February 26, 2008

People won't be able to say they weren't warned: FDIC getting ready for well over 100 bank failures in the next two years. Wow.

Watch for this list to get REALLY long...

Sure to fail (in my personal first-amendment protected opinion) will be the toxic lenders with banking operations - IndyMac, Washington Mutual and Countrywide. They got access to cash from the FHLB by using hilariously dubious toxic loans as collateral, but that Ponzi Scheme will eventually unravel.


Smaller local banks will also be failing in droves, and not because of housing, but because of the credit unwinding and the blow-up in commercial real estate.

I've had confidential updates from an insider at the FDIC letting me know one of the biggest problems out there now is smaller banks who loaned money to developers to develop new subdivisions and strip malls, and then the development went belly-up or got mothballed. That money ain't gettin paid back either.

Get ready for RTC2. Get ready for the wave of sure-to-come bank failures. And GET YOUR MONEY OUT OF THE BANKS. Only FDIC-insured limits, and not even that in banks that are obviously going to go tits-up since it'll be a pain to get access to your dough.

Here's the FDIC
story in the WSJ care of Calculated Risk

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.

FDIC spokesman Andrew Gray said the agency was looking to bulk up "for preparedness purposes." ...

The agency, which insures accounts at more than 8,000 financial institutions, is also seeking to hire an outside firm that would help manage mortgages and other assets at insolvent banks, according to a newspaper advertisement.
...
"Regulators are bracing for well over 100 bank failures in the next 12 to 24 months, with concentrations in Rust Belt states like Michigan and Ohio, and the states that are suffering severe housing-market problems like California, Florida, and Georgia," said Jaret Seiberg, Washington policy analyst for financial-services firm Stanford Group.

28 comments:

Afterthought said...

I don't think it will be a problem to get the money because of our electronic banking system.

Your debit card will still work; the problem is that the money won't be worth the electrons they're printed on!

Anonymous said...

Keith,

Let's promote a bank panic, shall we? Could you imagine your hysteria on the front page of a newspaper. What is this, "dump and slump"?
As things get worse, try to say what you have to say responsibly.

a.creampuff said...

That story brings to mind Tom Wolfe's A Man In Full. Charlie Croaker is somewhere out there sweating...sweating...saddlebags!.

Paul E. Math said...

I'm thinking of the impact of bank bailouts on Roubini's deflation thesis. Won't the government have to create paper (or electronic) money to backstop these institutions?

So all the banks investments fail because they gave money to people who created no inherent value and could not repay their debts, yet the banks still owe money to their depositors, right? So the govt is going to have to print money out of nothing to give to depositors.

To me, we have less value in the system and more paper dollars with claims on that value. That makes the paper dollars worth less. Result: inflation.

Anonymous said...

Same goes for credit unions. Know your limits!

sandman said...

OK HPers, given the FDIC reqport, here's the question...

If cash is king, where should you store the cash (assuming you were 7+ figure liquid).

Caymans? Geneva? In a safe in my house?

Appreciate any thoughts/suggestions.

God Bless? America said...

Boy, the US flagwavers will not like reading this.

Let them keep their money in a US Bank only to be stolen and looted by the Fellow Americans...

Ask not what your country can do for you...

God Bless? America

Anonymous said...

FDIC to Add Staff as Bank Failures Loom
By Damian Paletta
Word Count: 622
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.
The FDIC is looking to bring back 25 retirees from its division of resolutions and receiverships. Many of these agency veterans likely worked for the FDIC during the late 1980s and early 1990s, when more than 1,000 financial institutions failed amid the savings-and-loan crisis.
FDIC spokesman Andrew Gray said the agency was looking to bulk up "for preparedness purposes." The division now has 223 employees, mostly based in Dallas.
The agency, ...


http://online.wsj.com/article/SB120398607404892133.html

Anonymous said...

The Rust Belt - a once great area that used to actually PRODUCE goods of value - now no more than a mere harbinger of what the rest of this country shall experience.

Tweet said...

I think it will be 1000 not 100 banks, a little bird told me so.

geekgrl said...

What's RTC2?

What are the alternatives to banks?

Not A Contestant said...

The smart thing to do is to load up a few thousand dollars on gift cards from your local grocery store, Target, Starbucks, Williams Sonoma, and other shops specializing in the necessities of living. When you can't get access to your cash, you'll still be able to eat using your gift card balance. This is The Greatest Real Estate Agent in the World's plan for survival.

Anonymous said...

I wonder what this will do to the check cashing places they have for illegals. Since banks no longer require a SS# to open an account anyway the check cash biz should have failed a long time ago. Now the checks won't be any good and the banks will be unable to pay on them.

What chain bank is a good one to put money into?

I am going to soon cash out my mutual funds and buy silver/gold; shoulda done it 2 years ago...I'd have doubled the money.

My checking acct. needs to go into a new bank that will not fail.

Anonymous said...

the big question is how much is President Obama going to make us all pay?

Anonymous said...

I think you'd have to be crazy to have any significant amount of money sitting in a bank account anyway. With rampant inflation eating away at your dollars day after day you'd have to be a total freakin tool.

Anonymous said...

can someone comment on the banks that are more safe? I have ING, and was thinking of opening hsbc

OriginalFrank said...

"With rampant inflation eating away at your dollars day after day you'd have to be a total freakin tool."

So what, dear informant, do you recommend? Stocks (sure to dive one of these days - soon)? Bonds (backed by broke municipalities or companies announcing financial problems previously unexpected)? US Bonds (subject to rampant inflation as new dollars are printed by the fed to back all the failed banks)? Gold (now at all time highs - will it go still higher or reset to norm)? Euros (with the EU's own huge structural problems that are just now starting to unwind -- behind the US)? Yen (1% interest)? RMB (with China's economy linked tightly to the US, and with their own systematic lack of transparency)?

