More relevant is the asset value of failed banks and I suspect on that measure IndyMac is significant. If the only failed bank in a year were Citi that would be nothing on a # of banks graph but obviously a monstrously bad year for bank failure.
Hello. Has industry consolidation lowered the number of institutions, so that the current crisis might have "fewer" failures even if the real damage is larger (eg, real dollars)?
"In recent weeks, the share prices of some regional banks, like the BankUnited Financial Corporation, in Florida, and the Downey Financial Corporation, in California, have stumbled hard amid concern about their financial health. A BankUnited spokeswoman said the lender had largely avoided risky subprime loans."
ummm, yeah, IndyMac largely avoided Sub-Prime loans, look where it got them.
Hell, the article even acknowledges that IndyMac went tits-up due to Alt-A, then lets this blather pass without comment.
When is the MSM going to catch on that subprime is so 2007 and the 2008 is Alt-A and CRE and 2009 is going to be all of the above + ARMs?
I would absolutely love to see a pair of reports. One showing where the depositors reside for Indymac. A second for where the money was loaned. I want to see where the net transfer of wealth is. Are Californians getting to keep a lot of money that the rest of the US deposited? That is certainly the case for anything the FDIC might have to pay out.
Can't recall where I read on Friday (here?), but the average figure might be skewed by the number of those with greater than $100k in deposits. If you can parse out those numbers, you might find that the average joe didn't have a whole lot there.
Average loss is 50% on dollar and I believe that the typical loss was about $50k range. I was truly surprised by the number of folks who still had accounts there despite the media attention.
Well the bank branch guy I talked to a couple of days ago said they WERE in all that bad stuff. HE was telling the truth. Anything coming out of Camner's stooges mouths, not so much.
The 1990 failures were of small S&L's. Today these would be branches... on this basis, Indymac, with 200? branches, might have equaled 200 S&L failures from the prior era.
ALso, BSC failure would also be worth a lot of the little S&L's. A better measure is how much the US is/will pay on account of these failures... hopefully, Indy will only cost 4-8B as advertised, IMO more, but just 6B would have been a significant portion of gov costs in the S&L era, and 29B for BSC would have covered a major bit of the S&L overall costs.
We will be lucky if the current era does not break the bank, i.e. the treasury.
"Surprisingly the WSJ reports that the percentage of uninsured deposits has been growing rapidly:"
Not sure I'm surprised by this, living in Seattle. Lots of younger millionaires who have never seen a severe recession.
The number of bank failures is interesting, but hasn't there been a lot of consolidation? I wonder about failed-bank deposits represented as a percentage of all insured deposits...
I agree with all the comments so far. Is their a better way to relate what is happening now to the S&L crises. # of banks closed doesn't seem the right metric with all the industry consolidation.
Sorry in advance for OT. I've been puzzling the Friday market action specifically the selloff in 10yr Treasuries and the tightening of GSE spread. An earlier post suggested shaken confidence in the US for the Treasury but doesn't fit with the GSE spread tightening. Only thing I can come up with is GSE spread spec trades betting 5 trillion new effective treasuries coming onto the market with a bailout over the weekend (Buy GSEs, Sell the 10yr). If so, does this trade unwind with a vengence given "the plan" is so vague? Thoughts?
In your response to the question of why IMB deposits per customer are so high...
Indymac was never a big player in the DDA and SAV accounts. People didn't want to open these given the relative scarcity of branches.
Since I can remember, IMB has usually been at the top of the tier in CD rates. They are(were) rather new to the CA market and needed to build a customer base. The branches, and the entire retail bank, were poorly run to say the least.
As a result you have a very high proportion of customers seeking high yielding, non-relationship accounts like CD's. They kept their DDA and SAV accts at wells, wamu, and BAC.
Fair Economist, Not One Cent, sure, but unfortunately I don't have those historical numbers. But I think most of the failures will be small banks. The bank failures this year are (and deposits):
Douglas bank: $53.8 million
Hume bank: $13.6 million
ANB Financial: $1.8 billion
First Integrity: $50.3 million
IndyMac: $19.06 billion
The small banks show the trend. The bigger banks do the damage. Heck, even ANB almost looks insignificant compared to IndyMac!
BTW, I suspect only a few large banks are really at risk for failure.
To answer the question about what happens if the FDIC runs out of money--colloquially, the FDIC gets bailed out by a Resolution Trust Corporation-type entity--at least that's what happened 15-20 years ago when the savings and loan crisis swamped the FSLIC. One would hope that the cost of such a bailout would be recouped from the industry through a surcharge on future insurance premiums, but I'm not sure such a surcharge would survive the 2020 model Grover Norquist/Karl Rove.
Where will Chuck "the cluck" Schumer strike next? None of the banks could handle a run on them now and brokered deposits in the sub $100k level are the primary support of their life lines. Someone with the clout of Schumer can yell and cause any one of them to fall just like Indymac did.
jkiss, good point. We've discussed this before - I wish we had more data on branches (and bank size), but unfortunately the data is only by number of banks.
The total number of branches would be interesting. How many branches did NetBank have though? That was a pretty good size failure last year.
look no further than Downey Savings. DSL is the ticker. This is an absolutely atrocious loan portfolio. I thought they'd go before IMB, but I was wrong.
So how about it, senior Senator from New York? Any other California financial institutions on which you want to go public with your solvency concerns?
Nemo | Homepage | 07.13.08 - 11:53 pm | #
Lookin' for short candidates? Wastin' yer time here, call Chuck's Secretary - ask who he's sending 'open letters to' next.
Now you've got me wondering about the Federal Home Loan Banks. I wonder how solvent they are? If the FDIC has to pay back the loans the FHLB lent to these banks, then what happens if the FDIC doesn't have enough to pay back the FHLB?
Wonder if the SEC tracks these boards. Word of caution: be very careful of what you say. I suggest people stick to facts and not provide opinions on the financial health of any specific banks. It would be a shame to go to jail for speaking opinions, which happen to be true, but are prosecutable as "rumor mongering".
Isn't there some saying like "In times of universal deception to tell the truth is in itself a revolutionary act?"
BTW, I suspect only a few large banks are really at risk for failure. - Calculated Risk
That's a trick answer CR. Only a few large banks can fail before we have to try something different.
People here make a good case for Wachovia but I'm still rootin' fer WaMu. Rooting isn't exactly correct. This is a world where the elephants are dancing and I'm grass underfoot.
"In the 1980s, during the savings and loan crisis, the FSLIC became insolvent. It was recapitalized with taxpayer money several times, including with $15 billion in 1986 and $10.75 billion in 1987. However, by 1989 it was deemed too insolvent to save and was abolished along with the FHLBB; savings and loan deposit insurance responsibility was transferred to the FDIC."
I remember the FSLIC since it was the guarantor of my Home Fed "bank" account while I was going to school. They blew up in the 90s IIRC, emerging from the S&L crisis as HomeFed Bank I guess.
The indictment alleges that Mark Turkcan, as president of First Bank Mortgage, a division or wholly owned subsidiary of First Bank, misapplied monies of the bank, which caused them to pay loans, interest, commissions and other fees of more than $35 million to Bear Stearns, due to concealment of losses in buying and selling mortgage backed securities on behalf of First Bank Mortgage," U.S. Attorney Catherine Hanaway said in a statement.
FDIC was created in 1933. Per account coverage was raised to the current 100,000 in 1980; I think some of the other quirks like higher limits for IRAs, ways of structuring survivorship rights, etc., came after that.
CR, I think someone at Marketwatch screwed up; Downey released May NPAs of 14.33 on June 13, not today.
