Sunday, October 11, 2009
Ha ha ha ha ha ha! "Grim milestone!"
A year after Washington rescued the banks considered too big to fail, the ones deemed too small to save are approaching a grim milestone: the 100th bank failure of 2009.
There are now a number of companies... private insurers... who have more in cash reserves backing their own promises than the FDIC has available to back the banking system...
Leave it to the New York Times to fall for the 'rich get richer' divide. I mean, they already went for "grim milestone." Why not go whole hog for the stupidity? News flash for the Times: It's called "consolidation." Solid banks get a chance to purchase distressed assets of failing banks at a discount and thank God they do! It's good for everyone, and is saving the system from collapse right now.
Those commercial loans aren't turning around yet, either. And there's a new wave of ARMs due to reset soon, which should trigger a new round of foreclosures.
Yippee.
More stupidity. Deposits are safe? Only deposits up to $250,000. And that's not really sustainable, because we upped the limit from 100k to 250k without a supporting increase in premiums. Oh, and what's this "federal insurance?" Kemosabe?
Ok, time to hit the Times reporter over the head with a clue-bat: Larger banks don't pull back on CD rates because they're out of touch with local businesses, moron. They do it because they aren't desperate and stupid. There's a reason banks offer above-market CD rates. Think about it: They are trying to raise cash in a hurry, to stave off a short-term crisis. Often it doesn't work, and the bank fails. Sometimes, the smart money sees their bank offer a significantly above-market CD rate, and they yank their money, and the bank fails as a result of what amounts to a large-depositor run on the bank. (Small depositors tend to be lazier.)
Once the bank is acquired by a healthier bank, the crisis is past, and banks no longer have a reason to offer CD rates significantly above market.
(Here's another clue: If you are looking for a good deal on a loan, don't go to the bank offering crazy-good CD rates! They're not looking to lend, and will be very picky and jack up rates to exceed their new higher cost of capital.
This calls for a song!
There are now a number of companies... private insurers... who have more in cash reserves backing their own promises than the FDIC has available to back the banking system...
While the parade of failures still represents a mere fraction of America’s small banks, it underscores a growing divide between them and large institutions like Goldman Sachs, JPMorgan Chase and U.S. Bancorp, which are slowly growing stronger as the economy improves.
Leave it to the New York Times to fall for the 'rich get richer' divide. I mean, they already went for "grim milestone." Why not go whole hog for the stupidity? News flash for the Times: It's called "consolidation." Solid banks get a chance to purchase distressed assets of failing banks at a discount and thank God they do! It's good for everyone, and is saving the system from collapse right now.
Burdened by worsening commercial real estate loans, many small banks’ troubles are just beginning. Many analysts say that the now-toxic loans could sink hundreds of small lenders over the next few years and place a significant drag on the economy.
Already, the bank failures are placing enormous strain on the F.D.I.C. and its fund, which keeps depositors whole. Flush with more than $50 billion only two years ago, the fund recently fell into the red.
The prospect of more failures has led the F.D.I.C. to seek new ways to replenish the fund with higher and earlier payments by healthy banks, even after setting aside reserves for future losses.
Those commercial loans aren't turning around yet, either. And there's a new wave of ARMs due to reset soon, which should trigger a new round of foreclosures.
Yippee.
The initial wave of failures has also unsettled some communities, even though most of the troubled institutions have been bought by other banks rather than shuttered. While deposits are safe thanks to federal insurance, the new buyers often do not have the same ties to local businesses as the former owners.
More stupidity. Deposits are safe? Only deposits up to $250,000. And that's not really sustainable, because we upped the limit from 100k to 250k without a supporting increase in premiums. Oh, and what's this "federal insurance?" Kemosabe?
In some cases, they tighten lending and make it harder for longtime customers to obtain loans or favorable terms. In other cases, managers of the new bank make other changes, like ending offers for high-interest certificates of deposit and calling in certain lines of credit. In the longer term, some new owners are likely to close branches of the bank they have acquired in order to cut costs.
Ok, time to hit the Times reporter over the head with a clue-bat: Larger banks don't pull back on CD rates because they're out of touch with local businesses, moron. They do it because they aren't desperate and stupid. There's a reason banks offer above-market CD rates. Think about it: They are trying to raise cash in a hurry, to stave off a short-term crisis. Often it doesn't work, and the bank fails. Sometimes, the smart money sees their bank offer a significantly above-market CD rate, and they yank their money, and the bank fails as a result of what amounts to a large-depositor run on the bank. (Small depositors tend to be lazier.)
Once the bank is acquired by a healthier bank, the crisis is past, and banks no longer have a reason to offer CD rates significantly above market.
(Here's another clue: If you are looking for a good deal on a loan, don't go to the bank offering crazy-good CD rates! They're not looking to lend, and will be very picky and jack up rates to exceed their new higher cost of capital.
This calls for a song!
Labels: banking, economy, finance, New York Times
Comments:
hey, there,
This is a little bit random and I don't know how often you check this blog. I am writing an oratory (a persuasive speech) for my debate team at school. It's about appreciating the "little" people (I don't mean to offend, I just don't have a better term yet). Anyway, I have a few questions...
Do you feel under appreciated as a soldier, especially when it's generals (etc.) that recieve credit for winning battles? Why or why not? (Eloborate, please)
Thanks so much, I'd really appreciate it!
please email me, if you can, at king1026@bellsouth.net
Laura (from Atlanta)
This is a little bit random and I don't know how often you check this blog. I am writing an oratory (a persuasive speech) for my debate team at school. It's about appreciating the "little" people (I don't mean to offend, I just don't have a better term yet). Anyway, I have a few questions...
Do you feel under appreciated as a soldier, especially when it's generals (etc.) that recieve credit for winning battles? Why or why not? (Eloborate, please)
Thanks so much, I'd really appreciate it!
please email me, if you can, at king1026@bellsouth.net
Laura (from Atlanta)
# posted by 
: 12:47 PM
: 12:47 PM
Just checking--everything o.k. over there? We haven't heard from you in a couple of months now, and that's long enough to start causing some concern.
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# posted by : 6:16 PM
: 6:16 PM
