Large private banks no longer deserve public trust

more like this...

[L]arge-scale global banking cannot safely be entrusted to private banks. Their behavior yields socially unacceptable costs. They failed their fiduciary duties, betraying both public and private trust. Their continued existence imposes equally unacceptable risks. Modern societies do not leave military security to private armies, nor education to private schools, nor ports, harbors and transportation systems to private conveyors, nor control of the money supply to private banks. Governments, enterprises and households have now become dependent on credit in most advanced industrial economies. The extension of credit ought to be as equally socialised as dependence on credit has become.

when will the failures be prosecuted...?

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The fastest way to fix this mess is to see tens of millions of homeowners default on their mortgages ... and millions more file for bankruptcy

at last... some sense from someone in the mainstream financial press...

market watch...

You want to fix this economic crisis? You want to put people back to work? You want to light a fire under the economy?

There’s a way to do it. Fast. And relatively simple.

But you’re not going to like it. You’re not going to like it at all.

Default. A national Chapter 11 bankruptcy.

The fastest way to fix this mess is to see tens of millions of homeowners default on their mortgages and other debts, and millions more file for bankruptcy.

I told you that you wouldn’t like it.

I don’t like it much either. It sticks in the craw that people got to borrow all that money and won’t have to pay it back.

But you know what? The time to stop that was five or 10 years ago, when the money was being lent.

It’s gone.

And mass Chapter 11 is, by far, the least obnoxious solution to our problems.

[...]

It’s the debt, stupid.

We’re hocked up to the eyeballs, and then some. We’re at the bottom of a lake of debt, lashed to an anchor. American households today owe $13.3 trillion. That has quadrupled in a generation. It has doubled just in the last 11 years. We owe more than any other nation, ever. And for all the yakking about how people are “repairing their balance sheets,” they’re not. From the peak, four years ago, they’ve cut their debts by a grand total of 4%.

[...]

Some will say the financial impact would be terrible. But the banks would just be facing up to reality. And a lot of these mortgages are already trading at distressed levels.

Some will say, “why should people get away with borrowing imprudently?” The response: Why should the banks get away with lending imprudently?

There’s no point telling people not to borrow money. They always will. I have yet to see a Wall Street executive turn down free money. I have yet to see a company in an IPO say, “Don’t give us so much money!” People like money. They will take as much as they are offered.

In a free economy, the people who are supposed to ration the loans are the lenders. Banks are supposed to lend carefully and responsibly. What else are they paid for? Accepting deposits? You could hire people on minimum wage to do that.

Some will say, “it’s immoral” for borrowers to default. Alas, most of these people are being inconsistent. They are usually the first ones to defend a company when it closes down a factory and ships the jobs to China, or pays the CEO $50 million for doing a bad job, on the grounds that “this ain’t morality, pal, this is business!”

But when Main Street wants to do the same thing, they start screaming “Morality! Morality!”

We don’t live in an economy based on morals and fairness.

[...]

The correct moral hazard is to punish the banks who lent imprudently by making them eat their own losses.

yes, yes and yes...

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The big bankers would have been beaten as a political force

james galbraith obviously will win no points with our handlers by telling the truth...

Up to a point, one can defend the decisions taken in September-October 2008 under the stress of a rapidly collapsing financial system. The Bush administration was, by that time, nearly defunct. Panic was in the air, as was political blackmail -- with the threat that the October through January months might be irreparably brutal. Stopgaps were needed, they were concocted, and they held the line.

But one cannot defend the actions of Team Obama on taking office. Law, policy and politics all pointed in one direction: turn the systemically dangerous banks over to Sheila Bair and the Federal Deposit Insurance Corporation. Insure the depositors, replace the management, fire the lobbyists, audit the books, prosecute the frauds, and restructure and downsize the institutions. The financial system would have been cleaned up. And the big bankers would have been beaten as a political force.

[...]

[I]n a crisis, you need new people. You must be able to attack past administrations, and override old decisions, without directly crossing those who made them.

President Obama didn’t see this. Or perhaps, he didn’t want to see it. His presidential campaign was, after all, from the beginning financed from Wall Street. He chose his team, knowing exactly who they were. And this tells us what we need to know, about who he really is.

gosh... seems like decapitating the bankers would have been one of the most valuable things obama could have possibly done and what a wonderful opportunity he had - and blew it...!

here's a noteworthy galbraith quote...

Today, the signature of modern American capitalism is neither benign competition, nor class struggle, nor an inclusive middle-class utopia. Instead, predation has become the dominant feature — a system wherein the rich have come to feast on decaying systems built for the middle class. The predatory class is not the whole of the wealthy; it may be opposed by many others of similar wealth. But it is the defining feature, the leading force. And its agents are in full control of the government under which we live.

the defining feature...? yep... the leading force...? yep... in full control...? yep, yep and yep...

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Three big banks now hold $3 of every $10 on deposit in the U.S. while the little fish continue to die off

the "too big to fail" banks are, gosh and golly sports fans, now even BIGGER thanks to the strategy pursued by those who supposedly have the common good of the citizenry at heart... HA...!

check the stats in the last paragraph...

When the credit crisis struck last year, federal regulators pumped tens of billions of dollars into the nation's leading financial institutions because the banks were so big that officials feared their failure would ruin the entire financial system.

