I think that this plan will not so much fail the CEOs and COOs and CFOs and everyone else who steered us into this crisis. They're going to walk away just fine; no less rich, no less shamed, though no less criminal. They will not do time, they will not be punished for their anti-social and anti-democratic behavior.
The Toxic Asset Plan WILL fail us, the taxpayer, the every-day person. It will drive us deeper and deeper into debt, give the Corporatist/Conservative/New-New Republicans some rational, convincing arguments to throttle social spending altogether, and our institutions and vital social services will dwindle, crumble, and fall completely apart as we are chained to enormous and crushing debt to the rest of the world.
The Toxic Asset Plan is a lie, a fraud, a forgery. It's misguided, and fails to learn even from RECENT history. Just a whopping 20 years ago Japan tried this, and it destroyed the 1990s for them. Also 20 years ago, we performed recieverships on the S&L institutions, and it worked wonderfully. It seems that there is no real reason that it can't happen again.
WASHINGTON (CNN) -- Rampant fraud in the mortgage industry has increased so sharply that the FBI warned Friday of an "epidemic" of financial crimes which, if not curtailed, could become "the next S&L crisis."
Assistant FBI Director Chris Swecker said the booming mortgage market, fueled by low interest rates and soaring home values, has attracted unscrupulous professionals and criminal groups whose fraudulent activities could cause multibillion-dollar losses to financial institutions.
"It has the potential to be an epidemic," said Swecker, who heads the Criminal Division at FBI headquarters in Washington. "We think we can prevent a problem that could have as much impact as the S&L crisis," he said.
In the 1980s, many Savings and Loans failed because of poor management, risky loans and investments, and in some cases, fraud. Taxpayers were left with a $132 billion tab to cover federal guarantees to S&L customers.
The year this report was published and the above article date? 2004
Now tell me they did not foresee or know this was coming again.
The infamous claim that one must destroy jobs to create jobs is misplaced. It comes from technical innovation. i.e. the sewing machine increased productivity, made clothes cheaper but also displaced many hand sewing workers. Mass production of clothing displaced many workers on sewing machines...but up the skills ladder we go in that case and workers learn how to maintain, build the machines instead of doing hand labor...
Anyway, that's the crux of the theory.
"free" trade theory does acknowledge "localized economies" may be hurt but the claims is the overall positives "eradicate" those "temporary" localized economies destruction.
Well, there is something very wrong going on here. Firstly they seem to put those local economy destruction as "temporary" and the time line is much too short. But secondly and here comes our bad math again, they seem to have these local economic destructions as independent events. That is false. There is a correlation, a dependency between local economies, they are not isolated.
So, I think what one has here and this is also bore out by the macro economic theory with just a few variable tweaks...
is all of these local economy, sector "creative destructions" are adding up to destroy the entire United States economy.
That's the production economy.
And yes, the most advanced skills, the jobs required the highest education, the smartest people, are being offshore outsourced in mass and if they cannot offshore outsource those jobs they want to bring in foreign guest workers to do that and flood the domestic labor market with a global one.
If anyone believes that the United States, with the best universities in the world and a population of 300,000,000 people cannot produce enough of the highly skilled "geniuses" for the U.S. domestic labor force, they have not been paying attention to what is happening in these high skilled career areas.
It is only career areas which are highly protectionist, like attorneys through their bar exam and the Medical doctor, through their boards and certifications which so far are exempt. And Doctors are getting hit up at this point in time...
Lawyers, who of course are also making huge money from global labor arbitrage, have the most "local" certification process in order to practice their craft...and wala....
they are not being labor arbitrage or their wages reduced...
If we offshore outsourced attorneys you can bet there would be a flurry of national labor laws to stop the practice. ;)
That is a very good point for while I (obviously you) believe strongly in labor organization, one of the problems becomes when the union themselves take actions that are either not democratic or not plain smart, considering the economic conditions and as you note, disruptive to the overall economy with relation to what the fight is about.
I think this is why Professionals are not well organized. They need a lot of career support and are more free agents and the union structure seems to be counter to this. A more of a guild style.
Professional societies are frankly selling out their members on labor, the IEEE being one of them and that is due to global "take over" of many of these organizations, hence they sell out U.S. professionals on labor/career issues.
I haven't tracked all of the battles going on currently inside the SEIU, but I can tell you they have pushed, worked on many policies which sell professional labor right down the river. It's like the "anti" union union in that regard.
The government still refuses to collect any data on offshore outsourcing and, even worse, counts temporary guest workers into the unemployment statistics.
That's on top of the underemployment plus the large, growing "permatemp", which often is under 1099-misc and labeled a "Small business", so they do not even count in the employment statistics at all.
There are statistical issues that make the data less reliable than the U-3 released for states, and it's a annual rate.
But there are some jewels.
I'm planning a series once the semester finishes.
Look at the U-1 long terms (structural unemployment) rate as a percentage of the U-3. In certain states, structural unemployment was really taking hold by the end of 2008.
I don't understand this latest speak-out by William Black. Why is this coming out now?? Black has known about this for several years now, and now this is on every major media channel. This is not new information. The only thing extraordinary is that it has been released onto major media outlets. Why now?
Something is not right. Black supported Obama? Why isn't he reaming Obama on this matter?? Look at who Obama has selected as his economic team....they're ALL CROOKS. But Black is completely silent on this matter. That's a big RED flag if you ask me. Obama is the man with the power. Black should be blasting Obama to fix this immediately. And Obama could fix this with a snap of his finger. Certainly Black knows this...I do! So why does Black come out in public with this devastating news? Where is his outrage at Obama??? With Congress???
Something doesn't smell right here. We are manipulated by an organized group of people that are experts at mind control. This latest revelation by Black is very suspicious in light of his outrage which is directed at only Treasury secretaries. His outrage should be placed with the president and Congress. CONGress has the ultimate power to protect the constitution, oversight, investigative powers, supoena power...and the power to stop this immediately.
Black solution is to get rid of the CEOs that have been in place through this financial disaster. That's strange. Why wouldn't we focus on bringing out the truth. Why wouldn't we start investigations and indictments? Why not issue supoenas immediately? So his solution is for the CEOs to walk away, after they have been enriched by billions of dollars, and to find someone new???? That's absurd!!! The system is the problem, and the people who have hijacked it. Black offers us nothing more than what we already knew. He has just focused our anger onto the treasury secretaries...AND NOT THE PRESIDENT AND CONGRESS where it should be. Outrageous!! I can't believe what I am hearing.
Be careful folks. They are walking us down a very strange road which is filled with deceit, fraud and lies. This is just another step they are forcing us to take. I do not trust Black anymore than the others, especially after this interview.
Barack Obama’s Corrupt Economic Team
Benjamin Bernanke(Jewish) - Chairman, Federal Reserve System
Timothy Geithner(Jewish) - Secretary, U.S. Treasury Department
Lawrence Summers(Jewish) - Chairman, National Economic Council
Paul Volcker(Jewish) - Chairman, Economic Recovery Advisory Board
Jared Bernstein(Jewish) - Chief Economist and Economic Adviser, Vice President
Peter Orszag(Jewish) - Director, Office of Management and Budget(OMB)
Gary Gensler(Jewish) - Chairman, Commodity Futures Trading Commission(CFTC)
Mary Schapiro(Jewish) - Chairman, Securities and Exchange Commission(SEC)
Sheila Bair(Jewish) - Chairman, Federal Deposit Insurance Corporation(FDIC)
Karen Mills(Jewish) - Administrator, Small Business Administration (SBA)
Christina Romer(Jewish husband) - Chairman, Council of Economic Advisers
You can remove one of the three to get innovation, the question becomes then of the quality and rate of such endeavors. Between democracy, freedom and capitalism. that's the right concoction where you get things really moving. But like I said, it is possible to get innovation removing one, just would you get the same stuff or less by removing one of the legs of this three legged stool? Reward for such strides towards innovation are also asked under each scenario.
This was my problem with the libertarians who constantly scream "freedom" or "liberty." Yet what do they mean by that? Pure freedom as having the ability to do whatever you want? The term "Democracy" has been bandied about to mean all sorts of things from voting rights to putting workers in control of a company. I would like some clarification here by the definition being used for Democracy. But still, it's the weekend, I just got home from a nice wedding and feeling to get the juices flowing.
