15 Reasons Why The U.S. Economic Crisis Is Really An Economic Consolidation By The Elite Banking Powers
March 13, 2012
The American Dream
By The American Dream
Is the United States experiencing an “economic crisis” or an “economic consolidation”? Did the financial problems of the last several years “happen on their own”, or are they part of a broader plan to consolidate financial power in the United States? Before you dismiss that possibility, just remember what happened back during the Great Depression. During that era, the big financial powers cut off the flow of credit, hoarded cash and reduced the money supply. Suddenly nobody had any money and the economy tanked. The big financial powers were then able to swoop back in and buy up valuable assets and real estate for pennies on the dollar. So are there signs that such a financial consolidation is happening again?
Well, yes, there are.
The U.S. government is making sure that the big banks are getting all the cash they need to make sure that they don’t fail during these rocky economic times, but the U.S. government is letting small banks fail in droves. In fact, in many instances the U.S. government is actually directing these small banks to sell themselves to the big sharks.
So is this part of a planned consolidation of the U.S. banking industry? Just consider the following 15 points….
#1) The FDIC is planning to open a massive satellite office near Chicago that will house up to 500 temporary staffers and contractors to manage receiverships and liquidate assets from what they are expecting will be a gigantic wave of failed Midwest banks.
#2) But if the economic crisis is over, then why would the FDIC need such a huge additional office just to handle bank failures? Well, because the economic crisis is not over. The FDIC recently announced that the number of banks on its “problem list” climbed to 702 at the end of 2009. That is a sobering figure considering that only 552 banks were on the problem list at the end of September and only 252 banks that were on the problem list at the end of 2008.
#3) Waves of small and mid-size banks are going to continue to fail because the U.S. housing market continues to come apart at the seams. The U.S. government just announced that in January sales of new homes plunged to the lowest level on record. The reality is that the U.S. housing market simply is not recovering.
#4) In fact, a lot more houses may be on the U.S. housing market very shortly. The number of mortgages in the United States more than 90 days overdue has climbed to 5.1 percent. As the housing market continues to get increasingly worse, it will put even more pressure on small to mid-size banks.
#5) More than 24% of all homes with mortgages in the United States were underwater as of the end of 2009. Large numbers of American homeowners are deciding to walk away from these homes rather than to keep making payments on loans that are for far more than the homes themselves are worth.
#6) If all that wasn’t bad enough, now a huge “second wave” of adjustable rate mortgages is scheduled to reset beginning in 2010. We all saw what kind of damage the “first wave” of adjustable rate mortgages did. How many banks are going to be able to survive the devastation of the second wave?
January 13, 2012
By Bob Moriarty
It’s the turn of the year and New Year Predictions are sprouting like wild flowers after a spring rain. Usually I avoid the temptation to make predictions, I often go back and reread what others have projected and you could do as well tossing a quarter. But this time it’s different. This is an easy call and my readers need to know what is coming down the hill like a runaway train.
In 1931 an Austrian bank based in Vienna named the Credit-Anstalt failed. The bank was consider “too big to fail” but turned out in the end to be “too big to bail.”
Founded by the Rothschilds in 1855, the Credit-Anstalt ventured past the boring business of simply making business loans into the far more adventurous areas of investing in new ventures from sugar making to automobiles. Due to the size of the bank, smaller and more nimble local bankers snapped up the best loans leaving the giant Credit-Anstalt holding the paper no one else wanted.
For readers who never took a course on banking, it’s important for them to know that all banks are subject to a bank run and failure at any time no matter how healthy the bank or economic conditions due to the nature of their business.
When you walk into a bank and deposit money into your checking account, you are loaning money to the bank. They in turn loan out that money: hopefully to credit worthy borrowers who will pay the money back with interest. It’s vital for readers to understand the basic business of banks is to borrow short and lend long. When you deposit money you may want it back tomorrow. But when someone borrows money on a house, they may want 30 years to pay it back.
So if for any reason there is a run on a bank, the bank should go under. There are government programs in theory that protect the investor such as the FDIC but in reality, they are to protect the banks by preventing a run on the bank in serious times. Such as today.
