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Good morning, Tanta.
Mornin', 4shzl.
I have a soft spot for banks with "Security" in the name. I think they actually fail more often than banks with "Integrity" in the name, although I have not subjected this to any particular evidential rigor.
Perhaps someone at the FDIC can work up a study grant on the subject.
Way OT, but this site is causing my Firefox to lock up. It starts using approx. 50% CPU and stops responding. It does depend on which ads are running, but one of them is baaad.
Simian,
Yeah, that's happened to me too and I'm using IE 7.
Looks like the Inland Empire has turned into a black hole for banks. It's not just anyone in the RE business any more.
One of the banks mentioned in the Times article, East West (EWBC), did itself in by buying DCBK at a significant premium just after things started to unwind in the high desert portion of the IE.
The result: a stock price went from 40 to 10 in less a year. Not so good strategic planning on their part.
Over here in the northeast, community banks seem to be doing better. They stuck to more conservative lending practices according to the articles I've read. They may have lost out on some profits, but saved themselves some big headaches. Their nonperforming loans were less than 20% of what the larger commercial lenders were seeing in NJ.
Tom-I guess banks are just like people; a little common sense goes a long way. Their strategy will pay off very nicely when the foolish go under leaving much bigger market share for the prudent ones.
When I first started practicing law, I worked under a Chicago Title Underwriter whose previous gig had been supervision of commercial construction and development. He used to say you could trust them as far as you could throw them.
I know only one trustworthy contractor in Miami-Dade. I don't even have the name of a roofer I could recommend. This being obvious
for years, nay, decades, why did banks allofasudden decide you could trust contractors?
Oho sez I...
Goldman, Deloitte Agree Cheyne Finance SIV Restructuring Deal
[snip]
Goldman Sachs will auction a portion of the assets of SIV Portfolio Plc, previously known as Cheyne Finance Plc, by mid- July, Neville Kahn, a receiver at Deloitte in London, said in an interview today. The auction will set the price at which any unsold assets will be transferred to a new company set up by Goldman. The new company will then issue notes backed by the assets, Kahn said.
[snip]
Liz, it's more the developers than the contractors, but the problem is still the same:
"In the Inland Empire, we're hearing land is going for 20 or 30 cents on the dollar" of its appraised value when the loans were made, said RBC Capital Markets analyst Joe Morford.
Even 50% LTV C&D loans are underwater now and the borrowers have no reason to believe they will be able to convert that dirt into dollars in the forseeable future.
There's a major shake-out underway in the so-called Inland Empire of California.
"I know only one trustworthy contractor in Miami-Dade. I don't even have the name of a roofer I could recommend."
Lawyerliz | 06.17.08 - 9:15 am | #
I have one name. I work with him. Him and his dad build 4-5 houses a year. They do the middle market,semi custom homes. Nothing spec. They have been building for 30+ years. No desire to get big. Funny thing. They are still busy...
Chris
energyecon writes:
The auction will set the price at which any unsold assets will be transferred to a new company set up by Goldman.
So the junk shall henceforth be off our books.
Buy GS now!
Simian | 06.17.08 - 8:45 am |
close cnbc.com window, cr and cnbs are not compatible
Why have so few banks gone belly up? How long can this go on?
There's a major shake-out underway in the so-called Inland Empire of California.
sportsfan | 06.17.08 - 9:23 am | #
sportsfan,
I think it's gonna get ugly on the west coast of Florida. Why? NAR has worked really hard to clean up the land listings on the mls. I can't find any lot currently that was listed over six months. There were literally HUNDREDS of lots behind the county airport and 1 or 2 only show up now. Could it be they see the ugliness coming...
Chris
Mel writes:
Why have so few banks gone belly up? How long can this go on?
FED is implicitly guaranteeing them. Indefinitely.
Idefinitely or November, whichever comes first...
Chris, I don't know who might be gaming the MLS systems either there or here, but I think there's a lot of denial by the RE folks.