If OTS had acted even last November, when Schumer sent his letter to the Atlanta FHLB, FDIC wouldn't be taking such a bath on Indymac. I quit updating my numbers after I covered my short there (too early, ouch) but I'm pretty sure 4-8 billion mostly reflects the mark they're taking on the alt-A portfolio they have to reclaim from FHLB. I expect some kind of legislation allowing the FDIC to park such portfolios for runoff with unregulated entities or the Fed before too much longer.
I believe the FDIC has approximately 51 Billion right now. IndyMac is expected to cost 4-8 Billion. None or all of the banks on the list would put much strain on the fund except possibly, or probably, WaMu (I really have no idea how much each bank would cost the fund) I know the FDIC is funded by banks too, so I'd guess all banks will be paying an increase in their FDIC assessment (or whatever it's called)
There are much fewer banks now then there was then , so failures should not be as much, however the impact of these coming failures would definitely be felt.
Ask yourself how a tiny string of bank branches in California (like IBM) gets $18 billion in deposits.
Ask yourself how a tiny string of bank branches in Chicago (like CORS) gets $12 billion in deposits.
The answer is they paid the highest CD rates in the nation for a long time and did a lot of CDs just under the FDIC limit on the Internet. For awhile, I've been advising some elderly people on how to carve up $500,000 or more into batches just under $100,000 and parcel it out to the 5-10 highest yielding CDs in the nation that do Internet biz. These older people always ask me the same thing: "Wouldn't my money be safer at XYZ local bank?" When I explain that all banks are the same up to $100,000 because of FDIC, they get it right away. I also tell them never to just let the money roll over into the next CD. Always re-shop it. Therefore, these deposits are very "hot money" because now almost everybody is doing this. The deposits can leave almost as fast as they enter. FDIC and Internet banking together have changed the dynamics of the CD deposit biz. There's no reason to go to the local bank with a $95,000 CD anymore. It's like throwing money down the toilet.
You can have your $95,000 CD in 10 minutes and spend no money on gas.
The Federal Home Loan Bank of San Francisco has a perfected security interest in approximately $21.6 billion in mortgage loans (unpaid principal balance) and mortgage-backed securities (par amount).
There are other sites where you can read depository data, etc. But this site is as good as any to start.
It's just not as simple as CR's graph suggests. Like others have mentioned, think about branches, deposits evaporating, and the spectre of the FDIC not having enough to insure everyone.. at first.
Previous chart was for savings institutions. This is for commercial banks... there's been a sharp decrease in the number of institutions, and a sharp increase in the number of branches... http://www4.fdic.gov/HSOB/hsobRpt.asp
"Unlike IndyMac that failed mostly because of bad Alt-A mortgage loans, most of the coming bank failures will probably be small regional banks with too much exposure to Construction & Development (C&D) and Commercial Real Estate (CRE) loans."
Personally, I am a bear on Alt-A loans but the press releases on the failure blamed a run on the bank not an asset problem or capital ratio issue. Clearly, Schumer and others were a party to this event. Any thoughts?
Re: "The Federal Deposit Insurance Act, as amended by FIRREA, known as the FDIA, provides that such security interest should not be subject to avoidance by the FDIC, as receiver or conservator for the seller. Even if the FDIC cannot avoid a legally enforceable and perfected security interest, it may nonetheless repudiate such security interest. If the FDIC did repudiate an unavoidable security interest, it would be liable for statutory damages provided in the FDIA. Such damages are generally limited
to actual compensatory damages determined as
of the date the FDIC is appointed as conservator or receiver."
We don't need any one reason for massive bank failures, because we'll have all of them. RE, CRE, C&D, consumer credit, etc. -- they're all trending red. Too much risk, too little reserves. Oh, and lots of off-balance sheet shenanigans about to be dragged back on.
It'll be easier to count those left standing than those that fail.
So can these depositors who lost money sue Schumer? Actually, I guess that's a bad question, as anyone can sue. Would they have any possibility of prevailing (not that Schumer probably has any money worth collecting)?
Tom Lindmark writes:
Personally, I am a bear on Alt-A loans but the press releases on the failure blamed a run on the bank not an asset problem or capital ratio issue. Clearly, Schumer and others were a party to this event. Any thoughts?
The bank run is usually the proximate cause, but if there weren't an asset problem we wouldn't be talking about the possibility of losses on the uninsured deposits, as there'd be no question that the asset sales would cover them.
So can these depositors who lost money sue Schumer? Actually, I guess that's a bad question, as anyone can sue. Would they have any possibility of prevailing (not that Schumer probably has any money worth collecting)?
transient | 07.14.08 - 12:29 am
Him being in Congress and all, he's probably got legal immunity for tort if incurred in the course of the public business.
Any predictions on the next unintended consequence to pop up? This is serious whack-a-mole time, and every time Paulson & Bernanke intervenes something else falls apart. What will it be this time? TED spread, LIBOR, dollar down, PMs up, hedgies fall, bond yields up, CDS spreads???? I'm not a true economist, so I can't predict the next problem, but I know this event will have serious negative repercussions. Anybody want to speculate?
When will they realize that they simply can't help this situation? On second thought, I guess that's why Bush bought 100,000 acres in Paraguay.
Although the Bank is exempt from all Federal, State, and local taxation (except
for real property taxes), all FHLBanks are obligated to make contributions to
the Resolution Funding Corporation ("REFCORP") in the amount of 20 percent of
their net earnings (after deducting the AHP assessment). REFCORP was created by
the Financial Institutions Reform, Recovery and Enforcement Act of 1989
(FIRREA) solely for the purpose of issuing $30 billion of long-term bonds to
provide funds for the resolution of insolvent thrift institutions. The FHLBanks
were initially required to contribute approximately $2.5 billion to defease the
principal repayments of those bonds in 2030, and thereafter to contribute
$300 million per year toward the interest payments on those bonds.
OT, sort of, Yahoo news has an article that just came up saying "The Federal Reserve and the Treasury announced steps Sunday to shore up mortgage giants Fannie Mae and Freddie Mac, whose shares have plunged as losses from their mortgage holdings threatened their financial survival." I don't see enough in the article to know what it means. Can anyone here clarify?
I imagine Paulson had a chat with Moddy's and S&P about getting triple A ratings for that $5000 Billion bond they will issue in the morning, but who can say, I mean, really?
Your full of crap, bonds and Treasuries are being diluted and the dollar will go down, yields will go down and that will pull future value of EPS down, so as it is, the market is over-valued, so I assume it will skyrocket from speculation -- although in fundamental terms, it should drop 3000 points this year. I really did see oil going below $100 a week ago, but not now!
I seem to remember seeing a Bush land purchase from a credible source, but all I'm seeing now is something from Gather.com -- Did I imagine it, or is this an Orwellian moment?
Any predictions on the next unintended consequence to pop up?
GSE's will dramatically slow their purchases of mortgages and collect runoff to keep from borrowing from FRB and getting capital from Treasury. Mtg mkt freezes up which is opposite of what Ben and Paul expect. GSE's dragging their feet on jumbo purchases is a good past indicator of this behavior.
Me, I've long been telling folks to keep only modest sums -- amounts that they can lose -- at Bank of America, Citi, Chase, and the like. Just enough to clear the checks.
We keep everything but a few $K at Vanguard.
Equity at less than 10% of assets, counterparty to trillions in derivatives contracts, huge exposure consumer and mortgage loans, aggressive trading for their own account; I think all of the big banks will be toast.
Mtg mkt freezes up which is opposite of what Ben and Paul expect. GSE's dragging their feet on jumbo purchases is a good past indicator of this behavior.
The mtg mkt is already seized up. 1Q08 shows net mortgage lending was HALF of 2007 and 40% of 2005-2006's pace.
During the peak, $1.4T of lending went out. 2008, maybe $580B.
I see lowermybills.com is still at it with their deceptive banner ads.
I clicked through to see what they're up to. Now they're making the consumer provide contact information in order to get the loan quote.