Lets start with democracy. Now I'm assuming here you mean a real pluralistic voting environment where the average person can choose whom to vote for. Well, you have countries like Singapore which had essentially a one-party state under Lee Kwan Yu. There is also the Peoples Republic of China, Korea under the military juntas, Nazi Germany, the list goes on and on. But in each situation, you had companies or folks coming up with new products or innovations on established ones. Still, were they able to reap the fruits of their labor? In many instances, surprisingly yes, one could make money or get a better home. So long as you don't challenge the party in power, they don't care (see the PRC). Of course we then get to the next leg, Freedom.
Freedom, I'm speculating here (and please correct me if I'm wrong) meaning civil rights like freedom of movement, speech, etc. Well once more, you have instances where innovation has come even with the removal of freedom. Scientists, in the past and especially those deemed "enemies of the state" held in capitivity, created things for their overseers. The Russians used captured Nazi scientists, after the war and still under the "protection" of the KGB (or was it still called the NKVD??) to advance the USSR's rocket program. The scientists working on North Korea's rocket program have neither Democracy nor Freedom, yet they are on the cusp of launching the Taipong Dong 2 missile into orbit. In the Peoples Republic of China, one does not have many of the freedoms we take for granted, yet you have many new products coming out of that place (not to mention newly minted billionaires!).
This brings us to the last leg, capitalism. Now let me get classical here and go with it meaning a market based system where one is financially compensated for services rendered or products produced. Or for this argument, are those innovating getting paid or getting a piece of the action? Many scientists or have come up with products we use every day either also been entrapaneurs who started up businesses selling us those products, or employees in research & development for a company. Now they could get a royalty, but many don't, they just get a pay check and hopefully a bonus. But what if we removed financial compensation from this? Would we get innovation?
The average tinkerer may not be thinking about money when they're designing that gadget in their garage. Indeed, you've had many where the science of the product and not the economics were more important. But still, that inventor who had spent years in his garage or basement coming up with something, when they finished and showed it to a friend who said "that's cool, I'd definantly would use it" was probably thinking $$$ soon afterwards. But say we lived in a system where you invented something and the state just took it and at most all you got was a plaque commemorating your discovery, but then the state took your thing and made money off of it. The incentive may not be so great to come up with something.
Still, you have had inventors where it was not the money. During times of war you have had engineers come up with rifles or bombs while working for their armies. Sergei Simonov was one who helped come up with new guns for the Red Army during WW2. There was no financial incentive here, nor could he hope after the war for royalties. But nevermind war items, in centrally-planned economies where free markets are discouraged, you've had scientists coming up with products. In the former Eastern Bloc, because not all Western technology could be easily procured, scientists had to come up with ways to reverse engineer much of the technology, like a CMOS memory chip. East Germany had companies like VEB Robotron who routinely came up with products.
Of course we're leaving out the big economic white elephant in this discussion. Innovation does not come cheap. Whether it is a tinkerer in the garage utilizing his time and money, or a centrally-planned Industrierverband Fahrzeugbau, you can't ignore costs. To me this where the capitalism part really comes in, because in such systems you need the money to continue with research or even operate the enterprise. You can plan, of course, in a centrally-planned system, but variables can change. Set the price all you want on a commodity with a finite resource, but eventually pressure will build and costs will have to go up. The German Democratic Republic (GDR), like many of their Socialist bretheren, used to eat up a lot of the costs up front to maintain the appearance of stable prices. But we all saw what happened in the long run. In the end you need a market to better guage price/costs or things will get out of control.
So could you have innovation without Democracy or Freedom or Capitalism? The answer is yes, but the costs are in this author's opinion, too high.
Has current credit scores and ratings been taken into account when comparing the historic data? It seems Americans and American companies are broke. This coupled with the fact that interest rates are at record lows, I can't see anything but deflation for quite some time.
To see the correlation to major innovation and the size of the middle classes, social mobility, support for innovation.
A lot of innovation begets more innovation. In other words electricity and it's properties spawned a host of innovations, the car, the transistor, we can go through a list of things ...but somewhere someone was given support and enabled to do that initial research, investment.
It’s my understanding that the WMI lawyers have requested a Jury Trial. I hope that they (Weil, Gotshal & Manges) get it and examine (under oath); Paulson, Bair, OTS Officials & Dimon. I expect them to go for triple damages when it’s proven that the FDIC knowingly (or out of negligence, doesn’t matter) gifted more than the “whole bank” to JPM(c) (Providian for example). I’m not a lawyer but it’s obvious to me that JPMC’s recent Proof of Claim was a joke and a mockery of Judge Walrath’s order.
Abraham Lincoln (attributed): “You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time.”
It’s that simple folks – FDIC/JPM wants you to believe all was well with the fire-sale of WAMU but the truth is: The FDIC has no idea what they conveyed to JPM and as a result has recently resorted to claims of mismanagement and underfunding in an attempt to “thump their chest in public” even though their own sister agency (OTS) was in the WAMU books for months and said WAMU was well capitalized. And JPM while on one hand says (in public mind you) they paid fair value for the assets of WAMU and their purchase of WAMU brought great relief to JPM and its shareholders (you’d have to read JPM’s Shareholders PR), JPM contradicts itself in its own pleadings to the court saying that if there is a reversal of sorts – JPM stands to lose Billions (with an s) not 1.9 Billion…
I hope and hope for a jury trial – the good thing about Bankruptcy court is that they follow the the letter of the law to a “T”. We may not get triple damages but Paulson, Bair and Dimon will be severely damaged by their own words and actions – God Bless America.
FBI is currently investigating Wamu management. If they are found guilty of corruption, by all means send them to jail. However, the key for this law suit is the reckless and illegal action by a government agency. If Sheila Bair can do this to Wamu and Wachovia, she will continue to do it to other banks.
Not that many people pay attention to FDIC and many are still under the false impression that Sheila Bair cares about taxpayers. We all understand investments in stocks, bonds, even mutual funds are risky, but NOBODY, I mean, ABSOLUTELY NOBODY has the right to show such contempt to our deposits and savings that we have earned from working hard all our lives.
I believe a government agency can only function effectively and efficiently if its leader is intelligent and fair. When the leader is corrupt, systemic risk with irreversible consequences is involved and poses a threat to the entire nation. For example, given the scope of the crime, it would be shocking to find only "little" inspectors are responsible for the illegal Indymac backdating and the lack of investigation on Madoff's scam.
I believe this agency has several decisions detrimental to the US financial market today and I want to explain why.
What is FDIC? "The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress that maintains the stability and public confidence in the nation’s financial system by insuring deposits, examining and supervising financial institutions, and managing receiverships... The FDIC treats all employees, insured financial institutions, and other stakeholders with impartiality and mutual respect."
http://www.fdic.gov/about/mission/index.html
Im a Wamu shareholder so let's begin with this "biggest bank failure" in history. According to Sheila Bair, Wamu was facing intense liquidity pressure. OTS and FDIC decided to seize the bank and sell it to JP Morgan so deposits could be saved. In addition, this was done on a Thursday instead of the normal Friday because there was a press leak and Bair did not want to have a bank run.
But how did FDIC determine Wamu was in so much trouble that this seizure had to happen immediately? Wamu wasnt even on its problem bank list!
Besides, "Washington Mutual had a Tier 1 capital ratio of 8.4percent on Sept. 30, well above the 6 percent threshold that regulators use to classify a bank as well capitalized. JPMorgan Chase (NYSE: JPM), which purchased WaMu had a similar ratio of 8.9 percent. Wachovia... had a capital ratio of 7.5 percent as of Sept. 30, compared to Wells Fargo’s 8.6 percent. And National City had an 11 percent capitalratio, and yet had to sell out to PNC Financial Services (NYSE: PNC). By comparison, Bank of America (NYSE: BAC), considered one of the bedrock financial institutions, had a capital ratio at the end of the third quarter of 7.6 percent."
In addition, "Washington Mutual, which already essentially 'went under' by nature of forced acquisition, has a tangible book/asset ratio of 3.66. And that number is on the higher end of the scale/list. So, the thinking would be that many of the institutions with ratios lower than that could potentially be in trouble as well.
The US banks & their tangible book/asset ratios:
BB&T (BBT) 6.86
PNC (PNC) 5.87
Northern Trust (NTRS) 5.51
Goldman Sachs (GS) 4.86
Morgan Stanley (MS) 4.35
JPMorgan (JPM) 3.83
Washington Mutual (WM) 3.66
---
Wells Fargo (WFC) 3.50
Merrill Lynch (MER) 2.84
Bank of America (BAC) 2.83
US Bancorp (USB) 2.74
Lehman Brothers (LEHMQ.PK) 2.39
Citigroup (C) 1.52"
Most importantly, Washington Mutual Holding, Wamu's parent company, had over $4 billion in cash. Is that not enough to keep Wamu functional for a few more days as the bailout was being voted in Congress?
