Banking Crisis II

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Re: Banking Crisis II

Post by drunkensurvivor » Wed Jul 08, 2009 11:46 pm

Valarius wrote:1. Wells Fargo and Bank of America, among others, have said that they will stop accepting IOUs on Friday.

2. IOUs are apparently the only way some people are getting paid.

If I were a Wal-Mart CEO, and I was still stuck on the idea of having my own bank in Wal-Mart, I'd start accepting these IOUs as tender from all my customers in California. Nobody likes the main banks anyway, what with the bailout, and public opinion of them would go down. Meanwhile, public opinion of me might also change positively, allowing me to build more stores and generate a PR stream about stimulating the economy by creating new jobs. Then in the long term, when I was applying to be a bank, it'd be hugely beneficial for a bunch of politicians from the wealthest state in the union supporting me.

Any comments?
California defaults and WM is out maybe a billion? If I was a bank I wouldn't touch those IOUs unless the federal government backed them. These banks are already on shaky grounds, they don't need more write downs due to California's problems.

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Re: Banking Crisis II

Post by haploid » Wed Jul 08, 2009 11:49 pm

Valarius wrote:
If I were a Wal-Mart CEO, and I was still stuck on the idea of having my own bank in Wal-Mart, I'd start accepting these IOUs as tender from all my customers in California. Nobody likes the main banks anyway, what with the bailout, and public opinion of them would go down. Meanwhile, public opinion of me might also change positively, allowing me to build more stores and generate a PR stream about stimulating the economy by creating new jobs. Then in the long term, when I was applying to be a bank, it'd be hugely beneficial for a bunch of politicians from the wealthest state in the union supporting me.

Any comments?
You'd be opening yourself up to massive default risk. Do you really think California will be able to pay these warrants in October? You're dreaming. This state, and everything in it, is ruined. Wal-Mart could fully expect to take a $3B charge in its Q4 earnings if they did this.

I am in perpetual shock at all these optimistic green shootists and depression deniers acting as if everything is fine. All of my local friends, all of my neighbors, all of my employees, and particularly my ex-employees, are FUCKED with a capital F.

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Re: Banking Crisis II

Post by Kathy in FL » Thu Jul 09, 2009 12:12 pm

Here's another crisis in the making .... possibly ....

Goldman Sachs Loses Grip on Its Doomsday Machine: Jonathan Weil

http://www.bloomberg.com/apps/news?pid= ... eyqdzYcizc" onclick="window.open(this.href);return false;
Never let it be said that the Justice Department can’t move quickly when it gets a hot tip about an alleged crime at a Wall Street bank. It does help, though, if the party doing the complaining is the bank itself, and not merely an aggrieved customer.

Another plus is if the bank tells the feds the security of the U.S. financial markets is at stake. This brings us to the strange tale of Goldman Sachs Group Inc. and Sergey Aleynikov.

Aleynikov, 39, is the former Goldman computer programmer who was arrested on theft charges July 3 as he stepped off a flight at Liberty International Airport in Newark, New Jersey. That was two days after Goldman told the government he had stolen its secret, rapid-fire, stock- and commodities-trading software in early June during his last week as a Goldman employee. Prosecutors say Aleynikov uploaded the program code to an unidentified Web site server in Germany.

It wasn’t just Goldman that faced imminent harm if Aleynikov were to be released, Assistant U.S. Attorney Joseph Facciponti told a federal magistrate judge at his July 4 bail hearing in New York. The 34-year-old prosecutor also dropped this bombshell: “The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways.”

How could somebody do this? The precise answer isn’t obvious -- we’re talking about a black-box trading system here. And Facciponti didn’t elaborate. You don’t need a Goldman Sachs doomsday machine to manipulate markets, of course. A false rumor expertly planted using an ordinary telephone often will do just fine. In any event, the judge rejected Facciponti’s argument that Aleynikov posed a danger to the community, and ruled he could go free on $750,000 bail. He was released July 6.

Market Manipulation

All this leaves us to wonder: Did Goldman really tell the government its high-speed, high-volume, algorithmic-trading program can be used to manipulate markets in unfair ways, as Facciponti said? And shouldn’t Goldman’s bosses be worried this revelation may cause lots of people to start hypothesizing aloud about whether Goldman itself might misuse this program?

