Major Banks Say They Are Ready To Go Under.

Can someone explain to me how a bank can fail? I mean other than out right theft?

Very simple. Banks fail because they make loans to weak borrowers that cannot repay. As a result, they don't have enough in deposits on hand to cover deposits being withheld during normal day-to-day bank activity.

Banks have a fiduciary responsibility to make loans to people and companies that have the capacity to repay. They are lending depositor's funds - your money and my money held as deposit at the bank. So, if the loans don't get paid, we would lose our deposits. That's when the FDIC steps in.

reply to post by CookieMonster09


What about the other thousands of loans that are making payment? Where is that money going?

You cannot brainwash me into thinking the bank has only one lender. The banks have thousands of loans at any given time. Even when it was "loan heyday" they still made sure you could pay the loans... and many did.

So how exactly did the casino fail when the odds were rigged in their favor? Other than theft I mean.

What about the other thousands of loans that are making payment? Where is that money going?

Well, most of the banks that have failed have been small community banks. We are talking banks that have loan portfolios of, say, $250 Million or so.

If $50 Million of these loans go bad, which was not uncommon after the sub-prime crisis hit, the FDIC will step in and take over the bank. Yes, you do have performing loans, but that doesn't make up for the losses, which can be catastrophic to a small bank.

Remember, a lot of these small banks, especially in the South, were good ol' boy banks that had loosey-goosey lending standards. They gave crooked loans to friends and family, and most were given during a speculative real estate bubble.

Also, property values have dropped in the past few years. So, once the bank forecloses on the property, they now have to sell the property, oftentimes at a significantly reduced market value.

So, at closing, a bank writes a check to a Seller for $1 Million for a commercial property loan. That's $1 Million in deposits out the door. The property might be worth $1.5 Million when appraised just prior to closing. If the borrower defaults, the bank has to try to sell the property. What if that same property a year or two later can only be sold for $500,000? Sure, the bank may have collected some interest payments, but at the end of the day, they basically spent $1,000,000 and took in only $500,000, taking a $500,000 loss. Not to mention fees up the wazzoo - title fees, attorney fees, realtor fees, legal fees, foreclosure fees, etc.

reply to post by CookieMonster09

Originally posted by CookieMonster09

What about the other thousands of loans that are making payment? Where is that money going?

Well, most of the banks that have failed have been small community banks. We are talking banks that have loan portfolios of, say, $250 Million or so.

Thank you for your response.

I disagree.

Federal takeover of Fannie Mae and Freddie Mac

I would like to hear your answer for this.

Thank you.

Thank you for your response. I disagree. Federal takeover of Fannie Mae and Freddie Mac I would like to hear your answer for this. Thank you.

Freddie Mac and Fannie Mae aren't banks. They were government entities.

We were discussing bank failures, not governmental entities.

And, if you really want to understand why banks fail, just read the FDIC autopsy report for any failed bank in question. They will give you a long narrative about all of the factors that contributed to the bank's failure. In short, as I summarized earlier, the reason for bank failures is too many defaulted loans.

www.federalreserve.gov...

You can find the autopsy reports for failed banks at the web link above. These are called Material Loss Reports, and explain the causes for the particular bank failure in question.

This has been a long time coming. It's not a matter of if, but when. When this happens, the global bank will have an adequate excuse for coming into existence. It will start with the UN countries and the remaining countries will have no choice but to conform.

From 'too big to fail' to 'too massive to succeed'. Or move under it's own weight.

Corporations tend to centralize when internal operations get messy, and decentralize when they are too big and slow to respond to change.

reply to post by jude11


A few years, perhaps even decades of turmoil will be well-worth throwing off the bonds of our current corporate owners. I just hope it's a while before we're leashed again.

Originally posted by CookieMonster09

Can someone explain to me how a bank can fail? I mean other than out right theft?

Very simple. Banks fail because they make loans to weak borrowers that cannot repay. As a result, they don't have enough in deposits on hand to cover deposits being withheld during normal day-to-day bank activity.

Banks have a fiduciary responsibility to make loans to people and companies that have the capacity to repay. They are lending depositor's funds - your money and my money held as deposit at the bank. So, if the loans don't get paid, we would lose our deposits. That's when the FDIC steps in.

And the money they loan out as well as the interest simply does not exist. The only way to pay off all debt is to create more money, which is then used by banks to dole out and create more debt. The perfect system, everyone loses except for the bank! And when min wage goes up, a whole bunch of more money is printed so that the extra 75 cents an hour is quickly devalued until it's worth exactly what you were making before, in terms of material good.