Before, they were at least showing the consumer, in extremely fine print, on about the second screen, that the monthly payment on their banner ad was a pay-option, interest only, negative am ARM loan.
What they're doing is a blatant violation of the TILA. Somebody call Charles Schumer and Chris Dodd.
frankly, the only thing shrubya is qualified to run is some pissant 3rd world clusterf*ck ... he's perfectly cast as the mugabe, amin, or norriega of some south american "democracy" ...
Pinprick holes in a colourless sky
Let insipid figures of light pass by
The mighty light of ten thousand suns
Challenges infinity and is soon gone
Night time, to some a brief interlude
To others the fear of solitude
The question now should be are fannie and freddie still private institutions and subject to rules in that domain or otherwise after this FED and Treasury move.
Fannie Mae and Freddie Mac either hold or back $5.3 trillion of mortgage debt. That's about half the outstanding mortgages in the United States.
The announcement marked the latest move by the government to bolster confidence in the mortgage companies. A critical test of confidence will come Monday morning, when Freddie Mac is slated to auction a combined $3 billion in three- and six-month securities.
I'm not saying Mr Schumer is a saint, but it seems to me that, by pulling the plug on indymac a little early, he has saved some individual investors and also FDIC some money.
You're giving him way too much credit, orion. We may not like any of your choices, but it should be admitted that you can't be a stone simpleton to carry off what these others have accomplished.
The only reason George Wrongway hasn't sawed his leg off is that the Secret Service replaced the chain on his saw with a rubber one.
Richard McElhaney said he is even paying more for the guy who comes to trim the hooves of his cattle because it costs the guy more to travel to the farm
sigh, time to hole up in the rental fortress with a bottle of bourbon (i recommend eagle rare), my 686 and some good cynical poetry (i recommend lindsay or robinson) and await the inevitable zombie onslaught ...
Let not young souls be smothered out before
They do quaint deeds and fully flaunt their pride.
It is the world's one crime its babes grow dull,
Its poor are ox-like, limp and leaden-eyed.
Not that they starve; but starve so dreamlessly,
Not that they sow, but that they seldom reap,
Not that they serve, but have no gods to serve,
Not that they die, but that they die like sheep.
- vachel lindsay
"My supplier said the price is going up $6 a ton in July and another $6 in August," said Georgetown's highway surveyor, Peter Durkee, noting that the current price of asphalt is $51.90 a ton.
"Next year the price could go up even more," he said. "We're going to do the minor paving projects that we have to do this year, but I'm going to be holding off on some others until I know how much money I have to spend."
We talked about aircraft orders a while back. I mentioned that reduced orders would likely impact the trade deficit. I believe we are getting very close.
More than $100 billion (£50.2 billion) of aircraft orders could be cancelled or postponed in the next couple of years as the high price of fuel drives airlines into bankruptcy or forces them to cut spending.
Analysts estimate that 20 to 30 per cent of the $530 billion order backlog held by Boeing and Airbus, the aircraft manufacturers, could be cancelled or delayed as the aviation industry heads towards a winter of turmoil. These cancellations would have a significant impact on aerospace suppliers such as Rolls-Royce, the engine maker.
This will have a significant impact on the trade deficit as exports slow.
Caution, it's late, and I'm new at this, yada yada... But looks to me like there has been a very dramatic reversal in the % of deposit accounts over 100K -- so much that now more than half of deposit dollars are uninsured, versus less than a quarter in 1992.
There was a mention and link to the latest announcement on another thread tonight. But this isn't real news if you've been following this for the last four or five years.
What may be surprising is both Iran's delay in implementing their bourse, and, the administration's hesitation at attacking. A cynical mind might just suspect that the (next) mess is being timed to leave the next Occupant with not two but three wars to deal with.
This will have a significant impact on the trade deficit as exports slow.
I thought that Boeing just raised their forcast for the long term, they think that most airlines would have to effectively change their fleets to newer and more fuel efficient planes.
Iran won't be attacked until after the Olympics. Recommend this reading from a US Naval Observer. He's calling it a "September Surprise"... full discussion is related in various posts at that blog.
I don't remember the exact numbers, but IMB is about as large as everything the FDIC has shuttered in the past 15 years. It's big. It's also considerably larger than the rest of the FDIC's watch list - IIRC, 19 billion for IMB, 28 billion total. (Which means WAMU isn't on the watch list.)
I've heard rumors WAMU has been crazy tight on money lately (they've been perfectly normal with my checking account.) They probably aren't immediately about to go under - but they might be fighting to stay off the watch list, because people will know if they go on by the change in assets watched.
As to Schumer - the only complaint anybody has the right to make is that he didn't do it sooner, when it would have been cheaper to clean up the mess.
The Iran thing is noise, but reality is the future decline of EPS which will impact stock valuations and yields. The Iran thing will play with volatility and even if it escalates, it is a game of stupidity which can't be resolved. On the other hand, as yields go down as a result of weaker earnings from lower sales, there will come about a shift in oil speculation as this Iran game reaches equilibrium, then at that point, the dollar will gain value and oil decrease. Unfortunately, with the new Fannie notes, the dollar will head south and be supercharged by the war games, this will in turn push oil higher.
"Can't wait for some pop-economist clown to say it won't be as bad, all the while the sky is falling..."
Pop economist - you mean like Ben Stein? He's been on the radio here telling us multiple times this isn't the start of the Great Depression. Of course, he qualifies that by saying he doesn't know the future...
I think people love Ben Stein because he's been in movies (Beuller? Beuller?) and sounds like a funny old Jew. But for the record, he was telling people they should buy financials last August. OOPS!
isnt it amazing how powerful schumer is, with a word he destroys a perfectly good bank.
now thats dubya m d
too bad not one of the weak knee republican senators spoke up about how indymac was perfectly fine.
of course even if 10 republican senators said indy was ok no one would have believed them
cause schumer is so powerful.
just one problem... in a bank run, loosing depositors doesn't change the ballance sheet between equity capital and the assets and liabilities of the banks holdings.
blaming schumer for indymacs failure is nonsense. indy mack like many other IBs and S&Ls was on the short shit list.
I think what people forget is that IndyMac WAS insolvent before Schumer made his comments. He didn't make that up and he didn't cause IndyMac to fail. He probably accelerated the process, but that's it. And accelerating the inevitable isn't necessarily a bad thing. Wouldn't it be nice if Bernanke (or hell, Bush) came out and told everyone that house prices were going to fall another 30% nationwide? It's going to happen, we all know it's going to happen, so why not just help it along.
"Stein, or the whole of CNBC, or a couple of profs at George Mason come to mind. Even Krugman is calling it overblown."
I honestly could give two sh#ts what most economist think. If they want to share spin-free analysis, that's great, but appearing as a talking head on CNBC is more a dis-credit than a credit.
I dated an economist for years. Nuff said.
Stein flat out told people to buy financials (and hold them, no less) almost a year ago. IMHO, you can scratch him off the list.
Shiller, I could go for. He has a great batting average, and his book, though a bit lean on analyses, is very clear and to the point. Shows past bubbles, their causes, their development and demise, and how they are forgotten. Also discusses at length the change in the herd's mindset and the failure of the herd to even realize their mindset is changing. And oh, look, how interesting it is that things today look just like a huge real estate bubble! (2nd edition)
"The FDIC estimates its takeover of IndyMac will cost between $4 billion and $8 billion."
snip
"...a run on the bank that saw depositors withdraw more than $1.3 billion during the 11 days after Schumer released a letter about the possible risks of IndyMac failing."
Question: What will the FDIC do with any MBS's on Indymac's books? Will they sell them right away? Does that mean that these MBS's will needed to be marked on other banks books at whatever price the FDIC can get for them?
