March 03, 2007

Too big to fail? Moody's thinks the US government won't let JP Morgan and more banks go belly up. Get the dollar printing presses ready!


Oh dear god this seems like a joke, but it's not. Moody's upgraded some of the banks about to get slaughtered by the subprime meltdown and credit crunch, thinking the US government won't let them fail.

I thought Fannie and Freddie were bad enough - but now the taxpayers would bail out banks that have made horrific decisions during the Late Great Housing Bubble and resulting collapse?

Wow.

Get ready America for days like you've never seen. You live in interesting times. Thanks HP'ers for the link.

JPMorgan Chase, Large U.S. Banks Have Ratings Raised by Moody's

JPMorgan Chase & Co., Bank of New York Co. and State Street Bank & Trust Co. gained higher credit ratings from Moody's Investors Service Inc., which said the U.S. government would back the banks if they faced default.

Moody's announced new guidelines for bank credit ratings last month that consider financial strength along with any support companies may get from government and financial institutions if they get into serious trouble. Such backing might be offered if regulators conclude the effects of a failure would be catastrophic for the nation's economy, a concept rooted in banks' financial woes in the 1980s.

``People already feel like they're too big to fail,'' said Jonathan Hatcher, senior research analyst for corporate bonds at Delaware Investments, which holds $98 billion in corporate bonds.

48 comments:

Mort said...

I have been saying this for a long time. Nobody with any real money will be hurt by this crash, only J6P and the pension funds. Why does anyone believe that the funds where congressmen and senators keep their money will be allowed to fail? Welcome to Gestapo Amerika sheep people.

Mort said...

Why don't the crooks just tell the U.S. public how much money they want? It would be cheaper to pay the crooks $100 billion up front, rather than have them necessitate a $15 trillion bailout because of their shenanigans. The Bush crime family is the worst thing to ever happen to this country.

Anonymous said...

Wow.

Anonymous said...

Just make sure you don't have more than $100,000 in any one bank because that 100,001'st dollar you'll never see again

Anonymous said...

This is where Bernanke needs to be firm.

"Obligations other than those of the US Treasury are not backed by the full faith of the US government, or the Federal Reserve system.

The Federal Reserve believes that markets ought to make appropriate judgement and pricing of private risk assuming such risk is indeed private. Assumptions about future actions of the Federal reserve not currently part of Fed policy ought to be avoided."

Anonymous said...

got gold

Anonymous said...

Lighten up assholes.

Anna Nicole Smith was just buried yesterday. Get off this mindless trivial and get with the program.

Anonymous said...

Who is going to fail first the people or the Federal Government?

http://boards.prudentbear.
com/bbs_read.asp?
mid=486128&tid=486128&fid=1
&start=1&sr=1&sb=1&snsa=A#M
486128

HBB said...

How about leaving cash in the brokerage account. I think it will be much safer there.

I would'nt start betting my money against these big guys just yet. These are the NSA's and CIA's of the financial world.

Especially when there are so many other players w/o a VIP status, I feel much more comfortable playing in a level field.

I am using the wait and watch approach as to what language the Govt/Fed use when the banks starts saying their feet are under water, and the water is rising.

Shakster said...

Look what they did for GM over the years,but in the end they both will go poof.GOOD!

gubmint welfare mafia said...

The government is no better than the Mafia. They are even better at shakedowns because they can take money directly from your paychecks before you even get to touch it. It started with Roosevelt and the GSE's and gold confiscation. It is getting more brazen with the Bush Mafia Famiglia.

Anonymous said...

yeah, it's a big philosophical question of "who takes responsibility for this?"

When was the "Bhopal chemical spill," everyone through up their hands and said: "if you hold Union Carbide responsible, they'll go out of business."

That's the reason why a collapse or war might be the only resolution to big problems-- God help us!

Anonymous said...

Ok fellows...

