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Banking On The Financial System? Not So Fast!
Hoh hoh hoh! We're finally seeing some recognition of what I've been talking about for the last two years!
Aug. 14 (Bloomberg) -- More than 150 publicly traded U.S. lenders own nonperforming loans that equal 5 percent or more of their holdings, a level that former regulators say can wipe out a bank’s equity and threaten its survival.
And Bloomberg appears to have recognized the key problem with these banks (all of which should have been shut over a year ago):
Excluding the stress-test list, banks with nonperformers above 5 percent had combined deposits of $193 billion, according to Bloomberg data. That’s almost 15 times the size of the FDIC’s deposit insurance fund at the end of the first quarter.
Yeah, that's a problem.
As a consequence of our government's refusal to face this problem head-on in 2007 and 2008 (despite many calling for it, myself included) we are nowhere near the end of this crisis, despite rallies in the stock market. Indeed, I remain convinced that recognition of reality will come fast and hard in the next year or so as these "not too big to fail" firms blow up one by one, forcing regulators to come in and close them, and finally, asset valuations are forced down to a realm that comports with reality.
Originally posted by Hastobemoretolife
What exactly happens during a "Bank Holiday"?
I know the banks close, but are we still able to make purchases with debit cards and write checks and what not, or is all that shut down too?
Emergency Banking Act
The Emergency Banking Act (the official title of which was the Emergency Banking Relief Act) was an act of the United States Congress spearheaded by President Franklin D. Roosevelt during the Great Depression. It was passed on March 9, 1933. The act allowed a plan that would close down insolvent banks and reorganize and reopen those banks strong enough to survive. In summary, the provisions of the act were as follows:
One Of Three Down; Is The FDIC Still Solvent?
Here we go!
Colonial, Alabama’s second-largest bank, is being closed by regulators today, the person said, becoming the largest U.S. bank failure of 2009 after an expansion into Florida saddled the lender with more than $1.7 billion in soured real-estate loans.
The FDIC usually waits until the close of business Friday; they must have had a slight problem with withdrawals......
Left unsaid is what's going to happen to the FDIC's deposit insurance fund on this one - my guess is that it will be ugly, as these guys were up to their necks in Florida on development projects that went bad. The "value" of that paper may be very close to zero; if the FDIC avoids doing one of their 40% loss deals I will be quite surprised.
A 40% loss on this one would, if my math is right, kill the rest of their insurance fund plus quite a bit and put the FDIC in the position of immediately needing to go hit up Treasury for more money.
That ought to be good for confidence, right?
Oh, there are two more on the "you're dead" list that I've been talking about for a while: CORUS and Guaranty, both of which have said they (as of last filing) have a negative Tier Capital Ratio, meaning that they are formally underwater and IMHO should have been seized months ago.
But don't worry, Treasury has an infinite credit card to keep funding the FDIC with, right?
"Heh Mr. Chinaman, can you spare an extra trillion - or three?"
When will find out details on this "seizure"? Does FDIC go hit up the treasury for more [s]fake cash[/s], US Dollars after this debacle? Is the FDIC not seizing the other two banks because they are desperately looking for a buyer for two institutions that nobody wants to touch? What happens if the FDIC goes insolvent? Also, what does BB&T gain off of buying the banks with an iron clad loss agreement?
I see so BB&T is jealous that they can't get their hands into the taxpayers pockets so they picked up a bank that would allow them to do so.