Dear CIGAs,
Here is this week’s Bucket List for banks in the USA:
Security Bank of Houston County
Security Bank of Gwinnett County
Jim Sinclair’s Commentary
Sure the Fed can reduce emergency activities as the major financial companies release huge, somewhat fabricated earnings.
Phase #2 is going to blindside the Fed, but that is nothing really new.
More than 1,000 banks may fail, analyst estimates
RBC’s Cassidy sharply raises gloomy view, urges avoiding banking stocks
By Alistair Barr, MarketWatch
SAN FRANCISCO (MarketWatch) — More than 1,000 banks may fail during the next three to five years as the recession intensifies and loan losses climb, an analyst at RBC Capital Markets estimated on Monday.
In 2008, analyst Gerard Cassidy forecast 200 to 300 bank failures, but now he says the environment has deteriorated since then. See 2008 story on bank failures.
"Residential mortgage delinquencies remain at record levels, home-equity loan defaults are steadily rising and residential construction and land loan non-performing assets are skyrocketing for lenders with excess exposure to the weakest housing markets in the U.S.," Cassidy wrote in a note to clients.
"In conjunction with the slowdown in the economy, credit deterioration has accelerated in the commercial and industrial and commercial real estate loan areas," he said.
Since the mortgage-fueled credit crunch erupted in 2007, 34 banks have failed in the U.S. While Washington Mutual became the biggest bank failure in history last year, Cassidy expects most of the banks that collapse will be relatively small, with less than $2 billion in assets.
Cassidy and his colleagues have developed an early-warning system for spotting future trouble at banks using a calculation known as the Texas Ratio. It measures credit problems as a percentage of the capital a lender has available to deal with them.
Jim Sinclair’s Commentary
What China has accomplished with cheap labor, it will now do times 2 with high tech and excellent technicians. Call this phase two of China’s growth plan toward the world’s largest economy. China wants to be #1, not #2.
China’s government has not been captured by a freewheeling financial industry that makes policy based on what is good for Wall Street.
China economy growing again while US limps
By TOM RAUM (AP)
WASHINGTON — It’s a tale of two economies, China and the United States.
The United States, the world’s largest economy, remains mired in recession as do most of its fellow top industrial powers.
China, poised to pass Japan as the world’s second-largest economy perhaps by late this year, recently announced its Gross Domestic Product grew by more than 7.1 percent in the first half of this year.
That puts it alone among the top 10 world powers whose economy has expanded in recent months, making it the first major country to emerge from the worst global slump since the 1930s. Many analysts suggest that China could help to lead the rest of the world out of the doldrums.
For China’s part, it hopes the U.S. and other Western countries will also recover and revive their now-depressed demand for Chinese goods, further buoying the Chinese economy. U.S. officials, however, suggest that, with recession-shocked American consumers spending less and saving more, those glory days for Chinese exporters will not return anytime soon.
Economic and strategic cooperation among the two world economic superpowers tops the agenda as top officials from both countries hold a two-day meeting in Washington, beginning Monday.
Jim Sinclair’s Commentary
If you believe the economic analysis of the US Chairman of the Federal Reserve that it is all improving, then you are confused in the same way the general market is, illustrated below.
Jim Sinclair’s Commentary
I know how Mr. US Economy feels. He must have just flown from JFK to Beijing, around Africa, to Dubai and then back to JFK.
I will recover quickly, but the US economy will not for a long time.
Jim Sinclair’s Commentary
Three men might be credited with the invention of the OTC derivative in exactly the form it is applied today.
Those inventors are Fred Manko, John Edelman and Martin Armstrong.
The man this article should consider interviewing, if he could be found, would be the super geek John Edelman.
John walked away from a low security prison. His reward was the invention of the OTC derivative, near Lake Placid in the Adirondack in the early 90s as mathematicians began to issue their formulas on relations of varied but not the same interconnected indices between trading items.
The general thinking is that John Edelman suffered from depression which resulted in his actions, but others think he focused on his invention, the OTC derivative and new mathematics, as an opportunity of a lifetime for financial firms.
Inherent in that opportunity was the present death of capitalism.
After being around more than 50 years and knowing people produce an asset, this is the asset that I AM TRYING TO GIVE TO YOU FOR FREE, IF YOU HAVE THE FORESIGHT TO GRASP IT.
DO YOU?
There are those of you betting a fortune that I am an ass. You are going to lose yours.
The Man Who Crashed the World
Almost a year after A.I.G.’s collapse, despite a tidal wave of outrage, there still has been no clear explanation of what toppled the insurance giant. The author decides to ask the people involved—the silent, shell-shocked traders of the A.I.G. Financial Products unit—and finds that the story may have a villain, whose reign of terror over 400 employees brought the company, the U.S. economy, and the global financial system to their knees.
By MICHAEL LEWIS
August 2009
Six months ago, I received an odd phone call from a man named Jake DeSantis at A.I.G. Financial Products—the infamous unit of the doomed insurance company, staffed by expensively educated, highly paid traders, whose financial ineptitude is widely suspected of costing the U.S. taxpayer $182.5 billion and counting. At the time A.I.G. F.P.’s losses were reported, it became known that a handful of traders in this curious unit had sold trillions of dollars of credit-default swaps (essentially unregulated insurance policies) on piles of U.S. subprime mortgages, but its employees hadn’t yet become the leading examples of Wall Street greed. And so this was before Jake DeSantis and his colleagues found themselves suburban-Connecticut outcasts, before their first death threats, before the House of Representatives passed a bill because of them (taxing 90 percent of their large bonuses), before New York attorney general Andrew Cuomo announced he was going after their paychecks, and before Iowa senator Charles Grassley said that A.I.G.’s leaders should follow the Japanese example and “either do one of two things, resign or go commit suicide.”