JP Morgan/Chase Manhattan (I don't need to say anything. Everyone knows this one... combined power of Morgan and Rockfeller)

Bank of New York (oldest bank in America, 1784, truely the birth of the nation)

State Street of Boston (the last financial powerhouse in beantown)

Bank of America (the conglomerate gorilla which needs to be stopped)

Citicorp (no need to elaborate)

Wells Fargo (the one who settled the west, think Burt Lancaster and Clint Eastwood)

HSBC (key bank of the once great British Empire)

If all of the above is hurting then what's left of the American empire?

buyerwillepb said...

There was a time when Rome was too big to fail...

and Greece

and Egypt

and Spain

and Great Britain.

See a pattern here?

The Student said...

I think Moody's is right. Not because it's proper but because it's the reality of how things work.

JPM is one of the owners of the system. Along with the other true owners (like the Bank of NY) they will do whatever is necessary to shift the burden/costs onto the taxpayer. And the taxpayers will LOVE IT because they will believe the wolves' bailout is righteous and good.

You who believe the men/women you vote into office are representing you and striving to enact law that makes financial sense are deluded. The only way you're being represented is if your net worth is at least 10 million and well-connected OR at least 25 million and make generous donations. Anything less and you're a nobody sheep to be ignored.

How many of you have had a Senator return your call? How many even know someone who has?

And the Fed? Please someone tell me why after reading this blog for over a year no one has asked how much money the Fed made (profited) last year? Anyone know? Is the private corp. known as The Federal Reserve for profit or not? I know my local pawn shop advertises they "help" the unserved people of meager means obtain loans but everyone knows it's for profit.

And who is the US Government? I think Moody's knows. And I think they know the ACTUAL owners of the system will have the "government's" representatives (that they LET you vote for) pass legislation to save the banks whether you like it or not.

Anonymous said...

It's just business school risk and reward. The people carry the risk and the MBAs get the reward.

Anonymous said...

The RTC set a bad precedent in the 1980s when it protected accounts over $100k and didn't pursue cheats like Neil Bush more aggressively. Moral hazard and all that. Then again, it was a Republican-run government at the time, so it's no wonder the rich got coddled. It will be the same this time.

You got what you voted for, America.

cashwasking said...

This terrible news for all you HPers waiting for the big crash in house prices. If Uncle Sam bails out these banks with boatloads of funny money, the resulting inflation will push RE prices to the Moon.

Hope you've learned to love those third-floor, 2 BR shi_tholes you're renting, 'cause that may be as good as it gets for people sitting on cash.

Meanwhile the supposedly f***ed debtors of all stripes will be laughing their asses off making a monthly mortgage payment that is pitifully small compared to what you pay for rent.

WhiteTower said...

Now, we all knew this.

We've been saying that the US gubmint would be bailing out lenders, just as it did during the S&L crisis.

Anonymous said...

nk failure happens, the FDIC's 100,000 guarantee doesn't mean you're getting your 100k. want your money safe? keep cash with you under the rock.

Anonymous said...

I don't know if the press's can go any faster - I'm giving her all I can captain.

Anonymous said...

wait, this might be good for shareholders, maybe the boards high paid members will stop ripping off shareholders and start "dealing," with government bailouters, not including the kickbacks, maybe the 100s million $ salaries might hit the "bargaining tables??!!

Anonymous said...

Yes, the government bailout is going to come by means of a massive devaluation of the dollar. And how will foreign holders feel about their dollar reserves losing value?

Hard assets said...

Isn't it just grand. We print up $1, $5,$10 etc. for about 3 cents each, and we use this funny money to buy Mercedes and Toyotas. When is the world going to catch on.

They think the U.S. has a deficit problem. The U.S. doesn't have the problem, it's the rest of the world. Remember the old saying owe the bank $50,000 and you have the problem, but owe the bank, Chinese and Japanese, $15 trillion and the foreign bank has the problem.

Anonymous said...