Locally I still see SFR lots listed from between $70K and $160K, but I have no idea who would buy them at those prices. Heck, SFR houses might be at those levels in a couple years . . . with the lot thrown in.
I think the banks are about to start another leg down here. What do you all think? News is bad fundamentals are bad everyone has waited for GS they beat no pop time to go down IMO. Finanlly...
Price target for GS anyone? 130 perhaps? Higher or lower? Value trap with rusty iron teeth IMO.
I work for a small community bank in the Greater DC area. We have just shy of $200MM in assets, but less than one-tenth of 1% of our assets are non-performing. How? We didn't get greedy. We didn't bet on the come. We stuck tot he 5 Cs of credit.
Watching all of these finanical institutions fall from grace is a source of many laughs for us over lunch. How can so many supposedly brilliant people be so stupid?
energyecon:
I'm just curious if you bought those ELN LEAPs we discussed several months ago? They had huge news today for investors and Alzheimers sufferers. Potentially for future health care costs as well for that matter.
Beats the crap out of SRS, that's for sure!
Dow will close negative today, reason is GS posted better than expected.
FED speak is proving to be effective, USD index has improved since verbal intervention.
Flip side, bond rates are going up, where will funds slosh to next? Commodities look like they have a ways to go, oil is shaky, CFTC still says speculation although everyone else says otherwise. Let's see if they put in any controls.
Will demand destruction come in time before someone calls on the FED's bluff to raise rates?
There were literally HUNDREDS of lots behind the county airport and 1 or 2 only show up now.
Did FEMA buy them up for housing space ?
ducks
Tom, They knew what was going to happen. They got theirs and are walking. The rest of us and our children will pay and pay and pay.
Bring It On!!! Mission Accomplished!!
AoTC,
Hiyas and did not take that position, their news looks promising if a bit qualified...I should touch base with a coworker who was long them (my original source on ELN). Best of luck to you with ELN and to them as well in their quest for an Alzheimers cure.
The banks are getting a killer spread between what they are paying depositors and what they are charging for loans. The uptick in mortgage rates lately looks like a demand spike. At some point, the banks are going to have to start charging more to attract deposits aren't they?
energy-I'm sorry to hear you passed on it. IMO, the news is better than many press sources are portraying and eventual approval is now quite likely. Not a cure by any means but a big step forward. Even a 2-3 year delay in entering a nursing home will represent a big savings to society.
What your thoughts on oil going forward? I sold half my oil stocks a couple of weeks ago, because I was uncomfortable with the wild gyrations. I plan to hold the other half and look to add at some point in the future.
Tom Swift,
Be careful not to laugh too hard at your banking brothers.
Back in the 80's, the First National Bank of Dallas was being killed with bad oil patch paper (rightly so, the dummies) and the cross town rivals were laughing.Why? They were chest deep in that really good real estate paper. They all eventially merged and went under together.
http://energy.senate.gov/public/_files/Lukkenletter.pdf
stand clear long oil related trade's
It's a pretty safe bet that most of the posters here have heard this - but since Tanta mentioned failures by banks with "security" in the name, I have to post this link for anyone who hasn't seen "Subprime" by the Long Johns - the most hilarious take on all this available anywhere.
YouTube -
Interesting that I heard this in advance of the Bear Sterns bailout. It gains new relevance now.
To those who think that entities listing only one or two plots of land on the MLS when they have hundreds or thousands for sale are trying to hide something, I would point out that MLS listings are not free, so there's no sense listing more than a few. You generally see the same thing with condos and townhomes -- the builder will list a representative sampling, not each and every unit available.
AoTC,
What OE said - I am intrinsically long oil by working in the industry - keep looking at DUG but it seems we are one headline away from a spike to $150/bbl (military action in ME, hurricane in GoM etc.).
Longer term, think the new 'low' of the price cycle turning will be as mind boggling in its own way as the current highs (think about it, a 50% price crash from here is basically $70/bbl - I don't think we have $90/bbl fully priced through the economy yet).
Why have so few banks gone belly up? How long can this go on?
