina) as a class action. Discovery has just been completed. The FDIC elected to to depose former employees because it did not want additional information entered into the offical record. We expect that Judge Urbina will order mediation. A trial date at the earliest might be in September 2008 but I doubt that it will come that soon. The FDIC has said it will not negotiate until summary judgment. Below is a link to our 2005 Complaint. This 2005 should never have been conducted by the FDIC and we pray the DC court agrees.
http://www.roselawyers.com/docs/amendedcomplaint.pdf
Judge Ricardo M. Urbina link:
Judge Ricardo M. Urbina - U.S. District Court, Washington, DC
dryfly,
Well, cash is one thing we know they don't have, otherwise all these fancy "lending facilities" wouldn't be necessary, would they?
Barley - about 51B - go to fdic.gov
Dry:
Agree assets are hard to value, but quality of assets is critical. The liabilities are usually pretty easy - deposits, loans.
Banks can attract deposits by raising rates for deposits, and have FDIC protection. They can also be de leveraging. A bank can have great cash flow and insolvent.
"not nearly enough" - On that note, dryfly, I'm extremely pessimistic that the Bush Administration is going to do anything to add to the FDIC's war chest or support any legislative moves to provide it with additional help, such as a RTC-like helpmate. They are too stuck on their ideological high horse to countenance the idea. This worries me because triage is always most effective in mitigating the damage if done early.
REBear - FDIC has various specialist. Some are investigators who sue directors of failed banks and investigate what caused the bank to fail. Some handle the asset side in liquidation. Some handle the claims for insured and uninsured depositors. And, some work with the examiners division to yes try and prevent failures or plan a merger with a healthy financial institution. You can review some of the job postings at fdic.gov to get an idea of some of the requirements. The jobs are pretty intense and nobody sits around much at least not for long. There are also a pack of lawyers both inside and outside counsel.
Barley writes:
HIGHLY recommend you read the Economist "Wall Street" on news stands Wed or Thurs. Bloody good...if you want to see eversions here is a link...DO READ the comments once you clicked to the stories!
That's last weeks edition.
FFDIC,
Do they have anyone that specializes in slapping the bank execs silly?
FFDIC writes:
Barley - about 51B - go to fdic.gov
YUP 1.2% of insured deposited
That's last weeks edition.
transient
Nope check the cover dates ---- who cares, read the online comments very telling, indeed
tj&b, actually FDIC does have a legal department called Open Bank Enforcement where they prepare cease & desist orders, memorandums of understanding, civil money penalties and removal orders whereby bankers can be removed from office and prohibited for a lifetime from working for a fiancial institution again. These removals are made public by all the regulators with those powers and are available for your review at the internet sites for each banking regulator. However, the FDIC is understaffed and now overworked in this division as well.
Justin writes:
OT: gold is telling us to be wary of predicting that we're past the mid-point of anything. Just a very few trading days after commodity prices were "gutted" it is back to $950.
I'd be a lot more concerned about gold to fall further this weeks than any future bank failure.
O-Joe
Sorry I meant this week.
The FDIC's chief operating officer John Bovenzi - quoted in CR's link to 'USAToday' received a large EOY 2005 bonus for the September 2005 RIF which eliminated my job and reduced FDIC's salary, benefit, and lease expenses. Bovenzi is quoted as saying "we want to make sure that we're prepared..."
Barley writes:
"Nope check the cover dates ---- who cares, read the online comments very telling, indeed"
I bought it at the newsstand over the weekend. Are you referring to the comments on bigpicture, or the economist website?
Ipod
The Fed did not act to save a bank, but to enrich one.
Why is Bear Stearns Trading at $6 Instead of $2?
Hussman Funds - Weekly Market Comment: Why is Bear Stearns Trading at $6 Instead of $2
Hey Any -
F' off with that tired neo-con crap!
Drudge report postings should be deleted. Why propagate what is destroying our country?
Hey FFDIC,
I recently commented to my FDIC contact that, had the turf war between the OTS and the FDIC not existed and Superior Bank had been shut down sooner than the 10 years that the FDIC spent "monitoring" it, I may not not be in my current situation. I never received a reply...
Is that a sore spot by any chance?