It’s also important for readers to understand that banks make loans to each other and to governments. Again, lending long and borrowing short. But the key there is that if you walk into a bank and deposit $1 million, your Bank A may loan $1 million to Bank B who in turn loans $1 million to Bank C. If the same money has been loaned out 10 times, the balance sheet of the entire transactions would show $10 million in assets and $9 million in liabilities reflecting the original $1 million in real money.
Seven Startling Things Most People Still Don’t Know About The National Debt, Banking And The Money Supply
August 2nd, 2011
By: Mike Adams
Most people, even smart people, know surprisingly little about the way money really works in Big Government. With the debt ceiling fiasco suddenly raising awareness of the possibility of a total global financial blowout, now seems like a good time to remind people of seven disturbing facts about money that are almost never acknowledge in the old media.
Fact #1 – There is no FDIC insurance fund.
The money at your bank is insured against loss by the FDIC’s insurance fund, right? Nope. That’s total fiction. There is no actual money in the fund. The FDIC insurance money has already been looted by the U.S. Treasury which has simply replaced the money with a bunch of IOUs.
Why does this matter? Because it means that if the U.S. government goes into default, so will the FDIC! And that means all your bank funds have zero insurance. That’s gonna be a big shock for tens of millions of people when they finally figure this out one day…
Fact #2 – There are no social security funds, either.
When you pay social security taxes, all that money goes into a trust fund that’s held for safekeeping until the day it pays you back, right?
Ha! That’s the “sucker’s view” of social security that only ignorant people believe. In reality, there is no money in the social security trust fund because it too has all been looted by the U.S. Treasury and spent. In truth, social security is already broke. Can’t wait for people to wake up and figure this one out, either…
Fact #3 – The U.S. Treasury is stealing money from you every day, even if you pay no taxes!
Here’s a mind-boggling truth that most people just can’t seem to get their heads around: The U.S. Treasury is stealing money from you every single day by the simple fact that they keep creating new money and handing it out to wealthy banksters. Well, technically this is being done by the Federal Reserve, which isn’t even part of the federal government. But it’s all done in cahoots with the Treasury, which is eroding the value of your money through these money creation and distribution actions.
That’s why prices keep going up all around you, folks: Food isn’t suddenly worth more money; the truth is that your money is worth less! That’s how the Treasury and the Federal Reserve steal from you without even breaking into your home.
Probably 99.9% of the population has no understanding of this phenomenon — the erosion of currency valuation through the centralized government printing of more currency. And yet it is a government scam that has been carried out against citizens of the world time and time again, spanning millennia! As history has clearly shown, every nation that goes down the path of printing more currency to pay its bills eventually ends up in a runaway hyperinflation scenario followed by economic collapse. The USA will be no different.
Fact #4 – The “balanced solution” isn’t balanced.
Don’t you love the quirky White House Press Secretary who keeps spewing out the phrase “balanced solution” even while the debt deal leaves the U.S. budget entirely unbalanced?
When you’re spending more money than you’re earning, that’s not financial balance. When the White House says “balanced” what it really means is “compromised” — as in, half way between the Republican position (spend us into purgatory) and the Democratic position (spend us into oblivion). Neither party has any real solution to the cancerous growth of Big Government. That’s because they are creatures of Big Government!
Politicians can no more solve the problems of Big Government than arsonists can solve the problem of office fires. Because they are, themselves, creatures of runaway debt spending (how else do you get elected these days?), they simply do not possess the cognitive framework from which real financial solutions must stem.