If so, I see this as being the first in a long line of cascading bank failures.
But in the 80s the carnage was limited, if I recall correctly, to S&Ls by and large. Banks were not much exposed, except maybe late in 89 or 90 when even Citicorp and Bank of Boston were in danger. Today it affects both banks and savings institutions.
I was a child (elementary school) in Oklahoma when three banks failed (around 1985 I guess).
At that time, I think, checking accounts would be frozen for two weeks or so, so when there were rumors that another bank would close, people were desperate to get some living expenses and bill-paying money out.
But for Indymac -- they just lost one weekend of phone and Internet transactions?
Hmmmm.... grossly oversized deposits? Huh. Wouldn't THAT be a scam? Spin off a failing bank, fake the deposit amounts to just below the insured limits on thousands of shadow accounts, then let the bank go under and collect the insurance.
So, what is the process for getting your money from the FDIC and how carefully do they verify?
The relevant figure is losses/evaporation of wealth, not the number of bank failures. In addition, comparing the current and sure to be forthcoming number of bank failures to the historical S&L crisis figures fails to factor in failure and/or losses in the shadow banking system, something that was not nearly as prevalent in the 80's. We have a different animal here, and it is a nasty one.
I actually made a graph of bank failures per year using "total assets" instead of number of banks. I can't post the graph here but basically, total assets from failed banks totalled more than $140 billion each year between 1988 and 1991. The peak was $158 billion in 1989. I guess that's what caused the fall of the Berlin wall.
Anyway, after IndyMac, 2008 is already at $34 billion. Fortunately Bear Stearns wasn't insured ($200+ billion) and Countrywide didn't technically fail (another $200+ billion)
Just because a bank loans out $100.00 does not mean they have $100.00 in the safe or in liquid assets. Its more like $10.00 on the banks books in some form for every $100.00 loaned out.
So for all your money they are paying you 1, 2, maybe 3% interest on, they are turning around and charging 5 to 20% interest ten times over. Pretty slick deal for the banks, until the market turns against them and suddenly "poof" everybody's money disappears.
For a very good explanation of how our banking system works check out Sorry. Page not found.
More relevant is the asset value of failed banks and I suspect on that measure IndyMac is significant. If the only failed bank in a year were Citi that would be nothing on a # of banks graph but obviously a monstrously bad year for bank failure.
Hello. Has industry consolidation lowered the number of institutions, so that the current crisis might have "fewer" failures even if the real damage is larger (eg, real dollars)?
Thank you.
I'm not surprised that the percentage of uninsured deposits is growing. The FDIC limit is not indexed to inflation.
Fair Economist, we were typing at the same time.
from the NYTimes article:
"In recent weeks, the share prices of some regional banks, like the BankUnited Financial Corporation, in Florida, and the Downey Financial Corporation, in California, have stumbled hard amid concern about their financial health. A BankUnited spokeswoman said the lender had largely avoided risky subprime loans."
ummm, yeah, IndyMac largely avoided Sub-Prime loans, look where it got them.
Hell, the article even acknowledges that IndyMac went tits-up due to Alt-A, then lets this blather pass without comment.
When is the MSM going to catch on that subprime is so 2007 and the 2008 is Alt-A and CRE and 2009 is going to be all of the above + ARMs?
doom, doom, doom ... doomy, doomy, doom.
I would absolutely love to see a pair of reports. One showing where the depositors reside for Indymac. A second for where the money was loaned. I want to see where the net transfer of wealth is. Are Californians getting to keep a lot of money that the rest of the US deposited? That is certainly the case for anything the FDIC might have to pay out.
Did someone say "Depression"? ...
YouTube
- The Jam - The Great Depression
is ambac still AA?
17th.
Now I have to read the article.
Woo-Hoo.
If insured deposits are so hot right now, wouldn't that capitalize banks and keep them solvent?
Can't recall where I read on Friday (here?), but the average figure might be skewed by the number of those with greater than $100k in deposits. If you can parse out those numbers, you might find that the average joe didn't have a whole lot there.
Average loss is 50% on dollar and I believe that the typical loss was about $50k range. I was truly surprised by the number of folks who still had accounts there despite the media attention.
doom, doom, doom ... doomy, doomy, doom.
LOL
Well the bank branch guy I talked to a couple of days ago said they WERE in all that bad stuff. HE was telling the truth. Anything coming out of Camner's stooges mouths, not so much.
Nite all.
So in other words the number of bank failures is not important. What is important is the amount of M3 that is destroyed.
Questions:
1) How much money is socked away in the FDIC insurance fund?
2) Of those banks on the short list, do we have enough in the FDIC insurance fund to cover all depositors?
3) What happens when the FDIC runs out of money?
Deposits aren't capital. When you put money in the bank, that doesn't affect the balance sheet.
The 1990 failures were of small S&L's. Today these would be branches... on this basis, Indymac, with 200? branches, might have equaled 200 S&L failures from the prior era.
ALso, BSC failure would also be worth a lot of the little S&L's. A better measure is how much the US is/will pay on account of these failures... hopefully, Indy will only cost 4-8B as advertised, IMO more, but just 6B would have been a significant portion of gov costs in the S&L era, and 29B for BSC would have covered a major bit of the S&L overall costs.
We will be lucky if the current era does not break the bank, i.e. the treasury.
3) What happens when the FDIC runs out of money?
They go back to Congress, hat in hand.
"Surprisingly the WSJ reports that the percentage of uninsured deposits has been growing rapidly:"
Not sure I'm surprised by this, living in Seattle. Lots of younger millionaires who have never seen a severe recession.
The number of bank failures is interesting, but hasn't there been a lot of consolidation? I wonder about failed-bank deposits represented as a percentage of all insured deposits...
on this basis, Indymac, with 200? branches, might have equaled 200 S&L failures from the prior era.
Excellent point.
I agree with all the comments so far. Is their a better way to relate what is happening now to the S&L crises. # of banks closed doesn't seem the right metric with all the industry consolidation.
Sorry in advance for OT. I've been puzzling the Friday market action specifically the selloff in 10yr Treasuries and the tightening of GSE spread. An earlier post suggested shaken confidence in the US for the Treasury but doesn't fit with the GSE spread tightening. Only thing I can come up with is GSE spread spec trades betting 5 trillion new effective treasuries coming onto the market with a bailout over the weekend (Buy GSEs, Sell the 10yr). If so, does this trade unwind with a vengence given "the plan" is so vague? Thoughts?
In your response to the question of why IMB deposits per customer are so high...
Indymac was never a big player in the DDA and SAV accounts. People didn't want to open these given the relative scarcity of branches.
Since I can remember, IMB has usually been at the top of the tier in CD rates. They are(were) rather new to the CA market and needed to build a customer base. The branches, and the entire retail bank, were poorly run to say the least.
As a result you have a very high proportion of customers seeking high yielding, non-relationship accounts like CD's. They kept their DDA and SAV accts at wells, wamu, and BAC.
Don't worry; Schumer's just getting started.
So how about it, senior Senator from New York? Any other California financial institutions on which you want to go public with your solvency concerns?
Fair Economist, Not One Cent, sure, but unfortunately I don't have those historical numbers. But I think most of the failures will be small banks. The bank failures this year are (and deposits):
Douglas bank: $53.8 million
Hume bank: $13.6 million
ANB Financial: $1.8 billion
First Integrity: $50.3 million
IndyMac: $19.06 billion
The small banks show the trend. The bigger banks do the damage. Heck, even ANB almost looks insignificant compared to IndyMac!
BTW, I suspect only a few large banks are really at risk for failure.
Best to all.