Mike Dillon, I attended the sudden 2001 closing of Superior Bank in fact it was my first time in the Chicago area. I had to rush up there from Dallas. None of the regulators believed that the Pritzker family would walk away from their own bank but they did leaving the FDIC suddenly holding the bag. There are hundreds if not thousands of sore spots from Superior. As we often said at the FDIC, "We should write a book."
Mike Dillon - Make that millions.
...the realization that they'll be hiring unemployed mortgage brokers
Interesting reaction - let's see what the FDIC requires for its Corporate Employee Program (not much work at the FDIC over the last decade, unlike the two preceding it). As noted from the site, 'New entry level employees will be appointed at the grade CG-7 as Financial Institution Specialists for a three-year excepted service internship, with potential conversion to a permanent Financial Institution Specialist position with the FDIC. -
Education-Based Requirements
Applicants who qualify for hire based on education must receive their degrees prior to initial appointment. ....
To qualify for the entry level on the basis of education, you must meet one of the following two requirements:
OR
Does this sounds like your typical unemployed mortgage broker? And if you don't like education, here are the experience based qualifications-
'To qualify for a grade CG-7 Financial Institution Specialist job:
You must have one year of experience which demonstrated skill in gathering and analyzing financial data; interpreting balance sheets and income statements; and using a variety of software applications.... Examples of qualifying specialized experience include:
Still doesn't sound like a typical Californian unemployed mortgage broker.
Maybe a dawg can learn a new trick, and first read the information at FDIC: Careers at FDIC - Corporate Employee Program before simply giving another one of those well founded opinions, the sort which no one can refute to their owner's satisfaction.
But let's read a bit more -
'Career Advancement
New entry level employees will be appointed at the grade CG-7 as Financial Institution Specialists for a three-year excepted service internship, with potential conversion to a permanent Financial Institution Specialist position with the FDIC.
Employees who successfully complete the three-year internship and either finalize commissioning or demonstrate a high potential for successfully completing commissioning will be converted to permanent career appointments....
As part of the CEP, along with an examination commission, the FIS will acquire a certification in resolutions and receiverships (R&R). Upon commissioning and completion of the R&R certificate, employees are promoted to the CG-11. Following one year at the 11 level, and upon completion of a second certification of expertise in a specialization in risk, compliance or R&R areas, the Corporate Employee will be eligible for promotion to the CG-12 level, which is the full performance level for the Financial Institution Examiner position.'
Interesting - it only takes the FDIC 4 years to adequately train one Financial Institution Examiner. This doesn't remind me of mortgage brokers, it reminds me of the federal government, the one I grew up with in the 1970s, when a Republican administration was creating the Environmental Protection Agency and using price controls to battle inflation, followed by a Democratic Administration that battled inflation by appointing Volcker to the Fed and following Friedman when deregulating the airline and trucking industry. And where the actual people doing the actual work of government were generally competent professionals with solid educations.
I'll admit, most of them lacked the flair of the real go-getter types, who can play bridge while millions of their dollars disappear. And billions of other peoples' money.
Bank size should be limited via regulation. No single bank should be allowed to become To Big Too Fail. Banks could then be allowed to fail. A fairer, healthier system.
I don't think size is the proper metric, it should be complexity times size. Walmart is simple, large, and wouldn't endanger the system if it went toes up tomorrow. BSC's failure was deemed unacceptably dangerous.
Assets managed in nearly 10,000 hedge funds totaled $2.16 trillion as of Dec. 31, estimated researchers at Credit Agricole Structured Asset Management in a new report.
totaled $2.16 trillion
money is useless in itself, except for its utility as a paper product.
The real power of money comes from its ability to command labor (to deliver goods and services).
At a nominal $10/hr, the Hedge Fund Moneybags collectively own(ed) 200 billion man-hours of labor, or 100 million man-years.
One wonders why they need so much money.
The Depository Trust & Clearing Corporation (DTCC) announced today it cleared and settled more than $1.86 quadrillion in securities transactions in 2007.
Granted, the combined total exposure if the acquisition goes through could amount to less than that, since derivatives involving the two banks themselves would be cancelled. And with over-the-counter derivatives totalling a notional $516 trillion at the end of June 2007, according to the Bank for International Settlements.
In a research report it published last week, Bear said its more than 5,000 derivative counterparties and more than 1,000 futures counterparties were among the reasons the Federal Reserve and Treasury Secretary Henry Paulson felt compelled to find a buyer for the bank rather than see it go belly-up. Counterparties to these contracts are mostly banks, but also include hedge funds and insurance companies.