Wait a minute. The derivative market worldwide is worth over 370 trillion dollars. I don't think there's enough money in all the world's banks to soak up that amount of damage. At some point some banks will fail, and they're not all gonna be outside America. By the way, you could wait up to 99 years to get back the money in your FDIC-insured account. That's in the fine print nobody reads....

Joey said...

Keith, long time listener, first time caller. I must say, I respect that you left the USA to start a new life. This is my dream...I just am afraid to make the leap until I have enough savings....

Anonymous said...

The gov. (taxpayer) really needs to get out of the business of bailing these crappy companies out.

How the hell is the US ever going to get on the right economic path if all we do is keep bailing these stupid companies who make bad decisions, or crappy products (Chrysler anyone?), etc.

Not to mention the just plain crooks.

Anonymous said...

Ah yes, the Federal Government the source and solution to all our problems.........

Anonymous said...

Why does anybody hold large amounts of money (other than checking accounts) in a bank anyway?

Today, treasury bills and notes pay nearly as much as certificates of deposit, and they are tax free at the state level. In a high tax state (I am in CA, and used the Fidelity calculator), they can give better after-tax yield than any bank deposit. No BS. I just did the rate for the upcoming 6-month t-bill auction, about 5.05% and that's about 5.6% effective yield in CA.

Get a broker who allows you to buy treasury & GSE securities at auction for free (e.g. Fidelity).

There is a huge secondary market and no penalty, other than market fluctuations for cashing early.

E said...

You'll likely see nunuvit - not $1. The US consumer is about to get cut loose leaving only the military and the largest corporations to run essential services. Even the big banks will be allowed to "fail" - to wipe the debt away - but like before, they'll be revived and given new names.

harm said...

No reason for the banks to fail.
The crisis is in keith's mind, and
all his sheep-minded trolls

Anonymous said...

"Meanwhile the supposedly f***ed debtors of all stripes will be laughing their asses off making a monthly mortgage payment that is pitifully small compared to what you pay for rent."

You do not crasp the concept of hyperinflation. Wages are not going to rise automatically but day-to-day EXPENSES WILL RISE.

You might get 100 dollar rise one week but that probably won't do any good next week because prices have gone up again and again.

The interest rate of your mortgage might be 20+ percent. Try to pay 60 000 dollar interest per year for your 300 000 dollar ARM. Your mastecard interest rate might be 50 + percent.

Those with fixed interest loans will benefit but what is to good owning your house in some faraway suburban when gas costs 30 dollars per gallon?

You cannot afford the heating bill and monthly food costs are half of your salary. Your nice little suburban has turned effectively to unlivable hellhole.

Anonymous said...

I have faith in the US government, they put their name on the money. It says full faith and credit - right there!

Mort said...

They can't fail, because they own the system lock, stock, and barrel. The poor beleaguered dollar, we barely knew ya. The sheep will go baa while the money masters do as they see fit. I laugh at all the stupid sheeple. Bwahaha!!

duh duh duh said...

We all know there is absolutely no fraud, corruption or government waste in places like Chicago, LA or Palm Beach because they are run by Democrats. LMAO

The Dummycrat sheep are so naive

Anonymous said...

Why do the majority warn and advise that the Government will not make good on "Social Security" and other social programs and in the same breath claim it is all right for this same Government to bail out these bankrupt private financial institutions?

And FDR did not start this process of private money usurping the General Welfare. In fact FDR did the exact opposite by using the power granted to him under the constitution to place the bank rupt bankers of his day into receivership which he followed up by creating "regulations" which prevented these bankers from creating a mess all over again.

Over the last 15-20 years much of the regulatory laws enacted under FDR have been repealed by wide eyed doped up middle aged baby boomers in search of that next high.

This current financial and monetary meltdown or breakdown has been 3 decades in the making.

We require a President who will function as FDR did. Otherwise youre just whistling past the graveyard.

Anonymous said...

If the gov ends up bailing out these morons, I will be pissed. If these guys get saved, I had better get a huge check for being smart and not getting myself into this mess.

alan'sbuttboy said...