Here’s some of what we do know. Aleynikov, a citizen of the U.S. and Russia, left his $400,000-a-year salary at Goldman for a chance to triple his pay at a start-up firm in Chicago co- founded by Misha Malyshev, a former Citadel Investment Group LLC trader. Malyshev, who oversaw high-frequency trading at Citadel, said his firm, Teza Technologies LLC, first learned about the alleged theft July 5 and suspended Aleynikov without pay.

‘Preposterous’ Charges

Aleynikov’s attorney, Sabrina Shroff, told the judge at the bail hearing that Aleynikov never intended to use the downloaded material “in any proprietary way” and that the government’s charges were “preposterous.”

Goldman isn’t commenting publicly about any of this, though it seems the bank’s bosses want us to believe there’s no need to worry. On July 6, Dow Jones Newswires quoted a “person familiar with the matter” saying this: “The theft has had no impact on our clients and no impact on our business.” Note that this person was so familiar with Goldman that he or she spoke of Goldman’s clients as “our clients” and Goldman’s business as “our business.”

By comparison, last Saturday, while most Americans were enjoying the Fourth of July holiday, Facciponti was in court warning of looming threats to Goldman and the financial markets.

“The copy in Germany is still out there,” the prosecutor said, according to an audio recording of the hearing. “And we at this time do not know who else has access to it and what’s going to happen to that software.”

Secret Software

“We believe that if the defendant is at liberty, there is a substantial danger that he will obtain access to that software and send it on to whoever may need it,” Facciponti said. “And keep in mind, this is worth millions of dollars.”

By “millions,” it’s unclear if that would be enough to match Goldman Chief Executive Lloyd Blankfein’s $70.3 million compensation package for 2007. Or perhaps millions means thousands of millions, otherwise known as billions.

Facciponti said the bank told the government that “they do not believe that any steps they can take would mitigate the danger of this program being released.” He added: “Once it is out there, anybody will be able to use this, and their market share will be adversely affected.” All Aleynikov would need to get the code from the German server is maybe 10 minutes with a cell phone and an Internet connection, Facciponti said.

Judge’s Ruling

The hole in Facciponti’s argument was that the government offered no evidence that Aleynikov had tried to disseminate the software during the month prior to his arrest, after he downloaded it and had left his job at Goldman. That’s the main reason the judge, Kevin N. Fox, cited in ruling Aleynikov could be released on bail.

“We don’t deal with speculation when we come to court,” Fox said. “We deal with facts.”

Meantime, it would be nice to see someone at Goldman go on the record to explain what’s stopping the world’s most powerful investment bank from using its trading program in unfair ways, too. Oh yes, and could the bank be a bit more careful about safeguarding its trading programs from now on? Hopefully the government is asking the same questions already.

(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: Jonathan Weil in New York at jweil6@bloomberg.net

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Re: Banking Crisis II

Post by Moana Drifter » Thu Jul 09, 2009 1:16 pm

A lot of hype about not much. A number of firms (including Goldman) have had their black boxes go haywire over the past several years. CME simply breaks the trades, much to the disappointment of those who made big bucks taking the other side. Goldman is more worried about their proprietary algorithms becoming public than any danger to the financial system.
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Re: Banking Crisis II

Post by hooliganlite » Thu Jul 09, 2009 3:06 pm

Do you think Big Finance feels badly about trashing the economy? Neither did I.

In a surreal conjunction of "there's a sucker born every minute" and "the banks own the regulators" we have this:
July 8 (Bloomberg) -- Morgan Stanley plans to repackage a downgraded collateralized debt obligation backed by leveraged loans into new securities with AAA ratings in the first transaction of its kind...
http://www.bloomberg.com/apps/news?pid= ... TzfvEedKpQ

Silk purse meet sow's ear.

This pretty much sums it up:
“You’re manufacturing AAA out of not AAA, therefore allowing those people who have AAA written on their forehead to buy.”
What could go wrong? :roll:
All that blood, will never cover that mess.

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Re: Banking Crisis II

Post by raptor » Fri Jul 10, 2009 2:55 pm

I do know what to say about this "AAA" rated junk. Other than the FDIC and Treasury are now selling Legacy Assets instead of Toxic Assets.