To answer the question about what happens if the FDIC runs out of money--colloquially, the FDIC gets bailed out by a Resolution Trust Corporation-type entity--at least that's what happened 15-20 years ago when the savings and loan crisis swamped the FSLIC. One would hope that the cost of such a bailout would be recouped from the industry through a surcharge on future insurance premiums, but I'm not sure such a surcharge would survive the 2020 model Grover Norquist/Karl Rove.
Where will Chuck "the cluck" Schumer strike next? None of the banks could handle a run on them now and brokered deposits in the sub $100k level are the primary support of their life lines. Someone with the clout of Schumer can yell and cause any one of them to fall just like Indymac did.
Any other California financial institutions on which you want to go public with your solvency concerns?
Nemo | Homepage | 07.13.08 - 11:53 pm
Pssst. Doesn't the Fed have an office in San Francisco?
jkiss, good point. We've discussed this before - I wish we had more data on branches (and bank size), but unfortunately the data is only by number of banks.
The total number of branches would be interesting. How many branches did NetBank have though? That was a pretty good size failure last year.
Best Wishes.
+250 viewers on a Sunday nite = people gotz the heebee-jeebez
look no further than Downey Savings. DSL is the ticker. This is an absolutely atrocious loan portfolio. I thought they'd go before IMB, but I was wrong.
So how about it, senior Senator from New York? Any other California financial institutions on which you want to go public with your solvency concerns?
Nemo | Homepage | 07.13.08 - 11:53 pm | #
Lookin' for short candidates? Wastin' yer time here, call Chuck's Secretary - ask who he's sending 'open letters to' next.
UB, Where the hell are you??
Welcome back CR, I'm sure your sick of that by now.
Time to get back to work...
Lookin' for short candidates? Wastin' yer time here, call Chuck's Secretary - ask who he's sending 'open letters to' next.
LOL.
Barron's is going to make that an official leading indicator.
question: in regards to moral hazards, what is the history of FDIC? When was this insurance put in place? (not just the 100k, but any amount)
Hi homedad 43 and linear algebra,
Thanks for answering question #3
Now you've got me wondering about the Federal Home Loan Banks. I wonder how solvent they are? If the FDIC has to pay back the loans the FHLB lent to these banks, then what happens if the FDIC doesn't have enough to pay back the FHLB?
More RTCs?
Hi George,
The FDIC was put into place after the Great Depression.
What about the Buffalo?
Wonder if the SEC tracks these boards. Word of caution: be very careful of what you say. I suggest people stick to facts and not provide opinions on the financial health of any specific banks. It would be a shame to go to jail for speaking opinions, which happen to be true, but are prosecutable as "rumor mongering".
Isn't there some saying like "In times of universal deception to tell the truth is in itself a revolutionary act?"
OT but what the hey.
Just occurred to me that Paulsen is preparing a big "Mission Accomplished" scenario.
the job of the F&F is to make housing affordable to all Americans. And in a few more years, housing will be affordable to Americans.
So let's just run it off and declare "Mission Accomplished"!
BTW, I suspect only a few large banks are really at risk for failure. - Calculated Risk
That's a trick answer CR. Only a few large banks can fail before we have to try something different.
People here make a good case for Wachovia but I'm still rootin' fer WaMu. Rooting isn't exactly correct. This is a world where the elephants are dancing and I'm grass underfoot.
"In the 1980s, during the savings and loan crisis, the FSLIC became insolvent. It was recapitalized with taxpayer money several times, including with $15 billion in 1986 and $10.75 billion in 1987. However, by 1989 it was deemed too insolvent to save and was abolished along with the FHLBB; savings and loan deposit insurance responsibility was transferred to the FDIC."
I remember the FSLIC since it was the guarantor of my Home Fed "bank" account while I was going to school. They blew up in the 90s IIRC, emerging from the S&L crisis as HomeFed Bank I guess.
I missed this story, but perhaps we will see more of this type of prison time for Friends Of Angelo??
Former First Bank Mortgage CEO Turkcan indicted on wire fraud, faces prison
Former First Bank Mortgage CEO Turkcan indicted on wire fraud, faces prison - St. Louis Business Journal:
The indictment alleges that Mark Turkcan, as president of First Bank Mortgage, a division or wholly owned subsidiary of First Bank, misapplied monies of the bank, which caused them to pay loans, interest, commissions and other fees of more than $35 million to Bear Stearns, due to concealment of losses in buying and selling mortgage backed securities on behalf of First Bank Mortgage," U.S. Attorney Catherine Hanaway said in a statement.
CR, how about a graph of not the number of insitutions but the amount of capital? We have less banks with more concentrated money these days.
FDIC was created in 1933. Per account coverage was raised to the current 100,000 in 1980; I think some of the other quirks like higher limits for IRAs, ways of structuring survivorship rights, etc., came after that.
CR, I think someone at Marketwatch screwed up; Downey released May NPAs of 14.33 on June 13, not today.
If OTS had acted even last November, when Schumer sent his letter to the Atlanta FHLB, FDIC wouldn't be taking such a bath on Indymac. I quit updating my numbers after I covered my short there (too early, ouch) but I'm pretty sure 4-8 billion mostly reflects the mark they're taking on the alt-A portfolio they have to reclaim from FHLB. I expect some kind of legislation allowing the FDIC to park such portfolios for runoff with unregulated entities or the Fed before too much longer.
I suggest people stick to facts and not provide opinions on the financial health of any specific banks.
When we bought the house last year, I told the kids that the Bank of Dad was officially closed.
Does that count?
However, you are right and there is such a thing as Echelon.
I believe the FDIC has approximately 51 Billion right now. IndyMac is expected to cost 4-8 Billion. None or all of the banks on the list would put much strain on the fund except possibly, or probably, WaMu (I really have no idea how much each bank would cost the fund) I know the FDIC is funded by banks too, so I'd guess all banks will be paying an increase in their FDIC assessment (or whatever it's called)
We need an FDIC ubernerd here too.
There are much fewer banks now then there was then , so failures should not be as much, however the impact of these coming failures would definitely be felt.
Ask yourself how a tiny string of bank branches in California (like IBM) gets $18 billion in deposits.
Ask yourself how a tiny string of bank branches in Chicago (like CORS) gets $12 billion in deposits.
The answer is they paid the highest CD rates in the nation for a long time and did a lot of CDs just under the FDIC limit on the Internet. For awhile, I've been advising some elderly people on how to carve up $500,000 or more into batches just under $100,000 and parcel it out to the 5-10 highest yielding CDs in the nation that do Internet biz. These older people always ask me the same thing: "Wouldn't my money be safer at XYZ local bank?" When I explain that all banks are the same up to $100,000 because of FDIC, they get it right away. I also tell them never to just let the money roll over into the next CD. Always re-shop it. Therefore, these deposits are very "hot money" because now almost everybody is doing this. The deposits can leave almost as fast as they enter. FDIC and Internet banking together have changed the dynamics of the CD deposit biz. There's no reason to go to the local bank with a $95,000 CD anymore. It's like throwing money down the toilet.
You can have your $95,000 CD in 10 minutes and spend no money on gas.
I'm late here, any updates on this?
The Federal Home Loan Bank of San Francisco has a perfected security interest in approximately $21.6 billion in mortgage loans (unpaid principal balance) and mortgage-backed securities (par amount).
If I'm reading this chart correctly...
FDIC: HSOB Report Preparation
... total number of insured institutions is now much less than half (1,279 versus 3,087) of the number insured during the height of the S&L crisis.
There's an expectation that another stick-save has been engineered, but I still can't shake the feeling that it'll be extremely short-lived.
J6P doesn't really grok IBs or even GSEs, but he does understand bank runs. I think IndyMac's failure will undercut any GSE-inspired rally.
The Banking Act of 1933, also known as 'Glass Steagle Act' created the FDIC, separated 'investment banks' from commercial banks.
