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Chad
Posts:4

07/23/2008 9:30 PM	Alert
You Know The Banking System Is Unsound When.... (numbers 15 thru 25 are more fact oriented) 1. Paulson appears on Face The Nation and says "Our banking system is a safe and a sound one." If the banking system was safe and sound, everyone would know it (or at least think it). There would be no need to say it. 2. Paulson says the list of troubled banks "is a very manageable situation". The reality is there are 90 banks on the list of problem banks. Indymac was not one of them until a month before it collapsed. How many other banks will magically appear on the list a month before they collapse? 3. In a Northern Rock moment, depositors at Indymac pull out their cash. Police had to be called in to ensure order. 4. Washington Mutual (WM), another troubled bank, refused to honor Indymac cashier's checks. The irony is it makes no sense for customers to pull insured deposits out of Indymac after it went into receivership. The second irony is the last place one would want to put those funds would be Washington Mutual. Eventually Washington Mutual decided it would take those checks but with an 8 week hold. Will Washington Mutual even be around 8 weeks from now? 5. Paulson asked for "Congressional authority to buy unlimited stakes in and lend to Fannie Mae (FNM) and Freddie Mac (FRE)" just days after he said "Financial Institutions Must Be Allowed To Fail". Obviously Paulson is reporting from the 5th dimension. In some alternate universe, his statements just might make sense. 6. Former Fed Governor William Poole says "Fannie Mae, Freddie Losses Makes Them Insolvent". 7. Paulson says Fannie Mae and Freddie Mac are "essential" because they represent the only "functioning" part of the home loan market. The firms own or guarantee about half of the $12 trillion in U.S. mortgages. Is it possible to have a sound banking system when the only "functioning" part of the mortgage market is insolvent? 8. Bernanke testified before Congress on monetary policy but did not comment on either money supply or interest rates. The word "money" did not appear at all in his testimony. The only time "interest rate" appeared in his testimony was in relation to consumer credit card rates. How can you have any reasonable economic policy when the Fed chairman is scared half to death to discuss interest rates and money supply? 9. The SEC issued a protective order to protect those most responsible for naked short selling. As long as the investment banks and brokers were making money engaging in naked shorting of stocks, there was no problem. However, when the bears began using the tactic against the big financials, it became time to selectively enforce the existing regulation. 10. The Fed takes emergency actions twice during options expirations week in regards to the discount window and rate cuts. 11. The SEC takes emergency action during options expirations week regarding short sales. 12. The Fed has implemented an alphabet soup of pawn shop lending facilities whereby the Fed accepts garbage as collateral in exchange for treasuries. Those new Fed lending facilities are called the Term Auction Facility (TAF), the Term Security Lending Facility (TSLF), and the Primary Dealer Credit Facility (PDCF). 13. Citigroup (C), Lehman (LEH), Morgan Stanley(MS), Goldman Sachs (GS) and Merrill Lynch (MER) all have a huge percentage of level 3 assets. Level 3 assets are commonly known as "marked to fantasy" assets. In other words, the value of those assets is significantly if not ridiculously overvalued in comparison to what those assets would fetch on the open market. It is debatable if any of the above firms survive in their present form. Some may not survive in any form. 14. Bernanke openly solicits private equity firms to invest in banks. Is this even close to a remotely normal action for Fed chairman to take? 15. Bear Stearns was taken over by JPMorgan (JPM) days after insuring investors it had plenty of capital. Fears are high that Lehman will suffer the same fate. Worse yet, the Fed had to guarantee the shotgun marriage between Bear Stearns and JP Morgan by providing as much as $30 billion in capital. JPMorgan is responsible for only the first 1/2 billion. Taxpayers are on the hook for all the rest. Was this a legal action for the Fed to take? Does the Fed care? 16. Citigroup needed a cash injection from Abu Dhabi and a second one elsewhere. Then after announcing it would not need more capital is raising still more. The latest news is Citigroup will sell $500 billion in assets. To who? At what price? 17. Merrill Lynch raised $6.6 billion in capital from Kuwait Mizuho, announced it did not need to raise more capital, then raised more capital a few week later. 18. Morgan Stanley sold a 9.9% equity stake to China International Corp. CEO John Mack compensated by not taking his bonus. How generous. Morgan Stanley fell from $72 to $37. Did CEO John Mack deserve a paycheck at all? 19. Bank of America (BAC) agreed to take over Countywide Financial (CFC) and twice announced Countrywide will add profits to B of A. Inquiring minds were asking "How the hell can Countrywide add to Bank of America earnings?" Here's how. Bank of America just announced it will not guarantee $38.1 billion in Countrywide debt. Questions over "Fraudulent Conveyance" are now surfacing. 20. Washington Mutual agreed to a death spiral cash infusion of $7 billion accepting an offer at $8.75 when the stock was over $13 at the time. Washington Mutual has since fallen in waterfall fashion from $40 and is now trading near $5.00 after a huge rally. 21. Shares of Ambac (ABK) fell from $90 to $2.50. Shares of MBIA (MBI) fell from $70 to $5. Sadly, the top three rating agencies kept their rating on the pair at AAA nearly all the way down. No one can believe anything the government sponsored rating agencies say. 22. In a panic set of moves, the Fed slashed interest rates from 5.25% to 2%. This was the fastest, steepest drop on record. Ironically, the Fed chairman spoke of inflation concerns the entire drop down. Bernanke clearly cannot tell the truth. He does not have to. Actions speak louder than words. 23. FDIC Chairman Sheila Bair said the FDIC is looking for ways to shore up its depleted deposit fund, including charging higher premiums on riskier brokered deposits. 24. There is roughly $6.84 Trillion in bank deposits. $2.60 Trillion of that is uninsured. There is only $53 billion in FDIC insurance to cover $6.84 Trillion in bank deposits. Indymac will eat up roughly $8 billion of that. 25. Of the $6.84 Trillion in bank deposits, the total cash on hand at banks is a mere $273.7 Billion. Where is the rest of the loot? The answer is in off balance sheet SIVs, imploding commercial real estate deals, Alt-A liar loans, Fannie Mae and Freddie Mac bonds, toggle bonds where debt is amazingly paid back with more debt, and all sorts of other silly (and arguably fraudulent) financial wizardry schemes that have bank and brokerage firms leveraged at 30-1 or more. Those loans cannot be paid back. What cannot be paid back will be defaulted on. If you did not know it before, you do now. The entire US banking system is insolvent. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com