Fact #5 – The government is going to steal everything from you before it collapses
Oh my, this is a tough one for people to get their heads around… especially those who naively trust governments to act in the interests of the People. The simple truth of the matter — and I’ve publicly made this prediction before — is that the government is going to STEAL almost everything you own as it heads toward a total financial implosion. This will include:
• The government theft of private retirement accounts. The feds will claim they’re taking them over “for your protection.” Yeah, right. And then one day they will simply all vanish. Kiss your IRA goodbye…
• The government theft of precious metals. Within the next 3 years, watch for a national emergency to be declared, followed by government confiscation of gold and silver. The feds will take your gold and hand you paper money in exchange. The paper money, of course, will be all but worthless shortly thereafter. Only the suckers, of course, will actually turn in their metals…
• Government takeover of your bank accounts. As banks begin to fail in the big collapse, the government will step in and take ownership of the failed institutions, just as it did with Fannie Mae and Freddie Mac (which used to be publicly-owned companies but are now largely just government finance operations). This will put your bank accounts under the direct control of the White House, which can use executive orders to do things like banning all wire transfers out of the country or limiting daily withdrawals and transfers. Sure, you’ll still “own” your money in the bank, you just won’t be able to freely access it!
Fact #6 – Most people have no idea about fractional reserve banking, derivatives, the money supply or the Federal Reserve
It’s not just that most people don’t understand banking and finance; it’s that even members of Congress have no idea how all this works. With few exceptions (like Ron Paul), they’re just clueless!
Get this: Even most bankers don’t even know how fractional reserve banking really works. They don’t understand derivatives, either, which is why they screwed them up so badly in the housing boom that crashed in 2007. And because bankers, investors and bureaucrats have no idea how it all works, they unwittingly turn it all into a runaway catastrophe.
Allowing ignorant adults to play with debt and derivatives is like letting infants play with nuclear weapons. It can only lead to something messy.
Fact #7 – Most people are betting their lives on the dollar
People buy insurance for their cars, their homes and even their health. But when it comes to money, 99 out of 100 people in America are betting their entire financial existence on the U.S. dollar! They get their paychecks in dollars, their savings accounts are in dollars, and all their assets are denominated in dollars. As a result, they have no diversity to protect them against dollar devaluation.
That’s kinda crazy, considering just how quickly the dollar could collapse in the near future and become totally worthless. That’s why smart people are diversifying their assets and converting dollars into land, gold, silver or even storable food. Here in central Texas, even ammunition has a long-term barter value that far exceeds dollars.
Looking around at the financial behaviors of others, I’m just stunned at how many people are betting everything on the dollar because they never realized they had any other option (that’s the way the government likes to keep it, of course!).
September 27th, 2010
The Wall Street Journal
By: Randall Smith and Robin Sidel
The largest number of bank failures in nearly 20 years has eliminated jobs, accelerated a drought in lending and left the industry’s survivors with more power to squeeze customers.
Some 279 banks have collapsed since Sept. 25, 2008, when Washington Mutual Inc. became the biggest bank failure on record. That dwarfed the 1984 demise of Continental Illinois, which had only one-seventh of WaMu’s assets. The failures of the past two years shattered the pace of the prior six-year period, when only three dozen banks died.
Two more banks went down last Friday, and failures are expected to “persist for some time,” according to a report issued Tuesday by Standard & Poor’s. In the second quarter of this year, the Federal Deposit Insurance Corp. increased its number of problem banks by 6% to 829.
Between failures and consolidation, the number of U.S. banks could fall to 5,000 over the next decade from the current 7,932, according to the top executive of investment-banking firm Keefe, Bruyette & Woods Inc.
The upside of failures is that they can represent a healthy cleansing of a sector that grew too fast, with bank assets more than doubling to $13.8 trillion in the decade that ended in 2008. Many banks that failed were opportunistic latecomers. Of the failed banks since February 2007, 75 were formed after 1999, according to SNL Financial.
Still, economists say, the contraction represents an enduring threat to capital, lending and the economy.
“When we step back and look at this financial disaster 10 years from now, the destruction of capital in our economy as a result of what we’ve endured will be the single greatest lasting impact on recovery and how the economy performs in the future,” says Howard Headlee, president of the Utah Bankers Association.
The pain is less severe than in the Japanese banking crisis, in which banks languished for a decade despite $440 billion the government spent to assist the industry.
But, in the past two years, the whole U.S. banking system recoiled. Large banks like Countrywide Financial Corp. and Wachovia Corp. were acquired to avert failure while powerful banks including Citigroup Inc. and Bank of America Corp. were propped up by the government.