"Between 1930 and 1933 more than 9,000 banks closed their doors, and domestic investment decreased by 90 percent.."
Banking Act of 1933 - benefits
There are other sites where you can read depository data, etc. But this site is as good as any to start.
It's just not as simple as CR's graph suggests. Like others have mentioned, think about branches, deposits evaporating, and the spectre of the FDIC not having enough to insure everyone.. at first.
Be good.
Previous chart was for savings institutions. This is for commercial banks... there's been a sharp decrease in the number of institutions, and a sharp increase in the number of branches...
http://www4.fdic.gov/HSOB/hsobRpt.asp
tj & the bear --
J6P doesn't really grok IBs or even GSEs, but he does understand bank runs.
Best headline I have seen in a while (Reuters):
FDIC says overwhelming majority of U.S. banks are safe
Whew, now my mind's at ease.
I'm sleeping easier, too, Nemo.
Just gonna wake up at 4 am West Coast time, and make a few phone calls to New York, just in case.
I don't know that this dead cat bounce is going to last all that long.
CR wrote in the article:
"Unlike IndyMac that failed mostly because of bad Alt-A mortgage loans, most of the coming bank failures will probably be small regional banks with too much exposure to Construction & Development (C&D) and Commercial Real Estate (CRE) loans."
Personally, I am a bear on Alt-A loans but the press releases on the failure blamed a run on the bank not an asset problem or capital ratio issue. Clearly, Schumer and others were a party to this event. Any thoughts?
Interestingly, Wamu's balance sheet is exactly the 10x the size of IndyMac's.
320B in total assets / 300B in liabilities
vs 32B / 31B for Indy
by way of comparison, Wells shows:
$600B / $550B
but at least WFC has an after-tax net of ~$2B/quarter, while Wamu has lost $2B over the ttm.
BAC, $1.7T / $1.57T, MRQ showed $1B in after-tax earnings.
Oh, and the Wiki on Glass-Steagle is pretty good, too.
http://en.wikipedia.org/wiki/Glass-Steagal_Act
And if you're in a hurry, you can read the FDIC's short history on their own website. Cartoons, too!
FDIC: Learning Bank
This crap is beyond me, can we wake Tanta up:
Re: "The Federal Deposit Insurance Act, as amended by FIRREA, known as the FDIA, provides that such security interest should not be subject to avoidance by the FDIC, as receiver or conservator for the seller. Even if the FDIC cannot avoid a legally enforceable and perfected security interest, it may nonetheless repudiate such security interest. If the FDIC did repudiate an unavoidable security interest, it would be liable for statutory damages provided in the FDIA. Such damages are generally limited
to actual compensatory damages determined as
of the date the FDIC is appointed as conservator or receiver."
We don't need any one reason for massive bank failures, because we'll have all of them. RE, CRE, C&D, consumer credit, etc. -- they're all trending red. Too much risk, too little reserves. Oh, and lots of off-balance sheet shenanigans about to be dragged back on.
It'll be easier to count those left standing than those that fail.
So can these depositors who lost money sue Schumer? Actually, I guess that's a bad question, as anyone can sue. Would they have any possibility of prevailing (not that Schumer probably has any money worth collecting)?
Now all we need is Chucky Schumer to come out and start the run on WaMu, and that will really drop the bottom out of this market.
Hope they made their tribute payments to him during his last campaign...
Tom Lindmark writes:
Personally, I am a bear on Alt-A loans but the press releases on the failure blamed a run on the bank not an asset problem or capital ratio issue. Clearly, Schumer and others were a party to this event. Any thoughts?
The bank run is usually the proximate cause, but if there weren't an asset problem we wouldn't be talking about the possibility of losses on the uninsured deposits, as there'd be no question that the asset sales would cover them.
So can these depositors who lost money sue Schumer?
Short answer: No. Long answer has to do with sovereign immunity.
So can these depositors who lost money sue Schumer? Actually, I guess that's a bad question, as anyone can sue. Would they have any possibility of prevailing (not that Schumer probably has any money worth collecting)?
transient | 07.14.08 - 12:29 am
Him being in Congress and all, he's probably got legal immunity for tort if incurred in the course of the public business.
(Laughcoffee out nose)
Kona G3,
I think that means the FDIC is going to have to write a check to whoever is holding a security interest on the loans Indy pledged as collateral.
Now....who would that be? Hmmm.
Who did all the banks go to just this past fall asking for loans? (Hint, it's not the federal reserve.)
Any predictions on the next unintended consequence to pop up? This is serious whack-a-mole time, and every time Paulson & Bernanke intervenes something else falls apart. What will it be this time? TED spread, LIBOR, dollar down, PMs up, hedgies fall, bond yields up, CDS spreads???? I'm not a true economist, so I can't predict the next problem, but I know this event will have serious negative repercussions. Anybody want to speculate?
When will they realize that they simply can't help this situation? On second thought, I guess that's why Bush bought 100,000 acres in Paraguay.
Gavshire Hathaway if you were a true economist you wouldn't even know this was going on until next year.
What the hell is all of this business about Bush buying acreage in Paraguay?
Serious, or Onion material?
Jillayne,
I reckon I don't really know, but this is an interesting little problem!
FEDERAL HOME LOAN BANK OF DALLAS - Annual Report (10-K) ITEM 1. BUSINESS
Although the Bank is exempt from all Federal, State, and local taxation (except
for real property taxes), all FHLBanks are obligated to make contributions to
the Resolution Funding Corporation ("REFCORP") in the amount of 20 percent of
their net earnings (after deducting the AHP assessment). REFCORP was created by
the Financial Institutions Reform, Recovery and Enforcement Act of 1989
(FIRREA) solely for the purpose of issuing $30 billion of long-term bonds to
provide funds for the resolution of insolvent thrift institutions. The FHLBanks
were initially required to contribute approximately $2.5 billion to defease the
principal repayments of those bonds in 2030, and thereafter to contribute
$300 million per year toward the interest payments on those bonds.
OT, sort of, Yahoo news has an article that just came up saying "The Federal Reserve and the Treasury announced steps Sunday to shore up mortgage giants Fannie Mae and Freddie Mac, whose shares have plunged as losses from their mortgage holdings threatened their financial survival." I don't see enough in the article to know what it means. Can anyone here clarify?
Gavshire Hathaway if you were a true economist you wouldn't even know this was going on until next year.
Lol...So true.
Any predictions on the next unintended consequence to pop up?
Wind farms disrupt weather patterns causing tornadoes and droughts.
I would say any bank that is selling for 25% or less of book value or has a dividend over 10% is a good candidate.
Yahoo:
It means that the Treasury has kicked the can to Congress. But in fairness, the Paulson proposals are probably require statutory authority.
yahoo,
I imagine Paulson had a chat with Moddy's and S&P about getting triple A ratings for that $5000 Billion bond they will issue in the morning, but who can say, I mean, really?
My predictions, Markets to finish negative, yields go up and dollar declines. This latest action is not good news.
Oh and crude to go up too.
Re: Paulson proposals are probably require statutory authority
You mean Dodd has to go through the same process as The bear failure and act like he understands what happened?
BB,
Your full of crap, bonds and Treasuries are being diluted and the dollar will go down, yields will go down and that will pull future value of EPS down, so as it is, the market is over-valued, so I assume it will skyrocket from speculation -- although in fundamental terms, it should drop 3000 points this year. I really did see oil going below $100 a week ago, but not now!
Kona:
Get used that ugly mug. As Senate Banking Chair, Chris Dodd will be the most influential politician for the next five years...
Yay...
I seem to remember seeing a Bush land purchase from a credible source, but all I'm seeing now is something from Gather.com -- Did I imagine it, or is this an Orwellian moment?
@Gavshire Hathaway - you mean his big ranch in Paraguay? Or maybe it was Uruguay - I'll go look.
