Wednesday, September 30, 2009

Liberty Quote Of The Day: Frederich Hayek

Amongst the collection of brilliant attendees of Mises's weekly seminars back in Vienna, Frederich Hayek would distinguish himself as first amongst equals when he later won a Nobel Prize for building on Mises's groundbreaking work in developing an understanding of the impact of credit creation in business cycles.

Hayek was a proponent of liberty and understood that the government could not solve man's inherent problems (they are inherent) and that in its efforts to do good, it would generally have a multiplier of negative unintended consequences. This is Hayek's second Liberty Quote of the Day.

"What our generation has forgotten is that the system of private property is the most important guarantee of freedom, not only for those who own property, but scarcely less for those who do not. It is only because the control of the means of production is divided among many people acting independently that nobody has complete power over us, that we as individuals can decide what to do with ourselves."
- Frederich August Hayek - The Road to Serfdom: 1944

Tuesday, September 29, 2009

Guest Post: Max Headroom Brings The Rage To The FDIC

As your source for all things FDIC, we bring you a guest post from long time friend of TILB - Max Headroom - on the ongoing debacle that is the public "option" for deposit insurance. Don't worry though, we are sure a health care public option would be far sounder and less costly. The public options in mortgages (Fannie and Freddie) and deposit insurance (FDIC) are probably the outliers. Something as simple as healthcare (i.e., 16% of GDP and with all sorts of personal and moral decisions) would likely be much simpler.

In any case, Max brings the anger on the news the FDIC is going to borrow $45 billion from the banking system to support the banking system and that it expects to incur $100 billion of insured losses before all is said and done. Enjoy:
I can’t believe this isn’t getting more press. But I’ve been saying this for about 12 months now; finally the FDIC admits that it is a full-on insolvent sh!t show. It just ramped its loss estimates to $100 bn from merely $70 bn – that’s nearly an increase of 50% mind you – and says it will “go negative” this month (never mind the massive liabilities it has taken on and guaranteed too). So it officially has no money; actually, it officially has negative money.

But this is the shocker - to pay for this debacle, i.e. to do its job and protect depositors, Sheila is recommending that banks pay in advance 3 years of insurance premiums totaling $45 billion. What would you do if Allstate called you up and told you to pay 3 years of auto premiums in advance? An appropriate “go eff yourself” would no doubt be the response.

So while our “healthy” banks – which is hard for me to say with a straight face – continue to struggle (though not lend, i.e. do their job), our gubbernment chooses to further hinder their return to solvency (and hence lending) by placing this new $45 billion burden upon them. Keep in mind, this is direct thievery from the banks’ shareholders and can be seen as a penalty for prudence (or more correctly for being less insolvent).

“I do think this is a good balance,” Chairman Sheila Bair told reporters, and requires the industry to “step up” to spread the financial hit to banks (socialism, there, I said it).

Really, Sheila? You think that “stepping up” and stealing $45 billion from Americans to pay for your incompetency is “a good balance”? I recommend you “step down”, Sheila. You are a colossal failure of the largest proportions, only rivaled by AIG, US fiscal policy, and the Fed’s monetary policy. You are the Queen Joke of regulation in a time when it is really hard to be one because you are surrounded by so many regulatory jesters. Thanks, Sheila, for doing your part to destroy America.
Preach it M-M-M-Max.

Reversal of TARP

Best line of the morning from a friend of ours that runs Directive 10-289, "the FDIC forcing banks to lend it $36 billion is just a reversal of TARP."

Indeed, albeit unevenly meted out.

FDIC Contemplates Making Banks Prepay $36 Billion In insurance Premiums


Lajuan Williams-Dickerson, is this true? Can it be?

We are skeptics but even TILB never saw this coming.

According to this story, the FDIC is contemplating asking, nay, forcing its insureds (banks) to prepay three years worth of insurance premiums. When we posted last week about the rumors the FDIC might rob the rich banks to pay the poor banks, we thought "maybe one quarter's worth of fees". But three years?


We can't even get our mind around the balls that Sheila Bair must have dangling. She must f'ing hate Tim Geithner. Pure hate. She apparently prefers further imperiling the entire banking system to asking him to provide the FDIC with fresh cash that he (the Treasury) is legally bound to provide.

And why?

Ego is almost certainly the answer.

As long time TILB readers know, the issue the FDIC is facing is multifold:

  1. The Deposit Insurance Fund (DIF) is negative. It brings in maybe $200-250 million of "revenue" per week but losses have substantially exceeded that. Using the FDIC's own numbers, we put the DIF at negative $1 billion before Georgian Bank's failure this weekend ripped another $892 million (perhaps $670 million net of revenue) out of the FDIC's already negative coffers. Our estimate is that the FDIC's Deposit Insurance Fund now has worse than negative $1.5 billion in its equity position (unless the FDIC chooses to fraudulently manipulates its reserving, which now is clearly on the table - TILB is basically expecting it at this point);
  2. Much of the negative position is caused by reserving, so while the FDIC is insolvent and would have been taken over our failed if it were not a socialized insurer to begin with, it actually has plenty of "assets" to deal with its losses for the coming year;
  3. However, an enormous portion of those "assets" are not cash. In fact, the largest line item on the DIF's balance sheet - by far - is toxic mortgages and other toxic loans that the FDIC could not sell when it took over a given bank. TILB's estimate is this number is currently in the $30-35 billion range. And to date, they have basically refused to sell these "assets" so we can safely opine those loan values are rapidly deteriorating in value as the delinquencies accelerate and servicing is limited or non-existent.

As we noted last week, charging premium before it's actually due does not fix the solvency problem. Borrowing money does not plug a hole that is fundamentally and "equity" problem. The DIF will still be negative and thus the FDIC will still be functionally insolvent. However, it does temporarily solve the "cash" problem that the FDIC was facing.

With that "solution" comes several potentially ill outcomes, most importantly the FDIC would be sucking $36 billion of much needed capital out of the banking system all at once in order to shore up the same banking system (bend your noodle on that for a bit), ironically making strong banks much weaker while not helping weak banks. This effectively will raise the cost of funds for strong banks (Sheila may as well go kick Helicopter Ben straight in his tiny balls). This capital is needed by banks to protect their own balance sheets or, God Forbid, to make new loans. But alas...

Next, she's kicking the can down the road: Sheila Bair will not be running the FDIC when it comes time to pay the piper as she's already announced that she likely won't stand for reappointment. This is creating a shitstorm for her successor.

