Jan 10

Secrets and Lies of the Bailout (Rolling Stone, Jan 4, 2013):

It has been four long winters since the federal government, in the hulking, shaven-skulled, Alien Nation-esque form of then-Treasury Secretary Hank Paulson, committed $700 billion in taxpayer money to rescue Wall Street from its own chicanery and greed. To listen to the bankers and their allies in Washington tell it, you’d think the bailout was the best thing to hit the American economy since the invention of the assembly line. Not only did it prevent another Great Depression, we’ve been told, but the money has all been paid back, and the government even made a profit. No harm, no foul – right?


It was all a lie – one of the biggest and most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in – only temporarily, mind you – to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it. The result is one of those deals where one wrong decision early on blossoms into a lush nightmare of unintended consequences. We thought we were just letting a friend crash at the house for a few days; we ended up with a family of hillbillies who moved in forever, sleeping nine to a bed and building a meth lab on the front lawn.

Continue reading »

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Feb 26

(AP) –The number of banks at risk of failing made up nearly 12 percent of all federally insured banks in the final three months of 2010, the highest level in 18 years.

The Federal Deposit Insurance Corp said Wednesday that the number of banks on its confidential “problem” list rose to 884 in the October-December quarter, up from 860 in the previous quarter. Those are banks rated by examiners as having very low capital cushions against risk.

Twenty-two banks have failed so far this year. And more banks are at risk, even as reported the industry’s highest earnings as a group since the financial crisis hit three years ago.

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Jun 01

Congress looked serious about finance reform – until America’s biggest banks unleashed an army of 2,000 paid lobbyists

This article originally appeared in RS 1106 from June 10, 2010.

(Rolling Stone Magazine) — It’s early May in Washington, and something very weird is in the air. As Chris Dodd, Harry Reid and the rest of the compulsive dealmakers in the Senate barrel toward the finish line of the Restoring American Financial Stability Act – the massive, year-in-the-making effort to clean up the Wall Street crime swamp – word starts to spread on Capitol Hill that somebody forgot to kill the important reforms in the bill. As of the first week in May, the legislation still contains aggressive measures that could cost once-indomitable behemoths like Goldman Sachs and JP Morgan Chase tens of billions of dollars. Somehow, the bill has escaped the usual Senate-whorehouse orgy of mutual back-scratching, fine-print compromises and freeway-wide loopholes that screw any chance of meaningful change.

The real shocker is a thing known among Senate insiders as “716.” This section of an amendment would force America’s banking giants to either forgo their access to the public teat they receive through the Federal Reserve’s discount window, or give up the insanely risky, casino-style bets they’ve been making on derivatives. That means no more pawning off predatory interest-rate swaps on suckers in Greece, no more gathering balls of subprime shit into incomprehensible debt deals, no more getting idiot bookies like AIG to wrap the crappy mortgages in phony insurance. In short, 716 would take a chain saw to one of Wall Street’s most lucrative profit centers: Five of America’s biggest banks (Goldman, JP Morgan, Bank of America, Morgan Stanley and Citigroup) raked in some $30 billion in over-the-counter derivatives last year. By some estimates, more than half of JP Morgan’s trading revenue between 2006 and 2008 came from such derivatives. If 716 goes through, it would be a veritable Hiroshima to the era of greed. Continue reading »

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May 22


WASHINGTON (Wall Street Journal) — A total of 775 banks, or one-tenth of all U.S. banks, were on the Federal Deposit Insurance Corp.’s list of “problem” institutions in the first quarter, as bad loans in the commercial real-estate market weighed on bank balance sheets.

Poor loan performance in other sectors also continued to hurt banks, with the total number of loans at least three months past due climbing for the 16th consecutive quarter, FDIC officials said in a briefing on Thursday.

“The banking system still has many problems to work through, and we cannot ignore the possibility of more financial market volatility,” FDIC Chairman Sheila Bair said.

There were 702 on the FDIC’s “problem” bank list at the end of 2009 and 252 at the end of 2008. Continue reading »

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Mar 06

Related articles:

FDIC Reports 27 Percent Jump In Problem US Banks

FDIC Report: ‘We Were Broke And Getting Broker’


March 6 (Bloomberg) — Regulators shut banks in Maryland, Illinois, Florida and Utah, pushing the number of U.S. failures to 26 this year and placing more pressure on the Federal Deposit Insurance Corp. to dispose of a growing pile of toxic assets.