We fired our guns and the British kept a'comin'
There wasn't nigh as many as there was a while ago
a lot of money came out of IMB very quickly...$19 bln was the deposit base...think it was around $30 bln-ish at 1Q08...wonder what it was at 2Q08?
Kona G3:
Yes the dollar will decrease BUT the bonds will decrease too.
Let's wait and see.
Paraguay:
Pres. Bush buys 100,000acre ranch in Paraguay : Indybay
Any predictions on the next unintended consequence to pop up?
GSE's will dramatically slow their purchases of mortgages and collect runoff to keep from borrowing from FRB and getting capital from Treasury. Mtg mkt freezes up which is opposite of what Ben and Paul expect. GSE's dragging their feet on jumbo purchases is a good past indicator of this behavior.
Me, I've long been telling folks to keep only modest sums -- amounts that they can lose -- at Bank of America, Citi, Chase, and the like. Just enough to clear the checks.
We keep everything but a few $K at Vanguard.
Equity at less than 10% of assets, counterparty to trillions in derivatives contracts, huge exposure consumer and mortgage loans, aggressive trading for their own account; I think all of the big banks will be toast.
Good riddance to them.
Mtg mkt freezes up which is opposite of what Ben and Paul expect. GSE's dragging their feet on jumbo purchases is a good past indicator of this behavior.
The mtg mkt is already seized up. 1Q08 shows net mortgage lending was HALF of 2007 and 40% of 2005-2006's pace.
During the peak, $1.4T of lending went out. 2008, maybe $580B.
Makes sense, BB.
Makes sense, Chase S-.
More substance to the Bush Paraguay rumor. This from the Guardian, though it reports that the rumors are unconfirmed.
Paraguay in a spin about Bush's alleged 100,000 acre hideaway |
World news |
The Guardian
CR,
RE: Indy Mac and Jamie Dimon Comments
I just remembered an email exchange we had a few days ago. I would be interested in your thoughts at this point.
Herewith copies of the emails.
Here's a post I just put up. What do you think? METROPOLITAN | Property Management & Real Estate Investments
Tom Lindmark
Tom, I think Schumer was reckless, but that is about it.
Best,
Bill (CR)
I see lowermybills.com is still at it with their deceptive banner ads.
I clicked through to see what they're up to. Now they're making the consumer provide contact information in order to get the loan quote.
Before, they were at least showing the consumer, in extremely fine print, on about the second screen, that the monthly payment on their banner ad was a pay-option, interest only, negative am ARM loan.
What they're doing is a blatant violation of the TILA. Somebody call Charles Schumer and Chris Dodd.
Nikkei just crossed over.
Every single aspect of this entire mortgage/credit mess always seems to have Countrywide Financial somewhere in the picture....hhmmmmm.
Yeah! Surprise! Pump monkeys have S&P 500 futures up 9 points.
Piss away your money, schmucks!
Dollar's rallying big right now. Bonds too and S&P futures as well.
If the Fed wouldn't set ridiculously low interest rates, Aunt Mille might not be chasing yields, would she?
Anyone here in the know Re: Book-Entry Certificates??
Nikkei negative, futes here already gave up a third of their pump-monkey gains, gold & oil totally unphased.
frankly, the only thing shrubya is qualified to run is some pissant 3rd world clusterf*ck ... he's perfectly cast as the mugabe, amin, or norriega of some south american "democracy" ...
Pinprick holes in a colourless sky
Let insipid figures of light pass by
The mighty light of ten thousand suns
Challenges infinity and is soon gone
Night time, to some a brief interlude
To others the fear of solitude
Book-Entry Certificates
http://www.sortweb.com/cwsimages/Miscfiles/6343_drs_direct_transaction_form.pdf
Ah, tj, but the night is young for the pump monkeys!
Goodnight!
The question now should be are fannie and freddie still private institutions and subject to rules in that domain or otherwise after this FED and Treasury move.
Troy, concur mtg mkt already shrunk--gonna get even worse now.
tj & the bear writes:
gold & oil totally unphased.
That is scary.
Fannie Mae and Freddie Mac either hold or back $5.3 trillion of mortgage debt. That's about half the outstanding mortgages in the United States.
The announcement marked the latest move by the government to bolster confidence in the mortgage companies. A critical test of confidence will come Monday morning, when Freddie Mac is slated to auction a combined $3 billion in three- and six-month securities.
I'm not saying Mr Schumer is a saint, but it seems to me that, by pulling the plug on indymac a little early, he has saved some individual investors and also FDIC some money.
You're giving him way too much credit, orion. We may not like any of your choices, but it should be admitted that you can't be a stone simpleton to carry off what these others have accomplished.
The only reason George Wrongway hasn't sawed his leg off is that the Secret Service replaced the chain on his saw with a rubber one.
ditto for Bucky, BB.
Gallon of gas, $4; gallon of milk, $4
http://www.timesonline.com/articles/2008/07/13/news/top_stories/doc487ac74e29fd3589759197.txt
Richard McElhaney said he is even paying more for the guy who comes to trim the hooves of his cattle because it costs the guy more to travel to the farm
sigh, time to hole up in the rental fortress with a bottle of bourbon (i recommend eagle rare), my 686 and some good cynical poetry (i recommend lindsay or robinson) and await the inevitable zombie onslaught ...
Let not young souls be smothered out before
They do quaint deeds and fully flaunt their pride.
It is the world's one crime its babes grow dull,
Its poor are ox-like, limp and leaden-eyed.
Not that they starve; but starve so dreamlessly,
Not that they sow, but that they seldom reap,
Not that they serve, but have no gods to serve,
Not that they die, but that they die like sheep.
- vachel lindsay
Bush gives Israel tentative 'OK' to strike Iran
Bush gives Israel tentative 'OK' to strike Iran
Rising cost of asphalt puts area paving projects on hold
Rising price of asphalt puts area paving projects on hold - The Boston Globe
"My supplier said the price is going up $6 a ton in July and another $6 in August," said Georgetown's highway surveyor, Peter Durkee, noting that the current price of asphalt is $51.90 a ton.
"Next year the price could go up even more," he said. "We're going to do the minor paving projects that we have to do this year, but I'm going to be holding off on some others until I know how much money I have to spend."
REBear writes:
Bush gives Israel tentative 'OK' to strike Iran
Saw this headlines a day or two ago, really don't know what to think.
We talked about aircraft orders a while back. I mentioned that reduced orders would likely impact the trade deficit. I believe we are getting very close.
From the Times (UK)
Threat to aircraft orders as fuel prices soar - Times Online
More than $100 billion (£50.2 billion) of aircraft orders could be cancelled or postponed in the next couple of years as the high price of fuel drives airlines into bankruptcy or forces them to cut spending.
Analysts estimate that 20 to 30 per cent of the $530 billion order backlog held by Boeing and Airbus, the aircraft manufacturers, could be cancelled or delayed as the aviation industry heads towards a winter of turmoil. These cancellations would have a significant impact on aerospace suppliers such as Rolls-Royce, the engine maker.
This will have a significant impact on the trade deficit as exports slow.
OK, now I've been playing with the more detailed interactive SDI reports.
FDIC: Statistics on Depository Institutions
Caution, it's late, and I'm new at this, yada yada... But looks to me like there has been a very dramatic reversal in the % of deposit accounts over 100K -- so much that now more than half of deposit dollars are uninsured, versus less than a quarter in 1992.
I Googled Iran oil in Euros
There was a mention and link to the latest announcement on another thread tonight. But this isn't real news if you've been following this for the last four or five years.
What may be surprising is both Iran's delay in implementing their bourse, and, the administration's hesitation at attacking. A cynical mind might just suspect that the (next) mess is being timed to leave the next Occupant with not two but three wars to deal with.