We know Bear Stearns and Wachovia had approached the government for financial assistance but did Wamu? Without a doubt Wamu management was corrupt and made many poor and shady business decisions, contributing significantly to its downfall. As the mortgage crisis became more drastic, it engaged Goldman Sachs to shop for a buyer. Here was the strange thing, less than 2 weeks before FDIC seized Wamu Goldman actually upgraded Wamu; it "took the thrift off its "Americas Sell" list and said even though losses "continue to deliver body blows to the bank, the equity base is absorbing the pain.""
The question was, could Wamu's books have deteriorated so much in just two weeks, or did Goldman miscalculate its recommendation?
Not only that, is FDIC immune to our law?
"F.D.I.C.’s October agreement with JPMorgan Chase and Washington Mutual allows Chase to pick and choose which of the city’s 148 Washington Mutual branches it will keep. Chase will then turn over the rejects to the F.D.I.C. But here’s the kicker: According to sources, the F.D.I.C. [CAN THEN SIMPLY TERMINATE THE LEASES OF THOSE REJECTED BRANCHES, ALL CONTRACTUAL OBLIGATIONS VOIDED]...
-I am Lanlord for on of the WAMU Location I don't know who to talk to about this Lease or how to pay my Mortgage.
SOMEONE PLEASE HELP ME
-I believe we spoke with each other. WaMu moved out as of 2/10/,leaving me with an empty building and half a million loan with Chase-WaMu. FDIC legalized the cherry pick by Chase without obligations.Jamie Dimon is really a very smart banker and good bzman,but at the price of all WaMu contractors, landlords,shareholders,etc.
-I got the same situtation. They stopped rent payment. I can not pay the mortgage and will lose the property."
http://www.observer.com/2008/real-estate/it-s-washmu-landlords-fear-gapi...
Things got even worse after this seizure because FDIC basically killed the bond market.
"Washington Mutual Inc. bondholders are likely to lose most of their money after the thrift was seized in the largest U.S. bank failure in history... It seems that WaMu's major debt holders have been stranded by regulatory intervention... The deal structure seems to be unprecedented in that it excludes bondholders at the holdco and bank levels from the major assets and liabilities of the operating bank.''"
Banks were now having an even harder time raising capital via this common method (selling bonds). Wachovia became the first casualty as a result of this repercussion.
"The first thing that happened this morning: credit-default swaps blew out on Wachovia... Wachovia bondholders are wondering if they're next," Sauter said. Translation: options on Wachovia bonds showed confidence in the securities had collapsed. "Wachovia is on the ropes now because their financing costs are going through the roof. It's an absolute reaction against how FDIC sold WaMu," Sauter said.""
"At 4 a.m., Bair told Steel that the FDIC had chosen Citi to buy most of its operations, turning down a Wachovia proposal to stay independent with government help, according to the filing" Instead, "FDIC pushed both sides to make an announcement on Monday, Sept. 28, before the markets opened or Wachovia would be seized."
By the way, since when did blackmailing become legal?
WSJ reported this “sworn affidavit filed this weekend in federal court by Wachovia Corp. Chief Executive Robert K. Steel… “Wachovia was under tremendous pressure from Citi and the regulators to conclude a transaction with Citigroup with definitive agreements by the following Monday, October 6, 2008″… The Company’s advisors and I told the board that we believed that unless a definitive merger agreement was signed with either Citigroup or Wells Fargo by the end of the day Friday, October 3, that the FDIC was prepared to place Wachovia’s banking subsidiaries into receivership,” Mr. Steel said in the affidavit.”
http://online.wsj.com/article/SB122325890301006757.html
"Wachovia saw its share price plummet 90% to below 70¢ when Wall Street opened today. Federal regulators helped to arrange a deal in which Citigroup will take on $42 billion (£23 billion) of losses on a $312 billion pool of loans held by Wachovia, which has a portfolio of risky mortgages."
Here was another questionable act by Sheila Bair and her agency. How did FDIC determine Citigroup was strong enough to rescue Wachovia? This choice made no sense because Citigroup itself needed a huge bailout just a month later.
"Under the plan, Citigroup and the government have identified a pool of about $306 billion in troubled assets. Citigroup will absorb the first $29 billion in losses in that portfolio. After that, three government agencies -- the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. -- will take on any additional losses, though Citigroup could have to share a small portion of additional losses... In addition, the Treasury Department also will inject $20 billion of fresh capital into Citigroup. That comes on top of the $25 billion infusion that Citigroup recently received as part of the the broader U.S. banking-industry bailout."
Bair had boasted that the deal between Wamu and JP Morgan would "not cost taxpayers a dime."
http://www.entrepreneur.com/foxbusiness/141.html
Yet in this next transaction between Wachovia and Citigroup she changed her mind and decided it was reasonable to absorb over $200 billion in losses using tax money?
Since then, FDIC moved quickly and began seizing troubled banks one after another. It also started backing bank bonds because “It would be very costly” for banks to issue the debt without the guarantee." “Bank of America Corp., Goldman Sachs Group Inc. and the financing arm of General Electric Co. led $29.8 billion of FDIC- backed bond sales... companies began using the FDIC’s Temporary Liquidity Guarantee Program on Nov. 25..." Such guarantee by FDIC even expanded internationally:
"Morgan Stanley Sells FDIC-Backed Bonds in Hong Kong Dollars"
http://www.bloomberg.com/apps/news?pid=20601080&sid=ap0ErSe8PF1A&refer=asia
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3kprxkRPSyc&refer=home
Now what was wrong with this picture? FDIC is supposed to guarantee only deposits. Considering its reserve only had $19 billion (at the end of 2008) covering over $4 trillions in US deposits, why did it get involved with bond sales, not to mention it was FDIC's action on Wamu bondholders in the first place that basically destroyed the bond market?
Not only that, Sheila Bair had devised a loan modification plan to share losses and she pushed hard to get that program implemented.
"FDIC Chair Sheila Bair... outlined her ballyhooed plan to prevent an estimated 1.5 million foreclosures by the end of 2009. She plans to accomplish this feat by modifying more than two million loans at what she estimates would be a taxpayer cost of $24 billion... FDIC wants to offer private loan servicers a new incentive to modify troubled loans... FDIC would pay servicers $1,000 for every loan they modify, and taxpayers will share the losses if loans re-default... the White House estimates Ms. Bair's plan could cost as much as $70 billion next year -- not $24 billion"
http://bw.dowjones.com/article/SB122826619188174465.html
Is that FDIC's responsibility too? Because I do not see it mentioned anywhere on its website. Furthermore, was this program even effective? Not according to these articles:
"Foreclosure filings in the U.S. climbed 30 percent in February from a year earlier as the worsening economy thwarted efforts by the government and lenders to prevent homeowners from losing property, RealtyTrac Inc. said."
http://www.bloomberg.com/apps/news?pid=20601103&sid=aFS4Zbll06TU&refer=us
"Revised mortgage terms fail to curb defaults
Report shows most loan modifications don't lower payments. Delinquencies among prime borrowers soar...
Bair, a leading proponent of lowering loan payments to combat foreclosures and the damage they inflict on the economy, said many banks and loan servicers continued to provide only temporary relief to borrowers.
The report "unfortunately demonstrates a continued reliance by many servicers and lenders on repayment plans and modifications that do not reduce the borrower's monthly payment," Bair said in a statement.
Produced by the Treasury Department's bank regulators, the Office of the Comptroller of the Currency and the Office of Thrift Supervision, the report analyzed mortgages serviced by 13 large financial institutions, representing about two-thirds of all the outstanding home loans in the country.
The companies included such first-round recipients of the government's bank bailout funds as Bank of America, Wells Fargo, Citigroup and JPMorgan Chase, which collectively have received $145 billion in government money. "
http://www.latimes.com/business/la-fi-loanmods4-2009apr04,0,4466775.story
"Aid to Borrowers Not Preventing Rising Delinquency... More Help but More Defaults, Report Say"
http://www.washingtonpost.com/wp-dyn/content/story/2009/04/04/ST20090404...
In the mean time, since FDIC has been so busy expanding its jurisdiction, towns across the US suffered as a result of continuous bank seizures and more importantly, the painfully slow followup.
