Banking Crisis II

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Re: Banking Crisis II

Post by raptor » Thu Jul 23, 2009 11:26 am

flyingredgoat wrote:
raptor wrote:Interesting CIT development. Looks like the bondholders who loaned CIT $3 billion will push a CIT restructure via a bankruptcy.

http://www.reuters.com/article/innovati ... EB20090723" onclick="window.open(this.href);return false;
I don't understand. Bankruptcy is relief of debt by canceling it. Why would the people loaning money suggest canceling the debt? :?:

k
It makes sense once you understand that the people pushing for this restructure are the same ones who loaned CIT $3 billion and took a security position/collateral on assets worth $10 billion. Thus even if CIT declares bankruptcy AND CIT repudiates that debt they still walk away with the collateral which is likely a very desirable basket of assets potentially worth more than $3 billion. These folks have a preferred debt position.

The other thing to remember is that in a bankruptcy you are permitted to "work out" your debts. Businesses in bankruptcy (think GM) can leave behind very expensive debts but still keep other debts and contracts in place if it makes sense and the plan is approved by the bankruptcy judge. Bankruptcy done right is a powerful tool to reorganize a business. GM & Chrysler used it to shed dealers at no cost when this typically would have cost them $2 million per dealer.

I would guess that based upon the fact that CIT's business model is reported to be flawed and everyone agrees a restructure is necessary that the bondholders would rather see a restructure whereby their "ASSets" are protected and the debtors take a haircut and thus ensure that CIT will be around a while.

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Re: Banking Crisis II

Post by flyingredgoat » Thu Jul 23, 2009 3:35 pm

raptor wrote: It makes sense once you understand that the people pushing for this restructure are the same ones who loaned CIT $3 billion and took a security position/collateral on assets worth $10 billion. Thus even if CIT declares bankruptcy AND CIT repudiates that debt they still walk away with the collateral which is likely a very desirable basket of assets potentially worth more than $3 billion. These folks have a preferred debt position.

The other thing to remember is that in a bankruptcy you are permitted to "work out" your debts. Businesses in bankruptcy (think GM) can leave behind very expensive debts but still keep other debts and contracts in place if it makes sense and the plan is approved by the bankruptcy judge. Bankruptcy done right is a powerful tool to reorganize a business. GM & Chrysler used it to shed dealers at no cost when this typically would have cost them $2 million per dealer.

I would guess that based upon the fact that CIT's business model is reported to be flawed and everyone agrees a restructure is necessary that the bondholders would rather see a restructure whereby their "ASSets" are protected and the debtors take a haircut and thus ensure that CIT will be around a while.
So they are now gambling on a friendly judge? I guess the finance folks are still playing Russian roulette with our assets. Remember Ben Franklin. "Neither a lender nor a borrower be." (OK, I think he said it).

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Re: Banking Crisis II

Post by phil_in_cs » Thu Jul 23, 2009 4:00 pm

raptor wrote:These folks have a preferred debt position.
Lots of folks thought they had a preferred debt position in GM and Chrysler too.
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Re: Banking Crisis II

Post by raptor » Thu Jul 23, 2009 5:55 pm

phil_in_cs wrote:
raptor wrote:These folks have a preferred debt position.
Lots of folks thought they had a preferred debt position in GM and Chrysler too.
This is true but in this case these creditors have the first right to any cash proceeds from the sale of some very specific assets. They have a preference position to the assets they hold as collateral. They get paid in full principal, legal fees, penalties and interest from the proceeds of the disposition of these assets before anyone else gets a dime. Since these assets are worth 3.33 times the amount of debt owed it is likely that the debt will be repaid in full. They may even have the right to take possession of the assets in lieu of payment, though I doubt that.

A bankruptcy will not likely hurt this specific group of creditors and improve the health of the company at the expense of the other creditors.

My take on it anyway.

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Re: Banking Crisis II

Post by phil_in_cs » Thu Jul 23, 2009 6:24 pm

Some of the Chrysler bonds were secured via liens on factories. I recall the lady than manages the Indiana State Employees Pension fund complaining about that - she paid a premium for those bonds since if Chrysler went bankrupt the pension fund would own the factory and would actually turn a profit.

