he bloodletting at Freddie Mac [FRE-N] and Fannie Mae [FNM-N] could have profound consequences for the U.S. economy, but it appears to stem more from a crisis of confidence than fundamentals.
"Events are moving so quickly, I'm not sure what's relevant any more," said Howard Shapiro, an analyst at New York's Fox-Pitt Kelton Cochran Caronia Waller. "We're basically in the world of psychology and panic now and nothing has anything to do with reality."
While industry experts suggest Freddie Mac and Fannie Mae have enough capital to weather the housing crisis, shares in both companies dropped 45 per cent in the last week as investors rushed to get their money out, fearing that U.S. government intervention could wipe out their holdings.
CNBC said that the OTS made a statement to the effect that IMB was brought down by Senator Chuck "whatigottadotogetontvagain" Schumer's comments last week which initiated a run on the banks deposits.
"IndyMac's primary regulator, the Office of Thrift Supervision, blamed comments by New York Democratic Sen. Charles Schumer for causing a run on the deposits at the largest independent publicly traded U.S. mortgage lender.
Schumer responded quickly on Friday, blaming the OTS for not doing its job and for letting IndyMac's loose lending practices continue.
"
Blaming Schumer - funny! Hypothetically you could blame him for not dropping warnings last year when it might have stopped a lot of psycho lending but he really would have taken too much flack for it.
A little light background reading for the weekend.
One of the most notable features on the landscape of the banking crises of the 1980s
was the crisis involving Continental Illinois National Bank and Trust Company (CINB) in
May 1984, which was and still is the largest bank resolution in U.S. history.
PDF WARNING http://www.fdic.gov/bank/historical/history/235_258.pdf
Schumer did his job, which is to protect his constituents, not thieves. Its coming unglued because they made bad loans over and over again. Banks eat like birds and sh1t like elephants!
Turn up the TV, no one listening will suspect
Even your mother won't detect it, so your father won't know
They think that I've got no respect but
Everything is less than zero
Hey, oo hey-ey
Hey, oo hey-ey
I got out of SKF the other day. In hind site, guess I should have waited a day or two later.
Nonetheless, I'm hesitant to get back in right now. Seems like the market on financials might be a little oversold right now. I'm waiting for a pull back to 130/150 to get back in as I do believe there's more to come.
Keep in mind that SKF is 2x to the down, so any 'good' news can really hurt your position quickly. Of course with bad news like this, it's happy days with SKF in the portfolio.
I was using it to hedge out the financials from my overall portfolio earlier in the year and it certainly helped cushion the fall.
The company was started in 1985 by Countrywide founders Angelo Mozilo and David Loeb under the name Countrywide Mortgage Investments. In 1999, it converted into a savings institution from a real estate investment trust. That year, Michael Perry replaced Mozilo as chief executive officer.
Schumer did his job, which is to protect his constituents, not thieves. Its coming unglued because they made bad loans over and over again. Banks eat like birds and sh1t like elephants!
Cynical Yes | 07.11.08 - 8:34 pm |
How many branches do you think IndyMac has in NY??
"The bloodletting at Freddie Mac [FRE-N] and Fannie Mae [FNM-N] could have profound consequences for the U.S. economy, but it appears to stem more from a crisis of confidence than fundamentals.
"Events are moving so quickly, I'm not sure what's relevant any more," said Howard Shapiro, an analyst at New York's Fox-Pitt Kelton Cochran Caronia Waller. "We're basically in the world of psychology and panic now and nothing has anything to do with reality."
This is a load of hooey. They are leveraged at 60:1 and are insolvent. It is the fundamentals and the ability of investors to understand the fundamentals of insolvency that is causing the GSE's fall.
Beyond that, there are a number of options to manage our capital position. The average rate of run-off on our retained portfolio is currently about $10 billion per month, and not replacing that run-off would free up approximately $250 million of capital per month. Over the course of a year, this would free up approximately $2.5 to $3 billion of additional capital if this run-off rate remains constant. We also could consider reducing our common stock dividend. Our current annual common stock dividend is approximately $650 million.
Basically, we are not broke, but if congress and the Fed don't help us break this panic we stop loaning.
Nice way to negotiate.
Nope, I don't think Freddie is bust, not with that kind of threat.
In other words, we can and will go into runoff and devil take the lending market.
"These are companies with a solid business plan. They are fundamentally well-run companies, but are the victims of the broad financial downturn. There's been a huge loss of value there," said Peter Morici, an economics professor at the University of Maryland and former chief economist at the U.S. International Trade Commission. "My feeling is that, as long as they can meet their obligation, they shouldn't be taken over."
-- this is the kind of thing that makes me worry that things are about to get much much worse. I dont think this guy would ever say such a thing on his own accord. He's rarely that obtuse.
It is difficult to create a "run" on a solid bank. Easy on one that is teetering. Schumer's great sin was to cut through the lies the government lives by. And of course it couldn't care less if the bank ultimately went down and took all the gullible unaware depositors with it. Schumer's warning may have caused many to get out in time. So good for him.
Another argument for a national bank owned by the government is simply this: it would force private banks to be run so they would not go bankrupt. If they engaged in the reckless practices recently so widespread people would take their money out and put it into the government bank. Private banks would have to be as "sound" as the government bank. So it would serve as a backup to keep the private banking system honest. The problem recently is that so many people had no other place to keep their savings but in a bank that could well be in shaky condition.
In a move to decrease transparency, the FDIC has ordered auditors on-site in Pasadena to order out for a balanced mix of pizza, sub sandwiches and General Tso's chicken.
Tanta,
What I am interested in knowing is how much OTS staff is taken up by the IMB implosion and how much more staff is there for other implosions. Is FFDIC here?
Schumer is an American hero, make no mistake about it -- he warned people there was trouble and he clearly suggested that the powers that be in this corrupt administration, were not doing enough to help resolve matters related to this crisis -- what more could you want than someone with the balls to go against the grain and stand up to collusion!!!
OTS should be wiped out as a department for failing to do its job; they turned a blind eye on every possible matter of regulation and accounting and supported fraud and then denied they had any part in this....they should be shut down ASAP!
Where is Dodd and his Friends Of Angelo crooks in this matter, are they too busy pointing fingers? Dodd should resign next week, or in reality, how many more bank failures on his watch?????
The American government needs revamped as soon as possible. Allowing business as usual to continue will result in a death blow and it is far from logical to assume that these crooks in power today have any clue as to how to honestly fix this mess they have fed off for 10 years!
Over the course of a year, this would free up approximately $2.5 to $3 billion of additional capital if this run-off rate remains constant.
Of course there's the minor issue that they lost twice that in the prior year.
Who exactly is the target of that threat anyway? The Feds can't prop up Freddie's stock price except by a heavy-duty bailout and that fails the fairness test (huge benefits to current shareholders). If Freddie stops new lending it would be a catastrophe. I could see no solution except either nationalization or starting a new governmental loan guarantor. Either means the immediate death of Freddie and probably Fannie too. This is like the Blazing Saddles hostage maneuver.
diogenes writes:
44 years of the demoKrats "great society" and woodstock come to fruition.
diogenes | 07.11.08 - 11:38 am | #
scav writes:
so all this Executive Privilege We don't have to answer to no steenkin Congress bullshit is due to Woodstock Liberals. YeeHaw!
Hank Jestor writes:
there is a directly link to counterculture and its failure accomplish the changes that they wanted...
ok so let me get this straight
a bunch of dope smoking music lovin hippies created no doc loans with teaser rates and re-sets and then spread mortgage backed securities and CDOs around the world after inventing SIVs with tranches and...
hey... scav, diogenes and hankjester
obviously you been smoking too much of that good shit.
bye the way...i was at woodstock and didn't see hank, dubya, phill graham, Rubin or Mozillow there...but did see bill clinton!
he was singing back up for sly and the family stone... the chubby guy in the back dressed in drag!
Mr. Perry of IndyMac Bank should have gotten all dramatic in his last letter and offered to reduce his pay by, say, 95%, and offer double-bonus-pony severance packages, instead of getting all tightwad MBA at the end. After all, he must have suspected none of it mattered longer than about a week... but sure would have felt good going out in a blaze of populist glory like that! When falling, LEAP!
Here, here! I really would not fully place the blame on the OTS or FDIC however much I would like to do so. When Bushwhacker came into office I was still employed at FDIC. There was an immediate change first in the examinations and many front line examiners complained bitterly without success. Some gave up in disgust and retired. This crisis is the result of how the Bush Whitehouse wanted the regulators to operate with many fewer employees, drive-by examinations and go easy on the white male bankers who are big Republican donors. The regulators (mostly white males) naturally go along with whoever is in power at the moment good or bad. That's how they survive and thrive in a mean old world. For those of you interested in staffing I'm sure that FDIC has a huge staff there or on the way which has almost depleted its Dallas site and leaves little staff available should there be another run on a bank in the very near future. They simply do NOT have the manpower at this point to handle much more than what they are currently trying to manage. It's a silent FDIC staffing crisis being kept from the public. Now, when is that pizza going to get here.
Joe,a truck driver was taking a test for hauling dangerous loads.He was asked what he would do if while driving a tanker of gasoline he crested a hill and the road down was a sheet of ice.There were dropoffs on either side and at the bottom there were already several burning trucks and cars.Nowhere to go and his brakeslockup.Joe thought for a minute and said he would wake up Jim."Who's Jim?"."Jim is my co-driver and he's never seen a really bad wreck"
Schumer is shining a klieg light on a significant issue: the bank regulators are not shutting these high flyers down and as a result the ending regulatory closure cost is going to skyrocket. These guys are not reporting their delinquency pipelines and taking writeoffs for losses because the SEC, FDIC & OTS are at the beach. Go CHUCK!
So can we get a picture of the people who still had money in accounts over the insured limits? Like they didn't have at least three separate warnings in the last two weeks? Stupid is what stupid does.
Clyde's got a point, related to my previous point that the supervisors are no such thing. These flunky lenders should have packed it in long long ago. And yet, they have been making junk loans all the while that the bust has been going on. It's absurd.
AllenM, you gloss over one important thing. At a certain price point, lot of people would buy those exurban homes. The problem is, that price point is now well below construction costs. A long way to drop still, and by the time they find sufficient buyers, the homes will be junked from neglect. Many wont be rebuilt when they realize that no one will pay what it costs to build them.
For a six-month CD with a $5,000 minimum deposit, IndyMac's website Wednesday was offering an annualized yield of 4.1% as an online "special."
The next-highest yield on a six-month CD was 3.7%, available from three banks: Corus Bank of Chicago, GMAC Bank and Charlotte, N.C.-based NewDominion Bank, according to bankrate.com.
IndyMac was paying significantly more Wednesday than it was Sunday, when it was offering 3.75% on a six-month certificate, according to Informa Research Services of Calabasas, which tracks savings rates.
failing banks are gonna be like passenger planes diverted to another airport, circling, holding, until FDIC and the OTS (air traffic controllers) say it is their turn to land.
Nova said: Tommorow I go out to the garage and sort through all the crap to make sure we have a working emergency kit.
Man, I put our emergency kit together when the Red Sox won the World Series. No surer sign of the apocalypse than that.
George Bush says something stupid? Congress readies useless legislation? If that's got you putting an emergency kit together, I think you're about 7 years overdue.
Better late than never, though. And don't forget the duct tape!
In a conference call late Friday night, FDIC Chairman Sheila Bair said "it's possible this will be the most costly bank failure in history, but it's too soon to say." The failure "could also affect premiums paid by all banks for deposit insurance," she said.
I think the thing to do AllenM, is band together a bunch of people who would all buy in (not a speculators) to an empty development at a low ball price. You'd need a good critical mass to make the place fly and keep the values up. But if done at the right time and price, theyd stand to come out big winners. The problem with the newly built ghost towns now is that no one will go in alone, and if they do, no one will build out any retail or services around them.
So can we get a picture of the people who still had money in accounts over the insured limits? Like they didn't have at least three separate warnings in the last two weeks? Stupid is what stupid does.
Too true. I'm hoping the high rates available from CORS are a signal of impending doom.
Nope, I am going to wait and buy some lots out in some beautiful areas that will allow me to build a veerrrrry nice retirement hacienda when this fiasco is ancient history.
That will be in 15 years.
I can hardly wait.
We have at least two, if not three years to the bottom.
I can hardly wait for the knife catchers to start up with "It's over, buy now!"
It's not over, but nimble folks will still make killings on short term trades.
This volatility is killing any long term buy and hold strategies.
Nothing like a big set of problems to destroy complacency.
Oil leapt $5 to a new record high near $147 a barrel on Friday, spurred by growing worries of threats to supplies from Iran and Nigeria and the possibility of a strike by Brazilian oil workers next week
The US dollar dropped to within a cent of the all-time low against the euro on concern losses at Fannie Mae and Freddie Mac may deepen even after policy makers said the companies aren't facing a government takeover.
Better late than never, though. And don't forget the duct tape!
Anonymous | 07.11.08 - 9:25 pm | #
Naw, I got tape they use on the space shuttle.
Bush, yet another stupid remark? Because I think he really, really does not have a 1/2 clue. Because I think the man has lost it. Did you see him with Merkel and his Hamburg crackup.
Because I know Bush will OK an Israeli airstrike. Because there is no plan, no leadership. Because IndyMac will quickly lead to more problems and there is coherent stategy.
Have you ever worked on a big project that has gone bad? At some point you realize that despite all the meetings, the extensions, the happy talk, it is going to crash and burn. That is todays moment for me.
