Wachovia's Contribution to the Credit Crunch
Submitted by
CalculatedRisk on Tue, 07/22/2008 - 7:49am (35 comments)
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You know, as banks are closing up their shoppes and tightening belts, it's time to re-harangue Tanta and CR with the thought of creating their own bank.
I know you detested Tantabanc, Tanta, but I think I have the perfect name now - it oozes respectability:
CR TantAmount Savings & Loa
Thanks CR! great title Brian! (CR-the font for the title credit is almost invisible??)
[Alo] "You know, as banks are closing up their shoppes and tightening belts,"
Belt-tightening might be useful for the banks if they hadn't put the belt around their necks.
So inquiring minds want to know: will the FDIC have to take over Wachovia any time soon? If not, how does a bank bleeding red ink so profusely keep their head above water.
I bet you Wachovia analysts have been reading this site.
Do this all means I can has SKF at $117?
I dont needs no pony....
Cause the price o' hay be goins up....
WB up substantially on all the good news today. Quite a market...
So we've been in this sh1tstorm for almost a year now, and every 6 months some new statement is released that says we're at the bottom, or we've turned a corner. Now they are saying 2010.. Mid 2010... End of 2010...
At what point do we pony up and just call it a lost decade?
Meanwhile - the market is rallying. This is bizarre. I've invested in Guns AND Ammo.
It seems to me this inflation talk is intended to get people to buy now assuming prices go up and never come back.
That is a sign of desperation that consumer outlook is so bad our Fed is talking UP inflation.
Problem is, the Fed couldn't succeed in hyperinflationary stimulus even if they tried: no wage pressure to support it out of the gate.
So go everyone, buy, buy, buy, it's the only thing you can do....hoard, store years worth. Just buy, dammit, we NEED YOU TO BUY!!!
dk writes:
Meanwhile - the market is rallying. This is bizarre.
The market is rallying because it only cares about getting its next fix from the government. And since it knows it is going to get unlimited fixes, it is in junkie heaven.
The big dumb animal is responding positively to conflicting news. It will soon realize that it's being prodded and head down again - maybe later today.
"Wachovia is now projecting house prices will bottom in mid-2010"
Glacial speed of RE price discovery.
isn't some of this anemic rally due to oil talking? futures contracts expiring and all, and storm passing.
To go further, the excessive talk of how we should expect the dollar to continue to weaken in forex markets is further intended to push us to buy, buy, buy.
Deflation is unavoidable now.
Current off-balance-sheet accounting has been abused and rule makers plan to issue a proposal soon, probably in August, to bring them back on the balance sheet, the chairman of the U.S. Financial Accounting Standards Board said on Tuesday.
UPDATE 1-US FASB plans off-balance sheet proposal soon
| Reuters
Boom! About damn time.
They sure do like that word "enhanced."
My theory is the inflation scare is meant to justify the rate hikes needed to save the GSEs. Their negative duration and high leverage mean they're screwed unless rates go up. Of course, the rest of the economy is screwed if rates do go up, but the rest of the economy should have thought of that when they scrimped on bribing Congress.
5 year arm resets peak in 2010-2011 dont they? And havent hardly any of those mortgage holders refinanced? So arnt there a lot of forclosures likely to come in 2010-2013?
How can you possibly justify a market bottom in 2010?
I predict an inflation adjusted market bottom in 2015.
"rule makers plan to issue a proposal soon, probably in August"
That gives the vermin a month to hide their losses in a more creative way.
Forget the day to day in the market. Anyone watching closely notices that all upside comes with a corresponding downside...the most obvious is oil vs stocks.
There is just a massive rotation going on resulting in lower lows and lower highs. Example: The bank stocks rally came at the expense of other stocks and asset classes.
The vast majority of those buying and selling assets do so with other people's money. There is less and less OPM to play with.
The rake of the credit crunch and deflation is taking more and more off the table.
Just like a poker game may see massive movement of chips from one player to the next, the rake of the house slowly wittles away at the total. You may have players get up from the table winners but there will be an equal amount of losses/losers.