Other folks had friends in high places. Your mileage may vary.
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Re: Banking Crisis II

Post by raptor » Thu Jul 23, 2009 6:36 pm

phil_in_cs wrote:Some of the Chrysler bonds were secured via liens on factories. I recall the lady than manages the Indiana State Employees Pension fund complaining about that - she paid a premium for those bonds since if Chrysler went bankrupt the pension fund would own the factory and would actually turn a profit.

Other folks had friends in high places. Your mileage may vary.
The devil is in the details and it is up to you to do your own due diligence. Especially when it comes to debt and collateral.

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Re: Banking Crisis II

Post by raptor » Fri Jul 24, 2009 9:31 pm

Seven banks failed today though 6 are related, bring the total of failed banks in 2009 to 64 banks. The total cost to the FDIC fund is $812.6 million. All were absorbed by other banks.

http://www.reuters.com/article/domestic ... HW20090724" onclick="window.open(this.href);return false;

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Re: Banking Crisis II

Post by nyiangelo » Tue Jul 28, 2009 5:37 pm

Geithner: US to address deficits after recovery

http://finance.yahoo.com/news/Geithner- ... 3.html?x=0

Does it matter at this point? I don't think it does.
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Re: Banking Crisis II

Post by Kathy in FL » Tue Jul 28, 2009 6:40 pm

nyiangelo wrote:Geithner: US to address deficits after recovery

http://finance.yahoo.com/news/Geithner- ... 3.html?x=0

Does it matter at this point? I don't think it does.
Address how? The deed will already be done at that point.

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Re: Banking Crisis II

Post by raptor » Fri Jul 31, 2009 8:21 pm

A busy day for the FDIC. 5 banks closed at a cost of $911.7 million, bringing the total cost for failed banks to $15.13 billion for the 68 banks closed in YTD 2009. This BTW is an average loss of $222 million per bank closed.

The final thing to note is that based upon the latest FDIC list of troubled banks there remain 305 troubled banks despite the closure of 68 banks.

The banks are:
Mutual Bank, Harvey, IL

All deposit accounts have been transferred to United Central Bank, Garland, TX ("assuming institution") and will be available immediately. Starting on Saturday, August 1, 2009, the former Mutual Bank locations will reopen as branches of United Central Bank.

First BankAmericano, Elizabeth, NJ
All deposit accounts have been transferred to Crown Bank, Brick, NJ ("assuming institution") and will be available immediately. On Saturday, August 1, 2009, the former First BankAmericano locations will reopen as branches of Crown Bank.

Peoples Community Bank, West Chester, OH,
All deposit accounts have been transferred to First Financial Bank, N.A., Hamilton, OH ("assuming institution") and will be available immediately. On Monday, August 3, 2009, the former Peoples Community Bank locations will reopen as branches of First Financial Bank, N.A.

Integrity Bank, Jupiter, FL
All deposit accounts, excluding certain brokered deposits, have been transferred to Stonegate Bank, Fort Lauderdale, FL ("assuming institution") and will be available immediately. On Monday, August 3, 2009, the former Integrity Bank location will reopen as a branch of Stonegate Bank.

First State Bank of Altus, Altus, OK
All deposit accounts have been transferred to Herring Bank, Amarillo, TX ("assuming institution") and will be available immediately. On Saturday, August 1, 2009, the former First State Bank of Altus location will reopen as a branch of Herring Bank.


Source:
http://www.fdic.gov/bank/individual/fai ... klist.html" onclick="window.open(this.href);return false;
The good news is that all of teh failed banks have been acquired or absorbed by other banks.

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Re: Banking Crisis II

Post by Kathy in FL » Fri Aug 07, 2009 11:01 am

Goog golly Miss Molly ... :shock: Looks like we could begin seeing some impact on the economy from this sooner rather than later.
BLATANT Monetization Uncovered

http://tinyurl.com/nbwf7l" onclick="window.open(this.href);return false;

Remember the Dallas Fed's Fisher saying that "The Fed will not become the handmaiden of Treasury"?

He was lying (The Fed already has), and now there is proof.

The upshot: The Fed bought nearly half of LAST WEEK'S 7 year Treasury Issuance TODAY.

...