OK, rereading the Freddie statement it seems less threatening. They say they have plenty of capital and will not need to raise any in the near future (but note the near business!) Then they say that if they have to raise capital they're going to go postal on the world economy (presumably since they can't raise it in the stock market anymore, although they don't say as much.)
So it looks more like "we're OK for now, but you'd better start planning for a bailout."
How will this affect the announced severance packages?
Old severance: 1 weeks pay for each year of service, outplacement assistance, medical benefits continued for 30 days.
New severance: 1 slightly used toaster for each year of service, 100% polyester shirt with slogan "My bank got shutdown by the FDIC and all I got was this lousy T-shirt!"; empty pizza boxes (good for building your new home underneath a bridge.)
In dismissing the recommendations of its top experts, the government says regulating the greenhouse gases blamed for global warming would cripple the U.S. economy.
Yes, yes, we have such a healthy robust economy and it would be wrong to force businesses to make our air and water cleaner -- but as for the financial system, what the fuck, let that tsunami go wild baby!
Seriously, on the topic of severance, where do employees rank in situations like this? "Employees first" is the usual motto, but when you're in hock megabucks to FHLB, FDIC and lord knows who else what happens?
"Dog meat has been struck from the menus of officially designated Olympic restaurants, and Beijing tourism officials are telling other outlets to discourage consumers from ordering dishes made from dogs, the official Xinhua News Agency reported today."
You no eeta dat. Iss no good iss do meet. Rissen to me iss no good iss do meet.
I disagree, that statement says, we can survive, but to do it, we have to shut down.
So give us some cheap capital and prop us up (saving the share price and the bonuses of management), or we shut down and go into runoff. That is the threat of leaving the mortgage market, leaving house prices to drop.
As for the losses, remember most of them are mark to market, not actual losses, so cash will triumph in A RUN OFF.
I think the threat is aimed square at congress and Paulson, with the Fed getting a copy.
From the "FDIC Failed Bank Information" VI. Loan Customers
If you had a loan with IndyMac Bank, F.S.B., you should continue to make your payments as usual.
What about the ones not making payment? Should be amended to START making payments;-)
Don Miguel Sr & Jr
i got a 4.07 for 10 months about 2 weeks ago...wadda i care... its FDIC insured..its if ALL the banks fail...thats what has moi worried..
OTS press release:
OTS Closes IndyMac Bank and Transfers Operations to FDIC
Washington, D.C. — "The Office of Thrift Supervision (OTS) today closed the $32 billion IndyMac Bank, headquartered in Pasadena, California, and transferred operations to the Federal Deposit Insurance Corporation (FDIC).
A successor institution, IndyMac Federal Bank, FSB, will open for business on Monday and be run by the FDIC. Depositors will have no access to banking services online and by telephone this weekend, but will continue to have access to their funds this weekend by ATM, through other debit card transactions and by writing checks. Online banking and phone banking services will be available again on Monday.
The OTS has determined that the current institution, IndyMac Bank, is unlikely to be able to meet continued depositorsÂ’ demands in the normal course of business and is therefore in an unsafe and unsound condition. The immediate cause of the closing was a deposit run that began and continued after the public release of a June 26 letter to the OTS and the FDIC from Senator Charles Schumer of New York. The letter expressed concerns about IndyMacÂ’s viability. In the following 11 business days, depositors withdrew more than $1.3 billion from their accounts.
“This institution failed today due to a liquidity crisis,” OTS Director John Reich said. “Although this institution was already..." The page cannot be found
Runoff is simply they allow the loans in the owned portfolio to simply mature and paydown. The capital returned gives them cusahion so long as they are not redeploying that capital into new business like the new bigger jumbo caps!
Lawyerliz, they stop making and packaging new loans. They mercilessly push back bad loans for nitpicks, and lay off a bunch of folks. They also sell anything that resides anywhere near par. They tell really bad tales to buy back their bonds under par and under potential realized value and use that money to continue shrinking.
In other words cease their purpose and totally hunker down.
That way the shareholders have a chance at getting some money. But that housing market gets no more loans, so they will mitigate be selling houses as fast as they get them for highest bid.
Brutal, but making more loans and making it off the difference between 3% and 7% makes even more money since there is so little competition.
I think the paper they are currently writing is probably the most stable paper seen on the market in five years.
What the fuck! My daughters can not buy as many dollars now? We might as well go home and make babies in mexico, where the economy is strong! O Mary, mother, why should I stay here?
Too true. I'm hoping the high rates available from CORS are a signal of impending doom.
Not so. Today's CORS rates actually aren't that high, relative to past. They had the top 1-year CD rate always in 05 and 06. Now, they are usually in 5th or 7th place or something.
The signal of impending doom for CORS is the fact they "diversified" from their rotten condo construction lending book into office and hotel lending at the start of this '08, right at the wrong time.
California has a large Asian population, so I don't think they are being particularly selective in that picture....it's just random California workers, packing up their belongings...for that matter, whites are not a majority in California, so....
Well, if they did that interest rates would skyrocket and the value of their portfolio would tank, which I saw up close and personal in the early-mid 80s. Suppose they only went halfway down that road? Might be best for everybody.
They'd get more capital and only the best loans would be written. Oh, that last part--that's what's happening now. Everybody else gets hard money almost loan sharks.
Now come on, there must have been some Americans of majority, cleaning out their desks, that they could have photographed. Why these three?......
Canadian watching with popcorn
and
KnotRP writes:
California has a large Asian population, so I don't think they are being particularly selective in that picture....it's just random California workers, packing up their belongings...for that matter, whites are not a majority in California, so....
KnotRP
Umm, these are clearly IT workers, contractors( temporary workers ), part of the outsourcing ( but in house ) scam.. Its kinda obvious.
No moral and business judgement implied - I'm tri-national, one of which is a second-class Indian nationality.
After all, when the textile workers jobs were outsourced I was nowhere to be found, when the manufacturing jobs were outsourced I was nowhere to be found, when the call centre jobs were outsourced I was nowhere to be found, when the BPO jobs were outsourced I was nowhere to be found and when the outsourcing high-value IT trend I was nowhere to be found. I'd done well enough, so I was already out and over the prior 20 years learnt how to manage my pile and so just got on with it.
In a conference call late Friday night, FDIC Chairman Sheila Bair said "it's possible this will be the most costly bank failure in history, but it's too soon to say."
Too soon, because there are alot more banks to go.
Geoff writes:
I think the thing to do AllenM, is band together a bunch of people who would all buy in (not a speculators) to an empty development at a low ball price. You'd need a good critical mass to make the place fly and keep the values up. But if done at the right time and price, theyd stand to come out big winners. The problem with the newly built ghost towns now is that no one will go in alone, and if they do, no one will build out any retail or services around them.
Geoff | 07.11.08 - 9:27 pm | #
How are you going to 'keep the values up'... print your own script? If you can figure out how to keep the values up send your resume to Sheila & Hank...
This week IndyMac. Next week, Corus, Freddie, Fannie and Lehman Brothers. And the next week the world, in the most fabulous subprime meltdown imaginable.
I have a simplistic but serious question: why would anyone who posts to this blog, or to other similar and serious-minded blogs, vote for an incumbent? Will it ever occur to voters that "change" can come about only through the non-election of incumbents? Far better, IMO, to throw out one decent baby with the bathwater if it refreshes the entire tub. We have proof, daily and in every media I know of, that incumbents are the cause of ruin. Get rid of 'em. Buy pitchforks, if you have to. Use that "rebate" to buy the pitchforks if you're otherwise short of cash.
FFDIC writes "This crisis is the result of how the Bush Whitehouse wanted the regulators to operate with many fewer employees". You are so right. Actually, the downsizing of government agencies started during Reagans term in the 1980s.
Over the last 25 years Republican Presidents have stripped regulatory agencies of oversight powers and personnel, including the FDA, EPA, OTS, FDIC, etc., etc.
Remember the tens of thousands of dead dogs and cats that were feed tainted pet food, childrens toys with lead paint, failing financial institutions. The list goes on and on.
It is easier to get away with a crime when no one is looking.
"but it appears to stem more from a crisis of confidence than fundamentals."
In my experience, that's what the Ponzi guys always say too. "If it hadn't been for the bad press, and that cease-and-desist order from the AG, we would have been fine."
Bad news is this stuff is just beginning. Good news is there will emerge a new party that represents the 90% of the Country that has been disenfranchised by the super wealthy and those waiting for a handout.
@Good news is there will emerge a new party that represents the 90% of the Country that has been disenfranchised by the super wealthy and those waiting for a handout.
That will happen around the same time cars become powered by ribgas.
How's TWM treating you? I haven't gone there, but the P/E is crazy.
Man-moth | Homepage | 07.11.08 - 10:27 pm | #
Thanks for asking. You know, on days like today, you just fall down on your knees and believe there is a PPT.
Basically, like I posted yesterday, the PPT focuses on black box trading to prop up indexes. They can't prop up individual stocks. Today was a huge down day for individual stocks, especially large-cap banks and financials. But the R2000 index still managed to end up.
I don't sweat it, and I've got all the TWM I ever had. Basically, I think TWM is still the best bet on the planet because I still think net earnings of the 2,000 small-cap components are going below zero and will stay there about a year. In that case, you'll see R2000 in the 400s at some point. I can't say when. I can't tell you there won't be strange, frustrating days like today. But just hang in there with TWM and you'll do pretty good. I started buying it about 14 months ago and, with a little bit of profit-taking, I figure I'm up 25% overall so far. If you don't like the 2X inverse volatility, go with RWM. I'm up about 20% on RWM at 1X inverse.
Sorry to post twice in the same day, much less week, but when has the reelection of a member of Congress of either major party been a boon for this country? IMO, never. "Term limits" was a popular concept among voters. Is it law for the U.S. House or Senate? Of course not. But nobody dredges up why it is not law for same.
Career politicians are the ruin of this country. simple enough. Only by destroying their capability to make ruling a career can we even hope to see the level of change that we desire effected. All the rest is pap.
"Term limits" was a popular concept among voters. Is it law for the U.S. House or Senate? Of course not.
It would take a constitutional amendment to make it law. In 1994, the GOP put it as one of the provisions of their "Contract with America." Believe it or not, there were several GOP Congressman that kept their promises.
"This week IndyMac. Next week, Corus, Freddie, Fannie and Lehman Brothers. And the next week the world, in the most fabulous subprime meltdown imaginable."
I'd call them weapons of mass financial destruction, right. Only problem is that term has already been used by Mr. Buffet.
Dow Jones dives as Hank Paulson rules out rescue of Fannie Mae and Freddie Mac
By Ambrose Evans-Pritchard
"The meltdown at the two federally chartered agencies amounts to a heart attack at the core of the US credit system, leaving it obvious that the Bush administration has failed to stabilise the financial system since the Bear Stearns collapse in March. In a terse statement, Mr Paulson said the Treasury was working on a plan to bolster the two agencies in their "current form". http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/12/cndow112.xml
You must have a strong stomach to hold onto that TWM. I was watching it and could not understand what the hell was happening with it. PPT doesn't sound so tin foil-ish today! Probably why I've shied away from TWM (I have dipped in and out of RWM infrequently and with ok results).
You're right, it's got to fall apart at some point, and many here will wish they'd had the nerve to wait it out.
One possibility is for Mr. President to delivering a stirring speech a la "We have nothing to fear but fear itself."
That ought to put an end to this irrational whining.
I predict that a new Federal agency with a warm sounding name (maybe "Department of Financial Security") will start issuing daily color-coded alerts advising depositors of the likelihood that their banks implode...
Did Schumer's comments make it harder for the OTS to handle the liquidation? Yes.
As a result, did Schumer's comments make indymac's failure more expensive for taxpayers? Yes.
pdx | Homepage | 07.11.08 - 11:56 pm | #
I think Schumer is telling Team Bush & the rest of the GOP they aren't going to get to run out the clock... Schumer's cheap shot was purely political, purely payback.
And does this make the FDIC hit bigger than it would be if Indy went down 8 months or so from now? Well I guess that depends on if you think the mortgage market will be better in eight months or so than it is now. If not than the answer is 'no'.
I think the real damage wasn't to FDIC or the taxpayers (we were gonna pay now or later & a lot either way)... I think it makes congressional oversight that much more difficult. Who in this administration is going to come clean on anything now? Even the mid-level career bureaucrats will watch their step & zip their lips if they think the Schumers will blow their cover.
@I think Schumer is telling Team Bush & the rest of the GOP they aren't going to get to run out the clock... Schumer's cheap shot was purely political, purely payback.
I think it makes congressional oversight that much more difficult.
Call me a purist, but I believe in checks and balances, so I'm probably in the minority in finding fault with Schumer. If Congress is going to delegate the authority to regulate banks to OTS, and has a problem with the execution, the correct way is to address it via congressional subpoena and oversight committee, and not through tabloids.
oil meetings in cheney's office dividing up iraqi oil fields is secret
check
sneak and peek searches of americans homes without warrant is secret
check
wiretapping, and grabbing cell phone and internet communication is secret and requires no warrant
check
and now the fiduciary soundness of banks is hush hush and can not be discussed in public
check.
seems to me the antidote to irresponsible criticism of indymac would have been for somebody big and respectable to step forward and defend the bank...course that would have required more lies than even paulson can tell.
"I predict that a new Federal agency with a warm sounding name (maybe "Department of Financial Security") will start issuing daily color-coded alerts advising depositors of the likelihood that their banks implode..."