The two decades of more and more money coming to the table in the form of ever increasing ways to invest (401k, roth, 457 etc) combined with ever increasing contibution limits and a virtual vacuum of retired sellers is now being replaced with a generation of investors realizing that stocks don't always go up over the long haul combined with a baby boomer generation, with a lifetime of accumulation, seeing that selling sooner is better.
The tide has gone out for long term stock investors and it will take a long long time and a paradigm shift to bring it back.
i hope they left a trail of breadcrumbs so they can keep their bearings as to where this all started. i doubt there ever was any substance to begin with, so if there were any it would have been etheral crumbs in the first place.
Love this stuff:
So who is going to take your little piece of Big Sh*tpile off your hands, exactly?
Nice to know they can still come up with sentences that mean nothing. The MBA's haven't entirely lost their mojo.
You didn't understand what was "judicious" before, why should I think you suddenly know, now?
Ok, next question: how are you now going to, you know, actually make money?
I haven't read the comments yet, somebody I hope at least tried to explain what this means. Tanta? You have a gift for explaining this type of gobbledygook.. are they claiming that they have found a way to unload the BMW/Mercedes executive car pool at a good price? What?
Should I move my money out of Wachovia on principle?
yes, if you mean the black hole principle.
Dick Bove: "What that depositor does, or what that small businessman does, is he runs and puts his money in Bank of America, Wells Fargo, Citigroup, you know, the big banks that we know that the government will not let fail."
There's so much wrong with this statement that I can't even start.
"Current off-balance-sheet accounting has been abused and rule makers plan to issue a proposal soon, probably in August"
Translation: You guy's are cooking the books, we know your cooking the books and this shit is going to come to a screaming halt so you had better dump those insider shares while the getting is good.
Its an anaemic rally on the DOW. Looks like it needs some more pumping from government.
"5 year arm resets peak in 2010-2011 dont they?"
stealthwii@gmail.com
Yep, and not to mention the option arms meeting their maximum permitted neg am of 110% to 125% (depending on your state). They will both be resetting in alignment.
It's almost cosmic. It'll be a thing of beauty like a black hole swallowing up all real estate in it's path.
Not news:
Late Monday, Wachovia announced plans to leave the wholesale mortgage lending business...joining other lenders making similar moves to exit the troubled sector.
How will this affect mortgage brokers? Clearly they've already been hit pretty badly on tightening credit. Is it possible that the mortgage broker role will contract to a small fraction of what it was a few years ago, perhaps go away alltogether?
doom,
From your comment, I imagine a knife-catcher bragging his newly purchased McMansion while the whole city is at the black hole's Schwarzschild radius. "After a couple of renovations and some new countertop, I should be able to gain a $100K profit!".... shhwoooop...
How will this affect mortgage brokers? Clearly they've already been hit pretty badly on tightening credit. Is it possible that the mortgage broker role will contract to a small fraction of what it was a few years ago, perhaps go away alltogether?
Brokers who began during the boom are gone. The broker model is broken with only those having an established clientele being able to hold on.
Broker generated loans are showing a 20% default rate compared to less than 5% from lender generated loans. There was a lot of fraud caused by brokers. Unless a national licensing system is created the problems of brokers will continue. Even then, there's no guarantee brokers will be able to exist.
The mortgage broker business as we experienced it over the past 5 years is over. Those who want to stay in the business are adapting or going to work directly for lenders.
If anyone would like to know why they think housing bottoms in 2010, I have a guess:
Because it doesn't bottom in 2009.
Yeah, these guys are on the ball.
CR:
Is Wschovia, next Downey Saving? Which one is worse?
Anonymous,
"...rulemakers plan to issue a proposal soon, probably in August, to bring them [off balance sheet loans and mortgage securities] back on the balance sheet." Great post. This could be very big. Further down the article "analysts estimate financial institutions could be forced to book $5 Trillion! in new loans including troubled loans."
Now who thinks the accountants have the backbone to pass this proposal?
First Fed is the next Downey Savings. Wachovia has its own set of problems, but apparently Wall Street discounts those problems as "priced in".