In Galena, Missouri, "Construction at the resort property is at a standstill and Shirato is still waiting for a first mortgage to be returned to Columbia Bank in Kansas. The FDIC put the bank in receivership in August... Shirato is expecting the FDIC to make a decision soon so work can start. “I’ve heard it so many times from the FDIC. We have a process to go through. We were originally told 30 to 60 days,” Shirato said. “It took us six weeks before we could get anyone from the FDIC to talk to us. We’ve had to let workers go because we can’t pay them.”
http://www.bransondailynews.com/story.php?storyID=10989
In Augusta, Georgia, a news article detailing "how FDIC and Government actions are bankrupting people and contributing to unemployment" was posted.
"Late last week a call from FDIC brought news that the FDIC has decided to foreclose on the White's Building, a project that up until the time of the bank's failure had been in good standing with its lenders and subcontractors... In less than 90 days the bank failure and FDIC incompetence have turned this project into a non-performing mess and nearly bankrupted our company and me personally... During this time the developers have been keeping the lights on by using funds from their personal savings and home equity loans in the hope of saving the project. They had made Augusta their home, a town that embraced them as one of their own and provided them such warmth that they were happy to give up all they had to this project."
"Loudermilk accuses FDIC representatives of everything from indifference to incompetence... Loudermilk says he has found three separate lenders willing to buy the loan from the FDIC, yet the agency is unwilling to work with him, reportedly because it would violate procedure and could possibly look like favoritism... Instead of taking one of the offers, the FDIC will most likely put the loan in a pool of non-performing loans and sell it for far less on the dollar, which, according to Griffin, is just being lazy"
http://www.mmdnewswire.com/fdic-government-actions-4738.html
http://metrospirit.com/index.php?cat=1990310070813675&ShowArticle_ID=110...
Instead of power grabbing, FDIC should be helping these people with all its resources. It should focus on assisting troubled banks in the best interest of all parties involved, like it was mandated to do so by the government. Check out this list. All the capital Goldman Sachs, JP Morgan, and others raised by selling FDIC- backed bonds could have been used to save of some of these financial institutions.
http://online.wsj.com/public/resources/documents/info-Failed_Banks-sort....
FDIC is supposed to stabilize the financial system. Sheila Bair herself said she was afraid of a Wamu bank run so she had to act immediately. So why was she creating a panic by declaring FDIC could be insolvent before the end the year and therefore it was necessary to raise bank fees? What was so different about FDIC between now and last year? Did she not realize her statement could have caused the biggest bank run in US history? In fact, within just a few days Bair made several contradictory statements regarding FDIC's potential insolvency and her concern for using taxpayers money as a solution to that problem.
March 4, 2009
"No Taxpayer Funds Bair rejected arguments that the agency should use government aid to rebuild the fund. The FDIC has authority to tap a $30 billion line of credit at the Treasury Department and legislation pending in Congress would boost the amount to $100 billion.“Banks, not taxpayers, are expected to fund the system,” Bair said. Asking for taxpayer support “could paint all banks with the ‘bailout’ brush.” "
http://www.bloomberg.com/apps/news?pid=20601103&sid=alsJZqIFuN3k&refer=news
March 6. 2009
"The Federal Deposit Insurance Corp. may reduce an emergency fee on banks to bolster reserves if Congress expands the agency’s borrowing authority with the Treasury Department to $100 billion, Chairman Sheila Bair said"
http://www.bloomberg.com/apps/news?pid=20601103&sid=aGewvZuHR3dk&refer=news
March 9, 2009
"Bair said the FDIC had enough money in its industry-funded reserves and was fully backed by the U.S. government. "The money will always be there," she said. "We can't run out of money.""
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE5282OL20090309
So the money has always been and will always be there, right? There is no way the US government would ever not give FDIC enough backing to ensure consumer deposits.
It is deceptive and unethical, to insert FDIC's request for $500 billion into the Credit Card Reform bill.
FDIC is out of control and shows complete contempt on the safety of our deposit. Who gave Sheila Bair the right to "expect her agency [to] finance as much as $500 billion in purchases of residential and commercial real estate loans?"
http://www.nbcnewyork.com/news/us_world/NATLGeithner-to-Unveil-Plan-to-....
When our Congress gave Paulson TARP, at least it could claim it was deceived because Paulson didnt reveal he was going to use some of the money to save European banks and made Goldman Sachs whole.
On the other hand, if our Congress again passes another bailout similar to TARP, when Sheila Bair has already publicly announced she was going to use as much as $500 billion for Geithner's toxic assets, then those representatives with the yes votes should resign.
In this bill, FDIC can do whatever it wants up to $100 billion and is allowed to borrow up to half a trillion requiring approval from only FDIC itself, the Fed, and the Secretary of Treasury (if Im reading this correctly that means pretty much Bair, Bernanke, and Geithner get to decide what to do with the extra $400 BILLION and they only need to REPORT a reason to Congress)-
“During the period beginning on the date of enactment of this paragraph and ending on December 31, 2010, if, upon the written recommendation of the Board of Directors (upon a vote of not less than two-thirds of the members of the Board of Directors) and the Board of Governors of the Federal Reserve System (upon a vote of not less than two-thirds of the members of such Board), the Secretary of the Treasury (in consultation with the President)…”
http://www.opencongress.org/bill/111-s541/text
This is basically a repeat of what happened with TARP, except the names and agencies have changed.
Sheila Bair= Hank Paulson
FDIC= AIG
A responsible regulator does not declare potential insolvency that could cause a huge bank run because "FDIC has enough money but wants cushion."
An intelligent regulator does not force Wachovia to sell itself to another insolvent bank Citigroup and cause Wachovia share price to plummet 90% in value within a few hours of trading, in addition to throwing over $200 billion of guarantee on taxpayers.
A well-prepared regulator does not support poor regulation of derivatives:
“[W]hen Bair was the head of the CFTC, and there was an intense debate over whether more regulation of derivatives was needed, here’s what Bair had to say (from an October 1993 Bloomberg article): THE Commodity Futures Trading Commission (CFTC) has given the US$ 4.8 trillion derivatives market a clean bill of health, saying that fundamental changes in the way the market is regulated are not needed…. “We have a strong affinity for derivatives at this agency,” said acting CFTC chairman Sheila Bair. “We like them.”"
http://economicsofcontempt.blogspot.com/2009/01/sheila-bair-hearts-deriv...
Who is regulating OTS/FDIC/SEC?
No more illegal backdating, No more guarantee except for deposits, and No more Madoff scam
That is why Washington Mutual must sue and lay the book out in open, and pray our Judicial branch still stands for truth and justice.
with financial conglomerate and other financial sector companies is broke. It rewards failure and encourages/promotes excessive risk. Congress tried to do something. But..
Treasury continues to protect the financial oligarchy:
Honestly, not to tout our own horns but Black's interview almost sounded like a summary of our blogs posts since we started.
I think you got the one fact I had not idea of...that is it a law they must put into receivership insolvent banks.
I don't think he is alone in being disgusted with Obama at all even though he was an Obamamaniac during the election. There are many out there at this point and I am sure it is tough when all had such high hopes, worked on campaigns and so on.
(Myself I thought Hillary was least objectionable program, but not "endorsed" but she assuredly had much better policy positions including wanting a RTC/HOLC type of structure straight from the S&L and Great Depression, but she also voted for all of this bail out money.....so....)
But there are a host of other issues where Obama is doing the corporate bidding, it is not just the financial crisis. Sorry the news is grim, I wish it was different.
Anyway, I hope all watch the entire video. I could post the interview on EP, but I'm unsure on PBS now's copyrights and if they care about that or not so just click on the link.
He does an exceptional job of explaining the history in layman's terms. If anyone is still fuzzy on how this whole Ponzi scheme works, the interview should help out quite a bit in clarifying.
But I must say I like TAP better....
makes it more clear TAP the taxpayer.
I think that this plan will not so much fail the CEOs and COOs and CFOs and everyone else who steered us into this crisis. They're going to walk away just fine; no less rich, no less shamed, though no less criminal. They will not do time, they will not be punished for their anti-social and anti-democratic behavior.
The Toxic Asset Plan WILL fail us, the taxpayer, the every-day person. It will drive us deeper and deeper into debt, give the Corporatist/Conservative/New-New Republicans some rational, convincing arguments to throttle social spending altogether, and our institutions and vital social services will dwindle, crumble, and fall completely apart as we are chained to enormous and crushing debt to the rest of the world.
