Public Service Announcement
1 month ago
Friday, March 27, 2009
"Official" Failed Bank List
FDIC Site - List of Failed Banks
So far 21 banks have failed since the start of this year. That is almost 2 banks folding every Friday. Intrestingly, i was listening to a show on radio where they described how FDIC is hiring almost 600 so called secret agents for one of their regional offices to assist in the process of taking over failed banks. In addition, FDIC decides who will take over the failed bank; whether selected new owner wants to participate or take over the failed bank is never considered.
I am wondering if FDIC's one regional office is ramping uP hiring of so called army of secret agents, what does it say about the banking industry? How many more banks will go under? Commrcial Real Estate have barely begun the process of deleveraging.
So far 21 banks have failed since the start of this year. That is almost 2 banks folding every Friday. Intrestingly, i was listening to a show on radio where they described how FDIC is hiring almost 600 so called secret agents for one of their regional offices to assist in the process of taking over failed banks. In addition, FDIC decides who will take over the failed bank; whether selected new owner wants to participate or take over the failed bank is never considered.
I am wondering if FDIC's one regional office is ramping uP hiring of so called army of secret agents, what does it say about the banking industry? How many more banks will go under? Commrcial Real Estate have barely begun the process of deleveraging.
Speaking Truth to Power
Speaking Truth to Power
by J. R. Nyquist
Weekly Column Published: 03.27.2009
Diogenes the cynic was a Greek philosopher of the fourth century B.C. who walked the streets of Athens carrying a lamp in broad daylight. People asked what he was doing. He said, “I am just looking for a human being.” After Plato offered Socrates’ definition of humanity as “featherless bipeds,” Diogenes brought a plucked chicken to Plato’s Academy, saying, “Behold! I have brought you a human being.” When captured by pirates and sold into slavery his new master asked what his trade was. “Governing men,” he replied, adding that he wished to belong to someone who needed a master. One morning, when Diogenes was basking in the sun, Alexander the Great came to see him. Wishing to do the philosopher a kindness, Alexander asked if there was any favor he could bestow. “Yes,” replied Diogenes. “Stand out of my sunlight.”
The integrity of Diogenes has much to do with his independence. He was not interested in advancing his career, winning the favor of princes, or making money. He didn’t flatter his teachers or the public. When he spoke, there was no reason to distrust what he said. He had nothing to sell, so he had no motive to flatter or manipulate. In today’s world we have become very comfortable buying and selling things. It is also our habit to say what is pleasing to our superiors. More and more, our culture emphasizes the necessity of having a career, of promoting oneself, of making money and impressing other people.
To be wise, to love wisdom, requires a different emphasis than that of today’s culture. It requires an emphasis on truth and clarity. To be successful today, to advance your career, truth and clarity aren’t always appreciated. Perhaps you have heard that the customer is always right. And everyone with common sense knows that the boss is right – because he is the boss. Despite our egalitarian pretenses, rank is an inescapable reality of human existence. And when rank and privilege are abused, when truth is disregarded, what is the underling to do? Should he, like Socrates, drink the hemlock? Alexander the Great admired the nobility of Diogenes, because Diogenes revered his own clarity and the truth above all mortal masters. The Macedonian said, “If I were not Alexander, then I should wish to be Diogenes.”
Continue reading
by J. R. Nyquist
Weekly Column Published: 03.27.2009
Diogenes the cynic was a Greek philosopher of the fourth century B.C. who walked the streets of Athens carrying a lamp in broad daylight. People asked what he was doing. He said, “I am just looking for a human being.” After Plato offered Socrates’ definition of humanity as “featherless bipeds,” Diogenes brought a plucked chicken to Plato’s Academy, saying, “Behold! I have brought you a human being.” When captured by pirates and sold into slavery his new master asked what his trade was. “Governing men,” he replied, adding that he wished to belong to someone who needed a master. One morning, when Diogenes was basking in the sun, Alexander the Great came to see him. Wishing to do the philosopher a kindness, Alexander asked if there was any favor he could bestow. “Yes,” replied Diogenes. “Stand out of my sunlight.”
The integrity of Diogenes has much to do with his independence. He was not interested in advancing his career, winning the favor of princes, or making money. He didn’t flatter his teachers or the public. When he spoke, there was no reason to distrust what he said. He had nothing to sell, so he had no motive to flatter or manipulate. In today’s world we have become very comfortable buying and selling things. It is also our habit to say what is pleasing to our superiors. More and more, our culture emphasizes the necessity of having a career, of promoting oneself, of making money and impressing other people.
