Just a Little FDIC News - 117 Banks in Big Trouble, Profits Plunge 86%

Today is all DNC, all of the time to the point one is about to get absolutely nauseated listening to these 24/7 Cable pundit talking heads rambling on like Charlie Brown's teacher ...

so it's a very good time to release some bad news right?

The FDIC reports:

117 banks and thrifts were considered to be in trouble in the second quarter, up from 90 in the prior quarter and the biggest tally since mid-2003.

of course hidden further IndyMac will cost more:

The Federal Deposit Insurance Corp said on Tuesday it now expects IndyMac's failure in July to cost its insurance fund $8.9 billion, compared with the previous expected range of $4 billion to $8 billion

Another tasty treat: 34% of Georgia Banks are unprofitable

Bank profits plunge, down 86%. note to find a detailed report I had to go to China news!

Commercial banks and savings institutions insured by the U.S. federal government recorded net income of only 5 billion U.S. dollars in the second quarter of 2008, down by 86.5 percent from the year-ago level

Happy mindless convention coverage!

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Subprime crisis? Not anymore

Now it's a general mortgage crisis.

HOPE NOW’s monthly data shows that during July, foreclosures were initiated on 105,000 prime borrowers and 92,000 subprime borrowers. Prime foreclosure starts in July were well more than double the 51,000 recorded one year earlier, and up almost 10 percent from June; in comparison, subprime foreclosure starts in July were up 22 percent from one ago, and up 10 percent month-over-month as well.

“It’s easy for lawmakers to paint a picture of poor borrowers taken advantage of by big, bad lenders,” said one source, a bank executive that asked not to be named. “But that story falls apart when you start to see even those higher up the credit ladder struggle.”
Why this is likely to be the case lies in surging use of repayment plans by servicers dealing with prime borrowers — HOPE NOW’s data shows that 57,822 troubled prime borrowers received a repayment plan in July, equal to 72.3 percent of all workouts completed during the month. In comparison, just 48 percent of troubled subprime borrowers were placed into similar repayment plans, with servicers favoring loan modifications instead.

A similar reliance on repayment plans earlier on in the subprime credit cycle has proven to be at best a mixed blessing for investors, as HW covered in early January. On July 16, Moody’s Investors Service noted that 42 percent of subprime adjustable-rate mortgages modified during the first half of 2007 had become 90 or more days delinquent by the end of March 2008. That number was well north of 50 percent when looking at previously-modified loans 60 or more days delinquent.

Which means that a loss mitgation department’s heavy reliance on repayment plans for prime borrowers — either to keep roll rates acceptable, or because resources are being applied more directly towards subprime borrowers — could be setting up some servicers, and their investors, for a nasty surprise not too far down the road.

the 3rd wave is the killer

as I recall the ARM reset waves of the financial tsunami are the 1st wave was a majority percentage subprime and wave 2 is prime. What is the 3rd wave?

Arm Reset

Arm Reset Schedule (click to enlarge)

It's not that easy

The chart is technically correct, but it seems that some of those mortgage contracts will reset earlier if the home "owner" goes deeply into a negative equity position first.

For instance, many of those ARMs, which are supposed to reset 5-7 years after creation, allow negative amortization up to 110% or 125%. Millions of those home "owners" are only paying the minimum, and are thus losing equity by the day. With falling home prices they are running up against the negative equity limit sooner than expected.

maybe create a modified graph

For this is the reference. That has been an unanswered question for me. It was well documented people were funding the "stay afloat" to survive by tapping into their new evaluations with massive home equity loans. I hear little mention of those, say where the home is paid off or a much older mortgage and so on. How does that play in this debacle?

Bank Failure Fridays! Number 10 Announced!

Real Estate Lender Integrity Bank has failed.

Regions Bank of Birmingham, Ala., is assuming all of Integrity Bank’s $974 million in insured and uninsured deposits in 23,000 accounts, and about $34.4 million of the bank’s $1.1 billion in assets.

The remainder of Integrity’s assets are being retained by the Federal Deposit Insurance Corporation. The agency said it estimated that Integrity’s failure would cost its deposit insurance fund $250 million to $350 million

I sure hope that is an accurate estimate on the cost.