Three, think of what this is signalling as to the scope of pending bank failures. The FDIC needs an immediate $36 billion infusion? Using the FDIC's own numbers, we know that the in the third quarter alone (6/30 - 9/30) losses for insured banks have been $14.9 billion so far. Last week we estimated that the FDIC likely had less than $10 billion of that precious asset called "cash" remaining. How long will the $36 billion last? One year? Maybe 18 months of we're generous? And then what? Banks won't owe any new premium for another 18 - 24 months at that point. How many times can the FDIC tap already staggering banks for more money? We suspect we will find out.

The Citizen Guarantors of the FDIC - you and me - will inevitably have to step up to the plate on this. It is a function of when, not if at this point.

We have a lot more to say on this matter, but frankly it's probably best if we just let it play out before letting the steam come out of our ears.

Monday, September 28, 2009

Amherst Securities Issues A Report On The True Housing Inventory Overhang

Amherst Securities, perhaps most famous to TILB readers for their famous jobbing of JP Morgan, is back and this time they share an analysis of the true housing inventory overhang that exists today.

Basically, while the traditional media regularly touts the improvement signified by the contraction of housing inventory down to 8.5 months, these stories overlook the massive foreclosure/REO* inventory and pipeline that is building on the books of banks and servicers. Loans continue to move through the delinquency pipeline toward REO at a rapid pace but are moving out at a slow pace (meaning bank balance sheets (and the FDIC balance sheet!) are filling up with foreclosed homes that ultimately need to be sold). These properties are destined for liquidation of one kind or another and thus will be competing for scarce buyers with "normal" housing inventory. TILB argues that the shadow inventory is understated yet further by two factors:
  1. Folks that would like to sell but are unwilling to list their house during an unstable market. Everyone knows someone(s) like this and we suspect this is a huge backlog (of course, most "normal" sellers are would-be buyers as well)
  2. Investment properties. An enormous number of foreclosure sales have been purchased by investors that ultimately plan to re-list the properties they've acquired in order to have an exit and chrystalize their "gains". Unlike #1, these sellers do not come accompanied with a buyer. They are net sellers.

This point about "net sellers" is an important point. While "normal" housing inventory are homes owned by a bunch of sellers that expect to be buyers (e.g., they are moving and so they may sell a house in Cupertino and buy a house in Dallas, thus they are "net zero" to the nationwide supply/demand dynamic), REO inventory and investment property inventory are net negative. They do not have an natural "buy" that follows their sale. As such, this is a much "worse" kind of inventory, from a house price perspective.

Here's the synopsis Amherst provides about their report followed by the report itself. It is excellent.


The single largest impediment to a recovery in the housing market is the large number of loans that are either in delinquent status or in foreclosure that are destined to liquidate. This creates a huge shadow inventory. We estimate this housing overhang at 7 million units, 135% of a full year of existing home sales. We look at the impact on a number of local markets, then look to the causes of the overhang: (1) transition rates are high, (2) cure rates are low and (3) loans are taking longer to liquidate. We are concerned that, in light of this housing overhang, the stabilization we have seen in home prices the last few months is temporary.
Here's another juicy tidbit:
The Mortgage Bankers Association (MBA) Quarterly Delinquency Survey covers 44.7 million units, or approximately 80% of the total universe. Thus, about 55.9 million homes in the United States have a mortgage. Exhibit 1 (below) shows that at the end of Q2 2009, a staggering 13.54% of mortgages in the MBA survey were in some stage of delinquency: 4.3% of units surveyed were in foreclosure, another 3.88% were 90+ delinquent, 1.68% were 60 days delinquent, and 3.68% were 30 days delinquent.
Using transition rates for the calculations, our Q2 numbers indicate that the cure rate is near “0” for loans in foreclosure, and it’s 0.8% for 90+ days delinquent, 4.4% for 60 days delinquent, 26.5% for 30-day delinquent loans (thus, we assume 100% of the foreclosure bucket, 99.2% of the 90+ delinquent bucket, 95.6% of the 60 day
delinquent loans and 72.4% of 30 day delinquent loans will eventually liquidate). This implies that of the 13.54% delinquent units, we expect 12.42% of units to eventually liquidate. If the MBA data is representative of the mortgage universe, it suggests that 12.42% of 55.9 million units (6.94 million units) are already in the delinquency pipeline and will eventually liquidate.

To put that into perspective, existing home sales total around 5.2 million units - - so the overhang is approximately 1.35X one year of existing home sales. [emphasis added]
Honestly, we could go on and cut and paste the entire report, but you may as well click the below link and enjoy the source document yourself.

Green shoots!

Shadow Inventory Report Amherst 9-23-09

*REO means "Real Estate Owned". This is industry parlance for homes that banks and servicers have taken back, generally due to foreclosure, and thus no longer are recorded as a mortgage "loan" on the balance sheet of these entities but are now recorded as REO.

If you enjoy TILB, please send the link to a friend. Spread the anger.

Sunday, September 27, 2009

Detroit Lions Snap 19 Game Losing Streak Spanning Three Seasons Against Washington Redskins

How about Detroit putting its eight inches right up Washington's metaphorical dirt path yet again today? First Chrysler, then GM, then C4C, and now the hapless Lions snap an epic two year losing streak against the Redskins. It's like a karmic D in the A.


Friday, September 25, 2009

Reflections On Jim Cramer's "They Have No IDEA" Rant

It is almost hard to believe that it's been over two years since Cramer famously went apeshit on CNBC during that August of 2007 warning flash, shortly after the Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Fund, its sister vehicle, and Sowood all blew up, seemingly out of left field.

Banks had not yet begun to fail. Cramer, believe it or not, even alluded to Bear and other investment banks facing the likelihood of failure. This was in the face of Bear's stock trading for over $100/share! Amazingly, despite his well founded concerns, the market would go on to achieve new highs in October.

Cramer, we're sure, calmed down and went back to his typical schlocky pump and dump self. But for one afternoon in that summer of warnings, Cramer had prescience. He showed insight, knowledge, and connections. He was everything that he ought to be. It was fleeting and despite being the laughing stock of Wall Street in the days that followed this rant, nobody is laughing now. Watch the clip and ask yourself, "how did such a moron nail it so hard?"

When you watch this, it almost makes you respect Cramer. If he would stop with his typical showmanship schlock and do more of this, people would respect him.

What follows is from the afternoon that immediately followed Bear Stearns' conference call when it attempted to defend itself publicly and tell everyone, "there's nothing to see here. Move along."

Also, huge unintentional comedy in Cramer just totally disregarding Erin Burnett and steamrolling her.

In Cramer's own words:
"I don't want to create fear; I like Bear Stearns very much, but I think that at this stage this is not a good call, they shouldn't have done it, and they should have just said 'you know what, we're doing well' and don't say another thing. Just don't say it because it does does not inspire confidence...