Maybe a new name means they are good now. :lol: (Not likely)

Caveat Emptor!

http://www.treas.gov/press/releases/rep ... _sheet.pdf" onclick="window.open(this.href);return false;

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Re: Banking Crisis II

Post by raptor » Fri Jul 10, 2009 6:29 pm

Ok looks like one bank bought the farm today.
Bank of Wyoming, Thermopolis, Wyoming, was closed today by the State of Wyoming, Department of Audit, Division of Banking, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Central Bank & Trust, Lander, Wyoming, to assume all of the deposits of Bank of Wyoming.

http://www.fdic.gov/news/news/press/2009/pr09122.html" onclick="window.open(this.href);return false;




This is also an interesting development on a different front of the same topic:

CIT Group is one of the "new" banks. It became a bank in December 2008 and was traditionally a non-bank business lender rather like GE Commercial Credit. the FDIC has not agreed to let CIT to use the TLGP program despite aloowing GMAC and GE access to the guarantees. "Without the TLGP, CIT may default as soon as April, when a $2.1 billion credit line matures, according to Fitch Ratings." CIT serves primarily small businesses that banks do not like to service since they frequently are asset based loans. If CIT went away so would credit for many of these businesses.


http://www.bloomberg.com/apps/news?pid= ... aM9yec_lYA" onclick="window.open(this.href);return false;

CIT Group Inc. bonds and stock tumbled on concern that the Federal Deposit Insurance Corp. won’t give the commercial lender access to its Temporary Liquidity Guarantee Program.

The FDIC, which has backed $274 billion in bond sales under the TLGP since Nov. 25, has been unwilling to let CIT participate on concern that standing behind the lender’s debt would put taxpayer money at risk, according to people familiar with the regulator’s thinking who declined to be identified because the application process is private.



This bears watching if you use CIT for credit card or business lending activity.

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Re: Banking Crisis II

Post by phil_in_cs » Fri Jul 10, 2009 7:34 pm

The cynical part of me says the big banks are lobbying to stop the competition from CIT.
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Re: Banking Crisis II

Post by raptor » Fri Jul 10, 2009 8:35 pm

phil_in_cs wrote:The cynical part of me says the big banks are lobbying to stop the competition from CIT.

It sure looks that way to me. I wonder if CIT pissed off someone at the Treasury or if the Treasury wants to protect the investment in GE & GMAC.

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Re: Banking Crisis II

Post by phil_in_cs » Fri Jul 10, 2009 8:48 pm

raptor wrote:
phil_in_cs wrote:The cynical part of me says the big banks are lobbying to stop the competition from CIT.

It sure looks that way to me. I wonder if CIT pissed off someone at the Treasury or if the Treasury wants to protect the investment in GE & GMAC.
Or just sold them short, then cut off the money to make sure the short bid made.
Don't confuse a belligerent and aggressive attitude with the strength, training, and conditioning needed to prevail in a fight. How do you know you have the Will To Win, if you don't even have the will to train?

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Re: Banking Crisis II

Post by nyiangelo » Fri Jul 10, 2009 10:46 pm

Those Ruskies.....

http://www.bloomberg.com/apps/news?pid= ... FVNYQpByU4

Hope to look back one day and still be able to laugh about it.
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Re: Banking Crisis II

Post by raptor » Fri Jul 10, 2009 10:49 pm

nyiangelo wrote:Those Ruskies.....

http://www.bloomberg.com/apps/news?pid= ... FVNYQpByU4

Hope to look back one day and still be able to laugh about it.
Well that should strengthen the price of gold. :lol:

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Re: Banking Crisis II

Post by flyingredgoat » Sat Jul 11, 2009 8:14 am

raptor wrote:
nyiangelo wrote:Those Ruskies.....

http://www.bloomberg.com/apps/news?pid= ... FVNYQpByU4

Hope to look back one day and still be able to laugh about it.
Well that should strengthen the price of gold. :lol:
That's going to ruin my investment in Ameros. :lol:

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Re: Banking Crisis II

Post by Kathy in FL » Sat Jul 11, 2009 9:16 am

Here's an interesting article. The meeting in question took place in my town. I've heard from a lot realtors and bank folks that hundreds of new properties are going to start coming on the market every day in this area alone; thousands a day across the state. The people in the local branches/departments say that it is just as bad in other states.