Please let us know the safe investment that will return more than inflation -- we are eager to profit from your expertise!

Anonymous said...

Who wants to wait around for FDIC to kick back money 5 years after the banks close (I agree with the "1000 not 100" failure estimate above BTW). Peter Schiff advises in "CrashProof" to put money in gold (and silver and platinum) in the AAA-rated (really AAA, I swear) Perth Mint of Australia and GoldMoney.com. RBC also looks pretty sound and you can denominate in Loonies (really, I swear). Best also get to Wal-Mart and stock up on protein bars and cheap vitamins -- protein will be at a premium and vitamins can and will save your life from deficiencies -- good for barter too.

This is gonna suck...

Anonymous said...

US flagwavers? Where are you dailykooks keeping your money? Under your bed? You dailykooks pray for economic destruction and think you and your family and friends are immune to it?

You pledge allegience to yourself while sipping your tall latte?

Anonymous said...

Anonymous Anonymous said...

the big question is how much is President Obama going to make us all pay?

February 26, 2008 5:32 PM
===================================
Yeah. What is it going to cost us because the Republicans can't govern anything????

Sure hope Bush #2 has a lot of room on his ranch down in Paraguay to hide all those other Republicans.

Anonymous said...

OriginalFrank said...

So what, dear informant, do you recommend? Stocks (sure to dive one of these days - soon)? Bonds (backed by broke municipalities or companies announcing financial problems previously unexpected)? US Bonds (subject to rampant inflation as new dollars are printed by the fed to back all the failed banks)? Gold (now at all time highs - will it go still higher or reset to norm)? Euros (with the EU's own huge structural problems that are just now starting to unwind -- behind the US)? Yen (1% interest)? RMB (with China's economy linked tightly to the US, and with their own systematic lack of transparency)?

Please let us know the safe investment that will return more than inflation -- we are eager to profit from your expertise!

Nailed it! They just can't get wrap their widdle heads around it can they? Do you notice that the posts debating politics and bullshit get all the comments, but the real uglies like bank failures, ah not so much. Why is that? It is because when the shit hits the fan with the banks, everyone thinks somehow it's all going to be okay for me, while everyone else drowns. I will be okay!!

No you won't.

Anonymous said...

Blogger geekgrl said...

What's RTC2?

What are the alternatives to banks?

Soup Lines.

Anonymous said...

geekgrl asked "what is RTC2? "


The Resolution Trust Corporation was a US government-owned asset management company mandated to liquidate assets (primarily real estate-related assets, including mortgage loans) that had been assets of savings and loan associations ("S&Ls") declared insolvent by the Office of Thrift Supervision, as a consequence of the Savings and Loan crisis of the 1980s. It also took over the insurance functions of the former Federal Home Loan Bank Board. It was created by the Financial Institutions Reform Recovery and Enforcement Act (FIRREA), adopted in 1989. In 1995, its duties were transferred to the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation.

so what Keith is saying is alot of banks will go belly up again and the government will eventuall yhave to set up another organization to take them over, thereby making the taxpayer take it up the butt again.

dropthesoap said...

Not A Contestant said... "buy gift cards . . . blah blah" Let me educate you, not a contestant. Gift cards lose value over time if they are not used. They will be worthless in a matter of months. Anyways, with the way things are going, all those lousy over-priced stores may not exist in the near future.

Anonymous said...

The problem with getting all your money out of the banks is that most places still expect to be paid in Federal Reserve Notes, or the electronic equivalent.

Here's what we do...

As soon as the wage earner around here gets paid we go into action. First we send checks or electronically pay anyone who wants paying, the power bill, the landlord, and so on. Everything we can possibly do electronically we do, that way as soon as the wages hit the account we can send them on their way.

Three percent goes into the IRA, as that is what the wage earner's employer matches. Some other percent goes into some other retirement thing. Six percent goes into actual, fondleable metals. The silver pile is growing nicely. That way all our bases are covered.

A certain amount goes into an emergency fund, as a hedge against personal emergencies, not national/financial ones. Such as a suddenly ill cat, where an excess of Notes are needed. Half is kept in a savings account, half in a safe.

Then we make sure the pantry is well stocked. We have a six month lead time for everything from water to chocolate to ammo to trade goods (cigarettes and small bottles of alcohol). That's a hedge against national/financial type emergencies. By being very meticulously organized none of this costs much in any given month.

All of the above it taken care of withing 24 hours of the wages hitting the bank account. Just in case.

Anything after that goes to a large purchase fund and the little luxuries. Until we get down the last $50-100, then we leave it as a buffer. So, if the bank does go down we're only out that $50-100 and the current state of our non-cash emergency fund. It's a risk, but a minimal one.

I like the gift card idea, it has possibilities there. And we might just find some other way of paying out rent instead of a check. It's the only one we write in a month, and I'd hate to have the bank go down while the check was in the mail.

silver lining said...

You dumb masses don't get it do you? Paper money is exactly that - paper. It has zero intrinsic value and in a crisis the PTB will simply replace it with some other form of fiat crap. Gold and silver have intrinsic value and are recognized world wide as legitimate money.

Now please don't start with your survivalist bullshit about bullets, cans of beans, seeds, etc., as being even better forms of "money". That is nonsense as long as parts of the world can avoid the chaotic mess that is unfolding here in the USA.

I have junk silver coins that have appreciated 465% since 2003. How's that CD or stock index fund doing? I have an escape plan, do you?

LOL

Anonymous said...

CITIBANK!!!!!!!!!!!!

Anonymous said...

I actually had a checking account with NetBank when it went under. ING took over the next day and I had no problems. It's really no big deal.