tag:blogger.com,1999:blog-2916809362071329011.post2031848470576897897..comments2024-01-06T21:11:14.509-05:00Comments on Bluegrass Pundit: Failed bank sues FDICBluegrass Pundithttp://www.blogger.com/profile/13692965298692361473noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-2916809362071329011.post-40534975626044225772009-09-09T18:06:05.182-04:002009-09-09T18:06:05.182-04:00"n a slap in the face to American taxpayers, ..."n a slap in the face to American taxpayers, Washington Mutual Inc has sued the FDIC for $13 billion dollars. We should file criminal charges against the officers of these failed banks. Perhaps we could teach them some humility."<br /><br />And maybe we should just kick the shit out of an idiot like you. Bair, Paulson, and Jamie Dimon conspired to bring down WAMU, so Dimon could obtain it for a pittance. Hopefully, that will be rectified soon. To you LOSERS who parrot the official line, and never bother to do real DD, YOU'RE the ones who come off looking like complete ASSES!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2916809362071329011.post-55144079369148788602009-03-26T07:31:00.000-04:002009-03-26T07:31:00.000-04:00FBI is investigating Wamu management and if they a...FBI is investigating Wamu management and if they are found guilty of corruption, they should be sent to jail. <BR/><BR/>However, this law suit against FDIC must prevail because Sheila Bair is out of control and she also needs to be investigated.<BR/><BR/>This is why we need better regulators and why Congress must watch how<BR/>these people spend our hard earned tax money.<BR/><BR/>http://www.foxnews.com/politics/2009/03/05/senate-moves-loan-fdic-bil...<BR/><BR/>Now that FDIC has received Congressional approval for an increase to<BR/>borrow up to at least $100 billion and again started advocating the<BR/>aggregator, or bad, bank idea, I feel it is important to re-examine<BR/>FDIC's inconsistent and irresponsible actions as well as their<BR/>consequences during this economic turmoil. I believe this agency has<BR/>made several decisions detrimental to the US financial market today<BR/>and I want to explain why.<BR/><BR/>What is FDIC? "The Federal Deposit Insurance Corporation (FDIC) is an<BR/>independent agency created by the Congress that maintains the<BR/>stability and public confidence in the nation’s financial system by<BR/>insuring deposits, examining and supervising financial institutions,<BR/>and managing receiverships... The FDIC treats all employees, insured<BR/>financial institutions, and other stakeholders with impartiality and<BR/>mutual respect."<BR/><BR/>http://www.fdic.gov/about/mission/index.html<BR/><BR/>Im a Wamu shareholder so let's begin with this "biggest bank failure"<BR/>in history. According to Sheila Bair, Wamu was facing intense<BR/>liquidity pressure. OTS and FDIC decided to seize the bank and sell it<BR/>to JP Morgan so deposits could be saved. In addition, this was done on<BR/>a Thursday instead of the normal Friday because there was a press leak<BR/>and Bair did not want to have a bank run.<BR/><BR/>But how did FDIC determine Wamu was in so much trouble that this<BR/>seizure had to happen immediately? Wamu wasnt even on its problem bank<BR/>list!<BR/><BR/>Besides, "Washington Mutual had a Tier 1 capital ratio of 8.4percent<BR/>on Sept. 30, well above the 6 percent threshold that regulators use to<BR/>classify a bank as well capitalized. JPMorgan Chase (NYSE: JPM), which<BR/>purchased WaMu had a similar ratio of 8.9 percent. Wachovia... had a<BR/>capital ratio of 7.5 percent as of Sept. 30, compared to Wells Fargo’s<BR/>8.6 percent. And National City had an 11 percent capitalratio, and yet<BR/>had to sell out to PNC Financial Services (NYSE: PNC). By comparison,<BR/>Bank of America (NYSE: BAC), considered one of the bedrock financial<BR/>institutions, had a capital ratio at the end of the third quarter of<BR/>7.6 percent."<BR/><BR/>http://www.kciinvesting.com/articles/9864/1/Canadas-Big-Five-Banks-Co...<BR/><BR/>In addition, "Washington Mutual, which already essentially 'went<BR/>under' by nature of forced acquisition, has a tangible book/asset<BR/>ratio of 3.66. And that number is on the higher end of the scale/list.<BR/>So, the thinking would be that many of the institutions with ratios<BR/>lower than that could potentially be in trouble as well.