The hold on foreclosures has been removed. Judges are no longer giving as much leeway to consumers, especially when they can't prove that they actually have the wherewithall to keep their home. Bankruptcy judges are also getting tough ... tougher ... especially if it appears that consumers obtained loans, etc. based on fraudelent claims of income.

We've been carefully buying income properties and we are getting them at prices we couldn't even have gotten them at 6 or 7 years ago, but we are now in a holding pattern until we see what the upcoming property dump is going to do on the market in general. It sure isn't making it any easier to find renters, contrary to previous recessions, so we have to weigh and balance every aspect ... even with a good price if you can't rent the house out you've got nothing but a problem on your hands that is losing you money right out the door (think taxes, insurance, rental inspections, business licenses, etc.).

Anyone have a working crystal ball? Mine cracked a long time back and hasn't come out of the shop yet. :roll:
Economist: FDIC gearing up for bank closures
http://washington.bizjournals.com/washi ... ily39.html" onclick="window.open(this.href);return false;

The Federal Deposit Insurance Corp. is gearing up to handle a large number of bank failures expected as a result of bad mortgages, both in residential and commercial real estate, an economist said Tuesday.

“They know they’re going to take down a large number of banks and they can’t do it until they’re staffed up,” said Mark Dotzour, chief economist and director of research for the Real Estate Center at Texas A&M University.

Dotzour expects federal regulators to establish an agency, similar to the Resolution Trust Corp. that disposed of assets belonging to insolvent S&Ls in the late 1980s and early 1990s.

“Once they start to sell [foreclosed real estate], we’ll find out what the market really is,” Dotzour told attendees at an economic summit hosted by a handful of real estate groups in Tampa, Fla.

Dotzour blamed federal intervention for the lack of commercial real estate investment activity in recent months, as well as the failure of businesses to make major decisions.

“Nobody knows what to do so they’re doing nothing,” Dotzour said at the luncheon meeting at the Intercontinental Tampa.

Government, in its quest to help the economy, is causing harm by propping up failing companies and regularly changing rules, he said.

“No one can predict what the government will do,” Dotzour said.

“People are frozen. It’s not that they don’t want to invest in the future, the rules are unclear,” he said.

He jokingly called the Federal Reserve “inksters” for routinely printing money to bail out big business, including banks that are still not making many loans.

The government’s role in a capitalistic society, he said, “is to make the rules and get off the dance floor.”

Businesses and individuals that can’t pay their bills should resolve their problems in bankruptcy court, not with money from the government, he said. It’s a process that has worked for decades, for generations.

“Everyone has a lesson to learn here, including you and me,” he said. “We have to live within our means.”

Dotzour expects foreclosure rates to continue to climb, real estate prices to fall more and cap rates to rise to at least 9 percent before leveling off.

In 2010 and 2011, interest rates will begin to rise, as will inflation. Once investors realize the market is at bottom, deals will begin to flow again, he said.

In the meantime, he compared the bad loans that remain on banks’ books to a smelly cat litter box and the feds keep throwing more litter on top to mask the smell. But they’ll eventually have to remove the organic material to fix the problem.

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Re: Banking Crisis II

Post by raptor » Sat Jul 11, 2009 10:57 am

Kathy in FL wrote:
Anyone have a working crystal ball? Mine cracked a long time back and hasn't come out of the shop yet. :roll:
I do not have a working crystal ball and anyone who "knows" where this economy is going is simply expressing opinion nothing more.

As you well know the FL RE market is particularly murky. My opinion is that until unemployment stabilizes, the RE market nationwide will not hit bottom. However some markets may recover sooner and others may languish for a while. RE is obviously very location dependent and IMO employment driven.

I have also read numerous people who are predicting a rough ride for commercial RE. I think you are wise to sit back and watch for a while.

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Re: Banking Crisis II

Post by Heartless51 » Sat Jul 11, 2009 11:19 am

http://finance.yahoo.com/career-work/ar ... egotiation" onclick="window.open(this.href);return false;


I wonder how the upcoming min. wage hike might affect inflation and unemployment?

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Re: Banking Crisis II

Post by raptor » Sat Jul 11, 2009 1:46 pm

Heartless51 wrote:http://finance.yahoo.com/career-work/ar ... egotiation


I wonder how the upcoming min. wage hike might affect inflation and unemployment?
An interesting question. According to the article 14 states & DC require wages above the new minimum level of $7.25/hour so IMO those states should not much impact.

