kind of OT, but now that First Horizon is selling off it's mortgage book, looks like I'll be supporting MetLife in their ongoing valiant efforts to survive their issues with level 3 assets.
Future U.S. bank failures linked to the downturn in the real estate market may include "institutions of greater size" than in the recent past, Federal Deposit Insurance Corp Chairman Sheila Bair said on Thursday.
In a Times of London interview, Nassim Nicholas Taleb implies it's the nature of banks to fail:
Complex systems dont allow for slack and everybody protects that system. The banking system doesnt have that slack. In a normal ecology, banks go bankrupt every day. But in a complex system there is a tendency to cluster around powerful units. Every bank becomes the same bank so they can all go bust together.
He points out, chillingly, that banks make money from two sources. They take interest on our current accounts and charge us for services. This is easy, safe money. But they also take risks, big risks, with the whole panoply of loans, mortgages, derivatives and any other weird scam they can dream up. Banks have never made a penny out of this, not a penny. They do well for a while and then lose it all in a big crash.
@rent_to_own -- Ditto on your comment. Bank examiners and others involved are just regular guys/gals doing their jobs. Unannounced entry is time-tested method of auditing, fraud investigation, etc.
Also -- I think the real point is that even a very small, dinky bank requires a fairly large group of people. What if larger banks failed? Back to the days of the RTC?
Scav - once they're in the bank after close of business secrecy isn't important. It's while the doors are still open that you can't let the news slip. The way this is done with so little disruption to customers is dependent on another bank picking up the majority of the business. Those deals, of course, depend on depositors not running the bank and stripping the assets.
The first attempt with a failing bank is to get it sold, but when that fails, the only thing to do is shut it down as quietly as possible. I guess in this case no one wanted to deal with that Florida RE portfolio.
It is a great benefit to the businesses and individuals who have accounts with the bank to do it this way. It keeps the overall harm to the minimum, and it may limit losses of uninsured depositors.
ah, that was in the other town best I can tell. The pizza was delivered to the bank after hours. Granted, my point of reference is a town so small there's no possibility of ordering pizza - but even Staples figured it out. It's just sloppy writing.
The FDIC's closing teams have used many alias names in the past which are not always insurance related and some times humorous. They check into a local hotel using the alias and personal credit cards they switch to a government issued credit card at check out. The FDIC has a contract with a travel agency that assist with flights, hotels and odd requests that come up. The first night FDIC usually orders food in to keep the team working and not leaving for dinner. It's usually pizza and never ordered until hours after the bank closes. The food is for FDIC employees, bank employees still working late and the FDIC hired armed guards usually from the local police or sherrif's department. FDIC employees are not released to leave and return to their field office or home until they get permission from the bank closing manager on duty. They basically work and sleep with quick meals or skipped meals and several drinks late in their hotel bars. They get a per diem plus overtime on weekends if they have already clocked a 40 hour week during that pay period. Managers typically do not get overtime but all or paid well above $100,000. FDIC has one of the highest goverment pay scales in DC with locality pay rates nationwide well above your typical federal pay scale.
This will make it more difficult for FDIC bank closing teams to get to their failing bank destinations on time. They have an expensive option to charter planes and have done so on a limited basis in the past. They also have flown entire teams to far flung cities (Miami comes to mind) from Dallas only to have the FDIC employees return to Dallas on the same day because the failing bank received a last minute zero hour capital injection canceling the closing... at least for a while.
Now for a bigger institution to fail to teach "people" a lesson. What about Lehman? I sold out at a profit some time ago. That would be fine with me. Of course with Lehman or somesuch nobody would stand across the street in awe of all the suits moving in. When an IB fails, who picks up the pieces?
Local residents said the FDIC officials seemed to come out of nowhere. "I didn't know they were coming, but we knew when they were here," said Becky Hasselberg, 58, who has lived in Staples her whole life. "People in suits and ties walked into the coffee shop. They weren't too casual."
I am going to have to be DOUBLY CAREFUL to warn my big city eastern clients coming to N Minnesota to visit the snowmobile plants to NOT wear suits and ties - could cause a ruckus all the way from Minneapolis to Roseau (and 'yes' Roseau is spelled right).
Alec writes:
RayOnTheFarm writes:
Why did a bank in a Minnesota railroad town have loans in Florida ?
Because nobody's putting a 30 story condo complex in Detroit Lakes?
Alec | 06.05.08 - 2:08 pm | #
Alec sounds like a guy who's been to 'The DL' before... love to see those FDIC dudes camping out at the Super 8 just off Hwy 10 & 59. Like hiding the proverbial 900 lb gorilla under the throw rug.
Gorilla? What gorilla?
Maybe they can pretend to be a fishing party - you know just a bunch of guys going walleye fishing - in suits and ties.
kind of OT, but now that First Horizon is selling off it's mortgage book, looks like I'll be supporting MetLife in their ongoing valiant efforts to survive their issues with level 3 assets.
And then I'll support...
The whole "slip into a small town undetected" part sort of gives me the heebie jeebies.
Must just be me.
Drew writes:
The whole "slip into a small town undetected" part sort of gives me the heebie jeebies
Me too. Most honest people don't slip anywhere. Wonder if they all have black uniforms with silver stripes?
In other news, Lefty's Liquors reports record sales....
Future U.S. bank failures linked to the downturn in the real estate market may include "institutions of greater size" than in the recent past, Federal Deposit Insurance Corp Chairman Sheila Bair said on Thursday.
FDIC chief says big bank failures not likely
| Reuters
Ya think?
Undetected in a small town after an order of 32 pizzas? Not in the small towns I've known...
anybody know the trick to get the WSJ articles for free? All I could get was the "free preview".