The FDIC was unable to find buyers for two banks — Centennial Bank in Ogden, Utah, and Waterfield Bank of Germantown, Maryland — according to statements posted on the agency’s Web site. In the largest of yesterday’s failures by assets, Boca Raton, Florida-based Sun American Bank was purchased by First-Citizens Bank & Trust Co.

“South Florida is a great market for our company, especially with our focus on individuals, small- to mid-sized businesses and the medical community,” Frank B. Holding Jr., chief executive officer of First-Citizens, said in a statement.

Lenders are collapsing at the fastest pace in 17 years amid losses on residential and commercial real estate loans made at the height of the market. U.S. “problem” banks climbed to the highest level since 1992 in the fourth quarter and FDIC Chairman Sheila Bair warned Feb. 23 that the pace of failures will “pick up” and exceed last year’s total of 140. Continue reading »

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Feb 23

WASHINGTON (Reuters) – The number of “problem” U.S. banks jumped 27 percent during the fourth quarter of 2009 to 702, the highest level since 1993 and a sign the industry’s recovery is still shaky, regulators reported on Tuesday.

The Federal Deposit Insurance Corp said the industry overall eked out a profit of $914 million for the quarter, benefiting from a healing economy, but said the improvement was concentrated in the largest banks.

FDIC Chairman Sheila Bair said the profit was a huge improvement over the $37.8 billion loss the industry reported in the fourth quarter of 2008. “It’s not that this was a strong quarter. It’s simply that everything was so bad a year ago,” Bair said in a statement. Continue reading »

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Jan 10


WASHINGTON, Jan 8 (Reuters) – U.S. regulators closed Horizon Bank (HRZB.O) of Bellingham, Washington, on Friday, kicking off what has been forecast as a peak year for small bank failures.

The Federal Deposit Insurance Corp said Horizon Bank had approximately $1.3 billion in total assets and $1.1 billion in total deposits as Sept. 30.

Friday’s bank failure is expected to cost the FDIC’s insurance fund a total of $539.1 million.

The 18 branches of Horizon Bank will reopen during their normal business hours beginning on Saturday as branches of Washington Federal Savings and Loan Association and deposits will continued to be insured by the FDIC.

Community banks are facing persistent pressure from deteriorating loans, many tied to commercial real estate projects that have collapsed or are in decline.

Regulators closed 140 banks last year, the highest level since 1992 when officials were still cleaning up from the savings and loan crisis. That compares with 25 in 2008 and only three in 2007.

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Dec 19

Related articles:

FDIC insurance fund is now broke, closes quarter $8.2 billion in debt

FDIC Insuring 8200 Banks with $9 Trillion in Deposits and ZERO in the Deposit Insurance Fund

If the FDIC runs out of money, then Timmy will surely help:

US National Debt Tops Debt Limit

Let’s see what happens if 500 (or even 1000) banks will fail in 2010:

Bank CEO: 1000 Banks to Fail In Next Two Years


Dec. 19 (Bloomberg) — Seven U.S. banks were seized by regulators, bringing this year’s total of failed lenders to 140 as financial companies are tested by the recession and the Federal Deposit Insurance Corp. anticipates more shutdowns.

Banks with $14.4 billion in total assets were closed yesterday in six U.S. states, the FDIC said in statements on its Web site. The agency is overseeing the dissolution of banks at the fastest pace in 17 years.

Two of the closures were in California. The assets and deposits of Federal Bank of California in Santa Monica were bought by closely held OneWest Bank, which acquired IndyMac Federal Bank this year. Imperial Capital Bank was bought by City National Corp., the Beverly Hills-based parent of City National Bank, which expanded in Southern California with the purchase.

“Imperial Capital Bank is a very good fit for City National, given that eight of its nine locations are in communities we serve,” City National Chief Executive Officer Russell Goldsmith said in a statement. “We’re pleased to contribute to the increased stability of the banking system.”