I'm so used to seeing Billion, even with a bank failure announcement the quantity million is a relief.

CBO Report Social Security Remains Constant, Medicare Explodes!

Alarmingly, the CBO shows Medicare rising to almost 35 percent of GDP. When IBM envisions its Global Collaberation, so much of that Big Brother monitoring of all of us will be medical devices. We can be sure that tech will fill the void in medical care we see already. Assembly line medicine will become the norm to the point where no medical provider is contacted except during life and death emergencies, and then for the wealthiest patients.

Reading the CBO report, outlays on Social Security remain constant for the next 30 years. A quiet remark in the report assumes that immigration levels will be high for young immigrants. If waves of young immigrants materialize as expected, why will the dollar contribution remain high when wages are so low and dropping?


The answer lies in the expected population increases. CBO has bought the line that waves of new immigrants are needed to buoy the economy and pay the Social Security benefits of the Baby Boomers and Gen-Xers.

Burton Leed

H.R. 676

That is the bill for universal single payer health care or the not for profit health care more along the lines of the English, French and Canadian systems.

This is one of the great lies, social security, if they stop raiding the funds, social security is solvent. (On that Friday Night Video series, David Walker does really show this to be true in one of his graphs) and the nightmare is Medicaid/Medicare.

We're just getting pummeled by profit land and because the US government is a huge buyer, they of course get soaked in terms of costs.

This little tidbit make health care more affordable I think has to happen, regardless of proposal out there because the costs will break any nation, any system, any idea unless they are brought down.

BTW: over in the bottom right hand column on this site are CBO and GAO feeds of their latest statistical reports. If only we could replace accurate information instead of these constant spinners on cable news and in the media. I'm not sure if they read these reports and if they do, go beyond the executive summary.

Ted Kennnedy's 1980 Proposal: Split Off Emergency Care

In the hapless interview with Roger Mudd of CBS, Ted Kennedy did his infamous Ralph Cramden "Hummida, Hummida, Hummida" when asked why he wanted to be POTUS. Kennedy wanted to start with the 'Major Medical'. He meant to include all the the non-routine care. That is an appropriate place to start for a combined government/not-for-profit care.

It is easier to understand Health Insurance when you divide the care into distinct components: emergency, routine, and medicinal. Government or non-profits can handle the emergency care. Private Insurance or Self-Insurance can do Medical and and third insurance is needed for treatments (medicine, drugs,equipment).

I favor keeping all but emergency care private for the sake of economic incentive. Having worked for the nation's largest private insurer, I cannot be in favor of an entirely private system. I witnessed entire floors of business analysts create Routine Denial Systems: the answer is always no.

One more angle on Insurance. In the 30's and 40's a fellow by the name of Walter Annenberg ran the Numbers racket for he mob. Some of his clients included Washington's most powereful like J.Edgar Hoover who used to make bets on the Numbers.

Annenberg, like Joe Kennedy, was smart enough to get out of the rackets before he was dead or in jail. So what new racket did Annenberg choose? Insurance! Like the Numbers racket, the sucker puts down a bet and the house makes a predictable take, like all forms of gaming. Wall Street calls the percentage-take the Claim Payout Ratio. Heaven help any company whose Claim Payout Ratio exceeds 79 percent.

By 1970, Walter Annenberg was appointed by Nixon to the Court of St. James, U.S. Ambassador to the U.K. As Eliza Doolittle sang 'Go to St. James so often, I will call it St. Jim."

Burton Leed

For Profit

I gotta agree, those insurance companies are inefficient, bureaucratic and to top if off, in the denial business. Add to that the massive profits on Wall Street from all of this and honestly I just don't see how they are going to bring costs down, which is an absolute must. To me, it doesn't matter what kind of system happens if they don't somehow get costs and efficiencies down and seemingly in Europe, they have actually done that with a not for profit system.

I'm thinking maybe they could divide it out somehow and maybe put vanity drugs, cosmetic surgeries that are not needed for reconstruction and so on over in some private sector.

I don't think just emergency should be not for profit because so much wouldn't end up in emergency if we had early screening and prevention. So, to me the focus needs to be in those areas before it gets so bad someone ends up in emergency.