"Alan Greenspan told everyone to take a teaser rate and then raised the rate seventeen times, and Bernanke is being an academic...he has no idea how bad it is out there! He has NO IDEA! HE HAS NO IDEA!! I have talked to the heads of almost every single one of these firms in the last seventy two hours and he has no idea what it's like out there! NONE! And Bill Poole has no idea what it's like out there! My people have been in this game for twenty five years!! And they are losing their jobs and these firms are going to go out of business and he's nuts, they're nuts! They know nothing!!!"

Erin, "Cramer...I, I..."

"I have not seen it like this since I went five bid for half a million shares of Citigroup and I got hit in 1990. This is a different kind of market and the Fed is asleep. [Erin tries to interrupt] Bill Poole is a shame. He's shameful. [Erin tries to interrupt] He ought to go and read the Accredited Home document...You can't get a darn loan unless you're rich like me."

Then Erin tries to calm Cramer down, telling Cramer that if the Fed enacts an emergency rate cut we'll have Armageddon.

Cramer, "no, we have Armageddon. I wouldn't try to cause that. We have...we have Armageddon. In the fixed income markets we have Armageddon. We haaaavvve Armageddon...

"This is crazy. I am sorry to be upset about someone for heaven sake...I worked at Fixed Income at Goldman Sachs. This is not the time to be complacent. I mean darn, sometimes I wish I didn't know anybody so I could just sit here and say, 'you know what, just go buy some Washington Mutual and take that yield.' Unfortunately I know too many people and I'm too darn old...I've been around too long... And Bill Poole? Bill Poole. Bill Poole listen to me: there was a president by the name of Hoover. And no one thinks much of him now: The Great Engineer..."

Anyway, enjoy the trip down Memory Lane. The rant is hard to view through the lens of August 2007, but you have to try.

Thursday, September 24, 2009

Ron Paul Interview With John Stossel

First off, your TILB wrote in Ron Paul in last November's election and, as such, we admit to a large degree of bias. That said, having somehow never before seen this video series of Ron Paul's extensive interview in April 2008 with John Stossel, we walk away saying that amongst his more modern interviews, this is the most clear depiction of Congressman Paul's views we have seen. Absolute must watch. Stossel does a great job of challenging our favorite Congressman without being argumentative and allowing plenty of time for response.

It seems virtually impossible for Dr. Paul to be more different than President Obama.

The below is Part 3 of 6, as Ron Paul talks about the role of military and foreign policy.

Wednesday, September 23, 2009

The FDIC Announces Intention To Rob The Rich To Give To the Poor

We assure you that it was never our intention to become a site dedicated to unmasking the shitshow that is the FDIC, but we play the hand we are dealt.

The most recent FDIC ridiculousness, which we will address below, should not surprise loyal TILB readers as we have been stating over and over again that, using the FDIC's own numbers, the FDIC is insolvent.

Last week, we proved mathematically that the FDIC DIF is now negative and chewing through its reserves. While its liabilities exceed its assets, a portion of those liabilities are reserves that will be used to offset actual losses and pay its creditors (depositors of failed banks). This conversion of reserves into realized losses will keep the DIF alive for a period of time, but the FDIC will soon hit a wall in which it still has "assets" but those assets just don't happen to be "cash". In fact, we also noted that a huge portion of its assets are illiquid assets that are amongst the toxic of the toxic. This of course would not be a problem if they could pay depositors with toxic mortgages, but alas...

After losing another $650 million of value to the Deposit Insurance Fund (DIF) last week (basically $850 million of insured losses offset by $200 million of accrued premium and guaranteed fees), the DIF's capitalization now stands at worse than negative one billion!

As we have said many times, if the FDIC were a bank under the regulation of the FDIC, it would have been seized a long time ago. As American citizens, we find this all very embarrassing.

So, that leads us to this week's FDIC announcement: the FDIC is considering asking sound banks to pay their regular deposit insurance premiums in advance of the normal timeframe (while not asking unsound banks to do the same [note: calling all sellside analysts, you now have a great question to ask the banks you track!!!])

This announcement tacitly equates to stating the following:
1) Oh, shit - we're out of money! ...but not really, but we do need cash, but don't worry, everything's great!
2) In order to remedy this problem, we are going to make all of our lend us their insurance premiums until the premiums come due (don't worry though, this isn't a backdoor special assessment - next quarter we'll credit you for it - wink, wink...)
2a) Oh, and we're not going to make relatively weak banks pay this advance just feels more fair that way
3) For the time being, our real problem is a "cash" problem rather than an asset problem - don't you see all our pretty reserves? We keep those reserves right there on our balance sheet offset by assets (e.g., toxic, unpurchasable mortgages)

What the deuce is going on here? Are we the only people on Earth that think taking capital out of the banking system to prop up the banking system makes no sense? Isn't Bernie Madoff in jail until he dies for f'ing fewer people behind their backs?

At least the mainstream press is catching on a little bit to the debacle that is the FDIC. That said, the press is confused in its rationale for why big banks "support" this. They obviously support it because they don't want yet another "special" assessment and if paying their normal assessment early helps them avoid said special assessment, they certainly will be in favor of that. However, the article goes on to state big banks don't want the FDIC to borrow from, the Treasury.

This we are skeptical of.

To say that this would be construed as a taxpayer bailout of banks, is ridiculous. It's a taxpayer bailout of the government. And by the way, the FDIC's entire purpose is to provide bailouts. That's what the FDIC inherently is: a taxpayer guaranteed bailer-outer...but the bailout is to depositors, so to bailout the FDIC is to bailout depositors. While banks, of course, benefit from this in the form of reduced risk of bank runs, that is a statement that is always true, not true just now.

This proposal does not begin to address the FDIC's core problem: THE FDIC IS INSOLVENT. IT HAS LIABILITIES THAT MASSIVELY EXCEED ITS ASSETS. Borrowing more money does not generally address solvency (actually, it often makes the problem worse). What this solution does is simply delay the inevitable; kick the can down the road. As we said on SeekingAlpha last week, the FDIC's core problem is that while it has "reserved" $30 billion for losses (before Q3), it does not actually have $30 billion in cash. In fact, depending on how you calculate "cash" the FDIC had $20 billion or so of cash on June 30th (which is down by about $12 billion so far this quarter). Its largest asset was actually $22 billion of the most toxic loans from the most toxic banks: assets that buyers of failed banks were not willing to purchase ($22 billion as of June 30th, much bigger now).