<BR/><BR/>The US banks & their tangible book/asset ratios:<BR/><BR/>BB&T (BBT) 6.86<BR/>PNC (PNC) 5.87<BR/>Northern Trust (NTRS) 5.51<BR/>Goldman Sachs (GS) 4.86<BR/>Morgan Stanley (MS) 4.35<BR/>JPMorgan (JPM) 3.83<BR/>Washington Mutual (WM) 3.66<BR/>---<BR/>Wells Fargo (WFC) 3.50<BR/>Merrill Lynch (MER) 2.84<BR/>Bank of America (BAC) 2.83<BR/>US Bancorp (USB) 2.74<BR/>Lehman Brothers (LEHMQ.PK) 2.39<BR/>Citigroup (C) 1.52"<BR/><BR/>http://seekingalpha.com/article/125071-a-look-at-banks-tangible-book-...<BR/><BR/>Most importantly, Washington Mutual Holding, Wamu's parent company,<BR/>had over $4 billion in cash. Is that not enough to keep Wamu<BR/>functional for a few more days as the bailout was being voted in<BR/>Congress?<BR/><BR/>http://www.iht.com/articles/ap/2008/10/21/business/NA-US-Washington-M...<BR/><BR/>We know Bear Stearns and Wachovia had approached the government for<BR/>financial assistance but did Wamu? Without a doubt Wamu management was<BR/>corrupt and made many poor and shady business decisions, contributing<BR/>significantly to its downfall. As the mortgage crisis became more<BR/>drastic, it engaged Goldman Sachs to shop for a buyer. Here was the<BR/>strange thing, less than 2 weeks before FDIC seized Wamu Goldman<BR/>actually upgraded Wamu; it "took the thrift off its "Americas Sell"<BR/>list and said even though losses "continue to deliver body blows to<BR/>the bank, the equity base is absorbing the pain.""<BR/><BR/>http://www.nypost.com/seven/09132008/business/now_wamu_has_breathing_...<BR/><BR/>The question was, could Wamu's books have deteriorated so much in just<BR/>two weeks, or did Goldman miscalculate its recommendation?<BR/><BR/>Things got even worse after this seizure because FDIC basically killed<BR/>the bond market.<BR/><BR/>"Washington Mutual Inc. bondholders are likely to lose most of their<BR/>money after the thrift was seized in the largest U.S. bank failure in<BR/>history... It seems that WaMu's major debt holders have been stranded<BR/>by regulatory intervention... The deal structure seems to be<BR/>unprecedented in that it excludes bondholders at the holdco and bank<BR/>levels from the major assets and liabilities of the operating bank.''"<BR/><BR/>http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=aCpGk....<BR/><BR/>Banks were now having an even harder time raising capital via this<BR/>common method (selling bonds). Wachovia became the first casualty as a<BR/>result of this repercussion.<BR/><BR/>"The first thing that happened this morning: credit-default swaps blew<BR/>out on Wachovia... Wachovia bondholders are wondering if they're<BR/>next," Sauter said. Translation: options on Wachovia bonds showed<BR/>confidence in the securities had collapsed. "Wachovia is on the ropes<BR/>now because their financing costs are going through the roof. It's an<BR/>absolute reaction against how FDIC sold WaMu," Sauter said.""<BR/><BR/>http://www.philly.com/philly/blogs/inq-phillydeals/Did_FDIC_doom_Wach...<BR/><BR/>"At 4 a.m., Bair told Steel that the FDIC had chosen Citi to buy most<BR/>of its operations, turning down a Wachovia proposal to stay<BR/>independent with government help, according to the filing" Instead,<BR/>"FDIC pushed both sides to make an announcement on Monday, Sept. 28,<BR/>before the markets opened or Wachovia would be seized."<BR/><BR/>http://www.charlotteobserver.com/business/story/536848.html<BR/>http://www.nypost.com/seven/10072008/business/fingerpointing_amid_the...<BR/><BR/>"Wachovia saw its share price plummet 90% to below 70¢ when Wall<BR/>Street opened today. Federal regulators helped to arrange a deal in<BR/>which Citigroup will take on $42 billion (£23 billion) of losses on a<BR/>$312 billion pool of loans held by Wachovia, which has a portfolio of<BR/>risky mortgages."<BR/><BR/>http://www.financemarkets.co.uk/2008/09/29/citigroup-in-wachovia-resc...<BR/><BR/>Here was another questionable act by Sheila Bair and her agency. How<BR/>did FDIC determine Citigroup was strong enough to rescue Wachovia?<BR/>This choice made no sense because Citigroup itself needed a huge<BR/>bailout just a month later.<BR/><BR/>"Under the plan, Citigroup and the government have identified a pool<BR/>of about $306 billion in troubled assets. Citigroup will absorb the<BR/>first $29 billion in losses in that portfolio. After that, three<BR/>government agencies -- the Treasury Department, the Federal Reserve<BR/>and the Federal Deposit Insurance Corp. -- will take on any additional<BR/>losses, though Citigroup could have to share a small portion of<BR/>additional losses... In addition, the Treasury Department also will<BR/>inject $20 billion of fresh capital into Citigroup. That comes on top<BR/>of the $25 billion infusion that Citigroup recently received as part<BR/>of the the broader U.S. banking-industry bailout."