Folks, this is beyond bad - it is pernicious and outrageous conduct by The Federal Reserve in conspiracy with the Primary Dealers, both of which are now desperately trying to prop up the US Government Bond Market through subterfuge rather than just buying up the bond issue from Treasury when originally put to the market!

If you think the economy and credit markets are "on the mend" why would The Fed do something like this? It would not be necessary unless The Fed was told (by those very same Primary Dealers) that they were going to be unable or unwilling to take down any more Treasury Debt.

Folks, let me be clear: The United States HAS OFFICIALLY HIT THE TREASURY DEBT WALL and The Fed and Treasury are engaged in subterfuge and conspiracy in an attempt to hide this from the market.

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Re: Banking Crisis II

Post by Kathy in FL » Fri Aug 07, 2009 11:02 am

And some more lovely news .. grrrrr

Administration Considers Splitting Fannie Mae, Freddie Mac

Wednesday, August 5, 2009; 7:04 PM - Washington - excerpt

"The Obama administration launched a broad government effort this week to overhaul mortgage giants Fannie Mae and Freddie Mac and is considering splitting the companies and putting their troubled assets in a new federally backed corporation, administration officials said. Such an approach would keep the government on the hook for losses into the indeterminate future but would also clear the way for the revamped companies to play a critical role of financing home loans throughout the country.

The move would dispense with one of the biggest burdens created by the financial crisis: the hundreds of billions of dollars in money-losing home loans owned by District-based Fannie Mae and Freddie Mac. The government has already pledged nearly $2 trillion, including $85 billion in direct aid, to keep the mortgage market working through the firms.The proposal has appeared in several internal papers on the topic and appeared as part of an agenda for a meeting being hosted Thursday by the White House's National Economic Council."

http://www.washingtonpost.com/wp-dyn/co ... 03427.html" onclick="window.open(this.href);return false;


AIG, Fannie Mae, Freddie Mac Surge in U.S. Trading (Update4)

Aug. 5 (Bloomberg) -- "American International Group Inc., Fannie Mae and Freddie Mac, three companies the U.S. government took over because of last year’s financial crisis, surged in New York Stock Exchange trading. “Institutions under government conservatorship are speculative bets,” said Michael O’Rourke, chief market strategist at BTIG LLC in Philadelphia. “They’re not free- enterprise companies, and the normal fundamentals that drive a business or an investment don’t apply.”

- excerpts

http://www.bloomberg.com/apps/news?pid= ... W7FVe_hdDQ" onclick="window.open(this.href);return false;

US housing agency chief to step down

August 6 2009 01:41

"James Lockhart, regulator and effective head of US mortgage behemoths Fannie Mae and Freddie Mac, is leaving the job to pursue a career in the financial services industry.No long-term successor has been named as head of the Federal Housing Finance Agency, which was set up almost exactly a year ago. He threw Fannie and Freddie a $400bn government lifeline last September and took them into “conservatorship”, which left them subservient to the FHFA on all major decisions.

Mr Lockhart leaves the job at a critical juncture for Fannie and Freddie, which have combined liabilities of $5,400bn and own or guarantee almost three-quarters of new US mortgages. " - excerpt

http://www.ft.com/cms/s/0/7535de24-8218 ... abdc0.html" onclick="window.open(this.href);return false;

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Re: Banking Crisis II

Post by raptor » Fri Aug 07, 2009 11:27 am

Kathy in FL wrote:Goog golly Miss Molly ... :shock: Looks like we could begin seeing some impact on the economy from this sooner rather than later.
BLATANT Monetization Uncovered

http://tinyurl.com/nbwf7l" onclick="window.open(this.href);return false;

Remember the Dallas Fed's Fisher saying that "The Fed will not become the handmaiden of Treasury"?

He was lying (The Fed already has), and now there is proof.

The upshot: The Fed bought nearly half of LAST WEEK'S 7 year Treasury Issuance TODAY.

...

Folks, this is beyond bad - it is pernicious and outrageous conduct by The Federal Reserve in conspiracy with the Primary Dealers, both of which are now desperately trying to prop up the US Government Bond Market through subterfuge rather than just buying up the bond issue from Treasury when originally put to the market!

If you think the economy and credit markets are "on the mend" why would The Fed do something like this? It would not be necessary unless The Fed was told (by those very same Primary Dealers) that they were going to be unable or unwilling to take down any more Treasury Debt.