In a Times of London interview, Nassim Nicholas Taleb implies it's the nature of banks to fail:
Complex systems dont allow for slack and everybody protects that system. The banking system doesnt have that slack. In a normal ecology, banks go bankrupt every day. But in a complex system there is a tendency to cluster around powerful units. Every bank becomes the same bank so they can all go bust together.
He points out, chillingly, that banks make money from two sources. They take interest on our current accounts and charge us for services. This is easy, safe money. But they also take risks, big risks, with the whole panoply of loans, mortgages, derivatives and any other weird scam they can dream up. Banks have never made a penny out of this, not a penny. They do well for a while and then lose it all in a big crash.
[emphasis mine]
Full article here
Finally it's happening, now if only a big financial was allowed to go down.
OT - Home foreclosures set record in first quarter. Both the rate of new foreclosures and late payments were the highest on record going back to 1979.
The Raw Story | Home foreclosures set record in first quarter
They made real estate loans on Florida property? And they went all non performing? Who could have seen that coming?
@rent_to_own -- Ditto on your comment. Bank examiners and others involved are just regular guys/gals doing their jobs. Unannounced entry is time-tested method of auditing, fraud investigation, etc.
Also -- I think the real point is that even a very small, dinky bank requires a fairly large group of people. What if larger banks failed? Back to the days of the RTC?
There's a rather lovely fictionalized account of this process in Terry Pratchett's book "Making Money."
Scav: apparently they pretend to be an insurance convention.
Jon: thanks for the article link.
evensong writes:
@rent_to_own -- Ditto I agree if they can catch any fruadster I'm all for it.
jo6pac
The race to the bottom continues.
Scav - once they're in the bank after close of business secrecy isn't important. It's while the doors are still open that you can't let the news slip. The way this is done with so little disruption to customers is dependent on another bank picking up the majority of the business. Those deals, of course, depend on depositors not running the bank and stripping the assets.
The first attempt with a failing bank is to get it sold, but when that fails, the only thing to do is shut it down as quietly as possible. I guess in this case no one wanted to deal with that Florida RE portfolio.
It is a great benefit to the businesses and individuals who have accounts with the bank to do it this way. It keeps the overall harm to the minimum, and it may limit losses of uninsured depositors.
ah, that was in the other town best I can tell. The pizza was delivered to the bank after hours. Granted, my point of reference is a town so small there's no possibility of ordering pizza - but even Staples figured it out. It's just sloppy writing.
I can think of a few banks that would prefer cremation to burial...
The FDIC's closing teams have used many alias names in the past which are not always insurance related and some times humorous. They check into a local hotel using the alias and personal credit cards they switch to a government issued credit card at check out. The FDIC has a contract with a travel agency that assist with flights, hotels and odd requests that come up. The first night FDIC usually orders food in to keep the team working and not leaving for dinner. It's usually pizza and never ordered until hours after the bank closes. The food is for FDIC employees, bank employees still working late and the FDIC hired armed guards usually from the local police or sherrif's department. FDIC employees are not released to leave and return to their field office or home until they get permission from the bank closing manager on duty. They basically work and sleep with quick meals or skipped meals and several drinks late in their hotel bars. They get a per diem plus overtime on weekends if they have already clocked a 40 hour week during that pay period. Managers typically do not get overtime but all or paid well above $100,000. FDIC has one of the highest goverment pay scales in DC with locality pay rates nationwide well above your typical federal pay scale.
This will make it more difficult for FDIC bank closing teams to get to their failing bank destinations on time. They have an expensive option to charter planes and have done so on a limited basis in the past. They also have flown entire teams to far flung cities (Miami comes to mind) from Dallas only to have the FDIC employees return to Dallas on the same day because the failing bank received a last minute zero hour capital injection canceling the closing... at least for a while.
Continental Cuts 3,000 Jobs as It Grounds Planes
Continental Is the Latest to Charge for a Checked Bag - NY Times
Why did a bank in a Minnesota railroad town have loans in Florida ?
Isn't that carrying Community Reinvestment a bit far ?
RayOnTheFarm writes:
Why did a bank in a Minnesota railroad town have loans in Florida ?
Because nobody's putting a 30 story condo complex in Detroit Lakes?
Now for a bigger institution to fail to teach "people" a lesson. What about Lehman? I sold out at a profit some time ago. That would be fine with me. Of course with Lehman or somesuch nobody would stand across the street in awe of all the suits moving in. When an IB fails, who picks up the pieces?
SunTrust, National City, KeyBank or M&I bank.
All three have low asset bases and 9-15% delinquent construction loans.
From the link...
Local residents said the FDIC officials seemed to come out of nowhere. "I didn't know they were coming, but we knew when they were here," said Becky Hasselberg, 58, who has lived in Staples her whole life. "People in suits and ties walked into the coffee shop. They weren't too casual."
I am going to have to be DOUBLY CAREFUL to warn my big city eastern clients coming to N Minnesota to visit the snowmobile plants to NOT wear suits and ties - could cause a ruckus all the way from Minneapolis to Roseau (and 'yes' Roseau is spelled right).
Alec writes:
RayOnTheFarm writes:
Why did a bank in a Minnesota railroad town have loans in Florida ?
Because nobody's putting a 30 story condo complex in Detroit Lakes?
Alec | 06.05.08 - 2:08 pm | #
Alec sounds like a guy who's been to 'The DL' before... love to see those FDIC dudes camping out at the Super 8 just off Hwy 10 & 59. Like hiding the proverbial 900 lb gorilla under the throw rug.
Gorilla? What gorilla?
Maybe they can pretend to be a fishing party - you know just a bunch of guys going walleye fishing - in suits and ties.
My gal is from DL, usually stay at the carlson country inn with the waterslide.