(from TomS)I work for a small community bank in the Greater DC area. We have just shy of $200MM in assets, but less than one-tenth of 1% of our assets are non-performing. How? We didn't get greedy. We didn't bet on the come. We stuck tot he 5 Cs of credit.
The question, and the answer. Apparently we still have lots of bankers who were not blinded by greed. That's good.
BTW, Tom Swift quoted above also asks a question of his own, which appears to be much harder to answer:
How can so many supposedly brilliant people be so stupid?
How can so many supposedly brilliant people be so stupid?
John Stark | 06.17.08 - 11:03 am | #
Also answered,...
Watching all of these finanical institutions fall
PEER PRESSURE!
How can so many supposedly brilliant people be so stupid?
They're lending other people's money, not their own, and if the company goes belly up, it's the stockholders and FDIC taking the hit, not management -- at least not top management. If top management is compensated with bonuses (and/or stock options they can exercise and get their profits from before the chickens come home to roost), then they'll set the numeric targets for the people down below.
For the managers down below, making their numbers is the name of the game. If they make the numbers so top management can get its take, then even if the bank fails and they're on the street, at least they can take a track record of making their numbers with them on their job hunt. And they won't lose their jobs until the FDIC finally comes around to putting the bank out of business. But if they were to refuse to make bad loans and didn't make their numbers, well, they be out on the street long before, as "low performers" unable to say they'd made their numbers.
What's stupid is the system that allows states to race to the bottom on corporate governance, which has resulted in most companies being incorporated in Delaware, under laws that make the stockholders -- the true owners -- nearly powerless.
Ahh, the ownership society.
Cobra, a large number of rez. lots were bought with cash or very large D.P.(money from HELOCs). So I wouldn`t be surprised if the happy owners of these lots decided to wait for the market to "come back".
How can one possibly know which neighborhood community banks are at risk? The FDIC doesn't release its own ratings, and I don't trust the private agencies.
By perverse logic, it seems safest to keep your cash in whatever large national bank seems likely to fail first, before the FDIC runs out of checks.
i'm getting the same thing simian
o well
easy self credit improvement
"What's stupid is the system that allows states to race to the bottom on corporate governance, which has resulted in most companies being incorporated in Delaware, under laws that make the stockholders -- the true owners -- nearly powerless.
Ahh, the ownership society."
Total agreement. If the system rewards irresponsible and short-sighted behavior, the intelligent people in the system will behave irresponsibly and short-sightedly.
And shrug and say "That's the way the system works." And go to church on Sunday and say all the words without the slightest hint of irony.
In regard with GS, I dont understand whats going on. GS was heavily involved in purchasing MBS from Fannie in 04 and05 that I know of.(I have a couple of friends from the old country who worked for GS-"derivatives experts"). Unless they got out at the right time, we are going to hear some bad news about GS in not so distant future.
P.S. My best friend worked for BS. He still believes there was nothing wrong with derivatives, swaps, etc, etc,. So we don`t talk about that anymore.
energyecon- I don't doubt that some correction is possible/likely barring those events you mentioned (but are you really going to bet on Mid-east peace breaking out?). Seasonal factors alone will probably take a bit off towards the latter part of the summer. Like the economy, most oil stocks are pricing in $70-80/barrel, so I will be looking to add if oil gets anywhere near there. In the meantime, as they say, no one ever went broke taking profits, so I don't regret selling some.
Good luck to you. I'll check back from time to time for a dose of gloom any time I find myself smiling too much.
the most compelling comment in the LA Times article:
"Regulators were late to recognize the severity of the problems with these loans"
when is someone going to ask bailout bair what was the fdic doing while the largest c&d lending concentration was being put on the balance sheet of the banks.
here is another timely article in the bradenton herald -- A bank on life support | HeraldTribune.com | Sarasota Florida | Southwest Florida's Information Leader
from that article: "There was no one who looked hard at credit, who questioned whether the bank should expand rapidly in a bubble market, who asked tough questions about what would happen if things went wrong," discussing first prioity bank.
where were the banking supervisiors?
