Busted: Bankers and The Global Economy

January 16, 2009

Treasury Bails Out Bank of America

rainy day for B of A

rainy day for B of A

Since the beginning of economic contraction, Bank of America, has been buying up banks and assets from failed institutions such as Merrill Lynch. Now is a rainy day for Bank of America, a toxic debt laden bank in danger of failure.

After taking recent value write offs on toxic debts, the U.S. Treasury and the Federal Deposit Insurance Corporation are providing protection against unusually large losses on approximately $118 billion of loans, securities backed by residential and commercial real estate loans and related faulty assets. (more…)

September 5, 2008

FDIC: Dismal Banking and Another Failure

As you’ve probably heard by now, industry results for banking in the second quarter were pretty dismal. The results were not surprising as the industry coped with financial market disruptions, the housing slump, worsening economic conditions, and the overall downturn in the credit cycle.

The main reasons for the drop off are the same that we’ve been seeing since the second half of last year:

declining non-interest income,
rising non-interest expense,
decrease in gains on securities sales,
and mounting loss provisions.

The eleventh bank failure of the year came into play with Silver State Bank of Henderson, Nevada. What is the problem with banking? Mainly liquidity. That is often an elusive problem for banks with abused balance sheets and a nation full of securitized bonds that are pretty much worthless.

August 30, 2008

FDIC Prepares for Banking Slaughter

The FDIC is seriously considering its future workload by expanding offices in Dallas, Texas that handle banking closures. However, the FDIC is trying to indicate that the 125,000 foot expansion is due to an increase in workload from the failure of ten banks this year, completed yesterday with the closing of Integrity Bank of Alpharetta, Georgia. 117 banks are now on the FDIC trouble list. The FDIC says that “it’s important to note most banks on the problem list will either cure themselves or end up being acquired by another company.” That is true. What is also true is that many failed banks don’t show up on the list at all. The silver lining in the situation is the number of government jobs that will be needed in the Dallas Metroplex area.

The FDIC reports that non-interest income at banks waned as trading and securitization services slowed. That is an understatement to be certain.

Sheila Bair reported: “We’ll be proposing changes to the current assessment system that will shift a greater share of any assessment increase onto institutions that engage in high-risk behavior to encourage and reward safer behavior.” The lack of honest information from banks has been and continues to be the Achilles heel in FDIC efforts. Fraudulent banking is reported as up by corporate information specialists while government regulators play down the significance of fraud and failure. The fear is palpable, but regulators are full of blather in an effort to convey confidence. ~ E. Manning

Check out an interesting article at RGE Monitor.

August 11, 2008

Banking Healthier Than Last Crisis?

healthy banking or bust
“healthy banking or bust”

There is no end of perspective, outlook or propaganda on the internet. You can surf until your bloodshot eyes can’t see anymore. One news agency will sometimes play both sides of a topic for weeks or months at a time and you can see it for yourself in real time if you are disposed to do so. If you are listening and lame enough to believe everything you read and hear, you are whirling around in your seat from the stress and pressure.

A consistent outlook is that the banking system is healthier than it was during the last crisis. When was that? Assuming we can remember back that far, consider the wonder of the U.S. Savings and Loan debacle. Those were some nasty times and bankers still didn’t learn much except how to create more trouble. Staid economists like this writer know better. But that isn’t the issue.

“Indeed, the recent spate of bank failures seems remarkable only if one compares it to the unusual period of tranquility that preceded it”, a spokesman for the Federal Deposit Insurance Corp., Andrew Gray, said. “If anything, the rate of bank failures is returning to historic norms.”

Between 1986-1995, over 1,000 institutions with total assets of over $500 billion failed. By 1999, the Crisis had cost $153 billion, with taxpayers footing the bill for $124 billion, and the S&L industry paying the rest. At this writing, 8 U.S. banks have failed. Even at worst, the FDIC is projecting that 100 to 200 banks will fail in the next 18 months. This simply doesn’t compare with the S&L debacle, so banking is clearly in better shape.

Naturally, the stellar minds that cooked up that dogma didn’t consider that comparing then with now is like comparing apple and oranges. They are both fruit and they may be overripe, but that is where the similarity ends. Why?

The reality has everything to do with Federal Reserve policy. The Fed has become the official policeman of the U.S. economy and finally the banking industry. In order to keep the economy on its feet and save the banking industry from certain collapse as well as a complete bursting of the confidence bubble, the Federal Reserve has heavily subsidized the banking and finance industry by floating loans in secret to troubled banks across the nation.