<BR/><BR/>http://online.wsj.com/article/SB122747680752551447.html<BR/><BR/>Bair had boasted that the deal between Wamu and JP Morgan would "not<BR/>cost taxpayers a dime."<BR/><BR/>http://www.entrepreneur.com/foxbusiness/141.html<BR/><BR/>Yet in this next transaction between Wachovia and Citigroup she<BR/>changed her mind and decided it was reasonable to absorb over $200<BR/>billion in losses using tax money?<BR/><BR/>Since then, FDIC moved quickly and began seizing troubled banks one<BR/>after another. It also started backing bank bonds because “It would be<BR/>very costly” for banks to issue the debt without the guarantee." “Bank<BR/>of America Corp., Goldman Sachs Group Inc. and the financing arm of<BR/>General Electric Co. led $29.8 billion of FDIC- backed bond sales...<BR/>companies began using the FDIC’s Temporary Liquidity Guarantee Program<BR/>on Nov. 25..." Such guarantee by FDIC even expanded internationally:<BR/><BR/>"Morgan Stanley Sells FDIC-Backed Bonds in Hong Kong Dollars"<BR/><BR/>http://www.bloomberg.com/apps/news?pid=20601080&sid=ap0ErSe8PF1A&refe...<BR/>http://www.bloomberg.com/apps/news?pid=20601087&sid=a3kprxkRPSyc&refe...<BR/><BR/>Now what was wrong with this picture? FDIC is supposed to guarantee<BR/>only deposits. Considering its reserve only had a few billions<BR/>covering trillions in US deposits, why did it get involved with bond<BR/>sales, not to mention it was FDIC's action on Wamu bondholders in the<BR/>first place that basically destroyed the bond market?<BR/><BR/>Not only that, Sheila Bair had devised a loan modification plan to<BR/>share losses and she pushed hard to get that program implemented.<BR/><BR/>"FDIC Chair Sheila Bair... outlined her ballyhooed plan to prevent an<BR/>estimated 1.5 million foreclosures by the end of 2009. She plans to<BR/>accomplish this feat by modifying more than two million loans at what<BR/>she estimates would be a taxpayer cost of $24 billion... FDIC wants to<BR/>offer private loan servicers a new incentive to modify troubled<BR/>loans... FDIC would pay servicers $1,000 for every loan they modify,<BR/>and taxpayers will share the losses if loans re-default... the White<BR/>House estimates Ms. Bair's plan could cost as much as $70 billion next<BR/>year -- not $24 billion"<BR/><BR/>http://bw.dowjones.com/article/SB122826619188174465.html<BR/><BR/>Is that FDIC's responsibility too? Because I do not see it mentioned<BR/>anywhere on its website. Furthermore, was this program even effective?<BR/>Not according to this article:<BR/><BR/>"Foreclosure filings in the U.S. climbed 30 percent in February from a<BR/>year earlier as the worsening economy thwarted efforts by the<BR/>government and lenders to prevent homeowners from losing property,<BR/>RealtyTrac Inc. said."<BR/><BR/>http://www.bloomberg.com/apps/news?pid=20601103&sid=aFS4Zbll06TU&refe...<BR/><BR/>In the meantime, since FDIC has been so busy expanding its<BR/>jurisdiction, towns across the US suffered as a result of continuous<BR/>bank seizures and more importantly, the painfully slow followup.<BR/><BR/>In Galena, Missouri, "Construction at the resort property is at a<BR/>standstill and Shirato is still waiting for a first mortgage to be<BR/>returned to Columbia Bank in Kansas. The FDIC put the bank in<BR/>receivership in August... Shirato is expecting the FDIC to make a<BR/>decision soon so work can start. “I’ve heard it so many times from the<BR/>FDIC. We have a process to go through. We were originally told 30 to<BR/>60 days,” Shirato said. “It took us six weeks before we could get<BR/>anyone from the FDIC to talk to us. We’ve had to let workers go<BR/>because we can’t pay them.”<BR/><BR/>http://www.bransondailynews.com/story.php?storyID=10989<BR/><BR/>In Augusta, Georgia, a news article detailing "how FDIC and Government<BR/>actions are bankrupting people and contributing to unemployment" was<BR/>posted.