...and, as we noted, the problem is compounding because the FDIC has been underreserving and its assets are almost certainly overstated. Because the FDIC has been extremely reticent to sell siezed assets, these generally non-performing loans have been sitting on their books stagnant, largely unmanaged and thus suffering deteriorating value as the likelihood of ultimate recovery declines by the day

[Note: generally when a bank fails, the FDIC sells some portion but not 100% of the assets of the failed bank. It retains the balance for disposition at a later date, generally through auctions]

And so this frames the FDIC's problem. It can pull cash forward by a few months, but that just means that unless the new payment cycle becomes permanent, the problem is worse three months hence. The FDIC can borrow from the, the "U.S. Treasury", but that does not address solvency - it simply adds another liability to the FDIC's balance sheet. Unless the Treasury makes an "equity" injection into the FDIC, we are not talking about "if" the FDIC is insolvent, we are simply talking about "when" people realize it.

When the FDIC files its September 30th balance sheet for the DIF, unless they start gaming their reserving (which is why bankers go to jail, mind you!), Sheila will have to admit that the DIF is technically insolvent.

The FDIC will have some modicum of claims paying ability that lasts for another two quarters perhaps, but it hits a wall soon unless she starts converting toxic assets into cash. TILB has been following the whole loan mortgage market for the past few years in a variety of capacities - we strongly suspect that the FDIC will not be able to move those assets at anything close to carrying value. When Q3's new basket of bank failures is added, the FDIC's total will exceed $30 billion of super-toxic loans. This is an enormous volume of this type of asset. Extracting value from these kinds of loans requires lots of time and manpower - the likely buyers are niche oriented.

Of course, if these toxic assets start actually trading to new hands (so that the FDIC can raise cash), these sales will have a depressing impact on the realizable value of similar assets on what are theoretically solvent banks, leading to yet more bank failures.

And so here we sit, staring at a Federal government operated trainwreck that's playing out in slow motion. Nobody seems to be paying any attention, yet we find ourselves mesmerized and not able to turn out attention away. We deal with it by standing tall and sharing our views with the our readers.

This is our world and we suppose it's indicative of the role that we play. If the mainstream media will not talk about the Emperor's lack of clothes, we'll go ahead and let you know: Sheila Bair is naked. No, not that way. She's naked in that she is managing a debacle of a regulatory body that has failed at its mission, is insolvent and is introducing all sorts of despicable incentives into the system. She's naked because she is now undertaking in all the despicable acts that she so rightly criticizes and regulates. She's playing favorites, mismarking her assets and understating her liabilities. But time is running out. The paintrain is coming - our view is man-up and admit the situation.

Don't "borrow" from Timmy G; rather, ask for an infusion of new "equity". Frankly, the truly appropriate thing to do would be to seek private capital, recapitalize the FDIC, spin it out completely from the government and operate it as a for profit insurer.

But what is the FDIC's response?

Pretend it's not happening.

Head in the sand, just hoping taxpayers keep walking by pretending there isn't some crazy bastard suffocating under the weight of the beach around them.

Monday, September 21, 2009

September Car Sales Fall Flat On Their Face

Apparently this Boston Globe writer missed the memo that the reason September auto sales are just an abysmal disaster is not because demand was pulled forward into July and August from today and the future, as TILB predicted it would, but that it's simply an inventory problem. The author, Megan Woolhouse, seems to believe - crazily, we might add - that there is a demand problem when clearly there is a supply problem.

If only the automakers would provide dealers with more inventory, all of these ills in the auto industry would be cured, as the lunatic Peter Fong stated.

Here are a few choice quotes from the article which highlights Woolhouse's fundamental misconception [emphasis added]:
Manager Adam Silverleib said business was “pretty intense’’ as a result of the federal stimulus program, with the dealership hustling to accommodate customers and handle the piles of paperwork required for them to receive reimbursement on vouchers. “Now we’re kind of back to where we were in the spring,’’ he said.

In an attempt to draw customers back to showrooms, some dealers are offering new incentives, albeit none as enticing as a $4,500 for a rusting junker. Silko, for example, is promoting 2.9 percent financing on new Accords, along with other deals on its website.

Nationwide, customers snatched up 700,000 new cars, most of them foreign-made, and the government ended up paying out nearly $3 billion toward the purchases. But from the start, analysts predicted that Cash for Clunkers would not boost sales for the year. September’s sales swoon seems to be making their case. Car sales are usually slow after Labor Day, but because of the recession consumers this year are especially reluctant to say yes to major purchases. To make matters worse for dealers, most are still waiting for voucher reimbursements.

“It was probably, in the end, a complete waste of taxpayer money,’’ said John Wolkonowicz, a senior auto analyst at IHS Global Insight, Lexington forecasting firm. “The dealers, who were supposed to be the primary beneficiaries, many were forced into cash flow problems because the government didn’t pay them in a timely fashion.’’
This program was very good at getting product off the lot, but there haven’t been long-term benefits,’’ he said. “Dealers are reporting that showrooms are pretty dead right now.’’

Wolkonowicz said the fall slowdown may have been worsened by the program because many buyers came out early to take advantage of the program instead of waiting until now to shop.

In Raynham, Silverleib is relying heavily on longtime customers ready for a new model. But he is realistic about the state of the auto business, and skeptical that the economy is out of the woods.

“Speaking as someone on the front lines, we’re still in a recession,’’ he said.
I love the smell of napalm in the morning...especially when its victim was my tax dollars.

[HT: LB]

Thursday, September 17, 2009

September Auto Sales A "Disaster" Per Chrysler's New Chief

Looks like we're headed back below 10 mm SAAR rate.

The good news apparently is that the automakers have decided this plunge is not from lack of demand post Cash For Clunkers but from lack of available inventory. So, let's turn those machines back on, boys and girls.

That's good news, because some of us cling to the apparently mistaken belief that Cash For Clunkers did nothing except shift demand around from one period (the future) to another period (the cash for clunkers era). Oh, and it created all sorts of bad market signals in a broad swath of industries.
“We are going to see harsh reality in September," Sergio Marchionne, the chief executive officer of Fiat and Chrysler, said at the Frankfurt Motor Show. He described the U.S. industry results as a “disaster."
Anyway, here's the article with Chrysler's chief quoted.

Monday, September 14, 2009

Failure Friday? Yes. Finally The FDIC Deposit Insurance Fund (DIF) Goes Negative

Well, as we have been saying week after week, the wizards at the FDIC are managing a functionally bankrupt Deposit Insurance Fund (DIF). Anyone with common sense could assess loss-reserves to the DIF asset base and recognize this as fact.

But this week is different.

This week the DIF actually lost its last penny and went negative.

Best we can tell, the FDIC is now drawing down its line from the U.S. Tax Payers...excuse us, we mean U.S. Treasury.

With the finally announced and seemingly inevitable failure of Corus Bank in Chicago (shocker!) as well as the not-insignificant failure of Venture Bank in Washington state, the DIF suffered a $2.0 billion nutpunch this week.

