ohh wachovia

[muldoon]

Last Thursday they were raided in their headquarters by state auditors armed with subpoenas.   Much like pulling up to your office and seeing the 60 minutes van, this was a bad thing. 
http://www.bloomberg.com/apps/news?pid=20601087&sid=avoYWzMJM0og&refer=home

Today they announce they are stopping wholesale mortgage practices.  No longer will their mortgages be available through brokers.  How is it that a lending institution makes money without lending? 
http://ap.google.com/article/ALeqM5irM5soz-UKxQkLipL8Hqrr-c4S7wD922IDV80

Anyway, they report earnings tomorrow, the street saying loss of 78 cents per share on revenue of 8.37 billion.  We'll see what comes of it.  While many financial firms have benefited from the SEC no-naked-shorts emergency rule this week, Wachovia was absent from the list.  I think they might be in real trouble here. 

I know I sound like a broken record, but if anyone has funds exceeding the 100k FDIC limit they need to move FAST to rectify the situation.  It seems no single bank is perfectly safe these days.. perhaps IndyMAC now is safe, I dont think it's technically possible for them to fail.  And without all those bad debts they are in good shape today anyway.  (Except for the whole no one taking their checks thing that is)
http://latimesblogs.latimes.com/laland/2008/07/wamu-refusing-i.html

seriously - if a bank is offering a high interest CD, it may be because they are unable to meet reserve requirements and NEED your money.  For the last 8 months it's been quite a tell for whose in trouble.  Put your funds somewhere safe people.  Return of capitol is better than a possible return on capital in this environment. 

Disclaimer - I am back in the market and stand to gain financially if the stock tumbles on down any more before September, so note the bias.  Other than that, do protect yourself. 

[desdawg]

Muldoon, do you think the bigger banks are safer Wells, Bof A, Wachovia just because they can stay the course longer than smaller banks with less money. B of A took on Countrywide and still showed a profit. They and Wells increased the amount available for writeoffs and apparently had the resources to do it.

[benevolance]

What scares me is that the government is artifically propping the financial institutions up and saving them.

Sure it might prevent a crisis.. but this is a horrible Precident! Banks can flaunt the lending laws and doctor their books for the government to bring on artificial growth that cannot last...

And when the bubble bursts the average american is holding the bag in Bankruptcy..While the banks get bailed out by the government... Never mind the fact that they have made record profits the last decade.. the minute they start to lose money the government steps in and grants them protection.

If we let a few of these banks fall it would encourage all others to follow legal business practices and it would bring about market correction...Which is what this country truly needs more than anything else.

[muldoon]

Muldoon, do you think the bigger banks are safer Wells, Bof A, Wachovia just because they can stay the course longer than smaller banks with less money. B of A took on Countrywide and still showed a profit. They and Wells increased the amount available for writeoffs and apparently had the resources to do it.

I am not convinced any of the major banks are solvent today.  That may or may not mean they are likely to go under as I do think the size of the bank plays a role in how long this will go on. 

The reason bank of america is showing a profit with countrywide is because they have assumed the assets of cfc and not honoring the losses or debts.  Frankly I don't see how that is legal.  No amount of restructuring in the world allows one to simply gut the good and ignore the bad, the bondholders of that debt will sue BAC for multiple decades. 

As someone else posted in a recent thread you sometimes have to go outside the US to get news..  this is from reuters india, the us counterpart isnt showing it yet.
http://in.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idINN2141836420080721

From the BAC con call.
"We have received a lot of questions about Countrywide's public debt. All I can say at this point is we don't intend to guarantee the public debt but we understand the ramification of not paying. We will keep you informed as we continue to integrate the country wide transaction."

Think about that, they are talking about simply shoving off the 90billion debt from cfc.  They took the 40billion cfc owed them and placed the rest in Red Oak for default.  What will that do to the bondholders for that debt?  This could be a time bomb for the entire CDS market.  Who would buy long term debt again for a measly 2-5% with the risks of total loss from one of the largest players in the game? 

I personally bank with bank of america, my wife banks with jp morgan chase.  I have some money in both, but really its a place to land direct deposit and pay bills from.  Nothing large in any way.  I have cash in both so if one were to be unavailable I could hopefully access the other.  I have some cash stashed but thankfully I don't have the kinda money where a bank failure would wipe me out.  If I had a large amount to keep safe I would look at http://www.treasurydirect.gov/  As long as we have functioning government the money is safe, and if we don't have that your money is no good anyway. 

[muldoon]

What scares me is that the government is artifically propping the financial institutions up and saving them.

Sure it might prevent a crisis.. but this is a horrible Precident! Banks can flaunt the lending laws and doctor their books for the government to bring on artificial growth that cannot last...

And when the bubble bursts the average american is holding the bag in Bankruptcy..While the banks get bailed out by the government... Never mind the fact that they have made record profits the last decade.. the minute they start to lose money the government steps in and grants them protection.

If we let a few of these banks fall it would encourage all others to follow legal business practices and it would bring about market correction...Which is what this country truly needs more than anything else.

I agree with everything you said. 

[Sassy]

Do all banks still pay the same amount for FDIC?  It used to be it didn't matter how big or how small a bank was - they all paid the same amount for the insurance...  unfair to the little guys & big subsidy to the big guys as both are bailed out... 

My dad had stock in a local bank with a few branches here in the valley - 2 mo's before he passed away, he'd asked my brother to cash in the stock - it was worth $40,000 at that time; my brother never got around to cashing it in, so after my dad was gone, we checked into the value - $2-3,000...  probably not worth anything now... 

My "Thrift Savings Plan" acct through the Federal Gov't is almost all in US Treasury as I agree with Muldoon that it is probably the safest place until our gov't totally fails...  it always creeps up just a little bit on a regular basis while all the other funds are up & down, more often down lately...  I'm hoping that by a couple years when I can take the money out, there will still be something, then the question will be, where to invest - but then I guess I'll have to cross that bridge when I get to it - who can predict what will be happening then...

We wonder how banks can blatantly break the law, but then Karl Rove has thumbed his nose at the courts & told them to take a flying leap, Bush has blatantly disregarded the will of the people & most laws...  so what would you expect...   

[muldoon]

I just re-read and noticed you also mentioned Wells Fargo.   Wells Fargo "beat the street" last week only because it made a policy change to write off home equity loans after 180 days instead of 120 days.  By doing this, they avoided 265million because they didn't claim those as losses, which would have put them under expectation by 8 cents instead of over it by 3.  I'm not calling fraud on this...  I'm just saying you can run the numbers however you want them, the problems don't actually go away.  Even though many stocks are going up this week, I dont think this is over just yet.  They still have not solved any of the problems.  Looks like going all out to keep things moving no matter how much additional damage is done later, so long as we can keep it afloat today.  That is not sustainable in any way.  ://seekingalpha.com/article/85720-wells-fargo-lays-bear-trap-on-wall-street

Sassy, Prior to 1993, all banks paid the flat rate FDIC assessment, which would place a burden on small banks.  Then a per risk model was used wherein they paid a percentage of funds on deposit and a risk multiplier.  To my knowledge, nearly all banks pay 1/12th of 1% of funds they have on deposit to FDIC insurance funds annually.  I cannot find this on fdic site, but I know I read it in the past.  (hope it was somewhere trustworthy). 

[benevolance]

Not very often someone really agrees with me Muldoon.. we may need to write this event down for future reference