The Toxic Asset Plan is a lie, a fraud, a forgery. It's misguided, and fails to learn even from RECENT history. Just a whopping 20 years ago Japan tried this, and it destroyed the 1990s for them. Also 20 years ago, we performed recieverships on the S&L institutions, and it worked wonderfully. It seems that there is no real reason that it can't happen again.
FBI warns of mortgage fraud 'epidemic'
The year this report was published and the above article date? 2004
Now tell me they did not foresee or know this was coming again.
The infamous claim that one must destroy jobs to create jobs is misplaced. It comes from technical innovation. i.e. the sewing machine increased productivity, made clothes cheaper but also displaced many hand sewing workers. Mass production of clothing displaced many workers on sewing machines...but up the skills ladder we go in that case and workers learn how to maintain, build the machines instead of doing hand labor...
Anyway, that's the crux of the theory.
"free" trade theory does acknowledge "localized economies" may be hurt but the claims is the overall positives "eradicate" those "temporary" localized economies destruction.
Well, there is something very wrong going on here. Firstly they seem to put those local economy destruction as "temporary" and the time line is much too short. But secondly and here comes our bad math again, they seem to have these local economic destructions as independent events. That is false. There is a correlation, a dependency between local economies, they are not isolated.
So, I think what one has here and this is also bore out by the macro economic theory with just a few variable tweaks...
is all of these local economy, sector "creative destructions" are adding up to destroy the entire United States economy.
That's the production economy.
And yes, the most advanced skills, the jobs required the highest education, the smartest people, are being offshore outsourced in mass and if they cannot offshore outsource those jobs they want to bring in foreign guest workers to do that and flood the domestic labor market with a global one.
If anyone believes that the United States, with the best universities in the world and a population of 300,000,000 people cannot produce enough of the highly skilled "geniuses" for the U.S. domestic labor force, they have not been paying attention to what is happening in these high skilled career areas.
It is only career areas which are highly protectionist, like attorneys through their bar exam and the Medical doctor, through their boards and certifications which so far are exempt. And Doctors are getting hit up at this point in time...
Lawyers, who of course are also making huge money from global labor arbitrage, have the most "local" certification process in order to practice their craft...and wala....
they are not being labor arbitrage or their wages reduced...
If we offshore outsourced attorneys you can bet there would be a flurry of national labor laws to stop the practice. ;)
That is a very good point for while I (obviously you) believe strongly in labor organization, one of the problems becomes when the union themselves take actions that are either not democratic or not plain smart, considering the economic conditions and as you note, disruptive to the overall economy with relation to what the fight is about.
I think this is why Professionals are not well organized. They need a lot of career support and are more free agents and the union structure seems to be counter to this. A more of a guild style.
Professional societies are frankly selling out their members on labor, the IEEE being one of them and that is due to global "take over" of many of these organizations, hence they sell out U.S. professionals on labor/career issues.
I haven't tracked all of the battles going on currently inside the SEIU, but I can tell you they have pushed, worked on many policies which sell professional labor right down the river. It's like the "anti" union union in that regard.
She really is trying to get reality into the oversight committee and is that very rare bird who is statistically, reality based.
Common Good, when the actual report comes out I hope you review it and do a full bore blog post on it.
Warren is also using youtube and video overviews to communicate the complexities of TARP, oversight issues so you might check that out too.
I don't have their website off hand, but search on EP for Warren for I know I put up all of these links in past posts.
The government still refuses to collect any data on offshore outsourcing and, even worse, counts temporary guest workers into the unemployment statistics.
That's on top of the underemployment plus the large, growing "permatemp", which often is under 1099-misc and labeled a "Small business", so they do not even count in the employment statistics at all.
BLS has finally released the U1-U6 measures for states.
There are statistical issues that make the data less reliable than the U-3 released for states, and it's a annual rate.
But there are some jewels.
I'm planning a series once the semester finishes.
Look at the U-1 long terms (structural unemployment) rate as a percentage of the U-3. In certain states, structural unemployment was really taking hold by the end of 2008.
First is denial, second is rage.
It sounds like you are a real Obama supporter. Many who post on EP were too.
But I really hate to tell you this, we have been tracking on this crisis for some time and Black is right.
That's by digging in deep into the economics, the facts, the policy moves, the money.
Black is not alone of many economists experts who thought Obama would be different who are now having a wake up call.
Black does blast Obama in this interview.
I agree though, all of those economists, policy experts really should have been talking during the election, in the primaries.
Of course it didn't matter in the general because McCain had even worse policies.
FREAKING RIDICULOUS!!
I don't understand this latest speak-out by William Black. Why is this coming out now?? Black has known about this for several years now, and now this is on every major media channel. This is not new information. The only thing extraordinary is that it has been released onto major media outlets. Why now?
Something is not right. Black supported Obama? Why isn't he reaming Obama on this matter?? Look at who Obama has selected as his economic team....they're ALL CROOKS. But Black is completely silent on this matter. That's a big RED flag if you ask me. Obama is the man with the power. Black should be blasting Obama to fix this immediately. And Obama could fix this with a snap of his finger. Certainly Black knows this...I do! So why does Black come out in public with this devastating news? Where is his outrage at Obama??? With Congress???
Something doesn't smell right here. We are manipulated by an organized group of people that are experts at mind control. This latest revelation by Black is very suspicious in light of his outrage which is directed at only Treasury secretaries. His outrage should be placed with the president and Congress. CONGress has the ultimate power to protect the constitution, oversight, investigative powers, supoena power...and the power to stop this immediately.
Black solution is to get rid of the CEOs that have been in place through this financial disaster. That's strange. Why wouldn't we focus on bringing out the truth. Why wouldn't we start investigations and indictments? Why not issue supoenas immediately? So his solution is for the CEOs to walk away, after they have been enriched by billions of dollars, and to find someone new???? That's absurd!!! The system is the problem, and the people who have hijacked it. Black offers us nothing more than what we already knew. He has just focused our anger onto the treasury secretaries...AND NOT THE PRESIDENT AND CONGRESS where it should be. Outrageous!! I can't believe what I am hearing.
Be careful folks. They are walking us down a very strange road which is filled with deceit, fraud and lies. This is just another step they are forcing us to take. I do not trust Black anymore than the others, especially after this interview.
Barack Obama’s Corrupt Economic Team
Benjamin Bernanke(Jewish) - Chairman, Federal Reserve System
Timothy Geithner(Jewish) - Secretary, U.S. Treasury Department
Lawrence Summers(Jewish) - Chairman, National Economic Council
Paul Volcker(Jewish) - Chairman, Economic Recovery Advisory Board
Jared Bernstein(Jewish) - Chief Economist and Economic Adviser, Vice President
Peter Orszag(Jewish) - Director, Office of Management and Budget(OMB)
Gary Gensler(Jewish) - Chairman, Commodity Futures Trading Commission(CFTC)
Mary Schapiro(Jewish) - Chairman, Securities and Exchange Commission(SEC)
Sheila Bair(Jewish) - Chairman, Federal Deposit Insurance Corporation(FDIC)
Karen Mills(Jewish) - Administrator, Small Business Administration (SBA)
Christina Romer(Jewish husband) - Chairman, Council of Economic Advisers
You can remove one of the three to get innovation, the question becomes then of the quality and rate of such endeavors. Between democracy, freedom and capitalism. that's the right concoction where you get things really moving. But like I said, it is possible to get innovation removing one, just would you get the same stuff or less by removing one of the legs of this three legged stool? Reward for such strides towards innovation are also asked under each scenario.
This was my problem with the libertarians who constantly scream "freedom" or "liberty." Yet what do they mean by that? Pure freedom as having the ability to do whatever you want? The term "Democracy" has been bandied about to mean all sorts of things from voting rights to putting workers in control of a company. I would like some clarification here by the definition being used for Democracy. But still, it's the weekend, I just got home from a nice wedding and feeling to get the juices flowing.
Lets start with democracy. Now I'm assuming here you mean a real pluralistic voting environment where the average person can choose whom to vote for. Well, you have countries like Singapore which had essentially a one-party state under Lee Kwan Yu. There is also the Peoples Republic of China, Korea under the military juntas, Nazi Germany, the list goes on and on. But in each situation, you had companies or folks coming up with new products or innovations on established ones. Still, were they able to reap the fruits of their labor? In many instances, surprisingly yes, one could make money or get a better home. So long as you don't challenge the party in power, they don't care (see the PRC). Of course we then get to the next leg, Freedom.