BEAR CHURNS
Bear Stearns deal boosts J.P. Morgans derivatives exposure
BEAR CHURNS Bear Stearns deal boosts J.P. Morgan’s derivatives exposure - Financial Week
Sen. Hillary Clinton wants Alan Greenspan on her high-level emergency group to deal with high-risk mortgages even though she admitted yesterday that she never understands what hes saying, a reference to Greenspans vaguely worded Fed speak that he used in his 18-year tenure as chairman of the Federal Reserve.
Retarded!
Just today Cees Bruggemans, chief economist at First National Bank in South Africa said in his online newsletter: "The US banking system is currently a slaughter house, where arriving cows are fearfully mooing as they are driven to the slaughter pens. Get the picture?"
He mentions some of the options for the "good guys" to do and remarks that they should be done:
"now and not after all the cows have been professionally sliced and diced like so many extinct derivatives.
So this is an endgame, in which the good guys are supposed to do the right things, and do it timely."
Thanks for the great blog! I really learn a lot and stand amazed.
Entering the funeral business - https://www.fnb.co.za/economics/servlet/Economics?ID=3395
Tory wrote: money is useless in itself, except for its utility as a paper product.
The real power of money comes from its ability to command labor (to deliver goods and services).
At a nominal $10/hr, the Hedge Fund Moneybags collectively own(ed) 200 billion man-hours of labor, or 100 million man-years.
One wonders why they need so much money.
They keep thinking of how many Spitzer-hours they could rack up at the Emperor's Club
Yes, Bush did not manage to totally destroy civil service. He did manage to appoint a huge pack of incompetents and crooks to leadership of agencies though.
Additional data and discussion of CRE, C&D exposure at lending institutions, with links for further reading available on recent threads:
Calculated Risk: Delinquencies Rise for Small Home Builders
Calculated Risk: FDIC Bracing for Bank Failures
OT
What Are Pensions Worth?
First, employers had to put retiree benefits on the balance sheet. Soon they could be required to trot out the details of their plan assets in fair value.
What Are Pensions Worth? - - CFO.com
Uh-Oh
Ralph Cramdown Can I assume that most local and regional banks passed through virtually all of their residential mortgages to the money center banks and didn't keep any equity tranche MBS, so will be failing because of their commercial exposure?
No. Most banks do have RE consumer portfolios. Home equity loans, HELOCs, etc. I've only run into one bank that did not do consumer RE lending, but they sold out on caution anyway because of their commercial tie-ins in the area.
Needless to say, the second lien losses in a declining home value market can be ferocious. It's one thing to have written a 100% mortgage on a home. If you foreclose, you may lose 30-40% on average as long as you aren't writing dingbat subprimes. Now imagine a portfolio of HELOCs in a down market. Your loss severity may be something like 80-90%.
The second line of losses in the current downturn will normally be small commercial on businesses that are related to consumer spending/mortgages. In places like some areas of Florida, there are huge drops in spending in dealerships for boats/cars, for example. I assume the same is true in areas of CA, AZ, etc.
Then there are expected C&D loan losses.
A huge amount of small commercial loans are actually secured by the borrower's homes. They are business purpose loans, so they do not show up in the consumer RE numbers, but they are secured by a home.
Imagine being into a building contractor for tools, truck, materials, operating cash, which line is secured by his home, in one of these areas in which the home market is deeply impacted. You've got loss of income (30-40%) plus loss of collateral value. You probably had title to vehicles, plus UCCs on tools and materials, plus the mortgage or DSD on the home. All of that collateral is depreciating in some of these boom-bust areas.
Almost nothing has been written about smaller banks' exposure to home equity, HELOCs and small commercial RE secured, but the potential losses at all but the most cautiously run banks are quite large and can take many banks out.
150 bank failures seems an underestimate. The estimates of actual losses on the housing market's downturn all seem woefully inadequate to me.
The lending environment has been so loose that better loans were hard to find. Unfortunately many financial institutions were competing with the non-bank financials, and ended up writing some ugly stuff. If they went for return they got into the higher risk seconds. If they went for safety they have low NIMs, and therefore are more sensitive to significant downturns.