<BR/><BR/>"Late last week a call from FDIC brought news that the FDIC has<BR/>decided to foreclose on the White's Building, a project that up until<BR/>the time of the bank's failure had been in good standing with its<BR/>lenders and subcontractors... In less than 90 days the bank failure<BR/>and FDIC incompetence have turned this project into a non-performing<BR/>mess and nearly bankrupted our company and me personally... During<BR/>this time the developers have been keeping the lights on by using<BR/>funds from their personal savings and home equity loans in the hope of<BR/>saving the project. They had made Augusta their home, a town that<BR/>embraced them as one of their own and provided them such warmth that<BR/>they were happy to give up all they had to this project."<BR/><BR/>"Loudermilk accuses FDIC representatives of everything from<BR/>indifference to incompetence... Loudermilk says he has found three<BR/>separate lenders willing to buy the loan from the FDIC, yet the agency<BR/>is unwilling to work with him, reportedly because it would violate<BR/>procedure and could possibly look like favoritism... Instead of taking<BR/>one of the offers, the FDIC will most likely put the loan in a pool of<BR/>non-performing loans and sell it for far less on the dollar, which,<BR/>according to Griffin, is just being lazy"<BR/><BR/>http://www.mmdnewswire.com/fdic-government-actions-4738.html<BR/>http://metrospirit.com/index.php?cat=1990310070813675&ShowArticle_ID=...<BR/><BR/>And by the way, so much for the effectiveness of Wamu rescue by FDIC<BR/>and JP Morgan. FDIC could have just issued a statement that all<BR/>deposits were safe to combat any further Wamu bank run.<BR/><BR/>"JPMorgan to Cut 2,800 Jobs at WaMu, Total to 12,000"<BR/><BR/>http://www.bloomberg.com/apps/news?pid=20601087&sid=aw1x8BUADEKk&refe...<BR/><BR/>Instead of power grabbing, FDIC should be helping these people with<BR/>all its resources. It should focus on assisting troubled banks in the<BR/>best interest of all parties involved, like it was mandated to do so<BR/>by the government. Check out this list. All the capital Goldman Sachs,<BR/>JP Morgan, and others raised by selling FDIC- backed bonds could have<BR/>been used to save of some of these financial institutions. Besides,<BR/>why would Goldman or JP Morgan need this assisted injection of capital<BR/>in the first place? They have repeated over and over again that they<BR/>were financially sound!<BR/><BR/>http://online.wsj.com/public/resources/documents/info-Failed_Banks-so...<BR/><BR/>FDIC is supposed to stabilize the financial system. Sheila Bair<BR/>herself said she was afraid of a Wamu bank run so she had to act<BR/>immediately. So why was she creating a panic by declaring FDIC could<BR/>be insolvent before the end the year and therefore it was necessary to<BR/>raise bank fees? What was so different about FDIC between now and last<BR/>year? Did she not realize her statement could have caused the biggest<BR/>bank run in US history? In fact, within just a few days Bair made<BR/>several contradictory statements regarding FDIC's potential insolvency<BR/>and her concern for using taxpayers money as a solution to that<BR/>problem.<BR/><BR/>March 4, 2009<BR/>"No Taxpayer Funds Bair rejected arguments that the agency should use<BR/>government aid to rebuild the fund. The FDIC has authority to tap a<BR/>$30 billion line of credit at the Treasury Department and legislation<BR/>pending in Congress would boost the amount to $100 billion.“Banks, not<BR/>taxpayers, are expected to fund the system,” Bair said. Asking for<BR/>taxpayer support “could paint all banks with the ‘bailout’ brush.” "<BR/><BR/>http://www.bloomberg.com/apps/news?pid=20601103&sid=alsJZqIFuN3k&refe...<BR/><BR/>March 6. 2009<BR/>"The Federal Deposit Insurance Corp. may reduce an emergency fee on<BR/>banks to bolster reserves if Congress expands the agency’s borrowing<BR/>authority with the Treasury Department to $100 billion, Chairman<BR/>Sheila Bair said"<BR/><BR/>http://www.bloomberg.com/apps/news?pid=20601103&sid=aGewvZuHR3dk&refe...<BR/><BR/>March 9, 2009<BR/>"Bair said the FDIC had enough money in its industry-funded reserves<BR/>and was fully backed by the U.S. government. "The money will always be<BR/>there," she said. "We can't run out of money.""<BR/><BR/>http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE5282OL20090309<BR/><BR/>So the money has always been and will always be there, right? There is<BR/>no way the US government would ever not give FDIC enough backing to<BR/>ensure consumer deposits are 100% safe.