Federal Bank was the biggest lender seized yesterday, with $6.1 billion of assets and $4.5 billion in deposits, according to the FDIC. Based in La Jolla, Imperial Capital had assets of $4 billion and $2.8 billion in deposits.

Earlier this week, the FDIC boosted its 2010 budget by 56 percent to $4 billion to manage further shutdowns. The total budget will increase from $2.6 billion and the set-aside for bank failures doubles to $2.5 billion over this year, according to a proposal approved by the FDIC board. The agency staff will increase to 8,653 next year from 7,010 this year.

‘Larger Number’ of Failures

The budget “will ensure that we are prepared to handle an ever-larger number of bank failures next year, if that becomes necessary,” FDIC Chairman Sheila Bair said in a statement. Yesterday’s bank closings will cost the agency about $1.8 billion, according to the FDIC statements.

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Nov 25

As the number of problem U.S. banks swells to the hundreds, the Federal Deposit Insurance Corporation is increasingly hard-pressed to fill in the gaps where institutions have put depositor’s funds at risk.

Unfortunately, a dire prediction made by government officials in early 2009 has come true: the FDIC’s deposit insurance fund is now broke, according to published reports.

“The deposit insurance fund dropped by $18.6 billion during the third quarter of 2009 to negative $8.2 billion, as the Federal Deposit Insurance Corp. set aside $21.7 billion in provisions for additional bank failures,” The Wall Street Journal reported. “This is the second time in the agency’s history that the balance has fallen into negative territory.”

In March the FDIC took steps to stave off the possibility that its insurance fund would run dry, instituting new fees on banks, forcing them to pay to protect consumers.

The head of the Federal Deposit Insurance Corporation, Sheila Bair, wrote to bank leaders declaring that “without these assessments, the deposit insurance fund could become insolvent this year.”

According to the FDIC’s most recent quarterly report, there were 552 “problem” banking institutions in the U.S., the most since the end of 1993.

“In its state of the industry report, the F.D.I.C. reported that banks posted a $2.8 billion gain in the third quarter, after a $4.3 billion loss in the previous period,” The New York Times reported. “The number of bad loans of nearly every stripe – credit cards, mortgages, small business and commercial real estate – continue to grow, albeit at a slower pace.”

BizJournals added: “Fifty institutions failed during the third quarter, bringing the total number of failures in the first nine months of 2009 to 95. As of Nov. 21, 124 banks have failed nationwide.” Continue reading »

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Aug 04

Oh My God.

I write two Tickers on The FDIC and banks’ refusal to take their marks, and gee, you’d think someone over there might have read them!

SAN FRANCISCO (MarketWatch) — The Federal Deposit Insurance Corp. said late Monday that banks should recognize losses on home loans promptly and warned that failure to do so could delay efforts to mitigate the financial impact.

Institutions must analyze the collectibility of the loans they hold for investment at least every quarter, the FDIC said in a statement on its Web site.

Banks then have to keep an appropriate allowance for loan and lease losses, covering estimated credit losses on individually evaluated loans that are deemed to be impaired, and on groups of loans with similar risk characteristics, the regulator said.


That’s just too much.

Let me put it in simple English, Ms. Bair.  Here ‘ya go, in formal letter format:

From: The Tickerguy
To: Ms. Sheila Bair, FDIC Chairwoman
Regarding: Your FDIC Statement Nonsense

Dear Ms. Bair;

You know full well that essentially every bank in the nation, including the largest ones that went through the so-called “Stress Tests”, have been intentionally mis-marking loans “held for investment” at or near par even when there is essentially no chance these loans will be satisfied in full, and that this practice has been going on since the housing crisis began.

These include defaulted loans; there are literally millions of Americans that are living rent-free, right now, because their lender has sent out a NOD and then done nothing else, despite never paying another penny toward their mortgage.

Why is the bank doing this?

That’s not hard to figure out.

If the banks foreclose and sell the property then the sale price becomes the indisputable mark to market on that paper, and avoiding that mark is absolutely critical or these banks would be forced to recognize their own insolvency.