I have a soft spot for banks with "Security" in the name. I think they actually fail more often than banks with "Integrity" in the name, although I have not subjected this to any particular evidential rigor.
Well banks with Morgan in their name never go bust, and Gates would be a pretty good safeguard too.
By perverse logic, it seems safest to keep your cash in whatever large national bank seems likely to fail first, before the FDIC runs out of checks.
I'd be happy to keep my money (under 100 thousand as a precaution of course) in a bank Buffett has been buying, like USB and WFC. I also would check the PE ratio of the bank. If it is above 11 or 12 that would tell you that informed people don't expect it to have many problems. Banks with problems often have low PE ratios.
Chris-TD Banknorth, if you have them in your area (New England/upstate NY). The Canuckski banks are well run (except for CIBC) and the big 6 have an absolute monopoly in Canada and can't help but make money on their Canadian operations. TD is the best of the bunch, sold all their sub-prime 2 years ago and has had virtually no write-downs.
OT: hope now adopts new guidelines:
http://www.hopenow.com/upload/press_release/files/HOPE%20NOW%20Adopts%20New%20Guidelines--%20June%2017,%202008.pdf
"They're lending other people's money, not their own, and if the company goes belly up, it's the stockholders and FDIC taking the hit, not management -- at least not top management. If top management is compensated with bonuses (and/or stock options they can exercise and get their profits from before the chickens come home to roost), then they'll set the numeric targets for the people down below."
This is exactly correct: people are just following their economic incentives.
Install institutional clawbacks for bonuses and this problem will disappear...
(...until some enterprising exec on Wall Street figures out a way around it, which should take all of about 3 months.)
"By perverse logic, it seems safest to keep your cash in whatever large national bank seems likely to fail first, before the FDIC runs out of checks."
And do what with that check, pray tell?
Markel "How can one possibly know which neighborhood community banks are at risk? The FDIC doesn't release its own ratings, and I don't trust the private agencies."
While CAEMLS rating are only disclosed to the board and senior management, quarterly data from call reports, which must be filed by any institution insured by the FDIC, is available at:
https://cdr.ffiec.gov/public/Default.aspx
Detailed balance sheets, income statements, and schedules breaking out the specifics for various line items (non-accruals, REO, securities, etc.) are all there for your perusal. Of course, you would need to do your own ratio analysis, but that is easy enough.
Warp 9 -
$116.72
"I would point out that MLS listings are not free"
In AZ brokers pay a yearly membership fee and can enter all the listings they like for no additional cost. I can't speak for other states.
It's like 14 year olds took over the banking system.
I beg to differ that "nobody foresaw what would happen to the housing market, or that sub-prime mortgages would collapse so completely."
Plenty of people, many of whom operate outside the banking industry, called it years ago.
They used common sense.
Amen, Chili.
I am an absolute layman here. No economics education, never worked in the business, blah, blah, blah.
But when Greenspan crashed interest rates to historic lows (after raising them every time somebody got a job in the Clinton years - including 3 or 4 times in an election year) and in congressional hearings (after rubber-stamping Bush's ruinous tax cuts) encouraged banks to engage in "creative financing" in congressional testimony - my hair stood on end.
I knew then that this was a disaster in the making. Every bit of news I heard on the subject thereafter only demonstrated that I had misunderestimated the problem - if anything. When option ARMS (which I had to research, having never heard of such a thing) and liar loans became a significant part of the market, I railed. I would have asked where were the regulators but I already knew. The fox was guarding the henhouse - and a couple of political hacks from the Nixon years (Greenspan and Cheney) were manipulating an ignoramus (Bush) to destroy the economy while another (Rumsfeld) was helping him destroy the military.
Our popularity abroad and constitutional government he had help from the Supremes with, (and the rest of the fascists he had appointed) but he did a fair job on that task by himself.
HOOCOODANODE that if you issue a license to steal, that some would take advantage of it?