Between the failures and government assistance, Gerard Cassidy of RBC Capital Markets says, the impact to the system has been “far more severe” than the savings-and-loan crisis. Not only were government rescue measures more sweeping and more global this time, the weakness in real estate continues to constrain economic growth.
Since 2008, the industry’s assets have shrunk by 4.5%.
“If you reduce the amount of assets at a bank, it means they make fewer loans, and that has a negative impact on the economy,” says Richard Bove, a bank analyst at Rochdale Securities in Lutz, Fla.
From small towns like Rockford, Ill., to Miami, the banks’ disappearance means not only cutbacks in lending but fewer banking choices, lower interest rates on savings accounts, and lost jobs.
The recession and collapse of the housing bubble have cut bank-industry employment by 188,000 jobs, or 8.5%, since 2007, according to FDIC data. Failures alone have cost 11,210 jobs, or 32% of the employees at failed banks, according to FIG Partners, an Atlanta investment firm that specializes in the banking industry.
For more than a year, Martin Quantz and his co-workers at the Woodstock, Ill. branch of Amcore Bank checked the FDIC’s website each Friday afternoon to see if their flailing bank had gone under. Regulators seized the bank in April and turned over its 58 branches to Harris National Association.
By August, Mr. Quantz was unemployed. He now hopes reconnecting with an old contact will lead to a new bank job.
“There’s a lot of pain out there, and there are a lot of people in the industry who won’t go back,” says Mr. Quantz, 41 years old.
The city of Clinton, Utah, may never be refunded $83,000, a portion of their cemetery-maintenance funds that wasn’t insured when nearby Centennial Bank failed without a buyer.
In nearby Ogden, Utah, Weber State University lost $100,000 in scholarship money that had been pledged by Barnes Banking Co., a 119-year-old local institution that failed in January. The scholarships, to be distributed in $1,000 increments, represented one quarter of in-state tuition, says a Weber State administrator. Earlier this month, the college restored the Barnes Banking Lecture Hall to its original name: “Room 110.”
Failed bank assets are now strewn across the banking system.
The FDIC is burdened with $38 billion of remnants it is trying to sell. They range from virtually worthless mortgaged-backed securities to office decorations such as plastic Christmas trees.
The tough times follow cresting prosperity in which banks with few loan losses chased customers into hot real-estate markets. When the subprime mortgage bubble burst, failures were concentrated among mortgage lenders such as IndyMac Bank, which left $1 billion of depositors’ money uninsured when it failed in 2008.
Various autopsies of expired banks all point to real estate as the primary cause. A tally by SNL Financial LC found that 94% of bank failures since 2008 had either residential or commercial real-estate as their largest category of delinquent loans. KBW says their riskier construction loans were 23% of their total portfolio, compared with 7.2% for the industry as a whole. The delinquency rate of commercial real estate was 13.5%, far above the current national average of 1.7%, SNL said.
The Imperial Capital Bank unit of Imperial Capital Bancorp in La Jolla, Calif., specialized in real estate. Like many other small banks, it extended beyond its home turf and made loans nationwide. The bank more than doubled its assets to $4.1 billion in the five years ended in 2008, according to an FDIC report. Then, the nine-branch bank purchased $826 million of mortgage-backed securities.
Real estate accounted for more than 95% of its loans, compared to 35% or less for its peers. The bank failed in 2009.
Some economists argue that, for all the damage, the failures’ impact on the economy was muted because the largest banks that failed or came close were quickly absorbed by other institutions or helped by the government.
“I don’t think enough banks have failed, or have been failing fast enough, to have a macro-economic impact,” says economist Edward Yardeni.
Surviving banks have raised more than $500 billion in new capital, reducing the risks of new failures by boosting rainy-day funds.
Failure can occasionally jumpstart lending. To conserve capital, regulators often block sickly banks from making new loans. When a bank buys the assets of the failed institution, that buyer often resumes lending.