Interesting idea, 4runner. If any of the guys in the control room read this blog, then it will probably become part of the President's six-part WE CAN DO IT, AMERICA! program.
The dam's been leaking for a while, but IndyMac's the first real hole gushing dollars. Methinks people should run like hell before the whole thing breaks.
Schumer's cheap shot was purely political, purely payback.
For what in the world, them having his boy Mukasey expose him before various Congressional committees this past week? I have a hard time seeing Schumer worried about an excess of forbearance toward the banking system, especially after all this, um, time.
Call me a purist, but I believe in checks and balances, so I'm probably in the minority in finding fault with Schumer. If Congress is going to delegate the authority to regulate banks to OTS, and has a problem with the execution, the correct way is to address it via congressional subpoena and oversight committee, and not through tabloids.
Argento | 07.12.08 - 12:20 am | #
I agree - but Schumer wasn't out to 'fix the system' & reassert checks-n-balances. It was a political cheap shot, pure and simple. He knew it would force the Bush admin hand NOW and make it impossible for them to pass that one off. A subpoena would do nothing with the limited time remaining & everyone out campaigning anyway... real easy to just run out the clock.
I watch a lot of hockey - have had season tickets to a top D1 college hockey program since the 70s. I know a good cheap shot when I see one.
Having said that - everyone in the game knows you never let up until the final buzzer AND you never skate around with your head down. If you do you are inviting a cheap shot.
The Bush administration appointees have been skating around this financial crisis at half speed with their head down & mind somewhere else - wishing they could go to the bus now. Schumer sent them the kind of wake up that should remind them the game isn't over.
But that doesn't mean the game will now go cleanly from here to the buzzer... throwing cheap shots late in the game can make for a very long & ugly end of the game. Bench clearing brawl-like end of game. I think we are in for a very ugly late summer & fall.
Crazy, the whole thing is crazy. If these financial businesses were open with their books as required, none of this would have even happened. Secrecy is the WORST thing that could happen.
There is, of course, a so-called plunge protection team, but I would be very surprised to learn they were actually intervening in the markets on a regular basis. The secret would leak out.
And, as Conjure likes to say, "The only way three people can keep a secret is to kill two of them."
Strictly speaking the FDIC took over IndyMac in a conservatorship; they did not "close" it. IndyMac will be operating, more or less normally on Monday morning.
Lots of talk, i don't hear anybody talking about change in the fundemental aspect of how they are going to affect change in this country. Just a lot of bitchi
We are very close to the point where any bank can fail at any time. If you are over the FDIC limit at Wachovia or Washington Mutual (or for that matter anywhere), do something about it immediately if not sooner.
mp writes:
There is, of course, a so-called plunge protection team, but I would be very surprised to learn they were actually intervening in the markets on a regular basis. The secret would leak out.
And, as Conjure likes to say, "The only way three people can keep a secret is to kill two of them."
mp | 07.12.08 - 12:48 am | #
I have come to believe there IS a PPT... but agree they have NOT been intervening yet. If they do it will not be a secret when and why they intervene...
Hint: it won't be to 'pump the Dow' a measly couple hundred points on a down day just to win jg's wrath. Think more decimal places and 'jagged numbers' for handles.
tj- "The ETFs do seem to exhibit unusually large & contrary moves at critical junctures, though."
tj, I agree, but a lot of that is automated trading. I'm just saying that, if there is a PPT, they'd have to be doing it very discretely through off-shore accounts.
"It's possible this will be the most costly bank failure in history, but it's too soon to say," FDIC Chairman Sheila Bair.
Nah. Bank of America and Citibank will top it.
B of A will fail via writedowns on its $660B in consumer loans; getting stiffed on its $34 trillion in derivatives exposure; writedowns on its $162B in trading assets; or bled dry through its $1.5 trillion in lending commitments.
Lots of ways for BofA and C- to die.
Ms. Bair, you will be amending your statement, I am positive.
Dryfly, I agree with you. There is no doubt that the PPT exists. It was established by executive order. The question is: how much power do they really have, and how do they use it?
Question for the group - wasn't ipod bragging a few days ago he was going to buy some of those high yielding Indy CDs? I mean they were paying the big money for 'FDIC insured' returns...
I haven't been able to keep up with the bazillion posts so might have missed him... does anyone know if he really did it?
If so I hope he shares his experience - its good to share.
The PPT, seems to me, is merely the self-interested actions of the brokers/dealers and commercial banks.
Those folks talk with the FRBNY.
The rediscount window is open to all, now, providing the requisite ammunition.
That's how I see the PPT, just self-interested actions by the broker/dealers and commercial banks, fueled by junk to the Fed --> Treasuries --> cash, with the tacit approval of the FRBNY.
mp writes:
Dryfly, I agree with you. There is no doubt that the PPT exists. It was established by executive order. The question is: how much power do they really have, and how do they use it?
mp | 07.12.08 - 1:08 am | #
I don't have that answer - I am increasingly of the opinion we are going to find out though. I don't think it will be a happy day - even for shorts & whiners.
You know, dryfly, these kinds of markets make me wish I was young again. I've been reading the comments this evening and a lot of these young bucks have got real balls, so either there's a lot of bullshit here, or some really savvy traders.
mp writes:
You know, dryfly, these kinds of markets make me wish I was young again. I've been reading the comments this evening and a lot of these young bucks have got real balls, so either there's a lot of bullshit here, or some really savvy traders.
mp | 07.12.08 - 1:15 am | #
Ya I agree. And if they are really good, a mix of both bullshit & smarts - almost indistinguishable until the accounts are settled.
We're not putting you guys out to pasture just yet.
I wish I had more funds to "play" with, but most of my money has gone into the ultra-conservative (aka survivalist) plan -- zero debt, cash that's not in the bank, and PMs. Looks like that was the right "play", if I do say so myself.
Fannie Mae, Jesus Christ, I can't get over it. It was such a wonderful idea, providing the funding to make it possible for working people to own their own home.
Everything has become so perverted. These bastards screwed The American Dream.
tj- "I wish I had more funds to "play" with, but most of my money has gone into the ultra-conservative (aka survivalist) plan -- zero debt, cash that's not in the bank, and PMs."
tj, as I've said before, unless you have a room full of Bloomberg terminals staffed by Versace-clad babes with Wharton degrees, this is not a time to be in the market.
I think we're soon going to see a "Clash of The Titans, dog-eat-dog, and you don't want to be in their way. No one does.
The depth of the problems we face is still beyond most people's grasp.
That's the point that I keep trying to make with my sheeple friends. Before we can get to the solution to our mess, we have to determine what our vision of America is. If it's the "shining city upon the hill" that consumes 40% (or whatever that number is) of the world's resources, with the nice little Asian people making cool iPods for us at $2/day, those days are dwindling.
On a tangential note, Roche has ceased researching AIDS drugs, despite the double digit growth in sub-Saharan Africa, because there's really no profit in it.
Those are the difficult choices we'll be making really soon.
yes, I'm conflating my metaphors tonight, trying to finish a brief. However, I'm distracted by trying to comprehend what a homeostatic world would be like.
It's getting to the point where the crises will be coming far too fast and from too many directions for TPTB to do anything but "freeze in the headlights".
Save housing? Use the GSEs! OOPS!!!!
Save the GSEs? Use the FED! OOPS!!!!
Save the FED? Use the Treasury! OOPS!!!
Sorry to be so cynical, but you can always count on them to make exactly the wrong moves. They've simply got way too much wrapped up in the status quo to do otherwise. It's human nature, and that never changes.
Thanks dryfly- I knew there had to be a purpose to Schumer's remarks, just not one that made sense in the financial/economic world, but the political jabs and counter jabs,...I'm still too simple to see the machinations.
Argento- "However, I'm distracted by trying to comprehend what a homeostatic world would be like."
Well, Jefferson envisioned a nation of self-sufficient farmers, who would owe nothing and, therefore, would cast their vote with conscience, rather than obligation as their guide. I guess he thought that Americans would be satisfied with the plenty that the North American continent offered.
Jefferson, of course, could be branded a hypocrite because of his own personal problems, and he certainly didn't foresee the rise of manufacture as Hamilton did.
Regarding the so called Plunge Protection Team, from Wikipedia:
"The Working Group on Financial Markets (also, President's Working Group on Financial Markets or the Working Group) was created by Executive Order 12631,[1] signed on March 18, 1988 by United States President Ronald Reagan.
The Group was established explicitly in response to events in the financial markets surrounding October 19, 1987 ("Black Monday") to give recommendations for legislative and private sector solutions for "enhancing the integrity, efficiency, orderliness, and competitiveness of [United States] financial markets and maintaining investor confidence".[1] ... One conspiracy theory regarding the Working Group refers to it as the Plunge Protection Team. This theory claims that the Working Group is an orchestrated mechanism that attempts to manipulate U.S. stock markets in the event of a market crash by using government funds to buy stocks, or other instruments such as stock index futures.[2] "
As far as the PPT- isn't there always a "they" in the markets? Vanderbilt, Fisk, Carnegie? Tsai, Johnson, Hunt? Buffett, KKR, Milliken? If God did not exist, we would have to invent him?
Thanks dryfly- I knew there had to be a purpose to Schumer's remarks, just not one that made sense in the financial/economic world, but the political jabs and counter jabs,...I'm still too simple to see the machinations.
Yeah, it's all politics for clowns like Schumer. It doesn't matter if real people lose their savings or lose their jobs. One upsmanship and game playing is all that matters.
I can only speak for myself, of course, but if I had more than the insured limit of 100T in any of the following I would take it out and move it elsewhere:
PFB, HRZB, DSL, RVSB, BHBC, FED. Those are only the ones I have noticed.
Right wing blogs amuck in Schumer blame. Hey jackasses, I'm concerned with Washington Mutual and Wachovia.
Hopefully when the next bank closes the OTS can point the finger at the blog "Calculated Risk". What a joke, if a bank is insolvent its insolvent... heck we the people should just force bank runs from week-week. This week everyone with odd SSNs take money out of Wachovia... and everyone with even SSNs take money out of WaMu... lets do a "stress test" on the system...
A few bank failures may be useful to teach complacent, gullible Americans that the people running things are not always competent, to say the least, and that authority should be viewed not with blind respect, but skepticism. If you read the LA Times story on IMB you can see easily that the people involved didn't do their jobs at all. One of the board, as I recall, was an ex-Fed Reserve Board member. What a klutz he must be. And I insist again that we need a 100% safe bank owned by the US Treasury. For people who want complete safety for more than 100T.
This week everyone with odd SSNs take money out of Wachovia... and everyone with even SSNs take money out of WaMu... lets do a "stress test" on the system...
I like the way you think.
Didn't the IMF or World Bank say they wanted to audit the US financial system- do a virtual stress test by 2010? Looks like we're going to save them the trouble.
And for those who might think that a substitute would be to insure bank deposits for, say, 500 thousand rather than 100, I will point out this: such a scheme would prompt private banks run for profit to take more risk, since they would be more richly protected from their follies. On the other hand, a government owned bank, NOT run for profit, would have no incentive to take silly risks since it would not be trying to increase its profits. It would be free to be run with the utmost conservatism. You see, folks, profits are not always the be all and end all of things.
jim, et al, be at least somewhat charitable. These people are human beings. Yes! Believe it or not, even a Federal Reserve Board governor puts his/her pants on the same way you do. They are not omniscient. They make mistakes.
Sometimes though, they don't make mistakes, they commit fraud.
Ken Lay, for example, was once a brilliant government regulator. He stepped out of his depth. The result was Enron. People are, dare I say, *human".
Oh come off it. These are financial experts who above all other should know what risk is and how to recognize it. The "everybody makes mistakes" excuse is a lot of CRAP.
Oh yes, Saint Schumer, the truth teller. This guy was in the Senate through the bubble and I'm sure his donor list reads like a who's who of Wall Street.
Look the guy did something stupid here. Maybe it was a political cheap shot, but it was really stupid nonetheless.
jim- we had boring banks before the repeal of Glass Stegal and we had boring S&L's before and we just made little changes to 'help' them. We just keep screwing up the safe secure stuff. Like Freddie and Fannie,...We'd do the same with a national bank.
One final thought here, which is completely "off-topic."
I find that Internet technology is still extremely limiting.
For example, "CR" throws out a news item, a "bone," and everyone chases it. There are those of us who would like to pursue a discussion, but are unable to do so because everyone abandons the topic for the next "bone."
The bank runs on other institutions begin tomorrow, should the stupefied masses of America begin to wake from their propaganda-media induced slumber.
The speculative attacks on the dollar begin the minute Paully Pocket and Bubbles Bernanke announce the omnibus bailout of Fannie and Freddie, as well as Lehman Bros. on Monday.
You're preaching to the choir. I'm very aware that Indy, Bear, Lehman, WAMU, Chorus, Etrade, etc. etc. have done some insanely reckless things. 40x leverage at the ibanks should have had a first year finance student saying WTF.
But I also think the probability that we may be facing a depression let alone a recession is pretty scarry. We need to put aside partisanship and work through these problems as effeciently as we can or things could go from worse to unimaginable.
I think Schumer was acting recklessly here and it's not excused by the stupidity of the execs at the banks or the FED or the OTS. I'm just afraid that we could create cascading effects here that could even bring down good lenders.
In the end we know that the hardest hit by this will be the Americans on the lowest rung of the ladder.
As a long-time (now former) NYC resident, who voted for Chuck twice, allow me to say, he's a complete douchebag.