Citigroup Estimates Cut by Oppenheimer's Whitney
The bank may lose $1.15 a share, compared with an earlier estimate of 28 cents, reflecting potential writedowns on leveraged loans and collateralized debt obligations of $13.1 billion, Whitney said in a note to investors dated yesterday. She cut her full-year estimate to a loss of 15 cents a share from a profit of 75 cents.
Whitney, 38, correctly predicted two months in advance that Citigroup Inc. would reduce its dividend to preserve capital. Her downgrade of Citigroup helped spur selling that erased almost $500 billion in value from the nation's stock market on Nov. 1. In the note, she also lowered U.S. industry-wide estimates for first-quarter earnings by an average of 84 percent.
This will not be our last reduction in 2008,'' Whitney wrote in the note.We anticipate further downside to both estimates and stock prices.''
Citigroup Estimates Cut by Oppenheimer's Whitney (Update5) - Bloomberg.com
Some info on Superior..
Penny Pritzker & Obama - The Pritzker Family Superior Bank Scandal | LoanWorkout.org
I think Downey Savings and Loan in Southern California must be on the list of 150. They reported a $200 million loss in 4Q2007 and the numbers for 2008 look worse. Their earnings include a lot of Neg Am interest too. I expect them to lose over $1 billion in 2008. I don't see how a bank with $13 billion in deposits can survive a loss that large.
Is there a source for info on credit union solvency? Like many folks I know, I haven't used a bank in over 20 years.
Thanks in advance.
FFDIC and Barley,
This was what i tried bringing up to CR. if reserves are 51B then how in heck to they propose to issue 220B to primary's? they have 700 BB if they took all the recerves from every bank in vault not needed to cover local obligations.
I could undertand offering more than you have cause "theoretically" you could get the treasury to print more.
However the terms were extended beyond 28 days which means, like basic credit cards, we are talking unsecured (MBS) secured loans. Of money they do not actually have on HAND.
Which means on the books they are using the in vault funds across america.
concur?
I think its table 2 on H.3 maybe?
Durable goods took it on the chin in February.
We seem to have two topics going here: lying leaders and failing banks. The two may be related nonetheless. Leaders lies may have created a nurturing soil for failing banks. Anyhoo, Hillary C., I think, has probably long just invented her past to suit her taste. She also never told people she failed her DC bar exam until years later. One devious woman, IMO.
Now, on topic. I went to Bankrate.com to look for the 1 star (lowest rated) banks in California. Got Indymac and another one, Fremont something. I would think 1 star rated banks would be the most likely candidates for failure.
But I thought we had hit the bottom already.
Actually, I will disagree with somethine as simplistic as just looking at either a cash flow statement or a balance sheet. You have to dig hard to figure out the meaning of each and the inter-relationships. Also leverage (in amy amount even if it sounds excessive) isn't a bad thing or a good thing. Many of you act as if leverage is just bad period. It isn't. It is, however, if the right circumstances come along and force you to de-lever in a short time-frame.
To know if a bank is in danger you have to take a look at on-going operations and the cash it throws off. For example, the IBs toss off a lot of cash. So far, even with the horrid write-offs they have still been able to show a profit. Then you have to look at how they are throwing off cash, and which businesses are going to suffer in the downturn. For example, M&A fees are going to decline, but other fees will rise. In a regular bank, some loans will turn non-performing, but those may be off-set with new business and increased fees.
So what you are looking for is a bank sitting in the perfect storm. It's fees are dwindling, the cashflow has (in the past) come from a place that is now deteriorating, and the number of non-performing assets loss can't be offset. Go look at Nations Bank or IndyMac if you want to do some due dilli and you'll get the trick. Those two are zombies right now.
Taking down some longs into any strength today... it's been a nice move, but window-dressing season ends tomorrow.
Oscillators on all 3 indices are back into overbought.
Thursday's a day to start rebuilding shorts.
Charlie, I think most of the shorts against Downey (myself included) have been waiting for the day that DSL announces their insolvency. Tinfoil hat wearers (again, myself included) would argue that the announcement of the bank's demise seems more predicated on all the major holders propping up the stock price until they can get out from under it.
My guess is that it implode much like like Seattle's old Kingdome a few years back, but without outside warning. I guess the better analogy is an earthquake-prone zone; you know it's going to happen, but exactly when?
with the highest concentration coming from states such as California and Florida where an overheated real estate market is in a fast freeze
Keep in mind that some banks who could experience problems in those states are not based in those states. Obvious examples are the really big banks (BoA, etc) and less obvious are the regionals who might have HQs in nearby states. Keep that in mind when looking at the various reports. Where the bank is based does not equal where they have exposure.
zackattack,
Agreed. PM should also rebound over time...