Loyal readers know that last week we calculated the DIF's remaining value at $1.3 billion. While the FDIC is bringing in about $200 million in top-line fees per week, simple math let's you know that $1.3 billion + $200 million - $2.0 billion = bad outcomes.

Because this is a red-letter day, we update the math below.

Deposit Insurance Fund Status:
+ $10.4 billion: DIF balance as of 6/30/09 (FDIC reported)
- $12.95 billion: Insured losses from 6/30/09 - 9/11/09 (FDIC reported)
- $0.2 billion: DIF operating expenses from 6/30/09 - 9/11/09 (estimate based on last 12 quarters)
+ $1.85 billion: Insurance assessments (estimated based on 20bps p.a. assessment per insured deposit on $4.8 trillion of insured deposits)
+ $0.4 billion: TLGP fees (TILB estimate of 65bps p.a. on $339 billion outstanding guaranteed debt at 6/30/09)
+ $0.1 billion: Transaction Accounts Guarantee Program ($736 billion guaranteed at 10bps p.a.)
= -$0.4 billion: Total DIF as of September 11th, 2009.

So, from here on out, We The People - the citizen guarantors of the FDIC - will be paying for the FDIC's (and other regulators') foolish behavior. It is officially our dime...and yet nobody seems to care. The media could do this math. This should be splashed across front pages nationwide, "FDIC Goes Broke", "Bank Failures Overwhelm FDIC," "FDIC Fails".

Where's the anger? Where's the dismay? All we see is resigned acceptance; the beaten attitude of a conquered spirit.

TILB is prepared to stand alone...


Ronald Reagan's Speech Supporting Barry Goldwater At 1964 GOP Convention

This speech is considered by many the great speech of modern republican history. Small government, firm but humble economic policy, inalienable rights, low taxes, low spending, government as a servant not a master, balance budgets. While many GOP politicians parrot those ideals, they practice anything but.

Watching this speech makes you quickly realized how far the GOP has drifted...this, despite invoking the name "Ronald Reagan" so often. Other than a few voices that are largely ignored - such as Ron Paul - most mainstream Republican politician bare little similarity to this man's views.

It is worth your time.

Sunday, September 13, 2009

Roger Federer Beautiful U.S. Open Tennis Shot

Roger Federer is easily one of the two or three best Swiss tennis players in the world. This shot reminds of us of a young Investment Linebacker.

Friday, September 11, 2009

Liberty Quote Of The Day: Ludwig von Mises

As TILB followers know, Mises is an unrivaled genius in understanding economic consequences and human behavior. We proudly display at the top of our website his "tu ne cede malis" quote as an ironclad motto of standing against the Wormwoods that populate our government.

As we collectively celebrate the wonders of money printing and the socialism of losses, TILB can't help but reflect back on this quote from Mises's great work Human Action. If it doesn't give you a warm fuzzy about Helicopter Ben, nothing will.

"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved."
- Ludwig von Mises
From somewhere, far in the distance, beyond the rising fog and across the seas, the wind carried on its back a faintly whispered word, audible only to the ears of the awake: "gold".

[HT: TD]

Wednesday, September 09, 2009

The FDIC Contemplates Granting GE Capital Six Months Of Life Support

Per Bloomberg, the FDIC is contemplating extending TLGP another six months. As long-time readers of TILB understand, this is targeted specifically at GE and its subsidiary GE Capital, which has quietly been sucking at the government teet since last fall as hard as possible.

As a reminder, GE Capital has issued approximately 30% of the entire $320 BILLION of wrapped debt under the TLGP. This almost unimaginable reliance on federal subsidies for a business that has a market cap of nearly $160 billion is happening with virtually no mention from the mainstream media. One has to wonder what portion of GE's one hundred sixty billion dollar market cap relies on taxpayer subsidies and why equity owners of one of the world's largest, most storied and theoretically most diversified businesses need - much less deserve - that taxpayer gift.

And how does GE disclose its fundamental reliance on taxpayer handouts? You'll be pleased to know that it is clearly stated in its most recent 10-Q on page 24, Section 8 under the heading GECS Borrowings in footnotes (a) and (d). Very explicit. But, hey, what's $100 billion of sovereign loan guarantees really mean these days anyway?

...and so we return to today's announcement that the FDIC is contemplating extending the TLGP program for an additional six months. One company is by far the largest issuer and we know that its reliance on government wraps has not abated. So, when one interprets the TLGP news...well, we're not sayin', we're just sayin'...

Ironically, the Bloomberg article, while mentioning GE as an issuer under the program seems to focus on the fact the program is intended for "banks" but does not connect that neither GE nor GE Capital are banks. We may not know everything about GE, but we know one thing for sure: GE may own a tiny little bank in BFE, but GE ain't no bank. It certainly is not a bank that deserves nearly $100 billion in loan guarantees from We The People. We suppose if you are the FDIC and you know your insurance fund is already broke, you can be comforted by the fact that you've already failed, nobody cares, and you are playing with the house's money. What's a few extra billion of other people's money (like one hundred billion) between friends. Hey, it's not your money. Have fun! Get some hookers and blow while you're at it!

Sept. 9 (Bloomberg) -- The Federal Deposit Insurance Corp. proposed a six-month, emergency-only extension to its debt guarantee program as regulators move to wean companies from federal aid approved at the height of last year’s credit crisis.

The five-member FDIC board unanimously approved seeking comment on the extension, which would be limited to certain cases, during a meeting in Washington today. The FDIC now guarantees eligible debt issued before the scheduled Oct. 31 expiration by banks that must get agency approval and pay a fee.
Under the limited extension, designed to help the FDIC phase out the program, banks would have to apply to the board for permission to access the aid and show that they were unable to issue unguaranteed debt due to market disruptions or other emergency circumstances.

The FDIC had about $320 billion in outstanding debt guaranteed by the program as of July 31, from firms including Citigroup Inc. and General Electric Co. Regulators are weaning banks from U.S. backing by requiring them to issue unguaranteed debt before repaying Troubled Asset Relief Program funds and escaping restrictions attached to that aid.

Issuance of FDIC-guaranteed bonds has shrunk to $10.8 billion in the third quarter of this year from $130.2 billion in the first quarter and $34.7 billion in the second, according to data compiled by Bloomberg.[emphasis added]
We look forward to a FOIA request showing how GE is "unable to issue unguaranteed debt".

Green shoots.

HT: LB and BC

Fannie Mae And Freddie Mac: Examples Of The "Public Option"

As President Obama prepares to pound the table for the so called "Public Option" using his bully pulpit later this week and the debate rages on about what said "option" would do to the private healthcare insurance market, TILB believes we need look no farther than the public "option" that already exists in the conforming mortgage market.