Since acquiring operations of the failed Frontier Bank in Everett, Wash., last April, Union Bank N.A. has started originating loans in Frontier’s region in western Washington and Oregon. Though Union lowered interest rates on certificates of deposit, “We desire to grow our loan portfolio and are eager to find ways to make loans that make sense,” says Tim Wennes, chief retail banking officer for Union Bank, a unit of San Francisco-based UnionBanCal Corp.
Such consolidation also means the biggest are getting bigger: Bank of America, J.P. Morgan Chase & Co. and Wells Fargo hold 33% of all U.S. deposits, up from 21% in 2006, according to SNL Financial. That gives them more market power to squeeze out smaller competitors.
John Squires, who was chief executive officer of Old Southern Bank when it failed in March, protests that his larger competitors in his Orlando, Fla., neighborhood all survived thanks to heavy doses of government support, which allowed them to raise capital more easily.
“Absolutely unfair—the big boys have the clout,” says Mr. Squires. “Community banks are in jeopardy all over the country.”
May 19, 2010
By Charlie Gasparino
Some of the nation’s largest banks have agreed to contribute enough money to save Chicago-based ShoreBank, the community lender with strong ties to the Obama administration, FOX Business has learned.
The banks have agreed to contribute $140 million to bail out the bank, while the federal government will donate tens of millions more, according to people close to the talks. In addition to major Wall Street firms like Goldman Sachs (GS: 139.48, 2.07, 1.51%), which agreed to contribute $20 million to the bailout effort, as well as Citigroup (C: 3.83, 0.11, 2.96%) and JPMorgan (JPM: 39.461, 0.441, 1.13%), General Electric’s (GE: 17.27, 0.04, 0.23%) GE Capital will also contribute $20 million to the rescue effort. All the firms have either received massive government assistance during the financial crisis or, in the case of Goldman Sachs, are facing multiple regulatory investigations into their business practices.
The bailout has been controversial. Senior Obama adviser Valerie Jarrett served on a Chicago civic organization with a director of the bank, and President Obama himself has singled out the bank for praise in lending to low-income communities.
But the bank has made its share of bad bets, and some of the Wall Street firms that have given money have said they’ve received political pressure to contribute to the bailout of a business that under normal circumstances would have been left to fail.
It’s still unclear how much the federal government will contribute to save the bank because it’s unclear exactly how much is needed to save the institution, which without the bailout would have been taken over by the FDIC.
March 23, 2010
By: Charles Feldman
Where were you when the housing bubble was building to crisis proportions?
Some government regulators were counting their bonuses, it appears. The Associated Press, which filed a Freedom of Information Act request to obtain government payroll data, found that during the boom years of 2003 – 2006, as the crisis was being primed by lax lending and risk-laden balance sheets, the agency watchdogs in charge of supervising U.S. banks handed out “at least $19 million in bonuses.” The agencies include the Federal Deposit Insurance Corporation, the Office of Thrift Supervision and the Office of the Comptroller of the Currency.
The money was given to regulators for their — ready for this — “superior performance.” You just can’t make this stuff up, folks…and I live in Hollywood, where fantasy IS reality.
Most of the money was given to the financial examiners who were supposed to be closely watching the banks and what the banks were doing. Even in 2008, the year the world as we knew it all but came to its financial end, the Office of Thrift Supervision was still giving out bonuses to more than 90 of its financial examiners for their “exceptional work,” reports the AP.
These were the same regulatory agencies that failed to flag the coming crisis, and that internal government investigations subsequently found to be lacking in their supervisory roles.
A spokesman for the FDIC, which gave out most of the bonus money, had no comment for the AP. An OCC spokesman, on the other hand, invoked the standard banker defense when he cited the need to “recruit and retain the very best people.” He also noted that the banks his agency regulated tended to do better than some of the others. You gotta give this dude high marks for trying. Like I said at the outset, you can’t make this stuff up.
February 22, 2010
By Paul Joseph Watson
A new advisory being sent by America’s third largest bank to its account holders has stoked fears that major financial institutions could be preparing for old fashioned bank runs if the economy takes a turn for the worse.