jpinpb
Posts:1480

07/23/2008 9:41 PM	Alert
Yeah. I just told Loony yesterday 25 billion will seem like nothing. We will have continual bailouts - maybe to the trillions.

dchestney
Posts:183

07/23/2008 9:58 PM	Alert
Remember, this is the same Paulson-monkey who blandly states over and over, without elaboration or shame, that our policy is to have a strong dollar, mimicking his boss. I guess it is the administration's failure to execute rather than a misguided policy.

hiswelshness
Posts:66

07/23/2008 10:05 PM	Alert
Washington Mutual is toast! Tha withdrawal activity in my local branch is scary? I overheard a lady withdrawing $250,000 yesterday. I don't keep more than a $20 surplus there now. And what the hell was that rally about this last few days? A few wily institutional traders wringing a quick 100% profit before the whole thing collapses. I see it dropped back 20% today!We live in interesting times when a major bank's share price can increase 100% in a week and lose 20% in a day. This is getting to be like a Third World Stock Market!

ElPato
Posts:364

07/23/2008 11:03 PM	Alert
>>Yeah. I just told Loony yesterday 25 billion will seem like nothing. We will have continual bailouts - maybe to the trillions. Fannie and Freddie either own or guarantee around 5.2 trillion in RE debt. If RE falls around 33% nationwide, then it seems reasonable that Fannie/Freddie investors/bondholders will take a 33% hit. That would be $1.75 trillion in losses. With the housing bill, that $1.75 trillion just became taxpayer losses, not investor losses. I have a hard time figuring out how the taxpayer can come up with $1.75 trillion on short notice. Perhaps we'll just walk away?

hiswelshness
Posts:66

07/23/2008 11:18 PM	Alert
Also - I know the poster boy of sub-prime. He is a waiter at my local Deli who bought 3 properties in Los Angeles to "flip" between 2005-6. When he told me of his new ventures a couple of years ago I asked him how he managed to get the money to buy these properties. He replied "its easy to get money - Washingto Mutual!" He has subsequently lost all 3 of his properties (didn't manage to flip one of them). He tried being a landlord for a while and ended up with bad tenants, a meth lab in Lancaster...like I said - the poster boy of subprime. His loans totalled more than $1 million. He declared bankruptcy and still works as a waiter in the deli. And Wamu have a nice methlab for sale in Lancaster so I hear!

UnsureBuyer
Posts:212

07/23/2008 11:32 PM	Alert
"These are days when many are discouraged. In the 93 years of my life, depressions have come and gone. Prosperity has always returned and will again." -John D. Rockefeller I think these words are true but it's going to be a long drawn out affair. I didn't think Bush would crumble so easily to the spendocrats and the repugnantcans. Those in government should be forced to give up all worldly wealth. Kind of like monks. Then you'll only see those purely interested in power serving :) (and maybe a handful who truly wish to serve).

TotoMMB66
Posts:99

07/23/2008 11:35 PM	Alert
We'll all be banking at Dubai Savings. Foreign spenders (using US dollars) already own a good swath of real estate, highways, corporate debt, and so on. They'll be running our ports and managing our public services. American corporations have been moving their HQs to foreign land by choice. Eventually, the American HQs will simply be the American arm of Middle Eastern or Asian conglomerates. Soon enough, when the world talks about outsourcing, it'll be low-wage industrial and manufacturing jobs coming back to America. That and being greeters at Walbu-Dhabi-Mart.

rwsinmissionhills
Posts:313

07/24/2008 9:16 AM	Alert
Posted By ElPato on 07/23/2008 11:03 PM >>Yeah. I just told Loony yesterday 25 billion will seem like nothing. We will have continual bailouts - maybe to the trillions. Fannie and Freddie either own or guarantee around 5.2 trillion in RE debt. If RE falls around 33% nationwide, then it seems reasonable that Fannie/Freddie investors/bondholders will take a 33% hit. That would be $1.75 trillion in losses. With the housing bill, that $1.75 trillion just became taxpayer losses, not investor losses. I have a hard time figuring out how the taxpayer can come up with $1.75 trillion on short notice. Perhaps we'll just walk away? No: We'll just take it out of our line of credit. monkey see; monkey do.

tpc
Posts:507

07/24/2008 12:12 PM	Alert
A $2T bailout is very manageable. We were able to increase the national debt by $8.5T (850%) since 1981 by lowering tax rates. We can have professor Laffer produce another Laugher curve to prove that an even greater tax cut will be in everyones best interest. Then we can elect McCain, dramatically increase our defense budget and terrorize the rest of the world into buying our debt instruments. Simple.

artist
Posts:83

07/24/2008 12:34 PM	Alert
The Greatest Transfer of Wealth in History is About to Unfold . A very interesting read. http://www.marketoracle.co.uk/Article5590.html

tpc
Posts:507

07/24/2008 2:19 PM	Alert
Laughing boy George "W" was on TV earlier trying to calm the markets. Promised 2 chickens for every pot. When have we heard that before RWS??????

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