Folks, let me be clear: The United States HAS OFFICIALLY HIT THE TREASURY DEBT WALL and The Fed and Treasury are engaged in subterfuge and conspiracy in an attempt to hide this from the market.

An interesting link Kathy. It points back to the below link from Chris Martenson as the source and while I normally consider Market-Ticker.com to be a source that requires significant verification however, in this case the chrismartenson.com source is generally factual. chrismartenson.com analysis turned up evidence that the Fed bought back and monetized a significant portion of the latest 7 year debt offering while saying the demand was strong. This may also explain why the market is heading up.

http://www.chrismartenson.com/blog/fed- ... tion/23880" onclick="window.open(this.href);return false;

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Re: Banking Crisis II

Post by Kathy in FL » Fri Aug 07, 2009 11:32 am

raptor wrote:
Kathy in FL wrote:Goog golly Miss Molly ... :shock: Looks like we could begin seeing some impact on the economy from this sooner rather than later.
BLATANT Monetization Uncovered

http://tinyurl.com/nbwf7l" onclick="window.open(this.href);return false;

Remember the Dallas Fed's Fisher saying that "The Fed will not become the handmaiden of Treasury"?

He was lying (The Fed already has), and now there is proof.

The upshot: The Fed bought nearly half of LAST WEEK'S 7 year Treasury Issuance TODAY.

...

Folks, this is beyond bad - it is pernicious and outrageous conduct by The Federal Reserve in conspiracy with the Primary Dealers, both of which are now desperately trying to prop up the US Government Bond Market through subterfuge rather than just buying up the bond issue from Treasury when originally put to the market!

If you think the economy and credit markets are "on the mend" why would The Fed do something like this? It would not be necessary unless The Fed was told (by those very same Primary Dealers) that they were going to be unable or unwilling to take down any more Treasury Debt.

Folks, let me be clear: The United States HAS OFFICIALLY HIT THE TREASURY DEBT WALL and The Fed and Treasury are engaged in subterfuge and conspiracy in an attempt to hide this from the market.

An interesting link Kathy. It points back to the below link from Chris Martenson as the source and while I normally consider Market-Ticker.com to be a source that requires significant verification however, in this case the chrismartenson.com source is generally factual. chrismartenson.com analysis turned up evidence that the Fed bought back and monetized a significant portion of the latest 7 year debt offering while saying the demand was strong. This may also explain why the market is heading up.

http://www.chrismartenson.com/blog/fed- ... tion/23880" onclick="window.open(this.href);return false;
Yeah, the fact that it had citations to the other article is the only reason I posted it. It does make you take a second look at your longer term investment plans and strategies when the Fed is starting to do stuff like this.

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Re: Banking Crisis II

Post by Kathy in FL » Fri Aug 07, 2009 11:37 am

More .....
About half of U.S. mortgages seen underwater by 2011

By Al Yoon Al Yoon – Wed Aug 5, 5:12 pm ET
NEW YORK (Reuters) – The percentage of U.S. homeowners who owe more than their house is worth will nearly double to 48 percent in 2011 from 26 percent at the end of March, portending another blow to the housing market, Deutsche Bank said on Wednesday.

Home price declines will have their biggest impact on prime "conforming" loans that meet underwriting and size guidelines of Fannie Mae and Freddie Mac, the bank said in a report. Prime conforming loans make up two-thirds of mortgages, and are typically less risky because of stringent requirements.

"We project the next phase of the housing decline will have a far greater impact on prime borrowers," Deutsche analysts Karen Weaver and Ying Shen said in the report.

Of prime conforming loans, 41 percent will be "underwater" by the first quarter of 2011, up from 16 percent at the end of the first quarter 2009, it said. Forty-six percent of prime jumbo loans will be larger than their properties' value, up from 29 percent, it said.