I have no employees at minimum wage now but I will when the new wages goes into effect. Wages in my businesses will stay flat, as will headcount.

However I do know someone who is going to lay off 2 employees to cover the wage bump. He has 10 employees and is probably just getting by. He also probably should have laid off 2 people in March and is likely using this as an excuse to trim his work force.

IMO there is logic to delaying this wage hike. However, politically that is not going to happen.

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Re: Banking Crisis II

Post by naegling62 » Sat Jul 11, 2009 2:26 pm

Well in my business this 3rd installmemt of the wage hike will raise my hourly labor outlay to approx. $75,000 more per year vs. from 3 years ago. Now having said that, my grosses have not increased.....so much for the folks that say the gross increase of consumer wealth will be recovered in in gross reciepts of the business community :wink:
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Re: Banking Crisis II

Post by Kathy in FL » Sat Jul 11, 2009 3:30 pm

naegling62 wrote:Well in my business this 3rd installmemt of the wage hike will raise my hourly labor outlay to approx. $75,000 more per year vs. from 3 years ago. Now having said that, my grosses have not increased.....so much for the folks that say the gross increase of consumer wealth will be recovered in in gross reciepts of the business community :wink:
Yes, that is a huge problem here in Florida. What this means is that the jobs that people are turning to to help with their current underemployment issues will begin to disappear or hours will become even more to acquire. They have already started to do that at the restaurant where my daughter works in anticipation of the wage hike.

The way it was explained to her ... The restaurant gets a gross number of wage dollars to allocate for the week. Whether the restaurant income goes up or down they have that same number of wage dollars. However, they have a daily percentage of sales that they have to stay within or the managers get in trouble.

The problem is twofold ... receipts are going down and hourly wages is increasing. They've already started trimming hours to keep their percentage of sales increase where it needs to be. Additionally now they will have to trim yet more hours to stay withing their allotment of wage dollars.

My daughter, one of the low men on the totem pole, has seen her hours over the last three weeks cut in half. She's had to pick up a second job and still barely gets half time work. Looks like her dad and I will have to continue to foot her car insurance for a while longer. :?

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Re: Banking Crisis II

Post by Moana Drifter » Sat Jul 11, 2009 6:48 pm

The minimum wage hike has already resulted in the closure of a cannery in American Samoa with a loss of 2000 jobs.

http://archives.pireport.org/archive/20 ... -04-04.htm" onclick="window.open(this.href);return false;
Perhaps we'll meet again on some sin-infested street corner in Houston, Texas.

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Re: Banking Crisis II

Post by raptor » Sat Jul 11, 2009 11:13 pm

Looks like CIT is preparing in case a bankruptcy filing is necessary.

http://www.bloomberg.com/apps/news?pid= ... OrbEKeCVzk" onclick="window.open(this.href);return false;

An interesting perspective on CIT.

http://seekingalpha.com/article/148153- ... -is-broken" onclick="window.open(this.href);return false;

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Re: Banking Crisis II

Post by raptor » Mon Jul 13, 2009 12:56 pm

More on CIT

http://www.breakingviews.com/2009/07/13 ... sg=nytimes" onclick="window.open(this.href);return false;

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Re: Banking Crisis II

Post by Gatorfarmer » Mon Jul 13, 2009 2:44 pm

Kathy in FL wrote: We've been carefully buying income properties and we are getting them at prices we couldn't even have gotten them at 6 or 7 years ago, but we are now in a holding pattern until we see what the upcoming property dump is going to do on the market in general. It sure isn't making it any easier to find renters, contrary to previous recessions, so we have to weigh and balance every aspect ... even with a good price if you can't rent the house out you've got nothing but a problem on your hands that is losing you money right out the door (think taxes, insurance, rental inspections, business licenses, etc.).
Are you set up to accept Sec. 8 vouchers? You simply need to have a property that passes inspection and do the paperwork. Then you can take in people where the government is paying part or all of their rent.

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Re: Banking Crisis II

Post by nyiangelo » Mon Jul 13, 2009 7:03 pm

A metal detector is like a new girl friend. Spend a lot of time with it, treat it right and it will give it up.

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