Freedom, I'm speculating here (and please correct me if I'm wrong) meaning civil rights like freedom of movement, speech, etc. Well once more, you have instances where innovation has come even with the removal of freedom. Scientists, in the past and especially those deemed "enemies of the state" held in capitivity, created things for their overseers. The Russians used captured Nazi scientists, after the war and still under the "protection" of the KGB (or was it still called the NKVD??) to advance the USSR's rocket program. The scientists working on North Korea's rocket program have neither Democracy nor Freedom, yet they are on the cusp of launching the Taipong Dong 2 missile into orbit. In the Peoples Republic of China, one does not have many of the freedoms we take for granted, yet you have many new products coming out of that place (not to mention newly minted billionaires!).
This brings us to the last leg, capitalism. Now let me get classical here and go with it meaning a market based system where one is financially compensated for services rendered or products produced. Or for this argument, are those innovating getting paid or getting a piece of the action? Many scientists or have come up with products we use every day either also been entrapaneurs who started up businesses selling us those products, or employees in research & development for a company. Now they could get a royalty, but many don't, they just get a pay check and hopefully a bonus. But what if we removed financial compensation from this? Would we get innovation?
The average tinkerer may not be thinking about money when they're designing that gadget in their garage. Indeed, you've had many where the science of the product and not the economics were more important. But still, that inventor who had spent years in his garage or basement coming up with something, when they finished and showed it to a friend who said "that's cool, I'd definantly would use it" was probably thinking $$$ soon afterwards. But say we lived in a system where you invented something and the state just took it and at most all you got was a plaque commemorating your discovery, but then the state took your thing and made money off of it. The incentive may not be so great to come up with something.
Still, you have had inventors where it was not the money. During times of war you have had engineers come up with rifles or bombs while working for their armies. Sergei Simonov was one who helped come up with new guns for the Red Army during WW2. There was no financial incentive here, nor could he hope after the war for royalties. But nevermind war items, in centrally-planned economies where free markets are discouraged, you've had scientists coming up with products. In the former Eastern Bloc, because not all Western technology could be easily procured, scientists had to come up with ways to reverse engineer much of the technology, like a CMOS memory chip. East Germany had companies like VEB Robotron who routinely came up with products.
Of course we're leaving out the big economic white elephant in this discussion. Innovation does not come cheap. Whether it is a tinkerer in the garage utilizing his time and money, or a centrally-planned Industrierverband Fahrzeugbau, you can't ignore costs. To me this where the capitalism part really comes in, because in such systems you need the money to continue with research or even operate the enterprise. You can plan, of course, in a centrally-planned system, but variables can change. Set the price all you want on a commodity with a finite resource, but eventually pressure will build and costs will have to go up. The German Democratic Republic (GDR), like many of their Socialist bretheren, used to eat up a lot of the costs up front to maintain the appearance of stable prices. But we all saw what happened in the long run. In the end you need a market to better guage price/costs or things will get out of control.
So could you have innovation without Democracy or Freedom or Capitalism? The answer is yes, but the costs are in this author's opinion, too high.
Has current credit scores and ratings been taken into account when comparing the historic data? It seems Americans and American companies are broke. This coupled with the fact that interest rates are at record lows, I can't see anything but deflation for quite some time.
To see the correlation to major innovation and the size of the middle classes, social mobility, support for innovation.
A lot of innovation begets more innovation. In other words electricity and it's properties spawned a host of innovations, the car, the transistor, we can go through a list of things ...but somewhere someone was given support and enabled to do that initial research, investment.
It’s my understanding that the WMI lawyers have requested a Jury Trial. I hope that they (Weil, Gotshal & Manges) get it and examine (under oath); Paulson, Bair, OTS Officials & Dimon. I expect them to go for triple damages when it’s proven that the FDIC knowingly (or out of negligence, doesn’t matter) gifted more than the “whole bank” to JPM(c) (Providian for example). I’m not a lawyer but it’s obvious to me that JPMC’s recent Proof of Claim was a joke and a mockery of Judge Walrath’s order.
Abraham Lincoln (attributed): “You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time.”
It’s that simple folks – FDIC/JPM wants you to believe all was well with the fire-sale of WAMU but the truth is: The FDIC has no idea what they conveyed to JPM and as a result has recently resorted to claims of mismanagement and underfunding in an attempt to “thump their chest in public” even though their own sister agency (OTS) was in the WAMU books for months and said WAMU was well capitalized. And JPM while on one hand says (in public mind you) they paid fair value for the assets of WAMU and their purchase of WAMU brought great relief to JPM and its shareholders (you’d have to read JPM’s Shareholders PR), JPM contradicts itself in its own pleadings to the court saying that if there is a reversal of sorts – JPM stands to lose Billions (with an s) not 1.9 Billion…
I hope and hope for a jury trial – the good thing about Bankruptcy court is that they follow the the letter of the law to a “T”. We may not get triple damages but Paulson, Bair and Dimon will be severely damaged by their own words and actions – God Bless America.
FBI is currently investigating Wamu management. If they are found guilty of corruption, by all means send them to jail. However, the key for this law suit is the reckless and illegal action by a government agency. If Sheila Bair can do this to Wamu and Wachovia, she will continue to do it to other banks.
Not that many people pay attention to FDIC and many are still under the false impression that Sheila Bair cares about taxpayers. We all understand investments in stocks, bonds, even mutual funds are risky, but NOBODY, I mean, ABSOLUTELY NOBODY has the right to show such contempt to our deposits and savings that we have earned from working hard all our lives.
I believe a government agency can only function effectively and efficiently if its leader is intelligent and fair. When the leader is corrupt, systemic risk with irreversible consequences is involved and poses a threat to the entire nation. For example, given the scope of the crime, it would be shocking to find only "little" inspectors are responsible for the illegal Indymac backdating and the lack of investigation on Madoff's scam.
I believe this agency has several decisions detrimental to the US financial market today and I want to explain why.
What is FDIC? "The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress that maintains the stability and public confidence in the nation’s financial system by insuring deposits, examining and supervising financial institutions, and managing receiverships... The FDIC treats all employees, insured financial institutions, and other stakeholders with impartiality and mutual respect."
http://www.fdic.gov/about/mission/index.html
Im a Wamu shareholder so let's begin with this "biggest bank failure" in history. According to Sheila Bair, Wamu was facing intense liquidity pressure. OTS and FDIC decided to seize the bank and sell it to JP Morgan so deposits could be saved. In addition, this was done on a Thursday instead of the normal Friday because there was a press leak and Bair did not want to have a bank run.
But how did FDIC determine Wamu was in so much trouble that this seizure had to happen immediately? Wamu wasnt even on its problem bank list!
Besides, "Washington Mutual had a Tier 1 capital ratio of 8.4percent on Sept. 30, well above the 6 percent threshold that regulators use to classify a bank as well capitalized. JPMorgan Chase (NYSE: JPM), which purchased WaMu had a similar ratio of 8.9 percent. Wachovia... had a capital ratio of 7.5 percent as of Sept. 30, compared to Wells Fargo’s 8.6 percent. And National City had an 11 percent capitalratio, and yet had to sell out to PNC Financial Services (NYSE: PNC). By comparison, Bank of America (NYSE: BAC), considered one of the bedrock financial institutions, had a capital ratio at the end of the third quarter of 7.6 percent."
http://www.kciinvesting.com/articles/9864/1/Canadas-Big-Five-Banks-Compa...
In addition, "Washington Mutual, which already essentially 'went under' by nature of forced acquisition, has a tangible book/asset ratio of 3.66. And that number is on the higher end of the scale/list. So, the thinking would be that many of the institutions with ratios lower than that could potentially be in trouble as well.
The US banks & their tangible book/asset ratios:
BB&T (BBT) 6.86
PNC (PNC) 5.87
Northern Trust (NTRS) 5.51
Goldman Sachs (GS) 4.86
Morgan Stanley (MS) 4.35
JPMorgan (JPM) 3.83
Washington Mutual (WM) 3.66
---
Wells Fargo (WFC) 3.50
Merrill Lynch (MER) 2.84
Bank of America (BAC) 2.83
US Bancorp (USB) 2.74
Lehman Brothers (LEHMQ.PK) 2.39
Citigroup (C) 1.52"
http://seekingalpha.com/article/125071-a-look-at-banks-tangible-book-ass...
Most importantly, Washington Mutual Holding, Wamu's parent company, had over $4 billion in cash. Is that not enough to keep Wamu functional for a few more days as the bailout was being voted in Congress?
http://www.iht.com/articles/ap/2008/10/21/business/NA-US-Washington-Mutu...