Basically, they can legally tell you your standard of living is higher because the numbers are higher, but actually they're devaluing the numbers, so the numbers mean ****.

I'd say it's stealing in every way you look at it except for the banker's point of view, which is "teeeeeechnically...."

It's a lot like GNP. Most people think the higher the GNP the more well-off the country, but the fact is that most of the highest grossers in terms of GNP are actually well behind in terms of health, education, public service, etc.

A great example is the USA. We have by far the highest GDP, yet our personal health sucks comparitively to other places in the world... How can that be? We have all the money, can't we buy the best healthcare? Maybe. But a large portion of our GDP is generated by the sale of cigarettes and mcdonald's. (Serious statement, not an attack) Riddle solved.

reply to post by thegagefather

A great example is the USA. We have by far the highest GDP, yet our personal health sucks comparitively to other places in the world... How can that be? We have all the money, can't we buy the best healthcare? Maybe. But a large portion of our GDP is generated by the sale of cigarettes and mcdonald's. (Serious statement, not an attack) Riddle solved

It is a bit more complicated too though...

The highest GDP per capita countries also have some of the most legally agreeable atomospheres to corporate culture. So the US can have the highest GDP because it supports corporate interests, but these companies pocket all the money, and do not disperse it or recirculate it into the economy. The two things that causes are poor personal wealth in relation to GDP, and economic collapse when your system is built on consumer spending.

Originally posted by randomname
reply to post by trustnothing

 

canada has great banks because i'm sure they don't want to find out what will happen if they steal their funds.

i doubt canadians will occupy wallstreet, they'll most likely burn banks down and the cops will join in.

en.wikipedia.org...

Not likely.

The Bank of Canada (French: Banque du Canada) is Canada's central bank and "lender of last resort".[1] The Bank was created by an Act of Parliament (the Bank of Canada Act)[2] on July 3, 1934 as a privately owned corporation. In 1938, the Bank became a Crown corporation belonging to the Government of Canada.[3] The Minister of Finance (on behalf of Her Majesty in right of Canada) holds the entire share capital issued by the Bank. "Ultimately, the Bank is owned by the people of Canada."[4]

The role of the Bank is to "promote the economic and financial well-being of Canada."

We like our Federal Programs and a strong country with unified rights of people. I don't believe in a monied system, just the Venus System type of thing run by counsels of citizens, no less, no monopolies of political power or pontiffs. But otherwise, I consider the banks to be a servant to the people and should be run at no profit to big shots, but breaking even as a service to them. With better paid employees, everyone should be at least middle middle class according to their family size.

we have to do what the politicians say, and the politicians have to do what the banks say

They steal our money (tax) and make us slaves for lives (debt interests)

when will we take back our lives?

Ron Paul would remove the income tax, and make the markets free so interests would go down

And the money they loan out as well as the interest simply does not exist. The only way to pay off all debt is to create more money, which is then used by banks to dole out and create more debt. The perfect system, everyone loses except for the bank!

If interest doesn't exist, then just stop paying your mortgage, car note, or any other loan, and see what happens. You will be in for a rude awakening when you tell the lender that "interest simply does not exist". I think they'll disagree with you. But go ahead and take a shot at not paying your debts for a few months and test your theory.

Banks cannot create more money out of thin air. The government can print more money, but banks cannot magically print more money. Banks can generate more deposits through sales and marketing efforts, or offering a good CD rate to attract more deposits, but that's about all they can do.

Everyone loses except for the bank? What planet are you from? Banks have been shut down in record numbers since the crisis in 2008. Dozens upon dozens of banks have lost their shirt and gone under, laying off thousands of everyday working people. Banks got screwed over by borrowers that defaulted on their loans, and the banks were left holding the bag. Just read the autopsy reports from the Federal Reserve on why these banks failed: too aggressive lending in a speculative real estate market, and when the bubble burst, loans were not repaid and they couldn't recoup their losses. Whammo - FDIC shuts them down.

Go here: www.federalreserve.gov...

According to the Office of the Inspector General, in its review of recent bank failures, 31 of the 35 bank failures clustered within three peer groups: (1) 11 banks with $100 to $300 million in assets, (2) 16 banks with $300 million to $1 billion in assets, and (3) 4 banks with $1 to $3 billion in assets. I.e., most of the bank failures were smaller banks.

Why did these banks fail?

