Coming Soon: Banking Crisis of Historic Proportions

[Kadriana]

Re: Coming Soon: Banking Crisis of Historic Proportions

Still a long way to go. It can go on like this for another 15 years.

Just in time for my oldest to graduate high school. Some days I really wish I could go back to being completely clueless about the economy. Now I know enough to be scared but not enough to actually know what to do.

[touchring]

Re: Coming Soon: Banking Crisis of Historic Proportions

Just in time for my oldest to graduate high school. Some days I really wish I could go back to being completely clueless about the economy. Now I know enough to be scared but not enough to actually know what to do.

It's the same everywhere, everyone is fighting for jobs. China has a huge rural population willing to work long hours blue collar factory jobs. Any job, even the cheapest janitor job that pays $70 a month is better than plowing the fields in the villages, which earns just about a little more than subsistence.

[Sapiens]

Re: Coming Soon: Banking Crisis of Historic Proportions

While I agree with your comment in principle....

Be careful for what you wish for, if it happens too fast, it could exceed the government's ability to handle. If that happens, and people find they can't get their money for a week or two, there could then be a run on all banks worldwide... and then things could get really ugly for a lot longer than an orderly wind-down will take.

Sometimes it makes sense to evacuate people from the rickety building, get the surrounding area clear, turn off the gas, water and electricity, and then take it down one controlled piece at a time. Overall it's a faster process and fewer people get hurt.

Well said.

[icm63]

Re: Coming Soon: Banking Crisis of Historic Proportions

ERROR: FDIC is not in trouble.

http://www.ritholtz.com/blog/2009/09...c-story-wrong/

http://www.calculatedriskblog.com/20...epayments.html

If the banks to fail to the extent this article suggests.

The lack of credit will be deflationary, no matter how much money is printed, as money printing with out velocity of money will not give you serious enough inflation to get gold to $5000 or whatever...

THATS why gold has not BUSTED through $1000 with a vengance !

[ThePythonicCow]

Re: Coming Soon: Banking Crisis of Historic Proportions

Sometimes it makes sense to evacuate people from the rickety building, get the surrounding area clear, turn off the gas, water and electricity, and then take it down one controlled piece at a time. Overall it's a faster process and fewer people get hurt.

That may work if there is a place for everyone to escape to, and if people generally agree the building is rickety and of little further use.

I don't think that describes the world economy very well .

[Slimprofits]

Re: Coming Soon: Banking Crisis of Historic Proportions

A quote from Whalen's entry on Barry's blog, from the html address posted by icm63 in the post above this one:

BTW, I have a long article in the next issue of The Bank Credit Analyst that goes through all of this in detail.

So the bottom line of all this is that, yes, the number of bank failures and the cost of cleaning up this mess will be much higher than the 1990s. But because the FDIC is industry funded and because the industry DOES NOT WANT TO BE SEEN BORROWING FROM THE TREASURY, the entire point of Weil’s piece is off the mark. In fact, my sources tell me that the banking industry is supporting a proposal at FDIC to prepay DIF assessments for several years in order to raise cash and reduce the need for borrowing from the UST.

Now that is a story worthy of Jon Weil’s time and talent.

-Chris Whalen

My emphasis in bold. And from the industry mouthpiece:

http://www.aba.com/News/insider.htm#story1

ABA Suggests Options To Raise Money for the Insurance Fund
The FDIC will meet on Tuesday to discuss how to raise more money for the declining Deposit Insurance Fund. The agency will invite comment from the industry. For several months, ABA has talked with bankers and worked with the FDIC to suggest realistic alternatives to another special assessment. ABA was the first to suggest using the revenue from the Temporary Liquidity Guarantee Program, and ABA remains hopeful that this option will be pursued.

ABA has discussed other options with the FDIC and formally provided suggestions in a letter to FDIC Chairman Sheila Bair last Monday.

Since cash is the most pressing need now, a pre-payment of assessments appears to be the easiest and a more attractive option than another special assessment. The pre-paid premiums would remain on banks' books as an asset until the payments are booked by the FDIC on a quarterly basis. However, ABA is concerned that the FDIC may ask for as many as three years' worth of premiums. Pre-paid premiums, unlike a special assessment or the TLGP revenue transfer, do not provide capital to the Deposit Insurance Fund immediately and would not stop the reserve ratio from declining and perhaps falling below zero. Pre-paid assessments would signal to the public that the FDIC has already collected the money from the industry.

cont.