Fannie Mae, Freddie Mac, and the FHA (collectively the GSEs) were created in spite of what had been - over time - a competitive, functioning home mortgage lending market called "banks". You may have heard of these companies. At one time, these so called "banks" made things called "loans" and kept the risk of these "assets" on their balance sheet in an attempt to earn an acceptable risk-adjusted "spread" between their cost of funds and their earning assets. The federal government (aka FD Roosevelt) did not appreciate the slow evolution of these private market lenders (which already are subsidized in many ways) and thus felt they needed public "competition" to spur them on.

As such, the GSEs are, in substance, the public option for conforming residential mortgages. If you are interested in borrowing to acquire a house and both you and your desired loan qualify for GSE standards ("conforming"), there is a 100% chance you will be rolled into a GSE product.

100% marketshare? Now that is a display of some awesome competitive power! These must be really well run businesses to drive their "competitors" completely out of the market. Hell, not only that, the GSE standards serve as a vortex that sucks all other "non-conforming" products toward GSE them. Amazingly good work, dear Fred and Fan!

As this Washington Post article highlights, not only do the GSEs have 100% market share of the conforming mortgage market, they have 90% market share of the entire mortgage market.

Luckily for us citizens, these wholly apolitical entities have managed to be purveyors of good and stability for our society...

....I mean, other than when they create the occasional systemic economic collapse leading to periodic multi-trillion dollar public bailouts.

The GSEs have been manipulated for political gains again and again creating a lollapalooza of unintended consequences that ultimately led to one of the greatest borrowing orgies of all time. Not surprisingly, this led to a period of horrific malinvestment and indescribably bad human behavior that subsequently was followed by the greatest financial collapse our nation has seen since the Great Depression. Luckily, the public option for healthcare will be magnificently better.

We at TILB are convinced that as politicized as housing (and thus the GSE system) has been, healthcare and the human behaviors associated with it will be totally outside the political spectrum and that the results of this socialist experiment will be grand indeed. There will be no political meddling. The natural short termism of man will not be made worse by election cycles and desires to buy votes with handouts. The seemingly good intentions of the public option's creators will never be replaced with the less good intentions of their future political replacements. The public option will endeavor to earn an acceptable commercial return on capital that puts it on even footing with private options. It will not lead to malinvestment and unusually horrible human behavior. It will not crowd out private capital and, most importantly, it will lead to improved healthcare outcomes.

How could the Public Rainbow Special Happy Happy Friendly Love Your Neighbor Option not accomplish all these wonderful things when Dear Leader says it will?

Just because every other socialist experiment in history led to less freedom, less productivity and a slew of negative unintended consequences does not mean that this will be the same.

In fact, we have been assured that "this time is different."

Back in the world of sanity, logic and reason, we suppose the "good" news is that because the proposed socialist health care system is clearly untenable in the long-term, we can trust that it will ultimately fail leading to a subsequent increase in freedom. Sadly, the long-term can take a long time indeed and our liberty can be taken from us for the duration before that welcome collapse and rebirth into an actual commercial and thus tenable solution takes hold.

In any case, we look forward to hearing The Administration's attempt at mass assimilation. Don't worry, dear reader, I'm sure it will sound wonderful. Just sit back, relax, and enjoy the tales of pixie dust and Tooth Fairy economics.

"Resistance, is futile. Your life, as it has been, is over. From this time forward, you will"

Tuesday, September 08, 2009

Is The FDIC Deposit Insurance Fund Broke; TILB Provides The Analysis

We are rolling out a new regular series on TILB today. We will update this periodically during the next year and a half.

As we noted recently, the FDIC Deposit Insurance Fund (DIF) took another $400 million hickey over the weekend. We have written several times about the de facto bankruptcy of the FDIC, including:
Now, now, we know the US Treasury guarantees the DIF, so depositors need not fear [other than for their tax dollars and the global incentive system], but hopefully this recognition of functional insolvency allows us to get past the ruse that the FDIC has fulfilled its duty of charging appropriate insurance premiums and providing capable regulatory oversight. In fact, the FDIC's has been an abject failure at these core functions. If the FDIC DIF were were an actual insurer, the FDIC Deposit Insurance Fund itself would have been taken over and killed by the government.

Keep that track record in mind when the FDIC "experts" espouse their opinions on the "solutions" to our current ills.

This is all happening in front of our very eyes and with another 300+ banks tee'd up to fail, if we assume the average failure costs $200 million (vs [$252] million per failure since 6/30/09), the FDIC will burn through another $60 billion of capital between now and the end of 2010.
So the natural thought arises, "TILB, you say the FDIC is broke, but on June 30th the DIF had $10.4 billion remaining. That seems like a lot of money, so why should I worry?"

Thus begins our regular tally of the DIF. We'll give you a sneak preview: the FDIC is bankrupt.

Deposit Insurance Fund Status:
+ $10.4 billion: DIF balance as of 6/30/09 (FDIC reported)
- $11.1 billion: Insured losses from 6/30/09 - 9/5/09 (FDIC reported)
- $0.2 billion: DIF operating expenses from 6/30/09 - 9/5/09 (estimate based on last 12 quarters)
+ $1.7 billion: Insurance assessments
+ $0.4 billion: TLGP fees (TILB estimate of 65bps p.a. on $339 billion outstanding guaranteed debt at 6/30/09)
+ $0.1 billion: Transaction Accounts Guarantee Program ($736 billion guaranteed at 10bps p.a.)
= $1.3 billion: Total DIF as of September 5th, 2009.

So, on a $4.7 trillion insured deposit base, that $1.3 billion represents less than 3 bps of reserve cushion. While Chairmen Bair, Bernanke and Geithner rail against the evils of overlevered banks and insurers, they share a hand in a government run insurer that is levered 3615 times its reserve base.

Don't you just feel secure? Thanks FDIC: you rock!

Green shoots.

As we noted last week, we expect the DIF to lose more than $60 billion between now and the end of 2009. If the FDIC were analyzing itself, it would look at its equity capital base of $1.3 billion, look at its likely losses of $60 billion (perhaps $20 of which would have already been reserved) and note that the stated net worth of the FDIC would be negative $18.7 billion with more losses on the way.

Given the higher insurance premiums it now charges, the FDIC generates about $10 billion per year in pre-reserving cash flow (i.e., it takes $10 billion of bank capital and sucks it out of the system, ironically weakening the banks it insures by precisely that amount), we suspect the FDIC would need the better part of a decade to "earn" its way out of this mess.

So, by its own standards not only would the FDIC would be on the problem bank list, the FDIC is broke. It is, in fact, a failed financial institution (and a big one at that).

Yes, these are the people in charge of the banking system (in combination with state regulators and the Fed, each of whom acquitted itself miserably over the past decade). As these bureaucrats make recommendations on future regulatory frameworks and on the future financial industry banking business model, please keep in mind that they themselves are proven abject professional failures.