To be wise, to love wisdom, requires a different emphasis than that of today’s culture. It requires an emphasis on truth and clarity. To be successful today, to advance your career, truth and clarity aren’t always appreciated. Perhaps you have heard that the customer is always right. And everyone with common sense knows that the boss is right – because he is the boss. Despite our egalitarian pretenses, rank is an inescapable reality of human existence. And when rank and privilege are abused, when truth is disregarded, what is the underling to do? Should he, like Socrates, drink the hemlock? Alexander the Great admired the nobility of Diogenes, because Diogenes revered his own clarity and the truth above all mortal masters. The Macedonian said, “If I were not Alexander, then I should wish to be Diogenes.”
Continue reading
Wednesday, March 25, 2009
Postal Service Asks Congress for Bailout
Postmaster General John Potter said Wednesday the financially strapped U.S. Postal Service will run out of money this year without help from Congress.
The only lingering question, Potter told a House subcommittee, is which bills will get paid and which will not. He did say ensuring the payment of workers' salaries comes first. But Potter also said other bills may have to wait.
Potter's appearance came as the agency, which has lived on a reputation of serving through wind, rain and all sorts of obstacles, seeks permission to reduce mail delivery to five days a week. It also wants to change the way retiree health benefits are amassed to save money.
"We are facing losses of historic proportion," he said. "Our situation is critical."
Read rest of the article.
The only lingering question, Potter told a House subcommittee, is which bills will get paid and which will not. He did say ensuring the payment of workers' salaries comes first. But Potter also said other bills may have to wait.
Potter's appearance came as the agency, which has lived on a reputation of serving through wind, rain and all sorts of obstacles, seeks permission to reduce mail delivery to five days a week. It also wants to change the way retiree health benefits are amassed to save money.
"We are facing losses of historic proportion," he said. "Our situation is critical."
Read rest of the article.
Monday, March 23, 2009
How latest plan can and most likely will go wrong
Open letter to FDIC Ombudsman by Karl Denninger @ Market Ticker
Now that the Treasury Plan to "cleanse" the market of "toxic assets" has been put forward, I have noted that The FDIC is the entity that will both guarantee the debt issued and vet the bidder list.
I also note the following quote from The FDIC:
The FDIC will provide oversight for the formation, funding, and operation of new public-private investment funds (“PPIFs”) that will purchase loans and other assets from depository institutions. The Legacy Loans Program will attract private capital through an FDIC debt guarantee and Treasury equity co-investment. Private market equity investors (“Private Investors’) are expected to include but are not limited to financial institutions, individuals, insurance companies, mutual funds, publicly managed investment funds, pension funds, foreign investors with a headquarters in the United States, private equity funds, and hedge funds. The participation of mutual funds, pension plans, insurance companies, and other long term investors is particularly encouraged.
There is a potential problem here.
Let's say that I am a bank ("financial institution") with $100 billion in "toxic assets". I have them on my balance sheet at 80 cents on the dollar. The market has them marked at 30 cents. We do not know what the held-to-maturity performance will be, since that requires knowing the future, although for the moment let's assume that they are cash-flowing at the present time.
What I (the bank) do know, however, is that if I sell them at 30 cents I take a monstrous loss - perhaps enough to force me under Tier Capital limits and thus render me subject to an FDIC enforcement action. I therefore will not sell for 30 cents so long as I have any belief whatsoever that the cash flow - or any government subsidy - will exceed that value.
If I, as a "financial institution" can participate as a bidder in these auctions I can foist off my loss onto the taxpayer. Here is how I can rig the game so as to avoid an otherwise-inevitable loss:
•I become a "bidder" and "bid" on my own assets at 75 cents.
•I am providing 5 or 10% of the money. The rest is covered by Treasury, The Fed and the FDIC via guaranteed bond issuance.
•The loan, ex my contribution, is non-recourse. That is, I can lose 5 or 10% of the total portfolio purchased, but nothing more.
Now the "assets" (a passel of CDOs?) turn out to be worthless. I lose 5% of $75 billion, or $3.75 billion that I put up, plus the other nickel on the original mark, but that's all.
The taxpayer gets hosed for the remaining $71.25 billion dollars.