[lsa420]

Re: Coming Soon: Banking Crisis of Historic Proportions

Sometimes it makes sense to evacuate people from the rickety building, get the surrounding area clear, turn off the gas, water and electricity, and then take it down one controlled piece at a time. Overall it's a faster process and fewer people get hurt.

Isn't that what bankruptcy court is for?

[GRG55]

Re: Coming Soon: Banking Crisis of Historic Proportions

ERROR: FDIC is not in trouble.

http://www.ritholtz.com/blog/2009/09...c-story-wrong/

http://www.calculatedriskblog.com/20...epayments.html

If the banks to fail to the extent this article suggests.

The lack of credit will be deflationary, no matter how much money is printed, as money printing with out velocity of money will not give you serious enough inflation to get gold to $5000 or whatever...

THATS why gold has not BUSTED through $1000 with a vengance !

There's nothing meaningful about $1000; it's just another round number. Like $400, $500, $600...

I remember being told that gold would never, ever, go higher than $450...because "they" would never be so foolish as to print "that much" money. Well, "they've" printed that much money and a whole lot more, and gold waved $450 goodbye some time ago [as, likewise, oil has inconveniently left behind BP's widely publicized $25 as the "natural" price for a barrel of crude ;)]

"Won't print enough" has now morphed into "can't print enough", as in "they can't print enough money to offset the deflation from credit contraction". Why not? What's to stop "them"?

Someone should start a thread speculating on the next explanation from the deflationist camp...the one that will take the place of "can't print enough"...

[metalman]

Re: Coming Soon: Banking Crisis of Historic Proportions

There's nothing meaningful about $1000; it's just another round number. Like $400, $500, $600...

I remember being told that gold would never, ever, go higher than $450...because "they" would never be so foolish as to print "that much" money. Well, "they've" printed that much money and a whole lot more, and gold waved $450 goodbye some time ago [as, likewise, oil has inconveniently left behind BP's widely publicized $25 as the "natural" price for a barrel of crude ;)]

"Won't print enough" has now morphed into "can't print enough", as in "they can't print enough money to offset the deflation from credit contraction". Why not? What's to stop "them"?

Someone should start a thread speculating on the next explanation from the deflationist camp...the one that will take the place of "can't print enough"...

how's this... 'they can't keep the value of each existing dollar from rising with each new dollar they print. it's impossible to stop the fed's perpetual motion machine!'

[jpatter666]

Re: Coming Soon: Banking Crisis of Historic Proportions

Someone should start a thread speculating on the next explanation from the deflationist camp...the one that will take the place of "can't print enough"...

Well, obviously because of global warming, we've reached "peak trees". I expect an government mandate to reduce all unnecessary paper usage as well as scheduling schoolchildren to have "planting money" days once per month (to be adjusted to once per week if needed).

[rj1]

Re: Coming Soon: Banking Crisis of Historic Proportions

Not if youve built an underground bunker a few blocks away and own the land that it sits on...!

You may think you have your bunker figuratively only to see that when crap starts to happen you're in the rickety apartment, thereby giving you a false sense of security.

[MulaMan]

Re: Coming Soon: Banking Crisis of Historic Proportions

What do you fake-military-coward-tards think is going to happen?

A bunch (10,000) unemployed bankers, traders, and slide-ruler professionals from wall street are going to invade your crap track home in Montana?

Give me a fricken break - If all top 10 banks in America go under, it will be a simple 3-6 months blip - the US will print money to cover the FDIC, fire ALL management, zero out bondholders and shareholders, sell off assets, and emerge from bankruptcy with new banks.

We don't need friken banks to run the country, within months of the banks going under things will actually improve.

Cowards. Bunker-dwelers. Call yourselves Americans.

[MarkL]

Re: Coming Soon: Banking Crisis of Historic Proportions

Isn't that what bankruptcy court is for?

There's no bankruptcy court for governments or entire systems.