While it is the FDIC that insures banks, it is the US Treasury that insures the FDIC and We The People that insure the U.S. Treasury. As such, the awful management of the FDIC and its failed practices leave you, TILB and the rest of us on the hook. Luckily, nobody is paying attention - Chairmen Bair, Bernanke and Geithner maintain robust credibility with the traditional media.

While they are busy negotiating our future amongst themselves, with not a dash of politics involved we're sure, We The People all sit back in our oversized ergo-chairs made to comfortably support either our 115 pound wives or our 300 pound friends that have a medical condition called "eating too much" and are brain-numbed by our 50 inch Chinese assembled plasmas and watch with placid stares of confusion and would-be bemusement as our country is systematically weakened from above.

Don't worry though, a "great" president frequently invoked by our modern incarnation once said "the only thing we have to to fear is...fear itself."

And spiders.

And snakes.

And werewolves.


If you find this enlightening, concerning, bemusing or some combination of the above, please let us know and share this with other folks. Spread the word.

We should not accept the revised regulatory profferings of the damned as the pathway to a sin-free future.

Be skeptical.

Be wary.

Most importantly, be angry.

Saturday, September 05, 2009

Deposit Insurance Roulette Hits Green Zero; An Unusually Bloody Week For The FDIC

Depositors with more than $250,000 can take heart that the FDIC tends to favor them in contravention of their mandate by providing free insurance for 24 out of 25 bank failures. Loyal readers know that we have challenged FDIC spokesman Lajuan Williams-Dickerson to defend this indefensible position. In our mind, it is fraud. The FDIC is robbing its citizen guarantors by paying taxpayer money to uninsured depositors in virtually every single bank failure.

We said "virtually" every single bank failure. For the second time in the past two and a half months, the FDIC deposit insurance roulette wheel hit green zero when no buyer was found for the failure of Platinum Community Bank, Rolling Meadows, Illinois. This of course is what "should" happen every week. A service not purchased (insurance on the portion of a deposit that is over $250,000) is a service that should not be provided. Yet we at TILB are angry about this as well. We are angry because this inconsistency is nonsensical and immoral. We are frustrated because this leads to confusion and manipulated outcomes. We are incensed because certain taxpayers are favored at the expense of others for no predictable or reasonably explainable reason.

Lajuan Williams-Dickerson, come to the conversation prepared. You stand forewarned. If you aren't prepared, send The Sheila Bear our way.

This was an unusually bloody week as five banks failed and all five banks generated losses to assets of over 30%. Interestingly, after a week of brutal press on the dubious loss-sharing agreements the FDIC has been entering, they only entered one loss-sharing agreement this week. Prior to this week, 13 out of the last 15 failures had loss-sharing agreements.

It seems increasingly clear to us that the folks over at the FDIC are so overwhelmed by failure right now that they can't tell their ass from their head. This is what happens when you are forced onto the defensive. Understaffed, ill-prepared, under-capitalized, facing an ever-increasing tidal wave of failure and losses, and with uncertain leadership in the future (as GOP appointed Sheila Bair will likely leave after her term expires) it does not surprise us that the FDIC finds itself reacting to news stories with billions of taxpayer dollars rather than doing what they believe is right. Lajuan? Lajuan? Lajuan?

Our bank death scoreboard for the July 1st, 2009 through September 30, 2010 period stands at:

44 down: 206 (minimum) to go

On to this week's stats:

Red Jersey of Shame Leaderboard - Illinois picks up two points:
Georgia 18, Illinois 15, California 9, Florida 6.

Weekly Failure Summary:
First Bank of Kansas City, Kansas City, MO
Assets: $16mm, FDIC Losses: $6mm, Losses as a Percentage of Assets: 37.5%

InBank, Oak Forest, IL
Assets: $212mm, FDIC Losses: $66mm, Losses as a Percentage of Assets: 31.1%

Vantus Bank, Sioux City, IA
Assets: $458mm, FDIC Losses: $168mm, Losses as a Percentage of Assets: 36.7%

Platinum Community Bank, Rolling Meadows, IL
Assets: $345mm, FDIC Losses: $114mm, Losses as a Percentage of Assets: 33.1%

First State Bank, Flagstaff, AZ
Assets: $105mm, FDIC Losses: $47mm, Losses as a Percentage of Assets: 44.8%

Straight Average Losses as a Percentage of Assets: 36.6%
Weighted Average Losses as a Percentage of Assets: 35.3%

In total, the DIF suffered another $400 million of losses this week. Green shoots.

Friday, September 04, 2009

Questions Arise Regarding FDIC Bidding Process

The Huffington Post has written a piece about the FDIC's failure to disclose all the bids in a bidding process. This apparently is a change of action by the FDIC. Further, HP shows what percentage of FOIA requests the FDIC is denying and that we are at a historical high. We've included that graph below.

The article touches on recently popular topics like the FDIC's loss sharing agreements and its insolvent deposit insurance fund (which we've been talking about forever, including earlier this week.
Since the start of 2008, the FDIC has cut 53 such deals, said David Barr, an agency spokesman.

Unlike most federal agencies, the FDIC does not receive appropriations from Congress. Rather, it relies on fees from the banks it oversees. The deposit insurance fund, which protects most bank deposits, now stands at about $10.4 billion; this time last year it was at $45 billion. It's supposed to insure about $4.8 trillion in deposits.

If that fund runs dry, the FDIC has a temporary $500 billion credit line to the U.S. Treasury through the end of next year. It was recently permanently increased from $30 billion to $100 billion.

Thomas argues that's part of the problem. Without knowing what the failed bids were offering, he said, it's impossible to know how much money the taxpayer may ultimately lose.

"The fund will go negative -- there's no doubt about it," he said.

The FDIC has not technically denied FOIA requests for the losing bid documents. Rather, the agency has simply delayed sending its decisions.

But a review of agency records shows that the FDIC has increasingly denied the public access under the Freedom of Information Act.

Through this week, the rate of denied FOIA requests has doubled from last year. In fact, FOIA requests are being denied at a higher rate than at any point during the notoriously-secretive George W. Bush administration.

[HT: DB]

Wednesday, September 02, 2009

Drill Baby Drill?

BP finds "giant" oil deposit in deep water Gulf of Mexico. At more than 35,000 feet (6.6 miles!) down, this is not low cost oil. But, as we at TILB have always said, the cure to high priced oil is high priced oil.

Here's the link to the press release.

The text follows:
BP Announces Giant Oil Discovery In The Gulf Of Mexico

Release date: 02 September 2009

BP announced today a giant oil discovery at its Tiber Prospect in the deepwater Gulf of Mexico.