"The impact of this is significant given that these markets have the largest share of the total mortgage market outstanding," the analysts said. Prime jumbo loans make up 13 percent of the total market.
(snip)

http://news.yahoo.com/s/nm/20090805/bs_ ... utschebank" onclick="window.open(this.href);return false;
Wages and Salaries Fell 4.7%, Most On Record

Thursday, August 06, 2009 - Mish's Global Economic Trend Analysis

“Consumers have started to change their behavior and they are going to save more,” said Richard Berner, co-head of global economics at Morgan Stanley in New York and a former researcher at the Fed. “You have pressure on wages, you have employment still declining.” Wages and salaries, which drive recoveries in spending, fell 4.7 percent in the 12 months through June, the biggest drop since records began in 1960, according to Commerce Department figures released yesterday. The Obama administration’s tax cuts, extended jobless benefits and a one-time Social Security bonus have helped mask the damage done by the worst employment slump since the Great Depression. Personal incomes, which include interest income, dividends, rents and other payments as well as wages, tumbled 1.3 percent in June, more than forecast and the biggest drop in four years, yesterday’s Commerce report showed. Excluding the effects of the stimulus plan, June incomes would have dropped 0.1 percent after no change in May, according to the report. In May, one-time additional payments to Social Security recipients boosted incomes 1.3 percent.

One of every 10 American workers will be without a job by early 2010, economists project, shaking the confidence of those still on payrolls and discouraging spending. It may take as long as 15 years for consumers to fully repair finances battered by the decline in home values, stocks and employment, said Edmund Phelps, winner of the Nobel prize in economics in 2006. Decreasing pay is not the only hurdle for consumers. Plunging home prices and stocks reduced household net worth by a record $13.9 trillion from the third quarter of 2007 through this year’s first quarter, according to figures from the Fed.

“Households are going to have to do an awful lot of rebuilding of their wealth,” Phelps, a professor at Columbia University in New York, said this week in an interview on Bloomberg Television. “Even if that rebuilding goes on at a pretty good clip, it will take 12 or 15 years for households to get to the wealth level that they had several years ago. Consumer demand is going to take a long time to rebuild to normal levels.” As for unemployment, I think we see 10% by September or October at the latest. Right now I am sticking with my forecast of 9.8% by August.

In regards to balance sheet repair, 15 years has ominous implications for jobs and the stock market.In regards to rebuilding wealth, "never" may be a better estimate than 12-15 years for boomers now retiring. Those boomers need to draw down savings during retirement while stock market gains will likely be hard to come by. Of course most of that "wealth" was all imaginary in the first place, especially in regards to home prices."

http://globaleconomicanalysis.blogspot. ... st-on.html" onclick="window.open(this.href);return false;

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Re: Banking Crisis II

Post by Kathy in FL » Fri Aug 07, 2009 11:39 am

"White House dismisses report on Fannie, Freddie"

Thu Aug 6, 2009 12:59pm EDT

WASHINGTON, Aug 6 (Reuters) - "The White House dismissed on Thursday a Washington Post report that U.S. officials were considering a plan to isolate failing assets held by Fannie Mae FM.N and Freddie Mac (FRE.N). "The story out today is light years ahead of any decision-making process here," White House spokesman Robert Gibbs told reporters. "Safe to say that many senior administration economic officials learned of this proposal sometime this morning."

http://www.reuters.com/article/marketsN ... 6320090806" onclick="window.open(this.href);return false;
Honest to goodness ... don't these "senior economic officials" have internet connection? That report has been around since the 3rd of 4th I think. :roll:

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Re: Banking Crisis II

Post by raptor » Fri Aug 07, 2009 9:16 pm

3 banks were closed today bringing the total to 72 banks closed in 2009 costing the FDIC about $140 million. The good news is that all of teh banks were taken over and depositors have not had to wait for check from the FDIC.

Community First Bank, Prineville, Oregon, was closed today by the Oregon Division of Finance & Corporate Securities, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Home Federal Bank, Nampa, Idaho, to assume all of the deposits of Community First Bank


Community National Bank of Sarasota County, Venice, Florida, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Stearns Bank, National Association, St. Cloud, Minnesota, to assume all of the deposits of Community National Bank of Sarasota County.

First State Bank, Sarasota, Florida, was closed today by the Florida Office of Financial Regulation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Stearns Bank, National Association, St. Cloud, Minnesota, to assume all of the deposits of First State Bank, excluding those from brokers.

http://www.fdic.gov/bank/individual/fai ... klist.html" onclick="window.open(this.href);return false;

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Re: Banking Crisis II

Post by nimdabew » Fri Aug 07, 2009 10:17 pm

raptor wrote:3 banks were closed today bringing the total to 72 banks closed in 2009 costing the FDIC about $140 million. The good news is that all of teh banks were taken over and depositors have not had to wait for check from the FDIC.