The hedge funds donated something like a lousy million bucks to his campaign, so he worked his darndest to preserve the hedge fund loophole - you know, the one where the 2/20 guys who made billions per years got to claim their earnings as dividends? Amazing the ROI you can get when buying politicians...
He also was a big supporter of Alito, but don't get me started...
But Max, is he connected to organized crime? Oh nevermind; I forgot that hedge funds are organized crime.
Here, this is interesting. We all have our little "Minsky Moments" and here is Bakley Rosser's moment -- the one where he tells us he successfully modelled bubbles, panics, and busts while everone else was just predicting it from the hip. (c/o econview)
I don't know if you will find this as grimly hilarious as I do, but on the top right of that page is a link to the Pete Peterson Foundation's "Help Fight The Fiscal Crisis" page. Little Mikey Milken has well attended global financial conferences, T. Boone Pickens rides in to save us with windmills, and this.
Indy could not have survived even if Schumer had said nothing. And if he had said nothing lots more people would have lost big when it went down.He did the right thing and it took some courage to do it when keeping quiet (a kind of lie) is all the rage these days in Washington.
You don't get the point. Even if the management was incompetent, it would not fail and the depositors would not be exposed to loss. By definition. And to say it would fail is a lie. Not everything run by the government is a mess. You seem to be a black and white thinker. Government bad, private good. Social Security works fine. It is a government program.
Sounds like Anthony Mozillo has done a good job of building 2 of the largest train wrecks in American History. Honestly, does the constitution protect terrorist like Mozillo, Bus and Cheeney?
It may be that I'm wearing rose colored glasses, but I'm not sure whether the widely expected demise of IMB implies the coming collapse of the entire U.S. financial system. Looking at history, there's been several waves of bank failures, and the system muddled through.
In particular, the Fannie/Freddie situation may or may not be as dire as people here argue. I am not talking a book, and I would not recommend investing in their securities from the long or short side - too much uncertainty.
The GSE equities could be thrown under the bus, and it will make no real difference for the capital markets. In other words, I would not recommend buying the equity based on some theory about "too big to fail". That might work, but that would be pure luck if it did.
Their importance lies in the MBS portfolio and the senior debt. The holders of that debt have deep pockets and will protect their own interests. For example, foreign central banks and even Bill Gross (based on his public comments) are big holders.
Given that the GSE's book of mortgages was more conservatively financed, it remains to be seen how much of a haircut they would take, even as the housing implosion continues.
And to put all the headlines in context, the GSEs can still borrow below LIBOR at the front of the curve. This means that they are still not viewed as a serious risk by the bond markets, which in this case, is the only market that matters. The bond market could be wrong, but you cannot extrapolate what you see in the equities to the debt side.
Indy could not have survived even if Schumer had said nothing. And if he had said nothing lots more people would have lost big when it went down.He did the right thing and it took some courage to do it when keeping quiet (a kind of lie) is all the rage these days in Washington.
According to John Reich, director of the Office of Thrift Supervision Indy's demise was caused by a deposit run that came after Schumer sent a letter to regulators on June 26 questioning Indy-Mac's viability. Customers withdrew 1.3 billion in the 11 business days after the letter, or more than $100 million a day on average, Reich said.
People will be rediscovering this virtue in big way.
Oh... I wish. Now maybe we can break the multi-generational welfare trend. (Its not going to happen... sigh.)
Did every one see the front page of the LA Times (note: I'm on graveyard shift, I just woke up, so I could be behind the curve.) Losing faith (in banking)
I stand by my prediction, 25% down payments will be the norm in the darkest days of this downturn.
Those with multiple accounts under $100,000 are probably screwed. During the S & L mess I had a friend with three accounts each under $100,000 that totaled $230,000. She was reimbursed a total of $100,000. Those at the S & L assured her all the money was insured. There was another S & L across the street. She lobbied Congress to no avail.
furst to say congrats to the shorts
first?
Psychology begins to take over now?
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Freddie and Fannie panic intensifies
he bloodletting at Freddie Mac [FRE-N] and Fannie Mae [FNM-N] could have profound consequences for the U.S. economy, but it appears to stem more from a crisis of confidence than fundamentals.
"Events are moving so quickly, I'm not sure what's relevant any more," said Howard Shapiro, an analyst at New York's Fox-Pitt Kelton Cochran Caronia Waller. "We're basically in the world of psychology and panic now and nothing has anything to do with reality."
While industry experts suggest Freddie Mac and Fannie Mae have enough capital to weather the housing crisis, shares in both companies dropped 45 per cent in the last week as investors rushed to get their money out, fearing that U.S. government intervention could wipe out their holdings.
How will this affect the announced severance packages?
CNBC said that the OTS made a statement to the effect that IMB was brought down by Senator Chuck "whatigottadotogetontvagain" Schumer's comments last week which initiated a run on the banks deposits.
See reuters article Schumer Story and IndyMac
From the above article
"IndyMac's primary regulator, the Office of Thrift Supervision, blamed comments by New York Democratic Sen. Charles Schumer for causing a run on the deposits at the largest independent publicly traded U.S. mortgage lender.
Schumer responded quickly on Friday, blaming the OTS for not doing its job and for letting IndyMac's loose lending practices continue.
"
Chuckie Boy way to go...
"but it appears to stem more from a crisis of confidence than fundamentals."
Yeah right that's what they always say. Also said the same about TMA, Bear, and Countryfried.
It's always the horrible psychology of the markets that takes the liquidity away then BAM everything tumbles.
Horsepockey.
"Senator Chuck "whatigottadotogetontvagain" Schumer's comments last week which initiated a run on the banks deposits."
I don't know - looks like he did some people a favor.
Here's a summary for people not wanting to surf through the 300 comments on the last thread:
Goodbye Indymac, Goodbye $500 Million
Blaming Schumer - funny! Hypothetically you could blame him for not dropping warnings last year when it might have stopped a lot of psycho lending but he really would have taken too much flack for it.
Too late to "invest" in SKF?
Chuckie Boy way to go...
Mike in Long Island | 07.11.08 - 8:26 pm | #
Its a dirty job but SOMEBODY has to do it.
BTW - folks here are always asking what stock to short next... my suggestion is to direct those questions to Sen. Schumer's office...
"Regulators to run IndyMac until buyer found "
Maybe they should put an ad on craigslist: "Bank-owned property in Pasadena 4sale Cheap!"
A little light background reading for the weekend.
One of the most notable features on the landscape of the banking crises of the 1980s
was the crisis involving Continental Illinois National Bank and Trust Company (CINB) in
May 1984, which was and still is the largest bank resolution in U.S. history.
PDF WARNING
http://www.fdic.gov/bank/historical/history/235_258.pdf
Anyone else got that strange BSC- like feeling? We could wake up to an ugly situation on Monday morning.
Schumer did his job, which is to protect his constituents, not thieves. Its coming unglued because they made bad loans over and over again. Banks eat like birds and sh1t like elephants!
Implode-O-Meter putting Fannie/Freddie on the ailing list lol.
Who'd a thunk it.
Tonight's Rock Blogging:
YouTube - Elvis Costello - Less Than Zero
Turn up the TV, no one listening will suspect
Even your mother won't detect it, so your father won't know
They think that I've got no respect but
Everything is less than zero
Hey, oo hey-ey
Hey, oo hey-ey
I got out of SKF the other day. In hind site, guess I should have waited a day or two later.
Nonetheless, I'm hesitant to get back in right now. Seems like the market on financials might be a little oversold right now. I'm waiting for a pull back to 130/150 to get back in as I do believe there's more to come.
Keep in mind that SKF is 2x to the down, so any 'good' news can really hurt your position quickly. Of course with bad news like this, it's happy days with SKF in the portfolio.
I was using it to hedge out the financials from my overall portfolio earlier in the year and it certainly helped cushion the fall.
Mr. Gramm:
Did this really happen or is it hallucinatory?
THis is interesting about Indymac!
The company was started in 1985 by Countrywide founders Angelo Mozilo and David Loeb under the name Countrywide Mortgage Investments. In 1999, it converted into a savings institution from a real estate investment trust. That year, Michael Perry replaced Mozilo as chief executive officer.
Schumer did his job, which is to protect his constituents, not thieves. Its coming unglued because they made bad loans over and over again. Banks eat like birds and sh1t like elephants!
Cynical Yes | 07.11.08 - 8:34 pm |
How many branches do you think IndyMac has in NY??
As usual the Onion nails the current situation down.
here.
"The bloodletting at Freddie Mac [FRE-N] and Fannie Mae [FNM-N] could have profound consequences for the U.S. economy, but it appears to stem more from a crisis of confidence than fundamentals.
"Events are moving so quickly, I'm not sure what's relevant any more," said Howard Shapiro, an analyst at New York's Fox-Pitt Kelton Cochran Caronia Waller. "We're basically in the world of psychology and panic now and nothing has anything to do with reality."
This is a load of hooey. They are leveraged at 60:1 and are insolvent. It is the fundamentals and the ability of investors to understand the fundamentals of insolvency that is causing the GSE's fall.
Since IndyMac stock was already 28 cents, the effect on SKF is neglible (IndyMac's demise was already factored in).
I second that awgee. We are nowhere near that point yet. When we are, heaven help us.
ATTENTION:
It's all in the psychology! As long as you keep loaning these failed, ahem, struggling institutions money, then there is no need for panic!
"it appears to stem more from a crisis of confidence..."
I'd say so... people just have no more confidence in a mortgage business built on liar loans.
Whiners.
Now this is interesting.
Freddie is threatening runoff of assets if the run on the stock continues:
Freddie Mac Statement on Capital Position - News Archive - Freddie Mac
Beyond that, there are a number of options to manage our capital position. The average rate of run-off on our retained portfolio is currently about $10 billion per month, and not replacing that run-off would free up approximately $250 million of capital per month. Over the course of a year, this would free up approximately $2.5 to $3 billion of additional capital if this run-off rate remains constant. We also could consider reducing our common stock dividend. Our current annual common stock dividend is approximately $650 million.
Basically, we are not broke, but if congress and the Fed don't help us break this panic we stop loaning.
Nice way to negotiate.
Nope, I don't think Freddie is bust, not with that kind of threat.
In other words, we can and will go into runoff and devil take the lending market.
Yowza.
I think thy just called Paulson's bluff.
Someday this war's gonna end...
chris dodd is a liar.
Even normally level-headed economists are trying to rush into the goal for a stick save :
Yahoo! 404 - Page Not Found
"These are companies with a solid business plan. They are fundamentally well-run companies, but are the victims of the broad financial downturn. There's been a huge loss of value there," said Peter Morici, an economics professor at the University of Maryland and former chief economist at the U.S. International Trade Commission. "My feeling is that, as long as they can meet their obligation, they shouldn't be taken over."
-- this is the kind of thing that makes me worry that things are about to get much much worse. I dont think this guy would ever say such a thing on his own accord. He's rarely that obtuse.
Rob Dawg - Your Aim is True
dryfly,
LOL
It is difficult to create a "run" on a solid bank. Easy on one that is teetering. Schumer's great sin was to cut through the lies the government lives by. And of course it couldn't care less if the bank ultimately went down and took all the gullible unaware depositors with it. Schumer's warning may have caused many to get out in time. So good for him.
Another argument for a national bank owned by the government is simply this: it would force private banks to be run so they would not go bankrupt. If they engaged in the reckless practices recently so widespread people would take their money out and put it into the government bank. Private banks would have to be as "sound" as the government bank. So it would serve as a backup to keep the private banking system honest. The problem recently is that so many people had no other place to keep their savings but in a bank that could well be in shaky condition.
Imaginary news release:
In a move to decrease transparency, the FDIC has ordered auditors on-site in Pasadena to order out for a balanced mix of pizza, sub sandwiches and General Tso's chicken.
What's going on with FNM and FRE stock prices?
Maybe the computers are getting confused:
$1 trillion - $1 trillion (or so) = ???
NaN or something.
NOW THE FED AND SENATE GETS TO CHOOSE WHICH BANKS AND INSTITUTIONS TO SAVE AND WHICH ONE'S TO SCREW....
CAN THE FED PLAY OPTIONS AND SHORT???
Jett Rink writes:
Rob Dawg - Your Aim is True
For the encore I'm hoping for "Watching the Detectives."
CAN THE FED PLAY OPTIONS AND SHORT?
No, but Senators' friends can.
Tanta,
What I am interested in knowing is how much OTS staff is taken up by the IMB implosion and how much more staff is there for other implosions. Is FFDIC here?
Schumer is an American hero, make no mistake about it -- he warned people there was trouble and he clearly suggested that the powers that be in this corrupt administration, were not doing enough to help resolve matters related to this crisis -- what more could you want than someone with the balls to go against the grain and stand up to collusion!!!
Is this a "mental bank failure"?
Curious isn't it that a large west coast bank fails and CR isn't available? Secret identity?
FFDIC has said there aren't many greyhairs left that remember the RTC days... but I suppose they can be coaxed out of retirement...
How many toxic mortgages with 350 bps payments did Schumaer get paid on? NONE!
I've heard rumors of a Bank of Bongwater coming soon. All deposits backed by snark and cynicism.
OTS should be wiped out as a department for failing to do its job; they turned a blind eye on every possible matter of regulation and accounting and supported fraud and then denied they had any part in this....they should be shut down ASAP!
The supervisory part of OTS only appears to have power to direct the mops during a clean-up. Basically useless.
Where is Dodd and his Friends Of Angelo crooks in this matter, are they too busy pointing fingers? Dodd should resign next week, or in reality, how many more bank failures on his watch?????