The well, located in Keathley Canyon block 102, approximately 250 miles (400 kilometres) south east of Houston, is in 4,132 feet (1,259 metres) of water. The Tiber well was drilled to a total depth of approximately 35,055 feet (10,685 metres) making it one of the deepest wells ever drilled by the oil and gas industry. The well found oil in multiple Lower Tertiary reservoirs. Appraisal will be required to determine the size and commerciality of the discovery.

"Tiber represents BP's second material discovery in the emerging Lower Tertiary play in the Gulf of Mexico, following our earlier Kaskida discovery," said Andy Inglis, chief executive, Exploration and Production. "These material discoveries together with our industry leading acreage position support the continuing growth of our deepwater Gulf of Mexico business into the second half of the next decade."

Tiber is operated by BP (NYSE: BP), with a 62 per cent working interest with co-owners Petrobras (NYSE: PBR/PBRA, 20 per cent) and ConocoPhillips (NYSE: COP, 18 per cent).

Liberty Quote Of The Day: James Madison

Our fourth president was an author of the famed Federalist Papers. He also was the primary author of the Constitution. He carved out a defined role for the federal government while leaving broad discretion for each state to create its own constitution for the many and undefined responsibilities of that state's governments. Despite writing a document that put strong restrictions on the role of central government, the scope of that government has done nothing but expand over that time such that now, 233 years later, we sit looking at the Dr. Frankenstein version of what was originally intended.

TILB cannot help but be pained by this evil.

From the Federalist Papers.
"The powers delegated to the federal government are few and defined. Those which are to remain in the state governments are numerous and indefinite. The former will be exercised principally on external objects, [such] as, war peace negotiation and foreign commerce. The powers reserved to the several states will extend to all the objects, which, in the ordinary course of affairs, concern the lives, liberties, and properties on the people".
- James Madison

Tuesday, September 01, 2009

The Big Get Bigger

Great chart from The Washington Post on how the big banks have become nothing but bigger despite the problems that the too big to fail policy has made evident in the past two years.

Click here.

The Good Ship U.S.S. Bank Failure Keeps A Chipper Pace

With three more failures this week, each of which was a good sized bank ($400 million to $1 billion in assets), the FDIC further dug its hole. While The Sheila Bear may not cop to being broke for a while yet as she authorizes the FDIC to keep playing games like underestimating losses on failures by entering long-tail loss-sharing agreements and levying special assessments on its constituents, I cannot imagine there is a thinking person in the U.S. that has looked at the FDIC's own statistics and thought there is a chance in hell they do not tap the U.S. Treasury for emergency funding (is pre-authorized "emergency" funding really an emergency, or just an eventuality?).

Our bank death scoreboard for the July 1st, 2009 through September 30, 2010 period stands at:

39 down: 211 (minimum) to go

Everyone and their mother refers to the FDIC's published data on the size of its Deposit Insurance Fund (DIF) when discussing its size. For instance, in this paragraph from the 8/31/09 WSJ, we can see the DIF is $10.4 billion:
We're referring to the federal deposit insurance fund, which has been shrinking faster than reservoirs in the California drought. The Federal Deposit Insurance Corp. reported late last week that the fund that insures some $4.5 trillion in U.S. bank deposits fell to $10.4 billion at the end of June, as the list of failing banks continues to grow. The fund was $45.2 billion a year ago, when regulators told us all was well and there was no need to take precautions to shore up the fund.
What they fail to mention is that by the FDIC's on estimates, in the bank failures that happened in July and August alone, the FDIC self-reports that it lost $10.7 billion!!! Now, obviously it has continued to receive guarantee fees for its monoline-esque business and it continues to bring in premium. Those probably total $3 billion in the past two months. That means that the DIF has less than $3 billion remaining.

THE FDIC IS BROKE. As we noted last week:
Now, now, we know the US Treasury guarantees the DIF, so depositors need not fear, but hopefully this recognition of functional insolvency allows us to get past the ruse that the FDIC has fulfilled its duty of charging appropriate insurance premiums and providing capable regulatory oversight. In fact, the FDIC's has been an abject failure at these core functions. If the FDIC DIF were were an actual insurer, the FDIC Deposit Insurance Fund itself would have been taken over and killed by the government.

Keep that track record in mind when the FDIC "experts" espouse their opinions on the "solutions" to our current ills.
This is all happening in front of our very eyes and with another 300+ banks tee'd up to fail, if we assume the average failure costs $200 million (vs $274 million per failure since 6/30/09), the FDIC will burn through another $60 billion of capital between now and the end of 2010.

Happy days!

Luckily, our government shits out $50 billion like it ain't no thing these days. The Fed will continue its backdoor monetization as it attempts to inflate away our debt problem without anyone noticing via a variety of lightly masked helicopter drops (we'll address this another day as we can only put so much angst into one post). We're sure nobody will so much as blink an eye at this.

Nor will anyone talk about the fact that the FDIC continues to steal from the poor and give to the rich in absolute violation of its mandate with nearly each and every bank failure. This was yet another week in which every depositor, whether or not they had deposits in excess of $250,000, was fully preserved. THIS IS JUST AN ABSOLUTE ABDICATION OF RESPONSIBILITY AND FIDUCIARY DUTY! Tell me one other insurance company that volunfuckingtarily provides insurance to its customers for events that both parties agree were not actually covered by the policy.

Tell me one.

Half the time you cannot get a private insurer to pay for things that you thought were insured!



TILB hereby challenges anyone from the FDIC to justify why on fucking Earth they provide insurance to depositors that are over the $250,000 limit. LaJuan Williams-Dickerson, are you listening? And Lajuan Williams-Dickerson, don't you dare tell me that this is needed to keep the public calm; if that is the case and everyone agrees it is necessary (we do not agree, but assume everyone excluding us for the time being), then at least charge for the service provided (gasp!). This is not rocket science.

Lord willing we will see a series of congressional hearings that end this theft going forward.

In any case, on to this week's stats:

Red Jersey of Shame Leaderboard - California picks up one point:
Georgia 18, Illinois 13, California 9, Florida 6.

Weekly Failure Summary:
Bradford Bank, Baltimore, MD
Assets: $452mm, FDIC Losses: $97mm, Losses as a Percentage of Assets: 21.5%

Mainstreet Bank, Forest Lake, MN
Assets: $459mm, FDIC Losses: $95mm, Losses as a Percentage of Assets: 20.7%

Affinity Bank, Ventura, CA
Assets: $1000mm, FDIC Losses: $254mm, Losses as a Percentage of Assets: 25.4%

Straight Average Losses as a Percentage of Assets: 22.5%
Weighted Average Losses as a Percentage of Assets: 23.3%
Happy Happy, Joy Joy.