RE writes:
This will have a significant impact on the trade deficit as exports slow.
I thought that Boeing just raised their forcast for the long term, they think that most airlines would have to effectively change their fleets to newer and more fuel efficient planes.
Well, that is what Rob thought but it looks like reality has set in on the airline business.
The FDIC chairman's comments, I think, show why comparing the number of bank failures today with those in the 80-90's is silly.
Different magnitudes and situation.
Can't wait for some pop-economist clown to say it won't be as bad, all the while the sky is falling...
Iran won't be attacked until after the Olympics. Recommend this reading from a US Naval Observer. He's calling it a "September Surprise"... full discussion is related in various posts at that blog.
I don't remember the exact numbers, but IMB is about as large as everything the FDIC has shuttered in the past 15 years. It's big. It's also considerably larger than the rest of the FDIC's watch list - IIRC, 19 billion for IMB, 28 billion total. (Which means WAMU isn't on the watch list.)
I've heard rumors WAMU has been crazy tight on money lately (they've been perfectly normal with my checking account.) They probably aren't immediately about to go under - but they might be fighting to stay off the watch list, because people will know if they go on by the change in assets watched.
As to Schumer - the only complaint anybody has the right to make is that he didn't do it sooner, when it would have been cheaper to clean up the mess.
Oui, oui,
The Iran thing is noise, but reality is the future decline of EPS which will impact stock valuations and yields. The Iran thing will play with volatility and even if it escalates, it is a game of stupidity which can't be resolved. On the other hand, as yields go down as a result of weaker earnings from lower sales, there will come about a shift in oil speculation as this Iran game reaches equilibrium, then at that point, the dollar will gain value and oil decrease. Unfortunately, with the new Fannie notes, the dollar will head south and be supercharged by the war games, this will in turn push oil higher.
"Can't wait for some pop-economist clown to say it won't be as bad, all the while the sky is falling..."
Pop economist - you mean like Ben Stein? He's been on the radio here telling us multiple times this isn't the start of the Great Depression. Of course, he qualifies that by saying he doesn't know the future...
I think people love Ben Stein because he's been in movies (Beuller? Beuller?) and sounds like a funny old Jew. But for the record, he was telling people they should buy financials last August. OOPS!
Big USD rally? That move is a rounding error in currency mkts.
As to Schumer - the only complaint anybody has the right to make is that he didn't do it sooner, when it would have been cheaper to clean up the mess.
Totally agree.
transient
homedad
isnt it amazing how powerful schumer is, with a word he destroys a perfectly good bank.
now thats dubya m d
too bad not one of the weak knee republican senators spoke up about how indymac was perfectly fine.
of course even if 10 republican senators said indy was ok no one would have believed them
cause schumer is so powerful.
just one problem... in a bank run, loosing depositors doesn't change the ballance sheet between equity capital and the assets and liabilities of the banks holdings.
blaming schumer for indymacs failure is nonsense. indy mack like many other IBs and S&Ls was on the short shit list.
You know, I could almost vote for a guy like Schumer. Almost.
Dollar is being strengthened now in anticipation of europe. Let's see if this trend can carry on till the US openings.
I seriously doubt it. Look at oil and gold... scary.
Stein, or the whole of CNBC, or a couple of profs at George Mason come to mind. Even Krugman is calling it overblown.
I think what people forget is that IndyMac WAS insolvent before Schumer made his comments. He didn't make that up and he didn't cause IndyMac to fail. He probably accelerated the process, but that's it. And accelerating the inevitable isn't necessarily a bad thing. Wouldn't it be nice if Bernanke (or hell, Bush) came out and told everyone that house prices were going to fall another 30% nationwide? It's going to happen, we all know it's going to happen, so why not just help it along.
"Stein, or the whole of CNBC, or a couple of profs at George Mason come to mind. Even Krugman is calling it overblown."
I honestly could give two sh#ts what most economist think. If they want to share spin-free analysis, that's great, but appearing as a talking head on CNBC is more a dis-credit than a credit.
I dated an economist for years. Nuff said.
Stein flat out told people to buy financials (and hold them, no less) almost a year ago. IMHO, you can scratch him off the list.
Shiller, I could go for. He has a great batting average, and his book, though a bit lean on analyses, is very clear and to the point. Shows past bubbles, their causes, their development and demise, and how they are forgotten. Also discusses at length the change in the herd's mindset and the failure of the herd to even realize their mindset is changing. And oh, look, how interesting it is that things today look just like a huge real estate bubble! (2nd edition)
Last? (New post up)
Hmm, my ratio (52%) is higher than the WSJs (37%). Wonder why.
In any case, here's another moral hazard scenario (sorry if mentioned already, dont have time to catch up on comments):
"The FDIC estimates its takeover of IndyMac will cost between $4 billion and $8 billion."
snip
"...a run on the bank that saw depositors withdraw more than $1.3 billion during the 11 days after Schumer released a letter about the possible risks of IndyMac failing."
Expired
6 billion minus 1.3 equals what ever was above and beyond any blame that can be cast schumers way....the bank was insolvent period.
The FDIC chairman's comments, I think, show why comparing the number of bank failures today with those in the 80-90's is silly.
"Yes. Smaller numbers of larger entities are much more vulnerable than larger numbers of smaller entities", the ant said to the woolly mammoth.
Question: What will the FDIC do with any MBS's on Indymac's books? Will they sell them right away? Does that mean that these MBS's will needed to be marked on other banks books at whatever price the FDIC can get for them?
If so, I see this as being the first in a long line of cascading bank failures.
Out: Whack-a-Mole!
In: Bail-a-bank!
But in the 80s the carnage was limited, if I recall correctly, to S&Ls by and large. Banks were not much exposed, except maybe late in 89 or 90 when even Citicorp and Bank of Boston were in danger. Today it affects both banks and savings institutions.
I have a question...
I was a child (elementary school) in Oklahoma when three banks failed (around 1985 I guess).
At that time, I think, checking accounts would be frozen for two weeks or so, so when there were rumors that another bank would close, people were desperate to get some living expenses and bill-paying money out.
But for Indymac -- they just lost one weekend of phone and Internet transactions?
I am just curious if other people know...
Hmmmm.... grossly oversized deposits? Huh. Wouldn't THAT be a scam? Spin off a failing bank, fake the deposit amounts to just below the insured limits on thousands of shadow accounts, then let the bank go under and collect the insurance.
So, what is the process for getting your money from the FDIC and how carefully do they verify?
The relevant figure is losses/evaporation of wealth, not the number of bank failures. In addition, comparing the current and sure to be forthcoming number of bank failures to the historical S&L crisis figures fails to factor in failure and/or losses in the shadow banking system, something that was not nearly as prevalent in the 80's. We have a different animal here, and it is a nasty one.
I actually made a graph of bank failures per year using "total assets" instead of number of banks. I can't post the graph here but basically, total assets from failed banks totalled more than $140 billion each year between 1988 and 1991. The peak was $158 billion in 1989. I guess that's what caused the fall of the Berlin wall.
Anyway, after IndyMac, 2008 is already at $34 billion. Fortunately Bear Stearns wasn't insured ($200+ billion) and Countrywide didn't technically fail (another $200+ billion)
Our banking system is flawed from the get go.
Just because a bank loans out $100.00 does not mean they have $100.00 in the safe or in liquid assets. Its more like $10.00 on the banks books in some form for every $100.00 loaned out.
So for all your money they are paying you 1, 2, maybe 3% interest on, they are turning around and charging 5 to 20% interest ten times over. Pretty slick deal for the banks, until the market turns against them and suddenly "poof" everybody's money disappears.
For a very good explanation of how our banking system works check out Sorry. Page not found.
I can't get into my WaMu account for the past 5 hours online.
Hmmm