Damn. I had indymac in the pool for which bank would offer the first 100-yr mortgage.
dammit.
The American government needs revamped as soon as possible. Allowing business as usual to continue will result in a death blow and it is far from logical to assume that these crooks in power today have any clue as to how to honestly fix this mess they have fed off for 10 years!
Over the course of a year, this would free up approximately $2.5 to $3 billion of additional capital if this run-off rate remains constant.
Of course there's the minor issue that they lost twice that in the prior year.
Who exactly is the target of that threat anyway? The Feds can't prop up Freddie's stock price except by a heavy-duty bailout and that fails the fairness test (huge benefits to current shareholders). If Freddie stops new lending it would be a catastrophe. I could see no solution except either nationalization or starting a new governmental loan guarantor. Either means the immediate death of Freddie and probably Fannie too. This is like the Blazing Saddles hostage maneuver.
diogenes writes:
44 years of the demoKrats "great society" and woodstock come to fruition.
diogenes | 07.11.08 - 11:38 am | #
scav writes:
so all this Executive Privilege We don't have to answer to no steenkin Congress bullshit is due to Woodstock Liberals. YeeHaw!
Hank Jestor writes:
there is a directly link to counterculture and its failure accomplish the changes that they wanted...
ok so let me get this straight
a bunch of dope smoking music lovin hippies created no doc loans with teaser rates and re-sets and then spread mortgage backed securities and CDOs around the world after inventing SIVs with tranches and...
hey... scav, diogenes and hankjester
obviously you been smoking too much of that good shit.
bye the way...i was at woodstock and didn't see hank, dubya, phill graham, Rubin or Mozillow there...but did see bill clinton!
he was singing back up for sly and the family stone... the chubby guy in the back dressed in drag!
So was TNX tanking due to the discount window rumor or due to the impending passage of the bailout bill or...?
Anyone...Buehler?
"Curious isn't it that a large west coast bank fails and CR isn't available?"
I think he is smuggling IndyMac diamonds OUT of the country in a tube of toothpaste.
Ah, Fair, you get it.
No more loans, no support for the housing market, free fall for housing.
Gee, even better than Blazing Saddles.
I nominate H. Paulson for the Hedley Lamar Central Banking Award!!!
Mongo just knocked the US economy out.
Now, we have to adjust.
I wonder if it is passe to short COF to pay off their loan.
Someday this war's gonna end...
i get it, i get it!
Bear sterns kaboom...all due to nasty rumors.
Fannie and Freddie kapow gossip and the attack of the short sellers!
indymac... kafloooie charles schumers big mouth.!!!!
we don't need to worry about no stinking dubya em dee
the enemy can destroy us with rumors, inuedos short sales and the stinkin truth...
my glod... i feel so vulnerable
? got gold?
La times has picks of some employees leaving the building...
Mr. Perry of IndyMac Bank should have gotten all dramatic in his last letter and offered to reduce his pay by, say, 95%, and offer double-bonus-pony severance packages, instead of getting all tightwad MBA at the end. After all, he must have suspected none of it mattered longer than about a week... but sure would have felt good going out in a blaze of populist glory like that! When falling, LEAP!
Here, here! I really would not fully place the blame on the OTS or FDIC however much I would like to do so. When Bushwhacker came into office I was still employed at FDIC. There was an immediate change first in the examinations and many front line examiners complained bitterly without success. Some gave up in disgust and retired. This crisis is the result of how the Bush Whitehouse wanted the regulators to operate with many fewer employees, drive-by examinations and go easy on the white male bankers who are big Republican donors. The regulators (mostly white males) naturally go along with whoever is in power at the moment good or bad. That's how they survive and thrive in a mean old world. For those of you interested in staffing I'm sure that FDIC has a huge staff there or on the way which has almost depleted its Dallas site and leaves little staff available should there be another run on a bank in the very near future. They simply do NOT have the manpower at this point to handle much more than what they are currently trying to manage. It's a silent FDIC staffing crisis being kept from the public. Now, when is that pizza going to get here.
Lo que el fuck! Mis hijas no pueden comprar la mayor cantidad de dólares de ahora? PodrÃamos asà como volver a casa y hacer los bebés en mexico, donde la economÃa es fuerte! Oh MarÃa, madre, ¿por qué deberÃa permanecer aquÃ?
Monthly Average Graph (Mexican Peso, American Dollar) 2008
Let me remind you whiners that Indymac's closing down is a figment of your imagination. Its all mental...
Joe,a truck driver was taking a test for hauling dangerous loads.He was asked what he would do if while driving a tanker of gasoline he crested a hill and the road down was a sheet of ice.There were dropoffs on either side and at the bottom there were already several burning trucks and cars.Nowhere to go and his brakeslockup.Joe thought for a minute and said he would wake up Jim."Who's Jim?"."Jim is my co-driver and he's never seen a really bad wreck"
Federal regulators seize crippled IndyMac Bank - Los Angeles Times
http://www.latimes.com/media/photo/2008-07/40917521.jpg
picture caption: IndyMac Bank employees in Pasadena load personal belongings into a car after the FDIC seized control of the bank.
DSL is next. Book it...
what is that place some kind of cult? What's with the polo shirts and running shoes? Or is that casual death knell day wear?
"I had indymac in the pool for which bank would offer the first 100-yr mortgage."
Interest only loans are infinite-year loans, IMB had those so maybe you did win!
Re: "load personal belongings into a car after the FDIC seized control of the bank."
I thought I was a friend of Angelo.....
Eventual buyer? I'm going to start the guessing with Wells Fargo.
Blame Schumer? Give a break. Look at Indymac's stock chart, the thing was on borrowed time before the ambulance chaser said anything.
I actually commend Schumer for speaking the truth. Yes, the truth, something lacking in government circles these days.
Every damn thing is couched in "things are stable and fine".. well there not, and Schumer had the balls to say so in this instance.
So Freddie Mac may quit lending money for mortgages to keep the doors open? Unless the gov gives them money? Did I get that right?
I also read the summary of the Housing Bill the Senate passed. My summmary which is much shorter: Not going to work.
Tommorow I go out to the garage and sort through all the crap to make sure we have a working emergency kit.
Why? Because the "Biggest Polluter in the world" is freakin nuts. He just dosent care. Either that and/or he is drinking again.
Who has high CD rates today and a high div yield?
Schumer is shining a klieg light on a significant issue: the bank regulators are not shutting these high flyers down and as a result the ending regulatory closure cost is going to skyrocket. These guys are not reporting their delinquency pipelines and taking writeoffs for losses because the SEC, FDIC & OTS are at the beach. Go CHUCK!
Hey, FFDIC, you could always get ready to saddle up.
A lot of folks are about to get new jobs shutting down banks.
This blog seems to do a good job of outing the walking dead.
Now all we need to do is wait.
Now, we watch oil roll over and play dead, along with a significant portion of the US economy.
What makes me laugh is that a bunch of housing stocks still haven't totally tanked.
Geez, talk about zombies.
Who is going to buy a house on the edge of exurbia with a crappy long expensive commute?
Someday this war's gonna end...
So can we get a picture of the people who still had money in accounts over the insured limits? Like they didn't have at least three separate warnings in the last two weeks? Stupid is what stupid does.
Clyde's got a point, related to my previous point that the supervisors are no such thing. These flunky lenders should have packed it in long long ago. And yet, they have been making junk loans all the while that the bust has been going on. It's absurd.
AllenM, you gloss over one important thing. At a certain price point, lot of people would buy those exurban homes. The problem is, that price point is now well below construction costs. A long way to drop still, and by the time they find sufficient buyers, the homes will be junked from neglect. Many wont be rebuilt when they realize that no one will pay what it costs to build them.
IndyMac CD rates surge as its stock price plunges
IndyMac CD rates surge as its stock price plunges - Los Angeles Times
For a six-month CD with a $5,000 minimum deposit, IndyMac's website Wednesday was offering an annualized yield of 4.1% as an online "special."
The next-highest yield on a six-month CD was 3.7%, available from three banks: Corus Bank of Chicago, GMAC Bank and Charlotte, N.C.-based NewDominion Bank, according to bankrate.com.
IndyMac was paying significantly more Wednesday than it was Sunday, when it was offering 3.75% on a six-month certificate, according to Informa Research Services of Calabasas, which tracks savings rates.
I knew something was wrong when they asked if it was OK if they payed my deposit in refrigerator magnets.
face it
failing banks are gonna be like passenger planes diverted to another airport, circling, holding, until FDIC and the OTS (air traffic controllers) say it is their turn to land.
it's 11:59 pm,
do you know where your bank is?
Yeah, everything has a price.
But a lot of homes will be empty, and the losses will be astounding.
Now, if you accelerate that bottom, a lot of that housing stock will not deteriorate too badly.
We are definitely going to return to the times when houses cost less than replacement.
But hey, just call me Milo Minderbinder.
There are going to be some juicy profits in this mess, and I mean to score some of them!
Someday this war's gonna end...
Indymac website had a facelift:
OneWest Bank
Nova said:
Tommorow I go out to the garage and sort through all the crap to make sure we have a working emergency kit.
Man, I put our emergency kit together when the Red Sox won the World Series. No surer sign of the apocalypse than that.
George Bush says something stupid? Congress readies useless legislation? If that's got you putting an emergency kit together, I think you're about 7 years overdue.
Better late than never, though. And don't forget the duct tape!
IMB divy yielding 236%...sounds like a buy to me.
Mock: You are most probably right, but what happens when the circling planes run out of fuel?
Banking regulators close IndyMac
Bank regulators close IndyMac, transfer to FDIC - Jul. 11, 2008
In a conference call late Friday night, FDIC Chairman Sheila Bair said "it's possible this will be the most costly bank failure in history, but it's too soon to say." The failure "could also affect premiums paid by all banks for deposit insurance," she said.
I think the thing to do AllenM, is band together a bunch of people who would all buy in (not a speculators) to an empty development at a low ball price. You'd need a good critical mass to make the place fly and keep the values up. But if done at the right time and price, theyd stand to come out big winners. The problem with the newly built ghost towns now is that no one will go in alone, and if they do, no one will build out any retail or services around them.
Dickeylee,
So can we get a picture of the people who still had money in accounts over the insured limits? Like they didn't have at least three separate warnings in the last two weeks? Stupid is what stupid does.
Too true. I'm hoping the high rates available from CORS are a signal of impending doom.
first question..
IndyMac CD rates surge as its stock price plunges
what happens to those CDs. I know they were insured to 100k, but does the new owner of IMB get to recast those rates ?
My screen says shit will hit this crooks as well:
Deutsche Bank AG (USA)
\t
Daimler AG (USA)
Bank of Ireland (ADR)
Thanks Amigos!
Why can't fannie (gag) and freddie (gag) just get merged into Ginnie? They have almost identical defacto charters now.
Nope, I am going to wait and buy some lots out in some beautiful areas that will allow me to build a veerrrrry nice retirement hacienda when this fiasco is ancient history.
That will be in 15 years.
I can hardly wait.
We have at least two, if not three years to the bottom.
I can hardly wait for the knife catchers to start up with "It's over, buy now!"
It's not over, but nimble folks will still make killings on short term trades.
This volatility is killing any long term buy and hold strategies.
Nothing like a big set of problems to destroy complacency.
Someday this war's gonna end...
Oil leapt $5 to a new record high near $147 a barrel on Friday, spurred by growing worries of threats to supplies from Iran and Nigeria and the possibility of a strike by Brazilian oil workers next week
The US dollar dropped to within a cent of the all-time low against the euro on concern losses at Fannie Mae and Freddie Mac may deepen even after policy makers said the companies aren't facing a government takeover.
We need a term for what happens when you keep refreshing the Haloscan comments, not realizing that there's a new post that everyone else has moved to.
Uncle Billy,
Where the Fuc- have you Fuc-ing been today?
http://www.latimes.com/media/photo/2008-07/40917521.jpg
Now come on, there must have been some Americans of majority, cleaning out their desks, that they could have photographed. Why these three?......
I hope all of this ends with a Constitutional Convention!
http://www.latimes.com/media/photo/2008-07/40919045.jpg
Better late than never, though. And don't forget the duct tape!
Anonymous | 07.11.08 - 9:25 pm | #
Naw, I got tape they use on the space shuttle.
Bush, yet another stupid remark? Because I think he really, really does not have a 1/2 clue. Because I think the man has lost it. Did you see him with Merkel and his Hamburg crackup.
Because I know Bush will OK an Israeli airstrike. Because there is no plan, no leadership. Because IndyMac will quickly lead to more problems and there is coherent stategy.
Have you ever worked on a big project that has gone bad? At some point you realize that despite all the meetings, the extensions, the happy talk, it is going to crash and burn. That is todays moment for me.
OK, rereading the Freddie statement it seems less threatening. They say they have plenty of capital and will not need to raise any in the near future (but note the near business!) Then they say that if they have to raise capital they're going to go postal on the world economy (presumably since they can't raise it in the stock market anymore, although they don't say as much.)
So it looks more like "we're OK for now, but you'd better start planning for a bailout."
Now come on, there must have been some Americans of majority, cleaning out their desks, that they could have photographed. Why these three?....
It looks like they might carpool together, and maybe they're related.
Two of the three have laptop bags. Self serve severance package anyone?
"Dog meat off the menu during Beijing Olympics"
Former IndyMAC employees bought all of the stock off market shelves...leaving hordes of Fannie and Freddie investors without affordable food.
Weather Helm writes:
ATTENTION:
It's all in the psychology! As long as you keep loaning these failed, ahem, struggling institutions money, then there is no need for panic!
