FDIC's Bair: "Institutions of greater size" May Fail
Submitted by
CalculatedRisk on Thu, 06/05/2008 - 8:53am (27 comments)
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at this point, until one "of greater size" does fail, her words are falling on deaf ears, IMO.
Candidate?
Webster to raise cash with preferred stock sale
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From the article:
Additionally, the FDIC is preparing guidance for banks that rely on third parties such as loan originators and mortgage brokers. The guidance will include due diligence in selecting a third party, contract structuring, and compensation arrangements to avoid encouraging third parties into steering customers to higher cost products, she said.
I suspect a Tanta post is in the offing.
Personally I'm not buying anything said until the words "never too big to fail" or "will be allowed to fail" cross her Bair's lips. That would be news.
Watch this stuff:
The Company closed Resource Real Estate Funding CDO 2007-1, Ltd.
("RREF CDO-2"), financing a $500.0 million portfolio of commercial real
estate loans and commercial mortgage-backed securities ("CMBS"), with a
weighted-average cost of liabilities of one-month LIBOR plus 0.61%.
Also:
RAIT CRE CDO I is a $1,018,000,000 revolving commercial real estate cash flow collateralized debt obligation (CDO) that closed on Nov. 7, 2006. As of the April 21, 2008 trustee report and based on Fitch categorization, the CDO was substantially invested as follows: commercial mortgage whole loans/A-notes (63.2%), commercial real estate mezzanine loans (28.1%), commercial real estate preferred equity securities (5.4%), and cash (3.4%). The CDO is also permitted to invest in REIT Debt.
The portfolio is selected and monitored by RAIT Partnership, LP. RAIT CRE CDO I has a five-year reinvestment period during which, if all reinvestment criteria are satisfied, principal proceeds may be used to invest in substitute collateral. The reinvestment period ends in November 2011.
The pool has above average loan diversity relative to other CRE CDOs. Based on Fitch categorizations, the pool currently consists of 134 loans and the Fitch Loan Diversity (LDI) score is 216, compared to the covenant of 333.
For a summary of the Fitch Loans of Concern and the 10 largest loans, please refer to the RAIT CRE CDO I CREL Surveyor Snapshot, on the Fitch Research web site, which will be available beginning June 10, 2008.
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The miscreants (Bankrupters and Fraudsters, supported by the Fed and various agencies of the USG) had to turn Americans into dopes in order to thrive and get support for their evil financial designs (they were so plain that only dopes could have not noticed).
The proof, as Americans like to say, IS in the pudding. How else could these miscreants have thrived?
Breeding dopes became a necessity and they had propaganda tools at their disposal.
It IS the Morality, Stupid! (Americans must pay the price for allowing immoral people full control of the economy).
Legalism is a morally bankrupt ideology.
Jas
Hm. Why is she delivering this sort of testimony in public?
I mean, what is her motivation? Is yelling "BANKS ARE GONNA FAIL!!!" part of the FDIC's mandate? Does that help anybody? How?
After all, this is not some blogger or talking head or politician. This is the chair of the FDIC. So what, exactly, is she thinking?
@ sewer rat:
Is this CRE CDO you mention owned by Rait Financial services (RAS) out of Maryland? I own some of them and I'd like to know if I need to punch out. They have a 20% dividend!
--
The coming bank failures are no secret
They were no secrets to a crank like yours truly in 2003 when the seeds were shown and they were flowering. Evildoers Greenspan and Bush were taking credit for artificial boost in the economy as a result of the evil deeds. I coined the term Bankrupters and Fraudsters of New York City in 2003. It was too obvious what they were doing except to the dopes.
Dopes thought that the American manipulation of the economy by the Fed was magical. Finance and magic dont mix. And finance does not lend itself to innovation.
Jas
Randy:
Deal Summary:
RAIT CRE CDO I is a $1,018,000,000 revolving commercial real estate.....
Fitch Affirms RAIT CRE CDO I
Trichet sends message to Fed. Being slow witted it took me a while to catch it. Below includes analysis and Lacker's speech
Jesse's Café Américain
"After all, this is not some blogger or talking head or politician. This is the chair of the FDIC. So what, exactly, is she thinking?"
It's kind of sad that we have reached the point where a public figure telling us the truth about our situation is surprising and incomprehensible.
Richmond Federal Reserve Bank President Jeffrey Lacker said the lending to securities firms that the central bank introduced in March may lay the seeds of further financial crises.
The danger is that the effect of the recent credit extension on the incentives of financial-market participants might induce greater risk taking,'' Lacker said in a speech to the European Economics and Financial Centre in London. Thatin turn could give rise to more frequent crises,'' he said.
Fed's Lacker Says Risks to U.S. Economy `Diminished' (Update3) - Bloomberg.com
Watch what they do not what they say.
Nemo - I know being truthful about economic circumstances isn't exactly a hallmark of the current administration, but the financial markets will probably react less severely to a larger-size bank failure if prepared in advance. The warning bell is being rung. Of course the market isn't paying attention today though - there's still stimulus checks to be spent!
Candidate?
Bigger Institution
AMBAC and MBIA cut to AA, remain on negative watch. The noose on the financials just got tightened another notch.
"Trichet sends message to Fed."
'Dueling banjos'
YouTube -
LOL - And the flood came in!
@ sewer Rat (again):
Read the link. So RAIT is the asset manager. I realize I'm a little slow here.....Does tht mean if things go south for the CDO, RAIT (RAS) is taking the hit? It doesn't look like from what I've read......
Sorry for having to ask again....... This is my retirement I'm talking about......
Thanks........:>
Posted in a thread below, but more apropos here in regards to bigger banks failing:
SunTrust, National City, KeyBank or M&I bank.
All three have low asset bases and 9-15% delinquent construction loans.
Read "Institutions of greater size"
and immediately thought
"rodents of unusual size" RUS's those don't exist.
Bear Sterns already went under for all intents and purposes (or, perhaps it was a bail-out of the counterparties - same difference), and the Fed bailed them out.
I wonder when the Fed will run out of the ability to bail out the collapsing banks? Only then will we truly see bank failures of any note.
They don't run out, but have to starting creating money to cover the bad bets which leads to other problems like inflation when they use up their Treasury assets.
Nemo her audience isn't you and me, IMHO. It's the managers of said banks. Saying "We're NOT going to bail all of you out," in public is saying it more loudly than saying that in private.
Yeah, larger banks will fail ... after the election.
Bigger than Integrity in Staples Minnesota!!! Whooa Nelly!!
I can't predict Big Bank Failures; I am an engineer. But, at the current oil prices and trend, The Big Three US Auto will vanish in 10 years or less and so also a majority of Airlines. The impact on the economy will be quite dramatic as by then, only a tiny fraction of the GDP will be in manufacturing (hard assets kind; not hamburgers and potato chips)
From 2000 to 2006, why wasn't it news when housing values increased beyond all reasonable expectations? Now that the cycle is heading down to saner levels, shouldn't this be expected? Why is it news now?