Thus we have people who live in their houses for more than a year with nothing more than a NOD in the mailbox, we have people who have had their homes foreclosed upon and then the bank has refused to perfect title (leading to stories in the media of foreclosed owners being chased for neglected upkeep, code violations and similar) and we have banks that have made a practice of bidding themselves in the foreclosure auction for the full mortgage amount, which of course is dramatically more than anyone else will pay for it.  They wind up “owning” their own foreclosure but the paper remains marked at the full mortgage amount, since that’s what they bid, even though there’s not a snowball’s chance in Hell that any real buyer would pay anything close to that amount (evidenced by the lack of bids at or above that amount at the auction!)

I have repeatedly stated (and shown my work) that there was likely $3 trillion in total “bad paper” in the banking system in residential mortgages alone.

We know for a fact that recovery is running in the neighborhood of 40% (including both first and second lines) from those loans that have been followed through from default to recovery. We know for a fact that bid lists of defaulted second lines circulate all the time and trade literally at a few pennies on the dollar; thus, a second line behind a defaulted first loan is essentially worth zero.

We also know that about $1 trillion in bad loans have been written down thus far, which means there is two trillion more to go, and then we get to talk about commercial real estate where “extend and pretend” has even become part of the vernacular of the trade!

Ms. Bair, this sort of misdirection is the worst sort of tripe.  You have two banks with self-identified negative Tier Capital Ratios, a circumstance that is never supposed to happen, but it has.

You have a third identified bank that had its last real chance for a rescue evaporate Friday and it reported, at the same time, a quarterly loss of more than five times its market capitalization.

All three of these institutions should have been seized LAST FRIDAY, but there’s a problem with doing that, isn’t there Ms. Bair?  It’s this table here showing how much money you have left in your insurance fund, and the average loss for a seized institution:

The last line in particular shows a paltry $8.26 billion dollars left.  Now since the FDIC thinks its cute to be somewhat secret about exactly how much money it has (and what of that is committed) we don’t have hard numbers, but this was a “best guess” sent to me the other night – and it looks about right.

So exactly how do you intend to close those three (and the other few hundred similarly-situated) banks and make sure Granny gets her $20,000 life savings back?  With your good looks?  Yes, I know, you have a potential $500 billion credit line from Treasury, but that line isn’t funded and in order to do so Turbo Tax Timmy would have to go auction off another $500 billion in Treasuries, and there might be a tiny problem with doing that, given the insane rate of issuance already taking place.

Continue reading »

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Mar 06

WASHINGTON — Senate Banking Committee Chairman Christopher Dodd is moving to allow the Federal Deposit Insurance Corp. to temporarily borrow as much as $500 billion from the Treasury Department.

The Connecticut Democrat’s effort — which comes in response to urging from FDIC Chairman Sheila Bair, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner — would give the FDIC access to more money to rebuild its fund that insures consumers’ deposits, which have been hard hit by a string of bank failures.

Last week, the FDIC proposed raising fees on banks in order to build up its deposit insurance fund, which had just $19 billion at the end of 2008. That idea provoked protests from banks, which said such a burden would worsen their already shaken condition. The Dodd bill, if it becomes law, would represent an alternative source of funding.

Mr. Dodd’s bill could also give the FDIC more firepower to help address “systemic risks” in the economy, potentially creating another source of bailout funds in addition to the $700 billion already appropriated by Congress.

Continue reading »

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Mar 04

March 4 (Bloomberg) — Federal Deposit Insurance Corp. Chairman Sheila Bair said the fund it uses to protect customer deposits at U.S. banks could dry up amid a surge in bank failures, as she responded to an industry outcry against new fees approved by the agency.

“Without these assessments, the deposit insurance fund could become insolvent this year,” Bair wrote in a March 2 letter to the industry. U.S. community banks plan to flood the FDIC with about 5,000 letters in protest of the fees, according to a trade group.

“A large number” of bank failures may occur through 2010 because of “rapidly deteriorating economic conditions,” Bair said in the letter. “Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative.”

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Mar 15

WASHINGTON — The Federal Deposit Insurance Corp. is taking steps to brace for an increase in failed financial institutions as the nation’s housing and credit markets continue to worsen…

Regulators are bracing for well over 100 bank failures in the next 12 to 24 months,… Continue reading »

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