They lose money on every transaction, but they make it up on volume!
How will this affect the announced severance packages?
Old severance: 1 weeks pay for each year of service, outplacement assistance, medical benefits continued for 30 days.
New severance: 1 slightly used toaster for each year of service, 100% polyester shirt with slogan "My bank got shutdown by the FDIC and all I got was this lousy T-shirt!"; empty pizza boxes (good for building your new home underneath a bridge.)
In dismissing the recommendations of its top experts, the government says regulating the greenhouse gases blamed for global warming would cripple the U.S. economy.
Yes, yes, we have such a healthy robust economy and it would be wrong to force businesses to make our air and water cleaner -- but as for the financial system, what the fuck, let that tsunami go wild baby!
In other news, Moody's has announced a downgrade of IndyMac debt from AAA to AA+, and puts IndyMac on credit watch with negative implications.
Moody's will continue to monitor IndyMac's financial health and will update investors when appropriate.
(If you can't tell, I'm kidding.)
Seriously, on the topic of severance, where do employees rank in situations like this? "Employees first" is the usual motto, but when you're in hock megabucks to FHLB, FDIC and lord knows who else what happens?
Run off is what?
Paid off loans that they won't replace? So no new lending or guaranteeing until capital is back where it's supposed to be?
We are headed right back to 50s-60s banking, I think.
Thanks for the link to the pictures, 4822.
"Dog meat has been struck from the menus of officially designated Olympic restaurants, and Beijing tourism officials are telling other outlets to discourage consumers from ordering dishes made from dogs, the official Xinhua News Agency reported today."
You no eeta dat. Iss no good iss do meet. Rissen to me iss no good iss do meet.
canada watching
My thoughts exactly....
That an A6 ?
Ciao
MS
I disagree, that statement says, we can survive, but to do it, we have to shut down.
So give us some cheap capital and prop us up (saving the share price and the bonuses of management), or we shut down and go into runoff. That is the threat of leaving the mortgage market, leaving house prices to drop.
As for the losses, remember most of them are mark to market, not actual losses, so cash will triumph in A RUN OFF.
I think the threat is aimed square at congress and Paulson, with the Fed getting a copy.
Someday this war's gonna end...
9:47PM [IMB] Citibank says IndyMac selloff "overdone"
9:48PM [IMB] Citibank raises IndyMac from sell to "conviction buy"
Disempowered Paper Pusher writes:
We need a term for what happens when you keep refreshing the Haloscan comments, not realizing that there's a new post that everyone else has moved to.
Unfortunatley, here at CR we suffer from the annoying haloscan compulsion ("First!") but not the useful haloscan compulsion (calling sheets).
I still want to know what run off is.
Canadian: it's meant to anger us by shwoing us that insourcing can be just as bad.
From the "FDIC Failed Bank Information"
VI. Loan Customers
If you had a loan with IndyMac Bank, F.S.B., you should continue to make your payments as usual.
What about the ones not making payment? Should be amended to START making payments;-)
Don Miguel Sr & Jr
i got a 4.07 for 10 months about 2 weeks ago...wadda i care... its FDIC insured..its if ALL the banks fail...thats what has moi worried..
OTS press release:
OTS Closes IndyMac Bank and Transfers Operations to FDIC
Washington, D.C. — "The Office of Thrift Supervision (OTS) today closed the $32 billion IndyMac Bank, headquartered in Pasadena, California, and transferred operations to the Federal Deposit Insurance Corporation (FDIC).
A successor institution, IndyMac Federal Bank, FSB, will open for business on Monday and be run by the FDIC. Depositors will have no access to banking services online and by telephone this weekend, but will continue to have access to their funds this weekend by ATM, through other debit card transactions and by writing checks. Online banking and phone banking services will be available again on Monday.
The OTS has determined that the current institution, IndyMac Bank, is unlikely to be able to meet continued depositorsÂ’ demands in the normal course of business and is therefore in an unsafe and unsound condition. The immediate cause of the closing was a deposit run that began and continued after the public release of a June 26 letter to the OTS and the FDIC from Senator Charles Schumer of New York. The letter expressed concerns about IndyMacÂ’s viability. In the following 11 business days, depositors withdrew more than $1.3 billion from their accounts.
“This institution failed today due to a liquidity crisis,” OTS Director John Reich said. “Although this institution was already..."
The page cannot be found
Runoff is simply they allow the loans in the owned portfolio to simply mature and paydown. The capital returned gives them cusahion so long as they are not redeploying that capital into new business like the new bigger jumbo caps!
Sorry, but the iPhone activation issues are a bigger story than the 2nd largest bank failure in US history, at least on CNN.com.
Our media is so awesome! They realize that iPhone 2.0 is a much bigger story than the financial meltdown!! Nation of whiners indeed.
YHVD
you ask what happens when those circling banks, i mean planes, run out of fuel?
my dear sir or madame
that's called a hard landing!
Lawyerliz, they stop making and packaging new loans. They mercilessly push back bad loans for nitpicks, and lay off a bunch of folks. They also sell anything that resides anywhere near par. They tell really bad tales to buy back their bonds under par and under potential realized value and use that money to continue shrinking.
In other words cease their purpose and totally hunker down.
That way the shareholders have a chance at getting some money. But that housing market gets no more loans, so they will mitigate be selling houses as fast as they get them for highest bid.
Brutal, but making more loans and making it off the difference between 3% and 7% makes even more money since there is so little competition.
I think the paper they are currently writing is probably the most stable paper seen on the market in five years.
Someday this war's gonna end...
325 visitors on a Friday night...
Here are some excerpts from Ambrose Evans-Pritchard's article, "Monetarists warn of crunch across Atlantic economies" in the London Telegraph:
"Paul Kasriel, chief economist at Northern Trust, says. . . "The money supply is crumbling in the US."
"The data is pretty worrying," said Paul Ashworth, US economist at Capital Economics. ". . .we think deflation is now the biggest threat."
Roger Bootle from Capital Economics said Britain could be facing a "real economic crisis and a financial collapse."
As we say in California, Have a Nice Day!
capital one is another that is bothering me..huge credit card exposure...
3.75% on deposits ..could it go the indymac way?
Translation of Don Miguel Sr.:
What the fuck! My daughters can not buy as many dollars now? We might as well go home and make babies in mexico, where the economy is strong! O Mary, mother, why should I stay here?
Eh, time for another name change. Things are getting too crazy. The next six months are pivotal.
Nova wrote
Bush, yet another stupid remark? Because I think he really, really does not have a 1/2 clue...
--
and that's not half the problem
rather he has surrounded himself with political hacks and yes men and women and incompetents...
as a nation, we are in serious serious trouble
Not so. Today's CORS rates actually aren't that high, relative to past. They had the top 1-year CD rate always in 05 and 06. Now, they are usually in 5th or 7th place or something.
The signal of impending doom for CORS is the fact they "diversified" from their rotten condo construction lending book into office and hotel lending at the start of this '08, right at the wrong time.
Dead bank walking.
Kaboom
thanks for the translatio
tranches of lunacy writes:
Very cool. You morph into different tranches based on different crises. Kinda like real life art, no?
California has a large Asian population, so I don't think they are being particularly selective in that picture....it's just random California workers, packing up their belongings...for that matter, whites are not a majority in California, so....
"The next six months are pivotal."
From here on out, every month is pivotal.
Hey Rich,
How's TWM treating you? I haven't gone there, but the P/E is crazy.
Thanks boob and AllenM.
Well, if they did that interest rates would skyrocket and the value of their portfolio would tank, which I saw up close and personal in the early-mid 80s. Suppose they only went halfway down that road? Might be best for everybody.
They'd get more capital and only the best loans would be written. Oh, that last part--that's what's happening now. Everybody else gets hard money almost loan sharks.
I see us winding up somewhere between Bladerunner and MadMax!
NY Times (Naked Cap has an excellent write up on IndyMac's initial impact on FDIC)
Regulators Seize Mortgage Lender
Regulators Seize IndyMac After a Run on the Bank - NY Times
FDIC Comments Imply a Big Haircut for IndyMac's Loans
Credit Bubble Stocks: FDIC Comments Imply a Big Haircut for IndyMac's Loans
You Know the Saying, "Celebrities Always Die in Threes"? Banks Always Fail in Hundreds.
Credit Bubble Stocks: You Know the Saying, "Celebrities Always Die in Threes"? Banks Always Fail in Hundreds.
The guys in the control room are going to be working all weekend to come up with a confidence-restoring press release before Monday morning.
One possibility is for Mr. President to delivering a stirring speech a la "We have nothing to fear but fear itself."
That ought to put an end to this irrational whining.
Not Found 40917521.jpg
Now come on, there must have been some Americans of majority, cleaning out their desks, that they could have photographed. Why these three?......
Canadian watching with popcorn
and
KnotRP writes:
California has a large Asian population, so I don't think they are being particularly selective in that picture....it's just random California workers, packing up their belongings...for that matter, whites are not a majority in California, so....
KnotRP
Umm, these are clearly IT workers, contractors( temporary workers ), part of the outsourcing ( but in house ) scam.. Its kinda obvious.
No moral and business judgement implied - I'm tri-national, one of which is a second-class Indian nationality.
After all, when the textile workers jobs were outsourced I was nowhere to be found, when the manufacturing jobs were outsourced I was nowhere to be found, when the call centre jobs were outsourced I was nowhere to be found, when the BPO jobs were outsourced I was nowhere to be found and when the outsourcing high-value IT trend I was nowhere to be found. I'd done well enough, so I was already out and over the prior 20 years learnt how to manage my pile and so just got on with it.
-K
In a conference call late Friday night, FDIC Chairman Sheila Bair said "it's possible this will be the most costly bank failure in history, but it's too soon to say."
Too soon, because there are alot more banks to go.
awgee
word!
Geoff writes:
I think the thing to do AllenM, is band together a bunch of people who would all buy in (not a speculators) to an empty development at a low ball price. You'd need a good critical mass to make the place fly and keep the values up. But if done at the right time and price, theyd stand to come out big winners. The problem with the newly built ghost towns now is that no one will go in alone, and if they do, no one will build out any retail or services around them.
Geoff | 07.11.08 - 9:27 pm | #
How are you going to 'keep the values up'... print your own script? If you can figure out how to keep the values up send your resume to Sheila & Hank...
This week IndyMac. Next week, Corus, Freddie, Fannie and Lehman Brothers. And the next week the world, in the most fabulous subprime meltdown imaginable.
Not Schumer's fault Indymac representatives created a criminal enterprise whereby they put themselves out of business because of their own greed.
I have a simplistic but serious question: why would anyone who posts to this blog, or to other similar and serious-minded blogs, vote for an incumbent? Will it ever occur to voters that "change" can come about only through the non-election of incumbents? Far better, IMO, to throw out one decent baby with the bathwater if it refreshes the entire tub. We have proof, daily and in every media I know of, that incumbents are the cause of ruin. Get rid of 'em. Buy pitchforks, if you have to. Use that "rebate" to buy the pitchforks if you're otherwise short of cash.
FFDIC writes "This crisis is the result of how the Bush Whitehouse wanted the regulators to operate with many fewer employees". You are so right. Actually, the downsizing of government agencies started during Reagans term in the 1980s.
Over the last 25 years Republican Presidents have stripped regulatory agencies of oversight powers and personnel, including the FDA, EPA, OTS, FDIC, etc., etc.
Remember the tens of thousands of dead dogs and cats that were feed tainted pet food, childrens toys with lead paint, failing financial institutions. The list goes on and on.
It is easier to get away with a crime when no one is looking.
"but it appears to stem more from a crisis of confidence than fundamentals."
In my experience, that's what the Ponzi guys always say too. "If it hadn't been for the bad press, and that cease-and-desist order from the AG, we would have been fine."
Damn. 211 near Midnight.
Sunday night will be "Can't Miss PC"
G'night all.
I have to ponder what I think is going to be the denouement of all of this.
Bad news is this stuff is just beginning. Good news is there will emerge a new party that represents the 90% of the Country that has been disenfranchised by the super wealthy and those waiting for a handout.
I for one, will vote out all idiotic democrats and treasonous republicans. If I am lucky enough to sit on their jury, I will vote for imprisonment.
@Good news is there will emerge a new party that represents the 90% of the Country that has been disenfranchised by the super wealthy and those waiting for a handout.
That will happen around the same time cars become powered by ribgas.
read "The Family" by Jeff Sharlet for another piece to the political puzzle
How's TWM treating you? I haven't gone there, but the P/E is crazy.
Man-moth | Homepage | 07.11.08 - 10:27 pm | #
Thanks for asking. You know, on days like today, you just fall down on your knees and believe there is a PPT.
Basically, like I posted yesterday, the PPT focuses on black box trading to prop up indexes. They can't prop up individual stocks. Today was a huge down day for individual stocks, especially large-cap banks and financials. But the R2000 index still managed to end up.
I don't sweat it, and I've got all the TWM I ever had. Basically, I think TWM is still the best bet on the planet because I still think net earnings of the 2,000 small-cap components are going below zero and will stay there about a year. In that case, you'll see R2000 in the 400s at some point. I can't say when. I can't tell you there won't be strange, frustrating days like today. But just hang in there with TWM and you'll do pretty good. I started buying it about 14 months ago and, with a little bit of profit-taking, I figure I'm up 25% overall so far. If you don't like the 2X inverse volatility, go with RWM. I'm up about 20% on RWM at 1X inverse.