Community First Bank, Prineville, Oregon, was closed today by the Oregon Division of Finance & Corporate Securities, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Home Federal Bank, Nampa, Idaho, to assume all of the deposits of Community First Bank


Community National Bank of Sarasota County, Venice, Florida, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Stearns Bank, National Association, St. Cloud, Minnesota, to assume all of the deposits of Community National Bank of Sarasota County.

First State Bank, Sarasota, Florida, was closed today by the Florida Office of Financial Regulation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Stearns Bank, National Association, St. Cloud, Minnesota, to assume all of the deposits of First State Bank, excluding those from brokers.

http://www.fdic.gov/bank/individual/fai ... klist.html" onclick="window.open(this.href);return false;
Do we still have that pool going on how many banks are going to close by the end of the year?
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Re: Banking Crisis II

Post by raptor » Fri Aug 07, 2009 10:39 pm

nimdabew wrote:Do we still have that pool going on how many banks are going to close by the end of the year?
Yes these are the ones I remember. If I left someone out be sure to chime in:
raptor wrote:BTW I claim dibs on between 75 and 100. :D
Kathy in FL wrote:Unless we rapidly ramp up the bank failures pretty soon I don't think it will got any higher than 100 for this year.
nimdabew wrote:67 dead banks.
Shadowsbane wrote:140-150.
With 20 Fridays left in 2009 and based upon the current result for 2009 if all things remain equal we would expect another 45 bank failures or between 110 and 120 bank failures in total.

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Re: Banking Crisis II

Post by drunkensurvivor » Wed Aug 12, 2009 2:15 am

Kathy in FL wrote:
raptor wrote:
Kathy in FL wrote:Goog golly Miss Molly ... :shock: Looks like we could begin seeing some impact on the economy from this sooner rather than later.
BLATANT Monetization Uncovered

http://tinyurl.com/nbwf7l" onclick="window.open(this.href);return false;

Remember the Dallas Fed's Fisher saying that "The Fed will not become the handmaiden of Treasury"?

He was lying (The Fed already has), and now there is proof.

The upshot: The Fed bought nearly half of LAST WEEK'S 7 year Treasury Issuance TODAY.

...

Folks, this is beyond bad - it is pernicious and outrageous conduct by The Federal Reserve in conspiracy with the Primary Dealers, both of which are now desperately trying to prop up the US Government Bond Market through subterfuge rather than just buying up the bond issue from Treasury when originally put to the market!

If you think the economy and credit markets are "on the mend" why would The Fed do something like this? It would not be necessary unless The Fed was told (by those very same Primary Dealers) that they were going to be unable or unwilling to take down any more Treasury Debt.

Folks, let me be clear: The United States HAS OFFICIALLY HIT THE TREASURY DEBT WALL and The Fed and Treasury are engaged in subterfuge and conspiracy in an attempt to hide this from the market.

An interesting link Kathy. It points back to the below link from Chris Martenson as the source and while I normally consider Market-Ticker.com to be a source that requires significant verification however, in this case the chrismartenson.com source is generally factual. chrismartenson.com analysis turned up evidence that the Fed bought back and monetized a significant portion of the latest 7 year debt offering while saying the demand was strong. This may also explain why the market is heading up.

http://www.chrismartenson.com/blog/fed- ... tion/23880" onclick="window.open(this.href);return false;
Yeah, the fact that it had citations to the other article is the only reason I posted it. It does make you take a second look at your longer term investment plans and strategies when the Fed is starting to do stuff like this.
The fed actually announced a program to buy long term treasuries back in March:
http://www.bloomberg.com/apps/news?pid= ... lq8GB5FWSc" onclick="window.open(this.href);return false;

I ran into this chris martenson/market ticker thing before it got posted here and found it really interesting at first, and someone on one of the comments there mentioned that the fed actually has less treasury debt on its balance sheet than it did a couple years ago. I don't know it that is true or not, but I guess it sounds about right. I don't know why the fed did this buy the way they did and if it is as strange as its made out to be, but they did say they were going to buy long term treasuries.

Anyways, I think extraordinary monetization of the debt is likely, but that isn't what we're seeing right now.