<BR/><BR/>Coincidentally, the House voted and passed a bill raising FDIC's<BR/>borrowing limit to $100 billion from $30 billion at the same time. In<BR/>addition, introduced in the Senate by Chris Dodd, with the Fed,<BR/>Treasury, and Congressional approval that credit line can increase up<BR/>to $500 billion. Does this even make sense? Her original decision to<BR/>uniformly raise charges on all banks, including the smaller but<BR/>responsible ones, would net her about $27 billion this year. Thus the<BR/>most increase she should have asked Congress for was $27 billion,<BR/>making the total drawing power at $57 billion. Where did that $100-<BR/>$500 billion number come from?<BR/><BR/>What is even more troubling is how FDIC plans to use that money. The<BR/>Congress should have known better and stipulated that this money must<BR/>only be used to protect bank deposits. Instead, it looks like we now<BR/>may have another Hank Paulson with billions to spend, courtesy of some<BR/>of these gullible Congressional leaders.<BR/><BR/>It is pathetic that so many elected officials failed to take into<BR/>account of the fact that "when Bair was the head of the CFTC, and<BR/>there was an intense debate over whether more regulation of<BR/>derivatives was needed, here's what Bair had to say (from an October<BR/>1993 Bloomberg article): THE Commodity Futures Trading Commission<BR/>(CFTC) has given the US$ 4.8 trillion derivatives market a clean bill<BR/>of health, saying that fundamental changes in the way the market is<BR/>regulated are not needed.... "We have a strong affinity for<BR/>derivatives at this agency," said acting CFTC chairman Sheila Bair.<BR/>"We like them.""<BR/><BR/>http://209.85.173.132/search?q=cache:ELvanw-xrHgJ:economicsofcontempt...<BR/><BR/>Worse, here is what FDIC feels about the bad bank idea. "FDIC says<BR/>U.S. toxic asset plan means taxpayer profits." It would be beyond<BR/>ridiculous if our Congress actually believes this assesement, coming<BR/>from the same individual who liked derivatives and who believed<BR/>Citigroup was strong enough to rescue Wachovia.<BR/><BR/>http://www.reuters.com/article/ousiv/idUSTRE52A7PT20090311<BR/><BR/>It is time for a change, a change for a better and more intelligent<BR/>regulator. We need someone who actually understands FDIC's role and<BR/>executes its responsibilities in a prudent and impartial manner. We<BR/>need someone who really cares about stabilizing banks and who acts in<BR/>the best interest of all parties involved. Add up all the amount of<BR/>bond FDIC is backing to Wachovia's 90% drop in share price to Wamu's<BR/>seizure resulting in job losses and savings and investments, you can<BR/>see how much confidence and trust we have placed in our financial<BR/>institutions were lost because of FDIC actions.<BR/><BR/>After all, "when we're putting that kind of money into the banks to<BR/>keep them solvent, why is the FDIC taking billions out?"<BR/><BR/>http://online.wsj.com/article/SB123612634762624059.html<BR/><BR/>Update- Maybe this is why Senator Chris Dodd recently introduced a bill to further increase FDIC's borrowing power to $500 billion; its not for deposit protection, not for more bank failures, but most likely to fund Geithner's "legacy asset" plan. http://ca.news.yahoo.com/s/capress/090323/business/us_bank_rescue <BR/><BR/>*imho*Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2916809362071329011.post-32669096083052643892009-03-22T17:25:00.000-04:002009-03-22T17:25:00.000-04:00It certainly bears looking into. At the very least...It certainly bears looking into. At the very least they seemed to be leveraged well beyond what was allowed. <BR/><BR/>I hear a lot of demand for stringing up the bankers. I'll reserve judgment until I see a specific law broken.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2916809362071329011.post-87972186285634167892009-03-22T15:48:00.000-04:002009-03-22T15:48:00.000-04:00"Steel Phoenix said... File criminal charges? W..."Steel Phoenix said...<BR/><BR/> File criminal charges? What is the crime?"<BR/><BR/>Accounting fraud? They lost trillions unexpectedly to their stockholders. The financial statements have to be cooked.Bluegrass Pundithttps://www.blogger.com/profile/13692965298692361473noreply@blogger.comtag:blogger.com,1999:blog-2916809362071329011.post-19525099422616934392009-03-22T15:44:00.000-04:002009-03-22T15:44:00.000-04:00File criminal charges? What is the crime?File criminal charges? What is the crime?Anonymousnoreply@blogger.com