"For the 20 reviews that resulted in OIG reports, in general, the majority exhibited a common fact pattern that contributed to the respective bank’s failure. In addition to the economic decline that triggered asset quality deterioration and significant losses at each of the failed banks, common elements included (1) management pursuing aggressive growth objectives and making strategic choices that eventually proved to be poor decisions; (2) rapid loan portfolio growth exceeding the bank’s risk management capabilities and/or internal controls; (3) asset concentrations tied to commercial real estate (CRE) or construction, land, and land development (CLD) loans, which increased the bank’s vulnerability to changes in the marketplace and compounded the risks inherent in individual loans; and (4) management failing to raise sufficient capital to cushion mounting losses."

So, please, don't sit here and tell me that banks never lose. Good grief.

Originally posted by litterbaux
reply to post by CookieMonster09

 

What about the other thousands of loans that are making payment? Where is that money going?

You cannot brainwash me into thinking the bank has only one lender. The banks have thousands of loans at any given time. Even when it was "loan heyday" they still made sure you could pay the loans... and many did.

So how exactly did the casino fail when the odds were rigged in their favor? Other than theft I mean.

Fractional lending, derivatives - banks have gambled more money then the entire GDP of the globe. So even if a tiny fraction of those bets go bad, then they go under.

Let's put it this way. Banks lose, depositors lost their money, BUT BANKERS never loses.

How many of them end up in jail for their frauds upon the people and depositors?

They are still enjoying their bonuses, while the lower end staff gets booted out, depositors and minority shareholders shafted, borrowers whom were conned into thinking the gravy train will never end suddenly found their loans clawed back, and made homeless with their kids living right under the rain, the hot sun and cold winters.

Did the People force the bankers to take losing positions, or was it because of their unconscionable and unbridled greed in collusion with corrupt govt officials, casino stock exchanges, that cause the banks downfall, afterall, they are in the management positions and NOT the People.

Bankers must be held accountable for the mess they had created. Open your eyes to the widespread scorch earth greed policies they had done to our devastated world today - every nation closed to recession now.....

Truths and realities hurt and are painful....most of the time...but best confront them so that errors can be corrected to progress and evolve. This is not the end yet, nor need be..

Banks lose, depositors lost their money, BUT BANKERS never loses.

You're making sweeping generalizations about an entire industry. We have had over 300 banks fail in this country. I assure you, there are plenty of unemployed ex-bankers that have gone bankrupt since the crisis started in 2008.

Sure, you have some elite, highly successful CEO types, but they are not the norm. These types are rare.

The norm is the Teller making $10/hour, or the Assistant Manager making $25,000/year. These are the "bankers" that lost their jobs and can't find work.

Did the People force the bankers to take losing positions,

Yes, through their elected representatives. Everyone deserves a home, right? It's called the Community Reinvestment Act. Banks were forced by the government to make loans to people that clearly had no capacity to repay. If banks failed to comply, they faced fines and stiff penalties from the politicians in Washington.

Loosey goosey lending was a direct result of government intervention in the banking industry. Politicians were trying to appeal to the desires and wants of their electorate who wanted affordable housing.

I assure you, there were plenty of borrowers that fit the greed bill to a tee.

Originally posted by CookieMonster09

You're making sweeping generalizations about an entire industry. We have had over 300 banks fail in this country. I assure you, there are plenty of unemployed ex-bankers that have gone bankrupt since the crisis started in 2008.

Sure, you have some elite, highly successful CEO types, but they are not the norm. These types are rare.
.
Everyone deserves a home, right? It's called the Community Reinvestment Act. Banks were forced by the government to make loans to people that clearly had no capacity to repay. If banks failed to comply, they faced fines and stiff penalties from the politicians in Washington.

Loosey goosey lending was a direct result of government intervention in the banking industry. Politicians were trying to appeal to the desires and wants of their electorate who wanted affordable housing.

I assure you, there were plenty of borrowers that fit the greed bill to a tee.

You accuse me of sweeping generalizations. Yet you are guilty as well. I blame the bankers, yet you prefer to lay full blame upon consumers, many whom are only generally unsuspecting and trusting individuals.

I swiped at the bankers of 300 banks, many that had sold or merged with industry leaders. The truth is, none had been jailed for their fraud. Govts may had wanted to please citizens, as you allude, but can any govt constitutionally direct a banker on what to do, or had any govt official pressed a gun barrel to a banker or bankers head to tell him to lend freely?

And had govt force those banks to manipulate the markets and commit other derivative frauds?

In the end, that responsibility lays with bankers, for they are ones with the books, not the govt or the consumers. There can be no way to whitewash their crime of fraud.