"You do not crasp the concept of hyperinflation. Wages are not going to rise automatically but day-to-day EXPENSES WILL RISE."

Never said there would be no pain. But interest rates typically have a cap, so even ARM holders will see a limit to their mortgage expenses. Renters OTOH, will be screwed as rents are increased monthly or even weekly and all those other expenses you mentioned hit them as well.

Inflation favors debtors over lenders or cash hoarders. That's why all the HPers here hope for a deflationary spiral. It an't gonna happen folks because Uncle Ben has that magic printing press...

Anonymous said...

Oh I see so banks are about to fail now. Uhmm is this before or after China dumps $1T? In late November China was supposed to have dumped all that money by now - or so I read on HP.

On and I recall reading also in November that some bank in NJ was about to go under too. Again, not happened yet.


Where's the delay?

Oh and I'm still waiting for that 70% price drop in California...where prices for the state as a whole were up in 2006 vs. 2005.

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

mort dude you need a hobby

Anonymous said...

Pehaps this is the birth pains of the New World Order. Let's remember these organizations have been unseen and unknown for decades and I can recall three names that can be undermining the great America. The Power Elite, the World Bank and a more conspiratal Illuminati. There is always some truth in rumor and stereotypes are based on undeniable facts. I have read that the great unraveling will start in 2007 mid year and not finish until 2012. I am no crazy conspiry theorist or a stand on a street corner crazy with a sign in big letters "the world will end tomorrow" with a peace sign at the bottom. But even to a novice this all looks easy to read and understand. I am saving my freeze dried (now sold at costco, I don't understand why, do they know something I don't?) food manufactured in China and get a couple of gallons of water (in case it stops raining can I blame global warming on Bush or China) because this looks like it is going to turn ugly. Maybe the world is really madder than they are saying about this war in Iraq and the killing of Mr. Hussein. They know that we are greedy and ugly american's and know that if they pull the rug from under us, oh well. Some people are quiet in their anger but the reprisals are deep and painful. All I can say is UH OH prepare for the fall. BTW My town is now talking bankruptcy and if there is no way to clean up the budget they will go into receivership. I wonder how many times that will play out over the country. All the anticipated property tax that I railed about month's ago. Wiped out. Now I see my garbage bill doubling as well as water, sewer, and anything the city can squeeze more money out of. I wondered how this all would affect me being a 14 year home owner now I know. "What's next" said the fly to the spider. "You'll know soon enough" said the spider to the fly.

Anonymous said...

FDIC:

Funds Disappear Into Cyberspace
F***ing Depositors Into Caskets

biff the realtor said...

It took three years for the NASDAQ to drop from 5200 to 1500. All the while the idiots were saying all is well while the markets slowly dropped. With each dead-cat bounce, the morons would come out of the woods to proclaim that the market had bottomed and the bears were all wrong.

If the market is fine, then why are foreclosures rising by 42% from 2005 to 2006 in a strong economy? People would have sold and cashed in on the supposed appreciation in their homes. Time to get the hamster going and connect the dots, Biff. We'll see who gets the last laugh when the first trillion dollars of ARM's reset this spring.

Anonymous said...

t took three years for the NASDAQ to drop from 5200 to 1500

Another renter with no clue regarding finance or history. Nasdaq hit it's 5048 (not 5200) peak in March 2000.

Anonymous said...

Another renter with no clue regarding finance or history. Nasdaq hit it's 5048 (not 5200) peak in March 2000 and was at 1500 in September 2001.

biff the realtor said...

The NASD all-time high was 5132, Biff. Anyway, it took 3 years for it to bottom while other Biffs like you were buying the dips and getting wiped out.

If you hear somebody outside, that's the Sheriff coming to remove all that junk you bought on the credit card and put a padlock on the door. Goodnite, Biff.

Anonymous said...

According to the FDIC, your insured deposits of a failed bank will only take a few days to transfer to your account at another FDIC insured bank.


http://www.fdic.gov/deposit/deposits/deposit/faqs/index.html