Calculated Risk on M&T’s conference call….
M&T is the first of the top 20 largest banks to report quarterly results, and the news is bad.
It's all bad
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Category Archives: Money
I just don't understand
It use to be the stock market would go up even when bad news was announced. Now we have have a bank run on a bank that has already been taken over by the FDIC. Can someone explain that to me?
I mean, are people really so ignorant that they don’t realize that the damage has been done once the government has taken over? If their accounts are under 100 grand they have nothing to worry about. If their accounts are over 100 grand it is to late to do anything about it.
It would seem more rational for their to be a run on banks that have not been taken over yet.
Edit: I just found this story from Reuters…..
At a branch at IndyMac’s headquarters, customers began arriving at 4 a.m., five hours before the doors opened. The Federal Deposit Insurance Corp now operates the thrift’s 33 Southern California branches.
“I didn’t think anything like this would happen,” said retired teacher Charles Tengeri from Pasadena, who was first to emerge from the branch after withdrawing $171,000 — about two-thirds of his life savings. “I withdrew as much as I could. I know it’s going to take a little time.”
The FDIC said the renamed IndyMac Federal Bank will cover insured deposits, mostly up to $100,000, and initially cover 50 percent of uninsured deposits.“I have $360,000 in this bank, and I was misled by this bank,” said Robert Clark, a Glendale resident. “I gave the names of my mother, my sister and my brother on the account so I thought I would be insured. I don’t know what to do. I really don’t know what to do.”
The guy who came out with $171,000 must have had a joint account. Otherwise he would have only got $100,000 out. And if you had $360,000 why would you try to game the system by giving the names of every relative under the sun so that you could keep all your money in just one account? Why not just open up an account somewhere else?
I think the guy knew that Indymac was in trouble but wanted to take advantage of high interest rates they were offering. You play with fire, you get burnt.
Control thoughts and you control reality
Or at least, that is what the SEC must be hoping. From Macro Man…..
At the same time, we have news that the SEC is looking at policing market rumours, particularly those surrounding the financials. Something tells Macro Man that this will be a one-way street; anyone suggesting that, for example, PIMCO and SAC have pulled Lehman’s line will face reprisals, but anyone suggesting that Warren Buffett is going to buy Lehman for $100 per share will remain unscathed. The UK has a head start on this particular slippery slope, with the FSA pursuing banking sector rumour-mongers and imposing farcically low disclosure thresholds for short interest in banks doing rights issues.
It’s all vaguely 1984-ish to Macro Man. If you use inappropriate language about a bank, they’ll do you. If you sell the wrong bank short, they’ll do you. If you wonder aloud on possible forthcoming bad news about a bank, they’ll do you. Perhaps sellside analysts should just cut to the chase and rate every financial out there with a “Doubleplusgood” rating. Who knew that MiFID stood for the “Ministry of Financial Information Dissemination.”?
Second Biggest Bank Failure in US history
Okay, so that the tittle of this post does not take into account inflation. Still, Indy Mac was not as small as most banks that have failed recently.
From Sacramento Real Estate Statistics (a blog)….
Indymac Bank officially failed a few minutes ago. The FDIC has taken it over, and will begin liquidating assets on Monday. The failure will cost the FDIC trust fund between $4 and $8 Billion. Sadly, it looks like many depositors will lose a lot of money as well.
I don’t believe that the FDIC will only lose between $4 and $8 billion on this deal. More like 10 to 16 billion. For one thing, I think they are going to keep Indymac a float for to long in hopes of finding a buyer.
Naked Capitalism has a good overview of how this will affect FDIC.
More details from Credit Bubble Stocks.
Are you ready for the fallout?
New nuclear plants are being built in…..
And that is just the most prominent ones.
Many of these are being built in countries that are famous for their sloppy building processes and corrupt building inspectors. For that matter, with so many being built at once I wonder how even the the rich countries going to find competent builders for all of them. Not just anyone can build a nuclear plant. It is also going to be trick to find competent people to run all of them. If I was terrorist or had inclinations that way I would be brushing up my resume right now.
And last I knew, people still had not agreed on a place to store the resulting waste. Did something change while I was not looking?
I don't understand
I don’t understand why Freddie and Fanny’s stock prices are crashing today. I don’t understand why former Fed president Richard Poole is now calling Freddie and Fanny insolvent. I don’t understand why the Wall Street Journal is now reporting on how the government is coming up with contingency plans for what to do if Freddie and Fanny fail.
Why now of all times? What has changed? (H/T Naked Capitalism here and here) (H/T Calculated Risk)(H/T Felix Salmon)
Edit: Here is a YouTube clip to news anchors reacting the drop of Freddie’s stock in real time. It is funny hearing them stammer.
The Next Bail Out
Fannie Mae holds or guarantees over $5 trillion in mortgages. A mere 1% decline would wipe them out. Is that adequately capitalized? I do not think so and neither does Minyanville’s Kevin Depew.
The FDIC is about to get its first real test
Don’t have time to write more at present. Read this for a good overview.
Will GM go bankrupt in the next 2 years?
As of June 30th, GM slipped beneath $20 billion in remaining cash assets but is burning $17 billion per year. In other words, GM probably has just 9 to15 months of life left, at the most. And if I were one of GM’s creditors, I’d prepare to swoop in and call all my loans after Congress goes on holiday break shortly after the election. No one will be able to stop it and GM will be history. And the lenders will still only get pennies on the dollar for each dollar they loaned.
I am not sure where this gentleman gets his figures from. Best I could tell from a quick search no one else is using them at the moment. But it could be he has a more updated source then I have.
At any rate, there is no doubt that a lot of mainstream forecasters have started worrying about GM going bankrupt. And lately, when mainstream forecasters start worrying about something, it means that it is a sure thing.
Essay of the Week: 7/6/08-7/12/08
Bringing Down Bear Stearns is an essay that claims to tell the story of Bear Stearns last days. Some parts of it are a little dubious, like the repeated hints that Bear Stearns demise was all due to the work of some evil short sellers. Once you read the article all the way through, you get a sense of a how fragile Bear Stearn’s position was and it makes you doubt that anyone would have had to deliberately do it in.
Nonetheless, the article makes for a great read once you get past the rather slow beginning. Some of the anecdotes in the article will fill you will unholy glee such as when you read about the Bear Stearns traders grousing about the risk adverse nature of Warren Buffett. Other anecdotes will make you wonder how independent the Federal Reserve really is. One gets the impression that Paulson was calling a lot of the shots for the Fed.