Sorry to post twice in the same day, much less week, but when has the reelection of a member of Congress of either major party been a boon for this country? IMO, never. "Term limits" was a popular concept among voters. Is it law for the U.S. House or Senate? Of course not. But nobody dredges up why it is not law for same.
Career politicians are the ruin of this country. simple enough. Only by destroying their capability to make ruling a career can we even hope to see the level of change that we desire effected. All the rest is pap.
Interesting! Twitpic - Share photos on Twitter
"Term limits" was a popular concept among voters. Is it law for the U.S. House or Senate? Of course not.
It would take a constitutional amendment to make it law. In 1994, the GOP put it as one of the provisions of their "Contract with America." Believe it or not, there were several GOP Congressman that kept their promises.
"This week IndyMac. Next week, Corus, Freddie, Fannie and Lehman Brothers. And the next week the world, in the most fabulous subprime meltdown imaginable."
I'd call them weapons of mass financial destruction, right. Only problem is that term has already been used by Mr. Buffet.
Dow Jones dives as Hank Paulson rules out rescue of Fannie Mae and Freddie Mac
By Ambrose Evans-Pritchard
"The meltdown at the two federally chartered agencies amounts to a heart attack at the core of the US credit system, leaving it obvious that the Bush administration has failed to stabilise the financial system since the Bear Stearns collapse in March. In a terse statement, Mr Paulson said the Treasury was working on a plan to bolster the two agencies in their "current form".
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/12/cndow112.xml
Was indymac going to go bust whether or not Schumer opened his mouth? Yes.
Did Schumer's comments hasten a run on the bank's deposits? Yes.
Did Schumer's comments make it harder for the OTS to handle the liquidation? Yes.
As a result, did Schumer's comments make indymac's failure more expensive for taxpayers? Yes.
Rich,,
You must have a strong stomach to hold onto that TWM. I was watching it and could not understand what the hell was happening with it. PPT doesn't sound so tin foil-ish today! Probably why I've shied away from TWM (I have dipped in and out of RWM infrequently and with ok results).
You're right, it's got to fall apart at some point, and many here will wish they'd had the nerve to wait it out.
Good luck, ma
One possibility is for Mr. President to delivering a stirring speech a la "We have nothing to fear but fear itself."
That ought to put an end to this irrational whining.
I predict that a new Federal agency with a warm sounding name (maybe "Department of Financial Security") will start issuing daily color-coded alerts advising depositors of the likelihood that their banks implode...
"Did Schumer's comments hasten a run on the bank's deposits? Yes."
If I had over $100,000 in one account in
any bank, I'd redistribute.
How many withdrawals were for
this purpose in the last two weeks?
Did Schumer's comments make it harder for the OTS to handle the liquidation? Yes.
As a result, did Schumer's comments make indymac's failure more expensive for taxpayers? Yes.
pdx | Homepage | 07.11.08 - 11:56 pm | #
I think Schumer is telling Team Bush & the rest of the GOP they aren't going to get to run out the clock... Schumer's cheap shot was purely political, purely payback.
And does this make the FDIC hit bigger than it would be if Indy went down 8 months or so from now? Well I guess that depends on if you think the mortgage market will be better in eight months or so than it is now. If not than the answer is 'no'.
I think the real damage wasn't to FDIC or the taxpayers (we were gonna pay now or later & a lot either way)... I think it makes congressional oversight that much more difficult. Who in this administration is going to come clean on anything now? Even the mid-level career bureaucrats will watch their step & zip their lips if they think the Schumers will blow their cover.
Its gonna be a long long summer & fall.
ffdic,tell us a little story about M-bank,First Republic or Texas commerce.
@I think Schumer is telling Team Bush & the rest of the GOP they aren't going to get to run out the clock... Schumer's cheap shot was purely political, purely payback.
Agree 100%.
I think it makes congressional oversight that much more difficult.
Call me a purist, but I believe in checks and balances, so I'm probably in the minority in finding fault with Schumer. If Congress is going to delegate the authority to regulate banks to OTS, and has a problem with the execution, the correct way is to address it via congressional subpoena and oversight committee, and not through tabloids.
so lets see if i got it straight.
cia stuff is secret
check
oil meetings in cheney's office dividing up iraqi oil fields is secret
check
sneak and peek searches of americans homes without warrant is secret
check
wiretapping, and grabbing cell phone and internet communication is secret and requires no warrant
check
and now the fiduciary soundness of banks is hush hush and can not be discussed in public
check.
seems to me the antidote to irresponsible criticism of indymac would have been for somebody big and respectable to step forward and defend the bank...course that would have required more lies than even paulson can tell.
the allegations and rumors were plausible even before they were voiced
imagine what would happen if the biggest software company was accused by a major political figure of being on the brink of bankruptcy
you know which company
people would laugh at the accusation and pundits would scoff while issuing data that prove the accuser to be a nut
dryfly is right
the dems are not going to let this administration run out the clock on the financial crisis...their political lives are at stake...both sides...
this games for keeps
"I predict that a new Federal agency with a warm sounding name (maybe "Department of Financial Security") will start issuing daily color-coded alerts advising depositors of the likelihood that their banks implode..."
Interesting idea, 4runner. If any of the guys in the control room read this blog, then it will probably become part of the President's six-part WE CAN DO IT, AMERICA! program.
The dam's been leaking for a while, but IndyMac's the first real hole gushing dollars. Methinks people should run like hell before the whole thing breaks.
I've said it on this blog before, this is a crisis in the confidence of the us gov in the ability to repay it's obligations.
Schumer's cheap shot was purely political, purely payback.
For what in the world, them having his boy Mukasey expose him before various Congressional committees this past week? I have a hard time seeing Schumer worried about an excess of forbearance toward the banking system, especially after all this, um, time.
Anyway, time will ruin all heels.
Call me a purist, but I believe in checks and balances, so I'm probably in the minority in finding fault with Schumer. If Congress is going to delegate the authority to regulate banks to OTS, and has a problem with the execution, the correct way is to address it via congressional subpoena and oversight committee, and not through tabloids.
Argento | 07.12.08 - 12:20 am | #
I agree - but Schumer wasn't out to 'fix the system' & reassert checks-n-balances. It was a political cheap shot, pure and simple. He knew it would force the Bush admin hand NOW and make it impossible for them to pass that one off. A subpoena would do nothing with the limited time remaining & everyone out campaigning anyway... real easy to just run out the clock.
I watch a lot of hockey - have had season tickets to a top D1 college hockey program since the 70s. I know a good cheap shot when I see one.
Having said that - everyone in the game knows you never let up until the final buzzer AND you never skate around with your head down. If you do you are inviting a cheap shot.
The Bush administration appointees have been skating around this financial crisis at half speed with their head down & mind somewhere else - wishing they could go to the bus now. Schumer sent them the kind of wake up that should remind them the game isn't over.
But that doesn't mean the game will now go cleanly from here to the buzzer... throwing cheap shots late in the game can make for a very long & ugly end of the game. Bench clearing brawl-like end of game. I think we are in for a very ugly late summer & fall.
Crazy, the whole thing is crazy. If these financial businesses were open with their books as required, none of this would have even happened. Secrecy is the WORST thing that could happen.
I've said it on this blog before, this is a crisis in the confidence of the us gov in the ability to repay it's obligations.
Damn straight. Conjure undoubtedly has a clock running on the dollar now.
There is, of course, a so-called plunge protection team, but I would be very surprised to learn they were actually intervening in the markets on a regular basis. The secret would leak out.
And, as Conjure likes to say, "The only way three people can keep a secret is to kill two of them."
Strictly speaking the FDIC took over IndyMac in a conservatorship; they did not "close" it. IndyMac will be operating, more or less normally on Monday morning.
Headline writing is never as easy as it looks.
mp,
The ETFs do seem to exhibit unusually large & contrary moves at critical junctures, though. That's hardly retail investor activity.
Lots of talk, i don't hear anybody talking about change in the fundemental aspect of how they are going to affect change in this country. Just a lot of bitchi
Mish:
We are very close to the point where any bank can fail at any time. If you are over the FDIC limit at Wachovia or Washington Mutual (or for that matter anywhere), do something about it immediately if not sooner.
auction pro,
Yes, they're fiddling while Rome burns...
Bush SCARES me!
He could do an incredible amount of damage in the next six months.
mp writes:
There is, of course, a so-called plunge protection team, but I would be very surprised to learn they were actually intervening in the markets on a regular basis. The secret would leak out.
And, as Conjure likes to say, "The only way three people can keep a secret is to kill two of them."
mp | 07.12.08 - 12:48 am | #
I have come to believe there IS a PPT... but agree they have NOT been intervening yet. If they do it will not be a secret when and why they intervene...
Hint: it won't be to 'pump the Dow' a measly couple hundred points on a down day just to win jg's wrath. Think more decimal places and 'jagged numbers' for handles.
Auction pro: Perhaps you hadn't heard - we are a nation of whiners. Things are good and we don't know how good it really is.
tj- "The ETFs do seem to exhibit unusually large & contrary moves at critical junctures, though."
tj, I agree, but a lot of that is automated trading. I'm just saying that, if there is a PPT, they'd have to be doing it very discretely through off-shore accounts.
It would be very interesting to see a study on this.
This country is ripe for political change. No one in government stands for intgreity.
"It's possible this will be the most costly bank failure in history, but it's too soon to say," FDIC Chairman Sheila Bair.
Nah. Bank of America and Citibank will top it.
B of A will fail via writedowns on its $660B in consumer loans; getting stiffed on its $34 trillion in derivatives exposure; writedowns on its $162B in trading assets; or bled dry through its $1.5 trillion in lending commitments.
Lots of ways for BofA and C- to die.
Ms. Bair, you will be amending your statement, I am positive.
Dryfly, I agree with you. There is no doubt that the PPT exists. It was established by executive order. The question is: how much power do they really have, and how do they use it?
Question for the group - wasn't ipod bragging a few days ago he was going to buy some of those high yielding Indy CDs? I mean they were paying the big money for 'FDIC insured' returns...
I haven't been able to keep up with the bazillion posts so might have missed him... does anyone know if he really did it?
If so I hope he shares his experience - its good to share.
mp, no problem, access to offshore accounts.
The PPT, seems to me, is merely the self-interested actions of the brokers/dealers and commercial banks.
Those folks talk with the FRBNY.
The rediscount window is open to all, now, providing the requisite ammunition.
That's how I see the PPT, just self-interested actions by the broker/dealers and commercial banks, fueled by junk to the Fed --> Treasuries --> cash, with the tacit approval of the FRBNY.
mp writes:
Dryfly, I agree with you. There is no doubt that the PPT exists. It was established by executive order. The question is: how much power do they really have, and how do they use it?
mp | 07.12.08 - 1:08 am | #
I don't have that answer - I am increasingly of the opinion we are going to find out though. I don't think it will be a happy day - even for shorts & whiners.
You know, dryfly, these kinds of markets make me wish I was young again. I've been reading the comments this evening and a lot of these young bucks have got real balls, so either there's a lot of bullshit here, or some really savvy traders.
What concerns me is is that TLT was tanking long before the FRE/FNM discount window rumor hit the street...
mp writes:
You know, dryfly, these kinds of markets make me wish I was young again. I've been reading the comments this evening and a lot of these young bucks have got real balls, so either there's a lot of bullshit here, or some really savvy traders.
mp | 07.12.08 - 1:15 am | #
Ya I agree. And if they are really good, a mix of both bullshit & smarts - almost indistinguishable until the accounts are settled.
Its gonna be interesting.
Nice work, C-B-S-, on your back of the envelope on the implied writedowns for IMB's assets.
I completely forgot about the FHLB loans.
This is going to be fun.
Y'all should consider Accrued Interest
...just sayi
Thanks for the link, e-c-; makes sense.
Goodnight, all.
mp, dryfly,
We're not putting you guys out to pasture just yet.
I wish I had more funds to "play" with, but most of my money has gone into the ultra-conservative (aka survivalist) plan -- zero debt, cash that's not in the bank, and PMs. Looks like that was the right "play", if I do say so myself.
Fannie Mae, Jesus Christ, I can't get over it. It was such a wonderful idea, providing the funding to make it possible for working people to own their own home.
Everything has become so perverted. These bastards screwed The American Dream.
Anyone have any idea if there were credit default swaps on Indy and how much?
tj- "I wish I had more funds to "play" with, but most of my money has gone into the ultra-conservative (aka survivalist) plan -- zero debt, cash that's not in the bank, and PMs."
tj, as I've said before, unless you have a room full of Bloomberg terminals staffed by Versace-clad babes with Wharton degrees, this is not a time to be in the market.
I think we're soon going to see a "Clash of The Titans, dog-eat-dog, and you don't want to be in their way. No one does.
These bastards screwed The American Dream.
The whole American dream, not just housing. The depth of the problems we face is still beyond most people's grasp.
...this is not a time to be in the market.
Not with any money you can't afford to lose, that's for certain.
Upon reflection, can anyone not hyper-rich afford to lose any money these days? I wonder...
I watch a lot of hockey - have had season tickets to a top D1 college hockey program since the 70s. I know a good cheap shot when I see one.
Speaking of cheap shots, did you see that Stu Bickel turned pro?
The depth of the problems we face is still beyond most people's grasp.
That's the point that I keep trying to make with my sheeple friends. Before we can get to the solution to our mess, we have to determine what our vision of America is. If it's the "shining city upon the hill" that consumes 40% (or whatever that number is) of the world's resources, with the nice little Asian people making cool iPods for us at $2/day, those days are dwindling.