Both California and Florida have economic underpinnings apart from real estate.
California has tech, financial services, entertainment, agriculture, and shipping/international trade.
Florida has tourism, retirees, agriculture, mining, and international trade.
Michigan, Ohio and Indiana have none of the above. There is nothing to keep these states from free-falling. The last viable industries they have left are government and higher education.
For CA and FL, it's a terrible cycle.
For MI, OH, and IN, it's death.
rich,
a little thought experiment: what happens if CA experiences 7.0 earthquake is SF or LA, and category 4 or 5 hurricane hits FL in the same year? Both involve heavy Fed assistance...is their slack in the system to provide relief/repair, or do both these states become the 9th ward? I agree that inherently both CA & FL have diversity financially, on the other hand, Fed Gov manages the other risks...
I don't see slack in the system.
Today should be a real test for the "new bull market" hypothesis.
Crappy durable goods ought to be a perfect excuse to sell off right at the 50DMA.
50DMA is typically the rally-killer in bear markets.
what happens if CA experiences 7.0 earthquake is SF or LA, and category 4 or 5 hurricane hits FL in the same year?
Honestly, what happens if an asteroid hits us? A more apt thought-experiment would be to look at the profits of various banks, their outstanding loan exposure by segment, and their last quarter revenue by segment to see if losses can be offset and by how much. Diversified lending portfolios can withstand shock better than high exposure in one area. What you are likely to see is that smaller banks took on too much risk in one area, leaving them screwed in the current market. I think that's why the FDIC is bracing. It isn't the big guys, although some are sure to do the dirt nap. It's the number of smaller ones that bet the farm of RE (commerical and residential) and just lost.
I started working right out of school for the FDIC. I no longer do. They maintain a problem bank list. They know whats goin on and are not sitting around. I can assure you of that. The fed examines banks typically with the state bank examiners, so the state sometimes is the front line. I eas in real estate loan analysis most of my time. The examinations are quite thorough. The FDIC is not the only agency examining banks. Theres is the comptroller of the currency, the fed reserve, thrif supervision and national credit union association which examines the myriad of credit unions. Here are two goo sites to go to. FDIC: Failed Bank List
this site will calculate if your deposits are insured.
http://www4.fdic.gov/EDIE/
The Federal Deposit Insurance Corp. wants to add 140 workers to bring staff levels to 360 workers in the division that handles bank failures, John Bovenzi, the agency's chief operating officer, said Tuesday.
"Hello, I am Apu in Bangalore. Thank you for calling the FDIC Bank Failure Hotline. How may I help you?"
Honestly, what happens if an asteroid hits us?
Actually, this isn't a dumb question. Insurers (like the Fed) need to retain a certain amount of capital in case there's an unexpected major catastrophe.
Asteriods? Now we're talkin' black swans! Or, at least I hope that's what you meant...
Rusty Griswold: Ya' got Asteroids?
Cousin Dale: Naw, but my dad does. Can't even sit on the toilet some days.
FFDIC - has Mr.Bovenzi sent you flowers and a card yet?
I need to start taping all the comments from Brian Wesbury when he is on CNBC.
Could anybody be more removed from reality? He will be the idiot poster boy for this disaster like Blodgett was for the tech wreck.
The FDIC is not the only agency examining banks. Theres is the comptroller of the currency, the fed reserve, thrif supervision and national credit union association which examines the myriad of credit unions.
Am I the only one who's less than reassured by the alphabet soup of so-called "watchdogs" on the case here?
At the risk of lapsing into consultant-speak, "responsible" does not equate to "accountable" ...