The debacle that brought this reality to fruition was not just predatory lending in the mortgage market, but a variety of untested and fraudulently-based banking instruments created by bankers to make more money, largely through the sale of securities for investment purposes. When the market froze up from lack of liquidity, panic and improper management, the economic fraud began to show itself, threatening not just the banks, but the entire economy.

Further, when Bear Stearns neared collapse the entire economy was prepared to go down the sink. To avoid this very real likelihood, the Fed put a new floor in the economy, consistency loaning to banking institutions and protecting them from their own foolish decisions and greed.

The FDIC or the funds that they hold have hardly been touched because the federal government has developed another economic salvation for banking and finance. The reality is that the jury is still very much out on the success that the Federal Reserve has enjoyed in bailing out the banking and finance industry. The cost is already much higher than the previous crisis and has impacted the world. In effect, the federal government through the Fed has bypassed the old system and upped the ante. The whole economy is on the line behind the success of government and Fed actions while inflation threatened to unhinge the system. The health of banking has become a national shell game of sorts: certainly not healthier than the last crisis.

~E. Manning

August 4, 2008

U.S.: What Banking Fraud Means to Depositors

There have been a number of bank failures and the recent accumulation is increasing in pace. The FDIC sees many bank failures down the road. If you are uncertain why banks should fail, you are at the right place. “Busted: Bankers” highlights corruption and fraud in the global banking industry without the restrictions of mainstream media and politics.

The public word is that regulators are bracing for 100-200 bank failures over the next 12-24 months. If the FDIC is anywhere near right, the United States has what could be considered to be an alarming increase in the number of U.S. commercial bank failures. This debacle, despite props from the Federal Reserve, has been caused by creative banking instruments and outright fraudulent activities in the name of profits for bankers and investors. The resulting contraction of the housing market and credit squeeze on a global basis are of their making, a hefty portion at taxpayer expense.

FDIC insurance is the ultimate standard for protecting the assets of banking depositors in the United States. The FDIC has raised their mandatory banking insurance rates to cover the expected expense of bailout. The government claims that the FDIC has ample resources. While this reality is debatable if several shoes drop at once, the U.S. federal government backs the FDIC. Deposits that meet requirements under the $100,000 account limit are fully protected, as good as the government that backs them.

How do you protect your money and keep that money in a safe bank? To begin, always look for the FDIC logo at your bank branch. If you are using online services or a bank, look for the logo as well. However, don’t assume that the FDIC label is accurate in the name of safety and healthy skepticism.

Simply go to the fdic.gov and locate “bank find“. In this way, you can be certain that the bank that you selected is FDIC insured. The FDIC also has a list of bank rating agencies on its Web site that can evaluate the financial stability of a bank. To get a free evaluation, check out bankrate.com, remembering where your loyalty lies. Banking information is generally set up to secure confidence. The information you are given is designed to that end. However, regardless of bank strength, FDIC insurance will secure compliant deposits. That is what you really need to know about.

As an individual, personal deposits are insured up to $100,000 in an FDIC-insured institution, including savings, checking, certificates of deposit and money market accounts. This assumes that your accounts are non-brokered. When you register with the bank directly, make sure that your deposits are non-brokered and will reside with the institution instead of being handled by a third-party. This will ensure your financial safety.

While banking fraud has meant plenty as far as creating a troubled economy, as a depositor, you are fully protected with FDIC insurance. The protection is as good as the government protection that is trusted in, which in essence, comes straight out of taxpayer pockets. Bank runs and panic aren’t a necessary part of your reactions.

In the meantime, investing and spending with a certain amount of prudence is importance. If you are involved in large financial transactions, plan ahead without waiting until the last moment. Some depositors with IndyMac put off dealing with large transactions until the last moment, putting a financial kink in meeting their obligations. The problems could have been prevented by securing a cashier’s check a few days ahead instead of at the last minute. A good rule of thumb is to avoid putting off anything that you can do today, especially where your financial life is concerned. ~ E. Manning

August 2, 2008

July 21, 2008

FDIC: Let the Innocent Cast the First Stone

Back in 2001, FDIC employees supervising day-to-day operations of failed bank Superior FSB funded more more than $550 million in subprime loans. According to a recent lawsuit by Beal Bank, who eventually purchased Superior FSB, a significant portion of 5,315 subprime mortgages are non-performing. The FDIC has even bought back 247 of the original loans, priming the pump for their blame. The problem is that the FDIC made the decision to continue to operate the failed bank under the banking monikker, churning out an additional 6,700 subprime loans.

Based on the FDIC’s own report, at least 19% of the loans are fully fraudulent or “contained significant (more…)

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