You may not like the truth. No one does. But if we do not acknowledge those errors and correct them, but instead spin, play blame games or whitewash them, another banking disaster will come soon and we will never progress and evolve.

Yet you are guilty as well. I blame the bankers, yet you prefer to lay full blame upon consumers, many whom are only generally unsuspecting and trusting individuals.

Laughable. Have you read what the FBI had to say at the time about rampant mortgage fraud by organized rings of criminal mortgage brokers, borrowers, title companies, and appraisers?

Let's take a close look at what the FBI stated as early as 2008:

www.fbi.gov...

"Mortgage fraud is a material misstatement, misrepresentation, or omissions relied upon by an underwriter or lender to fund, purchase, or insure a loan." The lender - in this case, a bank - is the patsy that gets swindled by the borrower, not the other way around.

Banks lost big time:

"SARs (Suspicious Activity Reports filed by banks) reported in Fiscal Year 2008 revealed losses of more than $1.4 billion, an increase of 83.4 percent from Fiscal Year 2007."

Read that again. In 2008, banks reportedly lost $1.4 Billion on frauds perpetrated by borrowers, and mortgage brokers.

Heck, these same criminals even dipped into the Reverse Mortgage fraud arena:

"Unscrupulous loan officers, mortgage companies, investors, loan counselors, appraisers, builders, developers, and real estate agents are exploiting Home Equity Conversion Mortgages (HECMs)—also known as reverse mortgages—to defraud senior citizens. They recruit seniors through local churches, investment seminars, television, radio, billboard, and mailer advertisements, to commit the fraud primarily through equity theft, foreclosure rescue, and investment schemes."

These same criminals will even go so far as to burn the house to the ground to avoid foreclosure:

"Homeowners, property flippers, and investors are committing arson to avoid real estate foreclosure."

So, take a close read of the FBI reports from 2007 through the present. The FBI squarely places the blame for the current crisis on criminal borrowers and their cohorts -- all of whom colluded to defraud banks. Many of these mortgage fraud rings were orchestrated by organized crime. These rings used highly sophisticated techniques to deceitfully defraud the banks:

"Street gangs such as the Conservative Vice Lords, Black P. Stone Nation, New Breeds, Four Corner Hustlers, Bloods, and Outlaw Motorcycle Gang are also involved in various forms of mortgage loan origination fraud as a means to launder money from illicit drug proceeds. Additionally, African, Asian, Balkan, and Eurasian organized crime groups have also been linked to various mortgage fraud schemes."

Per the FBI's report on Mortgage Fraud in 2009, banks were the losers:

"According to the Federal Deposit Insurance Corporation (FDIC), 140 banks failed in 2009, costing the nation’s Deposit Insurance Fund $37.4 billion."

Why do you think more than 300 banks failed in the past few years? Because of mortgage fraud perpetrated by borrowers. Good grief:

"Loan origination fraud schemes involve falsifying a borrower’s financial information—such as income, assets, liabilities, employment, rent, and occupancy status—to qualify the buyer, who otherwise would be ineligible, for a mortgage loan. This is done by supplying fictitious bank statements, W-2 forms, and tax return documents to the borrower’s favor. Perpetrators also employ the use of stolen identities."

The truth is, none had been jailed for their fraud.

Not true. The former CEO of ex-mammoth mortgage giant Taylor, Bean & Whitaker was convicted and sent to jail for crimes perpetrated against Colonial Bank. His crimes resulted in the 6th largest bank failure in U.S. history.

Even at small community banks, such as FirstCity Bank in Stockbridge, Georgia, have resulted in successful prosecutions. FirstCity's CEO and SVP Lending Officer are in jail for their financial crimes.

can any govt constitutionally direct a banker on what to do, or had any govt official pressed a gun barrel to a banker or bankers head to tell him to lend freely?

Yes, they can and did. In fact, the banks were threatened intensely by politicians if they didn't start aggressively lending to sub-prime borrowers, especially in lower class neighborhoods. They were threatened with further regulation, fines, and stiff penalties if they didn't loosen lending standards. It was government interference at its worst.

One more item, from the FBI report on Mortgage Fraud in 2007:

"BasePoint Analytics, a fraud analysis and consulting service, analyzed more than 3 million loans and found that between 30 and 70 percent of early payment defaults (EPDs) are linked to significant misrepresentations in the original loan applications."

Read that again. As much as 70 percent of loans that fall delinquent are from borrowers that lied and misrepresented their financial condition at the time of loan application. Don't even try to tell me that borrowers were not at fault in this crisis.