Sorry ipodius,
I lived through 3 major earthquakes in CA. 2 Hurricanes on the East Coast. No astroids. But your point is well taken. My point is that FDIC is under-capitalized in much the same way as the Fed Gov is under capitalized to deal with stress to the system... I'm aware of a lot of mid-size banks over-exposed in CRE where the local effect of mass defaults will lead to their failure. Given the stress, even the well capaitalized banks won't want to be forced to marry their poor ugly cousin with the Fdic giving them away at shotgun...I don't think the FDIC can move quickly enough to seperate the good, bad, and ugly and bring an orderly desolution to a large number of failed banks...this will be so 80s...
zack and blackhat
if u wait til tomorrow you'll be another day too late on PM's, energy and ag. the bounce has already started.
idoc,
I'm not too late. Trust me.
today is the day for a rollover IMO. however, keep in mind tomorrow is onset of TLSF.
blackhat,
yeah, i snatched some DBA UNG, and GLD a couple of days ago. looking good so far.
i keep saying this so forgive me. but if banks are unwilling to lend to each other, why would you buy their stock?
MOOK
Point well taken. In a systemic meltdown aint nobody gonna bail any of us out, unless we are wall street execs. I looked in the paper today for wall stree banker jobs. Couldnt find one. They must be all take
so i'll answer my own question for guys like Seb and Ojoe. "why the Fed of course. lender of last resort!"
i say that will only last so long and i think somebody like Congress will put a stop to that given all the public outcry from guys like Roger, Grant, and Faber. and if not them, the dollar, oil, gold, and short vigilantes like me.
Winter is coming
Maybe a dawg can learn a new trick, and first read the information at FDIC: Careers at FDIC home page C...yeeProgram.html before simply giving another one of those well founded opinions, the sort which no one can refute to their owner's satisfaction.
Or maybe the Federal government is giving California $5.7m in emergency funding to retrain unemployed mortgage works in the State. Yes, the usual employment requirements are very high but these are not usual times. We got into this mess by lowering barriers to entry. We look ready to try more of the same to get out.
"No single bank should be allowed to become To Big Too Fail. Banks could then be allowed to fail. A fairer, healthier system.
dr strangemoney"
You mean they'd be forced to work within the massive loopholes to 'fairly' be profitable or fail?
Any chance you'd support tightening off-balance rules? Simply restricting size ain't gonna cut it!
The bank filures will be held off until November or early next year. The FED will continue to add liquidity to the system by liquidity facilities like TAF and also by interest rate cuts (down to 1.5% IMHO). This will help banks but fuel inflation, commodities, and long term interest rates for mortgages. The consumer will not be helped as the concern is the financial system. Doesn't matter to me as I sold my bonds when the 2 year yield was 1.25% (Crazy!!!) and will be in oil until May as the real estate and economy bust become deeper and more apparent to everyone.
idoc,
I have so much oil it scares me.
I don't have any PMs here because the charts look like broken uptrend lines to me until proven otherwise.
I think oil captures every important hypothesis that gold expresses, and, as a bonus, isn't traded by quite so many nutbags.
sam writes:
I started working right out of school for the FDIC. I no longer do. They maintain a problem bank list. They know whats goin on and are not sitting around. I can assure you of that.
not sure when you left the fdic sam, but under former chairman powell and the cast of supervision executives that are still in place, exam practices changed significantly. they created something called "merit" and implemented a reward/budget system that greatly curtailed on-site exam acitivity. executive bonuses were geared to reduce exam hours.
in essence, total exam hours are capped via the budgeting process. it is a zero-sum game; should someone determine that more hours are needed at bank A, then those hours need to be cut back somewhere else. this program was dubbed "merit" and some senior examiners were admonished when they spent above budget hours on an exam even though it was warranted.
"merit" was also suppossed to be risk-focused. apparently, the fdic did not think there was any risk in allowing banks to ramp up to record levels of construction lending because at the time these concentrations were growing, the fdic was cutting exam hours. the fdic was essentially performing "drive-by" examinations.
the implementation of merit and a poorly designed pay system contributed to the very poor morale among fdic's examination ranks. many senior, experienced examiners left the fdic as a result and now they have hired some back on a temporary basis. but some are so bitter they will not return.
while fdic chairman bair is attempting to fix the morale problems; changes to date have mostly been cosmetic. a bandaid was put on the compenstation program this past year. while the "merit" program has been axed, it still is a zero-sum game. more budget resources have not been added to the supervision program and the recent annoucement is in resolution/liquidiation. if bair is serious about making changes she will need to reassign or let some of the senior executives go that were asleep at the wheel while excessive risk was being taken and for the morale mess they created.
Any chance you'd support tightening off-balance rules? Simply restricting size ain't gonna cut it!
Well it should be the size of the obligations. Off-balance sheet accounting is mostly just a scam to game the system.