On a tangential note, Roche has ceased researching AIDS drugs, despite the double digit growth in sub-Saharan Africa, because there's really no profit in it.
Those are the difficult choices we'll be making really soon.
No one in government stands for intgreity.
auction pro | 07.12.08 - 1:05 am | #
No one in government stands on intgreity
Sorry had to edit.
Barley,
Editing doesn't include spelling?
Argento, the idea of a shining city on the hill had nothing to do with ipods, but you know that.
Was indymac going to go bust whether or not Schumer opened his mouth? Yes.
Did Schumer's comments hasten a run on the bank's deposits? Yes.
Did Schumer's comments make it harder for the OTS to handle the liquidation? Yes.
As a result, did Schumer's comments make indymac's failure more expensive for taxpayers? Yes.
By pulling the plug on indymac sooner, Schumer reduced the amount of CD's the FDIC will have to cover.
mp,
yes, I'm conflating my metaphors tonight, trying to finish a brief. However, I'm distracted by trying to comprehend what a homeostatic world would be like.
Have we learned yet who first started dumping gse stock in large batches? Or large quantities of small batches?
It's getting to the point where the crises will be coming far too fast and from too many directions for TPTB to do anything but "freeze in the headlights".
Save housing? Use the GSEs! OOPS!!!!
Save the GSEs? Use the FED! OOPS!!!!
Save the FED? Use the Treasury! OOPS!!!
Sorry to be so cynical, but you can always count on them to make exactly the wrong moves. They've simply got way too much wrapped up in the status quo to do otherwise. It's human nature, and that never changes.
...and who profited most from shorting them?
Thanks dryfly- I knew there had to be a purpose to Schumer's remarks, just not one that made sense in the financial/economic world, but the political jabs and counter jabs,...I'm still too simple to see the machinations.
Argento- "However, I'm distracted by trying to comprehend what a homeostatic world would be like."
Well, Jefferson envisioned a nation of self-sufficient farmers, who would owe nothing and, therefore, would cast their vote with conscience, rather than obligation as their guide. I guess he thought that Americans would be satisfied with the plenty that the North American continent offered.
Jefferson, of course, could be branded a hypocrite because of his own personal problems, and he certainly didn't foresee the rise of manufacture as Hamilton did.
Just some random thoughts.
Regarding the so called Plunge Protection Team, from Wikipedia:
"The Working Group on Financial Markets (also, President's Working Group on Financial Markets or the Working Group) was created by Executive Order 12631,[1] signed on March 18, 1988 by United States President Ronald Reagan.
The Group was established explicitly in response to events in the financial markets surrounding October 19, 1987 ("Black Monday") to give recommendations for legislative and private sector solutions for "enhancing the integrity, efficiency, orderliness, and competitiveness of [United States] financial markets and maintaining investor confidence".[1] ...
One conspiracy theory regarding the Working Group refers to it as the Plunge Protection Team. This theory claims that the Working Group is an orchestrated mechanism that attempts to manipulate U.S. stock markets in the event of a market crash by using government funds to buy stocks, or other instruments such as stock index futures.[2] "
You guys have your tin foil hats firmly in place?
I guess what I'm saying is that the idea of self-sufficiency and its affect on the political arena seems to me a uniquely Jeffersonian idea.
The implications are far-reaching.
Just some random thoughts.
Keep'em coming, mp, keep'em coming.
Jim, shush. Here we talk about collanders, not tin foil hats.
self-sufficiency
People will be rediscovering this virtue in big way.
Necessity being the mother of invention there, tj...
As far as the PPT- isn't there always a "they" in the markets? Vanderbilt, Fisk, Carnegie? Tsai, Johnson, Hunt? Buffett, KKR, Milliken? If God did not exist, we would have to invent him?
Thanks dryfly- I knew there had to be a purpose to Schumer's remarks, just not one that made sense in the financial/economic world, but the political jabs and counter jabs,...I'm still too simple to see the machinations.
Yeah, it's all politics for clowns like Schumer. It doesn't matter if real people lose their savings or lose their jobs. One upsmanship and game playing is all that matters.
I can only speak for myself, of course, but if I had more than the insured limit of 100T in any of the following I would take it out and move it elsewhere:
PFB, HRZB, DSL, RVSB, BHBC, FED. Those are only the ones I have noticed.
I don't think Schumer is a clown. I think he's the guy who pointed out that the emperor doesn't have any clothes on.
sdtfs- "As far as the PPT- isn't there always a "they" in the markets? Vanderbilt, Fisk, Carnegie? Tsai, Johnson, Hunt? Buffett, KKR, Milliken?"
Yes, the great, unknowable "they." "They" are always there and, when things don't go as we expect, "they" are always to blame.
Right wing blogs amuck in Schumer blame. Hey jackasses, I'm concerned with Washington Mutual and Wachovia.
Hopefully when the next bank closes the OTS can point the finger at the blog "Calculated Risk". What a joke, if a bank is insolvent its insolvent... heck we the people should just force bank runs from week-week. This week everyone with odd SSNs take money out of Wachovia... and everyone with even SSNs take money out of WaMu... lets do a "stress test" on the system...
A few bank failures may be useful to teach complacent, gullible Americans that the people running things are not always competent, to say the least, and that authority should be viewed not with blind respect, but skepticism. If you read the LA Times story on IMB you can see easily that the people involved didn't do their jobs at all. One of the board, as I recall, was an ex-Fed Reserve Board member. What a klutz he must be. And I insist again that we need a 100% safe bank owned by the US Treasury. For people who want complete safety for more than 100T.
This week everyone with odd SSNs take money out of Wachovia... and everyone with even SSNs take money out of WaMu... lets do a "stress test" on the system...
I like the way you think.
Didn't the IMF or World Bank say they wanted to audit the US financial system- do a virtual stress test by 2010? Looks like we're going to save them the trouble.
And for those who might think that a substitute would be to insure bank deposits for, say, 500 thousand rather than 100, I will point out this: such a scheme would prompt private banks run for profit to take more risk, since they would be more richly protected from their follies. On the other hand, a government owned bank, NOT run for profit, would have no incentive to take silly risks since it would not be trying to increase its profits. It would be free to be run with the utmost conservatism. You see, folks, profits are not always the be all and end all of things.
jim, et al, be at least somewhat charitable. These people are human beings. Yes! Believe it or not, even a Federal Reserve Board governor puts his/her pants on the same way you do. They are not omniscient. They make mistakes.
Sometimes though, they don't make mistakes, they commit fraud.
Ken Lay, for example, was once a brilliant government regulator. He stepped out of his depth. The result was Enron. People are, dare I say, *human".
Oh come off it. These are financial experts who above all other should know what risk is and how to recognize it. The "everybody makes mistakes" excuse is a lot of CRAP.
Jim, you are over-simplifying what I said.
But, you know that.
Oh yes, Saint Schumer, the truth teller. This guy was in the Senate through the bubble and I'm sure his donor list reads like a who's who of Wall Street.
Look the guy did something stupid here. Maybe it was a political cheap shot, but it was really stupid nonetheless.
jim- we had boring banks before the repeal of Glass Stegal and we had boring S&L's before and we just made little changes to 'help' them. We just keep screwing up the safe secure stuff. Like Freddie and Fannie,...We'd do the same with a national bank.
Sorry, I think I butted into someone's train of thought.
pdx,
You might not want to hear this but Indymac Bank isn't the only bank that couldn't deal with a "bank run".
So there's nothing wrong with having 10B in deposits and only being able to pony up something like 1.3B?
I've got a bridge to sell you, got some land in Florida to sell you, and now, I'll hold your deposits for you.
One final thought here, which is completely "off-topic."
I find that Internet technology is still extremely limiting.
For example, "CR" throws out a news item, a "bone," and everyone chases it. There are those of us who would like to pursue a discussion, but are unable to do so because everyone abandons the topic for the next "bone."
Just a thought.
The bank runs on other institutions begin tomorrow, should the stupefied masses of America begin to wake from their propaganda-media induced slumber.
The speculative attacks on the dollar begin the minute Paully Pocket and Bubbles Bernanke announce the omnibus bailout of Fannie and Freddie, as well as Lehman Bros. on Monday.
Welcome to Cafe Argentina.
100T? How 'bout 100k?
YSLP,
You're preaching to the choir. I'm very aware that Indy, Bear, Lehman, WAMU, Chorus, Etrade, etc. etc. have done some insanely reckless things. 40x leverage at the ibanks should have had a first year finance student saying WTF.
But I also think the probability that we may be facing a depression let alone a recession is pretty scarry. We need to put aside partisanship and work through these problems as effeciently as we can or things could go from worse to unimaginable.
I think Schumer was acting recklessly here and it's not excused by the stupidity of the execs at the banks or the FED or the OTS. I'm just afraid that we could create cascading effects here that could even bring down good lenders.
In the end we know that the hardest hit by this will be the Americans on the lowest rung of the ladder.
What good lenders?
We need to put aside partisanship and work through these problems as effeciently as we can or things could go from worse to unimaginable.
That's just code language for letting the fat cats keep on doing things their way. That's what got us into this mess.
Off with their heads.
As a long-time (now former) NYC resident, who voted for Chuck twice, allow me to say, he's a complete douchebag.
The hedge funds donated something like a lousy million bucks to his campaign, so he worked his darndest to preserve the hedge fund loophole - you know, the one where the 2/20 guys who made billions per years got to claim their earnings as dividends? Amazing the ROI you can get when buying politicians...
He also was a big supporter of Alito, but don't get me started...
But Max, is he connected to organized crime? Oh nevermind; I forgot that hedge funds are organized crime.
Here, this is interesting. We all have our little "Minsky Moments" and here is Bakley Rosser's moment -- the one where he tells us he successfully modelled bubbles, panics, and busts while everone else was just predicting it from the hip. (c/o econview)
EconoSpeak: Falling from the Period of Financial Distress into the Panic and Crash
I don't know if you will find this as grimly hilarious as I do, but on the top right of that page is a link to the Pete Peterson Foundation's "Help Fight The Fiscal Crisis" page. Little Mikey Milken has well attended global financial conferences, T. Boone Pickens rides in to save us with windmills, and this.
Senor, mas thorazine por favor.
Sorry, top left of the page:
Help Fight the Fiscal Crisis
Indy could not have survived even if Schumer had said nothing. And if he had said nothing lots more people would have lost big when it went down.He did the right thing and it took some courage to do it when keeping quiet (a kind of lie) is all the rage these days in Washington.
We'd do the same with a national bank..
You don't get the point. Even if the management was incompetent, it would not fail and the depositors would not be exposed to loss. By definition. And to say it would fail is a lie. Not everything run by the government is a mess. You seem to be a black and white thinker. Government bad, private good. Social Security works fine. It is a government program.
Sounds like Anthony Mozillo has done a good job of building 2 of the largest train wrecks in American History. Honestly, does the constitution protect terrorist like Mozillo, Bus and Cheeney?
max flatow writes:
As a long-time (now former) NYC resident, who voted for Chuck twice, allow me to say, he's a complete douchebag.
::
LOL. Son of D'Amato.
It may be that I'm wearing rose colored glasses, but I'm not sure whether the widely expected demise of IMB implies the coming collapse of the entire U.S. financial system. Looking at history, there's been several waves of bank failures, and the system muddled through.
In particular, the Fannie/Freddie situation may or may not be as dire as people here argue. I am not talking a book, and I would not recommend investing in their securities from the long or short side - too much uncertainty.
The GSE equities could be thrown under the bus, and it will make no real difference for the capital markets. In other words, I would not recommend buying the equity based on some theory about "too big to fail". That might work, but that would be pure luck if it did.
Their importance lies in the MBS portfolio and the senior debt. The holders of that debt have deep pockets and will protect their own interests. For example, foreign central banks and even Bill Gross (based on his public comments) are big holders.
Given that the GSE's book of mortgages was more conservatively financed, it remains to be seen how much of a haircut they would take, even as the housing implosion continues.
And to put all the headlines in context, the GSEs can still borrow below LIBOR at the front of the curve. This means that they are still not viewed as a serious risk by the bond markets, which in this case, is the only market that matters. The bond market could be wrong, but you cannot extrapolate what you see in the equities to the debt side.
Indy could not have survived even if Schumer had said nothing. And if he had said nothing lots more people would have lost big when it went down.He did the right thing and it took some courage to do it when keeping quiet (a kind of lie) is all the rage these days in Washington.
According to John Reich, director of the Office of Thrift Supervision Indy's demise was caused by a deposit run that came after Schumer sent a letter to regulators on June 26 questioning Indy-Mac's viability. Customers withdrew 1.3 billion in the 11 business days after the letter, or more than $100 million a day on average, Reich said.
tj & the bear writes:
self-sufficiency
People will be rediscovering this virtue in big way.
Oh... I wish. Now maybe we can break the multi-generational welfare trend. (Its not going to happen... sigh.)
Did every one see the front page of the LA Times (note: I'm on graveyard shift, I just woke up, so I could be behind the curve.)
Losing faith (in banking)
I stand by my prediction, 25% down payments will be the norm in the darkest days of this downturn.
Got Popcorn?
Neil
Those with multiple accounts under $100,000 are probably screwed. During the S & L mess I had a friend with three accounts each under $100,000 that totaled $230,000. She was reimbursed a total of $100,000. Those at the S & L assured her all the money was insured. There was another S & L across the street. She lobbied Congress to no avail.
A great place to share you Indymac story. We have people all over the country sharing their experience with Indymac Federal bank.