This can and will be done if the "sellers" of these assets are allowed to bid either directly or indirectly as it provides a means for banks to intentionally dump bad assets at a certain loss that is much smaller than their expected realized loss over time, shifting the rest of the loss to the taxpayer.
This program has the potential to shift literally $500 billion or more in losses onto the taxpayer, not through the operation of "bad luck" but rather through what amounts to a bid rigging operation.
Be aware that I, along with many others, have figured this out. Also be aware that as taxpayers and your ultimate boss, we do not intend to sit still and allow the public treasury to be looted in such a fashion.
The FDIC's job is to prevent that sort of looting operation by prohibiting the sellers of these assets from having any financial interest in the bidding side of the equation, directly or indirectly, and I along with many others intend to hold you to that obligation.
I like the outline of this program if and only if it cannot be gamed in this or similar fashion. Provided that does not occur, this program has the potential to provide great benefit to both the banking system and our economy.
If, however, the financial institutions that created this mess in the first place are allowed by the FDIC and Treasury to use it as a looting operation to intentionally shift their bad assets onto the Taxpayer you can expect that we the people will hold our government to account.
Transmitted by email to ombudsman@fdic.gov
Now that the Treasury Plan to "cleanse" the market of "toxic assets" has been put forward, I have noted that The FDIC is the entity that will both guarantee the debt issued and vet the bidder list.
I also note the following quote from The FDIC:
The FDIC will provide oversight for the formation, funding, and operation of new public-private investment funds (“PPIFs”) that will purchase loans and other assets from depository institutions. The Legacy Loans Program will attract private capital through an FDIC debt guarantee and Treasury equity co-investment. Private market equity investors (“Private Investors’) are expected to include but are not limited to financial institutions, individuals, insurance companies, mutual funds, publicly managed investment funds, pension funds, foreign investors with a headquarters in the United States, private equity funds, and hedge funds. The participation of mutual funds, pension plans, insurance companies, and other long term investors is particularly encouraged.
There is a potential problem here.
Let's say that I am a bank ("financial institution") with $100 billion in "toxic assets". I have them on my balance sheet at 80 cents on the dollar. The market has them marked at 30 cents. We do not know what the held-to-maturity performance will be, since that requires knowing the future, although for the moment let's assume that they are cash-flowing at the present time.
What I (the bank) do know, however, is that if I sell them at 30 cents I take a monstrous loss - perhaps enough to force me under Tier Capital limits and thus render me subject to an FDIC enforcement action. I therefore will not sell for 30 cents so long as I have any belief whatsoever that the cash flow - or any government subsidy - will exceed that value.
If I, as a "financial institution" can participate as a bidder in these auctions I can foist off my loss onto the taxpayer. Here is how I can rig the game so as to avoid an otherwise-inevitable loss:
•I become a "bidder" and "bid" on my own assets at 75 cents.
•I am providing 5 or 10% of the money. The rest is covered by Treasury, The Fed and the FDIC via guaranteed bond issuance.
•The loan, ex my contribution, is non-recourse. That is, I can lose 5 or 10% of the total portfolio purchased, but nothing more.
Now the "assets" (a passel of CDOs?) turn out to be worthless. I lose 5% of $75 billion, or $3.75 billion that I put up, plus the other nickel on the original mark, but that's all.
The taxpayer gets hosed for the remaining $71.25 billion dollars.
This can and will be done if the "sellers" of these assets are allowed to bid either directly or indirectly as it provides a means for banks to intentionally dump bad assets at a certain loss that is much smaller than their expected realized loss over time, shifting the rest of the loss to the taxpayer.
This program has the potential to shift literally $500 billion or more in losses onto the taxpayer, not through the operation of "bad luck" but rather through what amounts to a bid rigging operation.
Be aware that I, along with many others, have figured this out. Also be aware that as taxpayers and your ultimate boss, we do not intend to sit still and allow the public treasury to be looted in such a fashion.
The FDIC's job is to prevent that sort of looting operation by prohibiting the sellers of these assets from having any financial interest in the bidding side of the equation, directly or indirectly, and I along with many others intend to hold you to that obligation.
I like the outline of this program if and only if it cannot be gamed in this or similar fashion. Provided that does not occur, this program has the potential to provide great benefit to both the banking system and our economy.
If, however, the financial institutions that created this mess in the first place are allowed by the FDIC and Treasury to use it as a looting operation to intentionally shift their bad assets onto the Taxpayer you can expect that we the people will hold our government to account.
Transmitted by email to ombudsman@fdic.gov
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