DeSantis turned out to be a friend of a friend. He’d called because he didn’t know anyone else “in the media.” As a type he was instantly recognizable: a “quant,” a numbers guy who was allowed to take financial risks because of his superior math skills, but who had no taste for company politics or public exposure. He’d grown up in the Midwest, the son of schoolteachers, and discovered Wall Street as a scholarship student at M.I.T. The previous seven years he’d spent running A.I.G. F.P.’s profitable stock-market-related trades. He wasn’t looking for me to write about him or about A.I.G. F.P. He just wanted to know why the public perception of what had happened inside his unit, and the larger company, was so different from the private perception of the people inside it, who actually knew what had happened. The idea that the employees of A.I.G. F.P. had conspired to maximize their short-term gains at the company’s longer-term expense, for instance. He and the other traders had been required to defer about half of their pay for years, and intertwine their long-term interests with their firm’s. The people who lost the most when A.I.G. F.P. went down were the employees of A.I.G. F.P.: DeSantis himself had just watched more than half of what he’d made over the previous nine years vanish. The incentive system at A.I.G. F.P., created in the mid-1990s, wasn’t the short-term-oriented racket that helped doom the Wall Street investment bank as we knew it. It was the very system that U.S. Treasury secretary Timothy Geithner, among others, had proposed as a solution to the problem of Wall Street pay.
Even more oddly, the public explanation of A.I.G.’s failure focused on the credit-default swaps sold by traders at A.I.G. F.P., when A.I.G.’s problems were clearly broader. There was the mortgage-insurance unit in North Carolina, United Guaranty, that had taken on all sorts of silly risks in the past two years, lost several billion dollars, and replaced their C.E.O. There were the fund managers at A.I.G., the parent company, who had blown nearly $50 billion on trades in subprime mortgages—that is, they had lost more than A.I.G. F.P., whose losses stood around $45 billion. And there was a pattern: all of this stuff had happened since 2005, after an accounting scandal forced C.E.O. Maurice “Hank” Greenberg to resign. Greenberg, who had headed A.I.G. since 1968, was a bullying, omnipotent ruler—one of those bosses who did not so much build a company as tailor it to his character and render it incapable of being run by anyone else. After he was forced out, Greenberg said, “The new management wanted to prove that they could continue to grow without former management” and so turned a blind eye to all sorts of risks. So how come most of the senior management at A.I.G. was left in place by the U.S. Treasury after the bailout? Why were officials, both public and private, so intent on leading others to believe all the losses at A.I.G. had been caused by a few dozen traders in this fringe unit in London and Connecticut?
I had no idea, was busy doing other things, and had no special interest in Jake DeSantis’s predicament. I listened politely, made my excuses—and went back to whatever it was I’d been doing. But then, on March 19, the new C.E.O. of A.I.G., Edward Liddy, went to Washington to testify. The story broke—or, rather, rebroke, as it had been reported two weeks earlier, without stirring much notice—that A.I.G. F.P. had just shelled out $450 million in bonuses to the 400 employees of A.I.G. F.P., including to Jake DeSantis. It must have been an otherwise slow news day because all hell broke loose, in a way it hadn’t before and hasn’t since in this financial crisis. The perception was that the very same people who had made these insane, greed-driven decisions that might cost the U.S. taxpayer $182.5 billion were still paying themselves big bucks! An exchange between C.E.O. Liddy and Florida congressman Alan Grayson captured the spirit of that moment:
Jim Sinclair’s Commentary
Here is some pure unadulterated MOPE.
Bernanke: Economy to bounce back stronger
At a town hall meeting in Kansas City, Mo., the Fed chairman said the recovery will take some time, but that lessons learned will benefit the nation.
By David Goldman, CNNMoney.com staff writer
Last Updated: July 26, 2009: 9:36 PM ET
NEW YORK (CNNMoney.com) — Federal Reserve Chairman Ben Bernanke said Sunday that lessons learned from the recession and the financial crisis will help make the economy stronger than it was before the crisis.
Speaking at a town hall event at the Kansas City, Mo., Fed called "Bernanke on the Record," the chairman answered questions from members of the public as well as moderator Jim Lehrer of PBS.
"The silver lining in this whole thing is that people are starting to save more, since they saw what happened with 401(k) investments," Bernanke said. "People are adopting good habits, so not only will we will be back on track, but the economy will be stronger than it had been before this started."
The Fed chairman also noted that government regulators are working to ensure that such a crisis can never happen again by addressing the issue of too big to fail and lobbying Congress to pass a regulatory reform bill.
Jim Sinclair’s Commentary
A natural phenomena of the 2006 Formula that only you paid attention to.
Where’s my check?! Millions wait for delayed unemployment payments
BY Christine Roberts
Friday, July 24th 2009, 10:40 AM
As the unemployment rate continues to rise and jobless benefit checks become more crucial than ever, the nation’s unemployment system is reaching a standstill.
Millions of unemployed Americans have been waiting for months for decisions about their unemployment benefits, while thousands have been waiting for actual checks, The New York Times reports.
State and federal unemployment systems are facing rock-bottom funding, forcing states to distribute benefit checks with money they do not have. According to the New York Times, sixteen states are relying on borrowed money to fund their unemployment programs. That number is expected to double by the end of the year.
The unemployment system also is failing to comply with federal standards. Thirty-eight states have failed to make jobless benefits decisions by the federal deadline.
And when an unemployed person is living week to week on benefit checks, states that fail to meet the deadline put their next meal or next rent check in danger.