Originally reported by John Carney over at the Business Insider website, Citigroup is sending the following information to customers along with their bank statements.
“Effective April 1, 2010, we reserve the right to require (7) days advance notice before permitting a withdrawal from all checking accounts. While we do not currently exercise this right and have not exercised it in the past, we are required by law to notify you of this change.”
An almost identical advisory to the one being sent out can be read on page 22 of Citbank’s Client Manual effective January 1, 2010, which can be read here from Citibank’s own website.
“We reserve the right to require seven (7) days advance notice before permitting a withdrawal from all checking, savings and money market accounts. We currently do not exercise this right and have not exercised it in the past,” states the manual.
According to the Future of Capitalism blog, Citigroup originally claimed that the warning was only sent nationwide as a result of a mistake, but that the measures do apply to account holders in Texas.
However, in a statement, Citigroup confirmed that they had reserved the right to impose the new 7 day rule on all account holders nationwide, but claimed they had no plans to enforce it. The bank stated that they had been forced to enact the new policy as a result of federal regulations.
“When Citibank moved to unlimited FDIC coverage in 2009, we had to reclassify many checking accounts to allow for immediate withdrawals in order to ensure all customers qualified for the additional coverage. When we moved back to standard FDIC coverage with most major banks in 2010, Citibank decided to reclassify those accounts back to make them eligible again for promotional incentives. To do so, Federal Reserve Reg D requires these accounts, called NOW accounts, to reserve the right to require a 7-day notice of withdrawal. We recently communicated this technical requirement to our customers. However, we have never exercised this right and have no plans to do so in the future,” reads a statement released by the bank.
Over the last 18 months, numerous rumors of bank runs, “bank holidays,” and limitations on access to cash at ATM’s have been floating around. Citigroup’s new policy to restrict withdrawals won’t do anything to calm such fears.
As we reported back in 2008, the Federal Deposit Insurance Corp., which guarantees individual accounts up to $100,000, only has about $50 billion to “insure” about $1 trillion in assets across the nation’s financial institutions.
This revelation prompted fears that an accelerating amount of bank closures could absorb FDIC funds and leave holders of money market and traditional savings accounts exposed.
January 20, 2010
Campaign for Liberty
By Ron Paul
Last week, the Financial Crisis Inquiry Commission kicked off their first round of hearings on the
causes of the economic meltdown on Wall Street. The commission is being compared to the the
Pecora Commission launched in 1932 to investigate the causes of the Great Depression. The
Pecora commission is beloved by those who believe the solution to every problem is more laws
because it was used to justify a number of new laws, including Glass-Steagall. Of course, none of
those laws addressed the real causes of the Great Depression. It was the introduction of unsound
monetary policy and central economic planning pursued by the Federal Reserve that really threw
everything off balance. The Fed was founded in 1913 to stabilize the economy and prevent a
recurrence of the short-lived Panic of 1907, but instead it promptly produced the Great Depression
which lasted more than 15 years.
The Pecora Commission was stacked with big government sympathizers who blamed the free
market and the gold standard without question, and without any consideration of government
interference in the economy. This panel is no different. Never will they contemplate how
government steered us into this crisis, and what perverse incentives can be removed or repealed so
that the market will function more smoothly. Never will they discuss how investment should come
from savings, not debt. Never will it occur to them that fiat money, artificially low interest rates and
the whole Federal Reserve System might be unwise and unstable, not to mention unconstitutional.
The answer will always be more government regulation and oversight. It is predictable that this
government panel will eventually come to the firm conclusion that government needs to be bigger,
and that the market is just too free.
January 19, 2010
Money & Markets
by Martin D. Weiss, Ph.D.
Washington has so thoroughly botched its supervision of the banking industry that 200 banks are likely to fail this year — easily surpassing last year’s 140 bank failures … inevitably involving the greatest bank losses in history … and already costing the FDIC ten times more than the great S&L and banking crisis of the 1980s did.
I am not basing these conclusions on conjecture. They come straight from official sources. Specifically …
In her testimony before the Financial Crisis Inquiry Commission on Thursday, FDIC Chairman Blair attacked the Fed under Greenspan for causing the housing bubble and subsequent debt crisis with its highly stimulative, low interest rate policy of the 2000s.
