Busted: Bankers and The Global Economy

February 20, 2010

20 US banks collapse in 2010 so far

Filed under: banking, economy — Tags: , , , , , , — digitaleconomy @ 11:07 am

In less than two months, 20 American banks have been closed by the FDIC. A staggering 174 U.S. banks have hit the skids since the collapse of Wall Street giant Lehman Brothers in September 2008, which has sparked one of the worst financial crises in modern times.

What is to blame? A high unemployment rate has resulted through increased defaults at small and medium size community banks.

May 28, 2009

Investors Afraid of Bailout Involvement

Filed under: banking, economy, government, money — Tags: , , , , , , , , , , , , , — digitaleconomy @ 10:41 am

toxic debtTo cleanse bank balance sheets of distressed loans, other unwanted assets and “reduce the associated market overhang”, the FDIC and Treasury launched the Legacy Loans Program. Now the plan has stalled and is likely to put be on hold, terminated or modified again as stifled feds puzzle over their dilemma.

The Legacy Loans Program as crafted by the Federal Deposit Insurance Corp is part of a $1 trillion Public Private Investment Program announced back in March. This program was theoretically designed to encourage banks to sell securities and loans weighing down balance sheets to willing investors. Many banks, flush with bailout cash, have gained a feeling of stability with previous government bailout and have become less eager to be involved in the Legacy program.

Prospective buyers and sellers are reluctant to be involved in such an endeavor and have voiced their concerns to the FDIC about participating. The majority are fearful that the federal government will change program rules in the ‘middle of the game’. Investors are also fearful of financial backlash from an overall hostile attitude against Wall Street.

Bailout ideas simply don’t seem to be working in the realm of public opinion and scrutiny. Even investors don’t want to be attached to the crooked banking mess that the bankers have created. ~ E. Manning

legacy-loans

January 17, 2009

FDIC Tries to Force Consumer Lending

The federal government has been closing in on ways to entice or force bankers to loan money to consumers, especially in exchange for financial assistance. Previously, taxpayer money has been used to prop up the banking system without any conditions.

attempt to enforce bank lending

attempt to enforce bank lending

The FDIC board announced that it will soon propose rule changes to its Temporary Liquidity Guarantee Program to extend the maturity of guarantees from three to up to 10 years where the debt is supported by collateral and the issuance supports new consumer lending.

Interestingly, the FDIC created this program last November to strengthen confidence and encourage liquidity in the banking system by guaranteeing newly issued unsecured debt. This is an effort to use a carrot to encourage banks to renew efforts to make loans to consumers and then contractual obligations to enforce lending. ~ E. Manning

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…)

January 14, 2009

U.S. Politics: Banks Must do their Part

financial security trouble

financial security trouble

What the Bush administration thoroughly disregarded as a possible solution for toxic banking assets and mortgage foreclosures for the last year, Obama and the new government order in Congress have picked up as a gold card solution.

Perhaps the FDIC is no longer a lonely stepchild agency calling in the political wilderness. Calls by bankers and lawmakers to use the remaining bailout funds for the “original purpose” of buying toxic assets have resulted in new political impetus. The view of the FDIC is that the government’s financial rescue efforts have not gone far enough and that troubled asset relief is necessary to get banks lending at more normal levels and to attract private capital.

The plan places (more…)

November 23, 2008

Citigroup Saved by Federal Reserve and TARP

citigroup1In headier times a mere six months ago, Citigroup was discussing the sale of assets to raise cash flow and liquidity. With the stock market value of Citigroup plummeting, one of the larger international bank groups has now been saved this morning through the Federal Reserve. This is undoubtedly designed to build confidence in the markets this week as the economy continues to flag amid record job losses in America.

Citigroup is one of the world’s largest owners of toxic collateralized debt obligations (CDOs). This pool of bonds has created one of the largest victims in the financial crisis.

The U.S. Treasury and the Federal Deposit Insurance Corporation is providing liquidity against the possibility of unusually large losses on an asset pool of approximately $306 billion of loans and securities backed by residential and commercial real estate, which will remain on Citigroup’s balance sheet. As a fee for this arrangement, Citigroup will issue preferred shares to the U.S. Treasury and FDIC.

The U.S. Treasury has invested $20 billion in Citigroup from the Troubled Asset Relief Program (TARP) in exchange for preferred stock with an 8% dividend to the U.S. Treasury. ~ E. Manning

October 26, 2008

Leadership Needed in U.S. Foreclosures

New statistics now share that 2700 Americans lose their homes every day due to the banking and mortgage debacle combined with a sharply declining United States economy. That number is up from 1200 a day one year ago. What do you think? Clearly, Americans are losing ground.

Digital Economy has shared a wealth of information and perspective regarding the foreclosure crisis consuming the American populace. Sheila Bair, head of the FDIC, says that the nation is way behind the curve on getting anything done about the foreclosure crisis. The do-it-yourself attitude of the U.S. government has been no help at all. I’m not sure why the FDIC would bother commenting on the foreclosure crisis, but hey, I’m game. What she said next is much more important: “We need to act quickly, and we need to act dramatically to have more wide-scale, systematic modifications.…”

Sheila Bair is voicing something that Americans and politicians have been mouthing for the last year with little results. Part of the problem is the opaqueness of the mortgage system coupled with that of the securitized and bundled loans so prevalent in the U.S. The Federal Reserve would tell you that rules are the problem. Yet, the truth is that there is no speedy way to deal with the crisis. The mortgage process is outdated and hopelessly compromised by the new age of banking greed. Expediency is important to politicians and as a result, the crisis gets nothing more than plenty of lip service.

Naturally, there are plenty of excuses why foreclosure resolution is so difficult:
Homeowners walking away
Job losses
Negative equity
Availability of credit for new loans
Investor speculation
Complex investment banking instruments (mortgage-backed securities)

The credit market is such that no homeowner is able to get a loan, especially from a competing bank. Bankers don’t want any more trouble from strapped homeowners than they already have. If Congress and the Bush Administration had acted faster with determinant action, much of the carnage could have been avoided. Instead, they have placated the public with voluntary programs such as the Hope Now Alliance. Hope Now isn’t bad, it just isn’t powerful enough or fast enough. No meaningful provisions have been adopted to force the mortgage and banking industry to hold more responsibility for the loans they created.

Now, the nation faces a global meltdown of epic proportions. Can you imagine 2700 houses a day being dumped on the U.S. housing market? The fact is that little real U.S. leadership has been shown. Along with the commensurate lack of leadership, bankers and mortgage servicers are still being allowed to run amok. So far, too little, too late is the result of laissez-faire economics that the Bush administration has adopted. Yet the same laissez-faire politicians are providing taxpayer money as bailout grist for bankers and businesses that they deem as too-large-to-fail. America needs something more than a hands-off approach to business/consumer regulations and relations. Americans need real leadership and action with real protection provisions in place. Even if some American citizens are dead wrong in how they have handled their finances, Big Government needs to step up to the plate and hold back the tide of banking greed and process, while forcing foreclosure resolution to work. It is all in the rules and how they are enforced. So far, your United States government has lacked the will to act strongly and decisively. America needs real leadership, not excuses. ~ E. Manning
Selling Short to Avoid Foreclosure
Good New for Cheated Homeowners
Selling Short to Avoid Foreclosure

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