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Re: Banking Crisis II

Post by hooliganlite » Wed Aug 12, 2009 7:34 am

raptor wrote:
nimdabew wrote:Do we still have that pool going on how many banks are going to close by the end of the year?
Yes these are the ones I remember. If I left someone out be sure to chime in:
....
With 20 Fridays left in 2009 and based upon the current result for 2009 if all things remain equal we would expect another 45 bank failures or between 110 and 120 bank failures in total.
I'll stake a claim on 200. I think commercial RE will be the final nail for lots of regional banks this fall.
All that blood, will never cover that mess.

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Re: Banking Crisis II

Post by Kathy in FL » Wed Aug 12, 2009 7:44 am

Yeah, we may break 100 at that. Between the fairly constant number of closings each week and as hooliganlite mention the commercial loan defaults that is a pretty strong straw on the camel's back.

People are getting goofy about being really concerned about what the end of August will bring because that is when the FDIC and some other major reports come out.

China's stockmarket took a hit of 5% so we'll have to see where that goes as well.

raptor wrote:
nimdabew wrote:Do we still have that pool going on how many banks are going to close by the end of the year?
Yes these are the ones I remember. If I left someone out be sure to chime in:
raptor wrote:BTW I claim dibs on between 75 and 100. :D
Kathy in FL wrote:Unless we rapidly ramp up the bank failures pretty soon I don't think it will got any higher than 100 for this year.
nimdabew wrote:67 dead banks.
Shadowsbane wrote:140-150.
With 20 Fridays left in 2009 and based upon the current result for 2009 if all things remain equal we would expect another 45 bank failures or between 110 and 120 bank failures in total.

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Re: Banking Crisis II

Post by raptor » Wed Aug 12, 2009 5:44 pm

The Fed expressed confidence in the economy but extended its program to buy Treasury Securities for a month later than planned. Sounds like a mixed message to me.

Overall their statements should not surprise anyone.

The Fed said it would gradually slow the pace of its program to buy $300 billion worth of Treasury securities and shut it down at the end of October, a month later than previously scheduled.

The Fed has bought $253 billion of the securities so far. The program is designed force interest rates down for mortgages and other consumer debt and spur Americans to spend more money.

The Fed left unchanged another program that aims to push down mortgage rates. In that venture, the Fed is on track buy $1.25 trillion worth of securities issued by mortgage finance companies Fannie Mae and Freddie Mac by the end of the year.


Sources:

Yahoo Finance

Bloomberg

Some interesting graphs:

This one shows the all mortgage applications to refinance an existing mortgage. It is the best overall gauge of mortgage refinancing activity.

Refinances of existing mortages have decreased

This is the TED spread which is actually good news. This indicated that LIBOR rates are staying around a norm of 1 point thus banks have liquidity. If you look at October of last year you will see the abnormality that almost creamed us all.

Finally we get to my opinion and it is just opinion and not fact.
1) The Fed has to leave interest rates low until such time as we see unemployment start to decline.

2) Until unemployment starts to decline (BTW we are at 16% unemployment and underemployment based upon the BLS' broadest definition of unemployment as of June 2009: Source ) saying we have reached the bottom of this mess is premature.

3) There are still a lot of bad assets in the banking system. There are also still a lot of banks that will be closed in 2009 and 2010.

4) The next wave of problems is forecast to be commercial lending. However, I personally think the next truly big wave will be the US deficit and the spending that has driven the current deficit to $1.7 trillion per the CBO. This deficit will have to be repaid either through new taxes, reduced spending or a combination of the 2. California is providing a glimpse of what that can look like.

5) It is still not TEOTWAWKI, but the next few years will not be fun.

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Re: Banking Crisis II

Post by nyiangelo » Wed Aug 12, 2009 8:29 pm

raptor wrote:4) The next wave of problems is forecast to be commercial lending. However, I personally think the next truly big wave will be the US deficit and the spending that has driven the current deficit to $1.7 trillion per the CBO. This deficit will have to be repaid either through new taxes, reduced spending or a combination of the 2. California is providing a glimpse of what that can look like.
That's whats scaring me too. It's to late for a "wake up call" cause the deficit is high and only going to get higher. I don't see an easy way out of this.
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