She slammed virtually all of Washington for allowing banks to establish a huge, high-risk “shadow banking system.”
And she made it abundantly clear that, without sweeping, far-reaching reforms, we risk another devastating debt crisis.
Each of her conclusions is abundantly obvious and thoroughly documented. What she did not mention, however, are the following equally obvious facts:
Obvious fact #1. The Fed under Bernanke is now pursuing an even more stimulative, lower interest rate policy than it did under Greenspan, threatening to create even larger bubbles and more devastating busts …
Obvious fact #2. In just the last two years, between bank bailouts and easy money, Washington has done more to encourage the growth of the shadow banking system than in all previous years combined, and …
Obvious fact #3. Despite all the talk and testimony, the nation’s powerful banking lobby virtually guarantees that, in the absence of another Wall Street meltdown, the chance of sweeping reforms is virtually nil.
So here’s America’s financial dilemma in a nutshell:
Without sweeping reforms, the nation is doomed to repeat history with another debt disaster. But without another debt disaster, the nation’s political will for sweeping reforms is dead or dying.
In the meantime, the aftershocks of the 2008 debt crisis are getting worse, as the latest news clearly illustrates …
171 actual total failures: In addition to the 140 banks and S&Ls that failed in 2009, 31 credit unions went under, bringing the total tally to 171.
Worse than the 1980s: If you’re among those who think today’s banking crisis isn’t nearly as bad as the great S&L and banking crisis of the 1980s, think again. The average bank failing today is six times larger than it was back then, producing far greater losses. Moreover, each bank failure is costing the FDIC about TEN times more than it did in the 1980s crisis, according to the Meridian Group of Seattle. As a result …
Worst FDIC losses of all time: The FDIC lost more money in bank failures ($36 billion) than it lost in the ENTIRE five-year banking crisis from 1987 through 1992 ($29.6 billion). And in 2010, with the number of failures likely to increase, the losses will be even larger.
Big banks still losing billions with consumers: Until last week, the consensus opinion on Wall Street was that the troubles at the BIG banks were over; that to close this chapter in history, the only task remaining was a mop-up operation at smaller regional and community banks around the country.
That theory was shattered on Friday when JPMorgan Chase revealed it was forced to add $1.5 billion to its consumer loan loss reserves. The big problem: When it took over Washington Mutual last year, the biggest failed S&L of all time, it inherited a cesspool of mortgages that are now going bad at an accelerating pace. Other big consumer banks — like Citigroup and Bank of America — likely face similar woes.
December 16, 2009
By Tom Hals
The company wants to investigate discussions between JPMorgan & Chase Co, regulators, competitors and rating agencies it said led to the seizure of Washington Mutual, or WMI, according to a filing in bankruptcy court on Monday.
It said the alleged misconduct includes JPMorgan “disclosing confidential information, in violation of the confidentiality agreement, to government regulators, ratings agencies, media and investors in an effort to harm WMI by driving down WMI’s credit rating and stock price.”
Washington Mutual said it needs to determine if it has valuable claims against regulators and others that could be pursued on behalf of its creditors.
The company was the largest U.S. savings and loan when it was seized by the government in September 2008, at the height of the financial crisis, and sold for $1.9 billion to JPMorgan in what Washington Mutual has called a “fire sale.”
The company has been investigating possible claims against JPMorgan since the middle of 2009 and cited some of the documents provided by the bank to justify expanding its investigation.
It cites an internal JPMorgan email it said shows that a week before Washington Mutual was seized, the bank’s executives were contacted by the Federal Deposit Insurance Corp regarding their interest in Washington Mutual.
The request to expand its investigation also relies on information from a suit filed by American National Insurance Co, which is suing JPMorgan for its losses on its investments in Washington Mutual securities.
American National said in its suit that JPMorgan used former JPMorgan executives who went to work for Washington Mutual as part of a long-term plan to acquire the savings and loan.
JPMorgan declined to comment.