We know Bear Stearns and Wachovia had approached the government for financial assistance but did Wamu? Without a doubt Wamu management was corrupt and made many poor and shady business decisions, contributing significantly to its downfall. As the mortgage crisis became more drastic, it engaged Goldman Sachs to shop for a buyer. Here was the strange thing, less than 2 weeks before FDIC seized Wamu Goldman actually upgraded Wamu; it "took the thrift off its "Americas Sell" list and said even though losses "continue to deliver body blows to the bank, the equity base is absorbing the pain.""
http://www.nypost.com/seven/09132008/business/now_wamu_has_breathing_roo...
The question was, could Wamu's books have deteriorated so much in just two weeks, or did Goldman miscalculate its recommendation?
Not only that, is FDIC immune to our law?
"F.D.I.C.’s October agreement with JPMorgan Chase and Washington Mutual allows Chase to pick and choose which of the city’s 148 Washington Mutual branches it will keep. Chase will then turn over the rejects to the F.D.I.C. But here’s the kicker: According to sources, the F.D.I.C. [CAN THEN SIMPLY TERMINATE THE LEASES OF THOSE REJECTED BRANCHES, ALL CONTRACTUAL OBLIGATIONS VOIDED]...
-I am Lanlord for on of the WAMU Location I don't know who to talk to about this Lease or how to pay my Mortgage.
SOMEONE PLEASE HELP ME
-I believe we spoke with each other. WaMu moved out as of 2/10/,leaving me with an empty building and half a million loan with Chase-WaMu. FDIC legalized the cherry pick by Chase without obligations.Jamie Dimon is really a very smart banker and good bzman,but at the price of all WaMu contractors, landlords,shareholders,etc.
-I got the same situtation. They stopped rent payment. I can not pay the mortgage and will lose the property."
http://www.observer.com/2008/real-estate/it-s-washmu-landlords-fear-gapi...
Things got even worse after this seizure because FDIC basically killed the bond market.
"Washington Mutual Inc. bondholders are likely to lose most of their money after the thrift was seized in the largest U.S. bank failure in history... It seems that WaMu's major debt holders have been stranded by regulatory intervention... The deal structure seems to be unprecedented in that it excludes bondholders at the holdco and bank levels from the major assets and liabilities of the operating bank.''"
http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=aCpGk.NPYZ3g
Banks were now having an even harder time raising capital via this common method (selling bonds). Wachovia became the first casualty as a result of this repercussion.
"The first thing that happened this morning: credit-default swaps blew out on Wachovia... Wachovia bondholders are wondering if they're next," Sauter said. Translation: options on Wachovia bonds showed confidence in the securities had collapsed. "Wachovia is on the ropes now because their financing costs are going through the roof. It's an absolute reaction against how FDIC sold WaMu," Sauter said.""
http://www.philly.com/philly/blogs/inq-phillydeals/Did_FDIC_doom_Wachovi...
"At 4 a.m., Bair told Steel that the FDIC had chosen Citi to buy most of its operations, turning down a Wachovia proposal to stay independent with government help, according to the filing" Instead, "FDIC pushed both sides to make an announcement on Monday, Sept. 28, before the markets opened or Wachovia would be seized."
http://www.charlotteobserver.com/business/story/536848.html
http://www.nypost.com/seven/10072008/business/fingerpointing_amid_the_wr...
By the way, since when did blackmailing become legal?
WSJ reported this “sworn affidavit filed this weekend in federal court by Wachovia Corp. Chief Executive Robert K. Steel… “Wachovia was under tremendous pressure from Citi and the regulators to conclude a transaction with Citigroup with definitive agreements by the following Monday, October 6, 2008″… The Company’s advisors and I told the board that we believed that unless a definitive merger agreement was signed with either Citigroup or Wells Fargo by the end of the day Friday, October 3, that the FDIC was prepared to place Wachovia’s banking subsidiaries into receivership,” Mr. Steel said in the affidavit.”
http://online.wsj.com/article/SB122325890301006757.html
"Wachovia saw its share price plummet 90% to below 70¢ when Wall Street opened today. Federal regulators helped to arrange a deal in which Citigroup will take on $42 billion (£23 billion) of losses on a $312 billion pool of loans held by Wachovia, which has a portfolio of risky mortgages."
http://www.financemarkets.co.uk/2008/09/29/citigroup-in-wachovia-rescue-...
Here was another questionable act by Sheila Bair and her agency. How did FDIC determine Citigroup was strong enough to rescue Wachovia? This choice made no sense because Citigroup itself needed a huge bailout just a month later.
"Under the plan, Citigroup and the government have identified a pool of about $306 billion in troubled assets. Citigroup will absorb the first $29 billion in losses in that portfolio. After that, three government agencies -- the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. -- will take on any additional losses, though Citigroup could have to share a small portion of additional losses... In addition, the Treasury Department also will inject $20 billion of fresh capital into Citigroup. That comes on top of the $25 billion infusion that Citigroup recently received as part of the the broader U.S. banking-industry bailout."
http://online.wsj.com/article/SB122747680752551447.html
Bair had boasted that the deal between Wamu and JP Morgan would "not cost taxpayers a dime."
http://www.entrepreneur.com/foxbusiness/141.html
Yet in this next transaction between Wachovia and Citigroup she changed her mind and decided it was reasonable to absorb over $200 billion in losses using tax money?
Since then, FDIC moved quickly and began seizing troubled banks one after another. It also started backing bank bonds because “It would be very costly” for banks to issue the debt without the guarantee." “Bank of America Corp., Goldman Sachs Group Inc. and the financing arm of General Electric Co. led $29.8 billion of FDIC- backed bond sales... companies began using the FDIC’s Temporary Liquidity Guarantee Program on Nov. 25..." Such guarantee by FDIC even expanded internationally:
"Morgan Stanley Sells FDIC-Backed Bonds in Hong Kong Dollars"
http://www.bloomberg.com/apps/news?pid=20601080&sid=ap0ErSe8PF1A&refer=asia
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3kprxkRPSyc&refer=home
Now what was wrong with this picture? FDIC is supposed to guarantee only deposits. Considering its reserve only had $19 billion (at the end of 2008) covering over $4 trillions in US deposits, why did it get involved with bond sales, not to mention it was FDIC's action on Wamu bondholders in the first place that basically destroyed the bond market?
Not only that, Sheila Bair had devised a loan modification plan to share losses and she pushed hard to get that program implemented.
"FDIC Chair Sheila Bair... outlined her ballyhooed plan to prevent an estimated 1.5 million foreclosures by the end of 2009. She plans to accomplish this feat by modifying more than two million loans at what she estimates would be a taxpayer cost of $24 billion... FDIC wants to offer private loan servicers a new incentive to modify troubled loans... FDIC would pay servicers $1,000 for every loan they modify, and taxpayers will share the losses if loans re-default... the White House estimates Ms. Bair's plan could cost as much as $70 billion next year -- not $24 billion"
http://bw.dowjones.com/article/SB122826619188174465.html
Is that FDIC's responsibility too? Because I do not see it mentioned anywhere on its website. Furthermore, was this program even effective? Not according to these articles:
"Foreclosure filings in the U.S. climbed 30 percent in February from a year earlier as the worsening economy thwarted efforts by the government and lenders to prevent homeowners from losing property, RealtyTrac Inc. said."
http://www.bloomberg.com/apps/news?pid=20601103&sid=aFS4Zbll06TU&refer=us
"Revised mortgage terms fail to curb defaults
Report shows most loan modifications don't lower payments. Delinquencies among prime borrowers soar...
Bair, a leading proponent of lowering loan payments to combat foreclosures and the damage they inflict on the economy, said many banks and loan servicers continued to provide only temporary relief to borrowers.
The report "unfortunately demonstrates a continued reliance by many servicers and lenders on repayment plans and modifications that do not reduce the borrower's monthly payment," Bair said in a statement.
Produced by the Treasury Department's bank regulators, the Office of the Comptroller of the Currency and the Office of Thrift Supervision, the report analyzed mortgages serviced by 13 large financial institutions, representing about two-thirds of all the outstanding home loans in the country.
The companies included such first-round recipients of the government's bank bailout funds as Bank of America, Wells Fargo, Citigroup and JPMorgan Chase, which collectively have received $145 billion in government money. "
http://www.latimes.com/business/la-fi-loanmods4-2009apr04,0,4466775.story
"Aid to Borrowers Not Preventing Rising Delinquency... More Help but More Defaults, Report Say"
http://www.washingtonpost.com/wp-dyn/content/story/2009/04/04/ST20090404...
In the mean time, since FDIC has been so busy expanding its jurisdiction, towns across the US suffered as a result of continuous bank seizures and more importantly, the painfully slow followup.
In Galena, Missouri, "Construction at the resort property is at a standstill and Shirato is still waiting for a first mortgage to be returned to Columbia Bank in Kansas. The FDIC put the bank in receivership in August... Shirato is expecting the FDIC to make a decision soon so work can start. “I’ve heard it so many times from the FDIC. We have a process to go through. We were originally told 30 to 60 days,” Shirato said. “It took us six weeks before we could get anyone from the FDIC to talk to us. We’ve had to let workers go because we can’t pay them.”
http://www.bransondailynews.com/story.php?storyID=10989
In Augusta, Georgia, a news article detailing "how FDIC and Government actions are bankrupting people and contributing to unemployment" was posted.
"Late last week a call from FDIC brought news that the FDIC has decided to foreclose on the White's Building, a project that up until the time of the bank's failure had been in good standing with its lenders and subcontractors... In less than 90 days the bank failure and FDIC incompetence have turned this project into a non-performing mess and nearly bankrupted our company and me personally... During this time the developers have been keeping the lights on by using funds from their personal savings and home equity loans in the hope of saving the project. They had made Augusta their home, a town that embraced them as one of their own and provided them such warmth that they were happy to give up all they had to this project."
"Loudermilk accuses FDIC representatives of everything from indifference to incompetence... Loudermilk says he has found three separate lenders willing to buy the loan from the FDIC, yet the agency is unwilling to work with him, reportedly because it would violate procedure and could possibly look like favoritism... Instead of taking one of the offers, the FDIC will most likely put the loan in a pool of non-performing loans and sell it for far less on the dollar, which, according to Griffin, is just being lazy"
http://www.mmdnewswire.com/fdic-government-actions-4738.html
http://metrospirit.com/index.php?cat=1990310070813675&ShowArticle_ID=110...
Instead of power grabbing, FDIC should be helping these people with all its resources. It should focus on assisting troubled banks in the best interest of all parties involved, like it was mandated to do so by the government. Check out this list. All the capital Goldman Sachs, JP Morgan, and others raised by selling FDIC- backed bonds could have been used to save of some of these financial institutions.
http://online.wsj.com/public/resources/documents/info-Failed_Banks-sort....
FDIC is supposed to stabilize the financial system. Sheila Bair herself said she was afraid of a Wamu bank run so she had to act immediately. So why was she creating a panic by declaring FDIC could be insolvent before the end the year and therefore it was necessary to raise bank fees? What was so different about FDIC between now and last year? Did she not realize her statement could have caused the biggest bank run in US history? In fact, within just a few days Bair made several contradictory statements regarding FDIC's potential insolvency and her concern for using taxpayers money as a solution to that problem.
March 4, 2009
"No Taxpayer Funds Bair rejected arguments that the agency should use government aid to rebuild the fund. The FDIC has authority to tap a $30 billion line of credit at the Treasury Department and legislation pending in Congress would boost the amount to $100 billion.“Banks, not taxpayers, are expected to fund the system,” Bair said. Asking for taxpayer support “could paint all banks with the ‘bailout’ brush.” "
http://www.bloomberg.com/apps/news?pid=20601103&sid=alsJZqIFuN3k&refer=news
March 6. 2009
"The Federal Deposit Insurance Corp. may reduce an emergency fee on banks to bolster reserves if Congress expands the agency’s borrowing authority with the Treasury Department to $100 billion, Chairman Sheila Bair said"
http://www.bloomberg.com/apps/news?pid=20601103&sid=aGewvZuHR3dk&refer=news
March 9, 2009
"Bair said the FDIC had enough money in its industry-funded reserves and was fully backed by the U.S. government. "The money will always be there," she said. "We can't run out of money.""
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE5282OL20090309
So the money has always been and will always be there, right? There is no way the US government would ever not give FDIC enough backing to ensure consumer deposits.
It is deceptive and unethical, to insert FDIC's request for $500 billion into the Credit Card Reform bill.
FDIC is out of control and shows complete contempt on the safety of our deposit. Who gave Sheila Bair the right to "expect her agency [to] finance as much as $500 billion in purchases of residential and commercial real estate loans?"
http://www.nbcnewyork.com/news/us_world/NATLGeithner-to-Unveil-Plan-to-....
When our Congress gave Paulson TARP, at least it could claim it was deceived because Paulson didnt reveal he was going to use some of the money to save European banks and made Goldman Sachs whole.
On the other hand, if our Congress again passes another bailout similar to TARP, when Sheila Bair has already publicly announced she was going to use as much as $500 billion for Geithner's toxic assets, then those representatives with the yes votes should resign.
In this bill, FDIC can do whatever it wants up to $100 billion and is allowed to borrow up to half a trillion requiring approval from only FDIC itself, the Fed, and the Secretary of Treasury (if Im reading this correctly that means pretty much Bair, Bernanke, and Geithner get to decide what to do with the extra $400 BILLION and they only need to REPORT a reason to Congress)-
“During the period beginning on the date of enactment of this paragraph and ending on December 31, 2010, if, upon the written recommendation of the Board of Directors (upon a vote of not less than two-thirds of the members of the Board of Directors) and the Board of Governors of the Federal Reserve System (upon a vote of not less than two-thirds of the members of such Board), the Secretary of the Treasury (in consultation with the President)…”
http://www.opencongress.org/bill/111-s541/text
This is basically a repeat of what happened with TARP, except the names and agencies have changed.
Sheila Bair= Hank Paulson
FDIC= AIG
A responsible regulator does not declare potential insolvency that could cause a huge bank run because "FDIC has enough money but wants cushion."
An intelligent regulator does not force Wachovia to sell itself to another insolvent bank Citigroup and cause Wachovia share price to plummet 90% in value within a few hours of trading, in addition to throwing over $200 billion of guarantee on taxpayers.
A well-prepared regulator does not support poor regulation of derivatives:
“[W]hen Bair was the head of the CFTC, and there was an intense debate over whether more regulation of derivatives was needed, here’s what Bair had to say (from an October 1993 Bloomberg article): THE Commodity Futures Trading Commission (CFTC) has given the US$ 4.8 trillion derivatives market a clean bill of health, saying that fundamental changes in the way the market is regulated are not needed…. “We have a strong affinity for derivatives at this agency,” said acting CFTC chairman Sheila Bair. “We like them.”"
http://economicsofcontempt.blogspot.com/2009/01/sheila-bair-hearts-deriv...
Who is regulating OTS/FDIC/SEC?
No more illegal backdating, No more guarantee except for deposits, and No more Madoff scam
That is why Washington Mutual must sue and lay the book out in open, and pray our Judicial branch still stands for truth and justice.
*imho*
that fosters innovation and supports creativity not American capitalism.
Both use gov't resources to protect oligarchs.
with financial conglomerate and other financial sector companies is broke. It rewards failure and encourages/promotes excessive risk. Congress tried to do something. But..
Treasury continues to protect the financial oligarchy:
Administration Seeks an Out on Bailout Rules for Firms
William K. Black on Bill Moyers Now.
Honestly, not to tout our own horns but Black's interview almost sounded like a summary of our blogs posts since we started.
I think you got the one fact I had not idea of...that is it a law they must put into receivership insolvent banks.
I don't think he is alone in being disgusted with Obama at all even though he was an Obamamaniac during the election. There are many out there at this point and I am sure it is tough when all had such high hopes, worked on campaigns and so on.
(Myself I thought Hillary was least objectionable program, but not "endorsed" but she assuredly had much better policy positions including wanting a RTC/HOLC type of structure straight from the S&L and Great Depression, but she also voted for all of this bail out money.....so....)
But there are a host of other issues where Obama is doing the corporate bidding, it is not just the financial crisis. Sorry the news is grim, I wish it was different.
Anyway, I hope all watch the entire video. I could post the interview on EP, but I'm unsure on PBS now's copyrights and if they care about that or not so just click on the link.
He does an exceptional job of explaining the history in layman's terms. If anyone is still fuzzy on how this whole Ponzi scheme works, the interview should help out quite a bit in clarifying.
Great reporting. Any notion of what this might translate into in terms of lost GDP for the years noted?
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