The crisis may be turning out very well for many of the behemoths that dominate U.S. finance. A series of federally arranged mergers safely landed troubled banks on the decks of more stable firms. And it allowed the survivors to emerge from the turmoil with strengthened market positions, giving them even greater control over consumer lending and more potential to profit.

J.P. Morgan Chase, an amalgam of some of Wall Street's most storied institutions, now holds more than $1 of every $10 on deposit in this country. So does Bank of America, scarred by its acquisition of Merrill Lynch and partly government-owned as a result of the crisis, as does Wells Fargo, the biggest West Coast bank. Those three banks, plus government-rescued and -owned Citigroup, now issue one of every two mortgages and about two of every three credit cards, federal data show.

leapin' lizards, batman...! that essentially means that you and i are now officially wholly-owned subsidiaries of the banksters...

meanwhile, the smaller fish continue to die off...

Regulators seized 45 firms during the first half of the year. In the past two months they have closed 36 more, including regional powerhouses Colonial Bank of Alabama and Guaranty Bank of Texas. The FDIC said Thursday that it counted 416 banks at risk of failing as of the end of June, a 36 percent increase from the first quarter. As with the cost of failures, the number was the highest since the early 1990s, when regulators were dealing with the aftermath of the savings and loan crisis and excessive lending for commercial development.

In recent quarters, the failures have forced the FDIC to spend more money than it collects. Banks use money from depositors to make loans. As a result, when a bank fails, much of the depositors' money is no longer in the vaults, and some of it is tied up in loans that will never be repaid. The FDIC was created by Congress to replace the missing money -- up to $250,000 in each account, under current rules.

The insurance fund held $45.2 billion at the end of June 2008. It held $13 billion at the end of March. The agency has warned that the balance could reach zero by the end of the year.

oh, but never fear... between you and i and our deep pockets, the treasury can always print more money to hand out...

Should the FDIC need even more money, the agency can borrow from the Treasury Department, then repay the government with fees collected from banks in years to come.

and what about the economic recovery that all the punditocracy is crowing about...? not so much...

[I]n an indication that the industry has not turned the corner, the share of troubled loans increased even more quickly. A trend that began with distressed mortgage lending has long since spread to other categories including credit card lending, loans to small businesses, and -- now deteriorating most rapidly -- loans for commercial real estate development.

kinda warms your heart, doesn't it...? in the mad dash of our controllers and handlers to preserve the status quo - the status quo of the super-rich and powerful elites, that is - we've ended up not only preserving the status quo, we've significantly bolstered it... heckuva job, tim... heckuva job, ben... heckuva job, larry... heckuva job, hank...

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Is this maybe why Spitzer was set up for a fall...?

spitzer seems to be talking pretty straight to me, something that was certainly not a quality that endeared him to the powerful moneyed elites who saw to it that he went down...

here he's talking about the federal reserve bank of new york in slate magazine...

[I]s it any wonder that the N.Y. Fed has been complicit in the single greatest bailout of poorly managed banks in history? Any wonder that it has given—with virtually no strings attached—practically the entire contents of the Treasury to the very banks whose inability to manage risk has brought our economy to its knees? Any wonder that not a single CEO or senior executive of a major bank has been removed as a condition of hundreds of billions of direct cash and guarantees? Any wonder that, despite its fundamental responsibility to preserve the integrity of the banking system, it sat quietly on the sidelines as the leverage beneath the banks exploded and the capital underlying their investments shrank?

I do not mean to suggest that any of these board members intentionally discharged their duties with the specific goal of benefitting themselves. Rather, what we have seen is disastrous groupthink, a way of looking at the world from the perspective of Wall Street and Wall Street alone. That failure has brought the world economy to the edge of unraveling. And some of Geithner's early missteps betrayed an inability to get beyond this tunnel vision, such as the idea that the banks need to be first in line to be paid and to be paid in full. We can only hope that Geithner, who, to his credit, did try to raise some of the regulatory issues that mattered while he was at the Fed, is no longer in the mental prison of Lower Manhattan and will have more success now that he has a board of one—President Obama.

Perhaps it is time to calculate what these board members have been paid by their banks in salary and bonuses over the years and seek to have them return it to the public as small compensation for their failed oversight of the N.Y. Fed. And more fundamentally, perhaps it is time to take a hard look at the governing structure and supposed independence of this institution that actually controls the use of our tax dollars and, heaven help us, the fate of our economy.

it's not only time, it's way, way, WAY past time...

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Stress test results

hmmmmmmm...

Nation's Largest Banks Need $75 Billion, Federal Stress Tests Find
The nation's largest banks collectively need another $75 billion in equity to ride out potential losses due to the recession, according to long awaited government stress tests released today. Nine of the 19 banks do not need any new capital at all, including J.P Morgan Chase and Goldman Sachs.

pardon the crudity, but fuck goldman sachs...

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GMAC needs to raise $13.1B in capital but there's something in the story I don't get

ok, here's the snippet with the part i don't get in bold...

The Federal Reserve has ordered the financing arm of General Motors to raise $13.1 billion in new capital to ensure the firm's stability in the face of heavy losses in mortgage and auto lending and costs related to taking over new loans for Chrysler dealers and customers, said sources familiar with talks between government and industry officials.

The sum is among the biggest required for any U.S. financial institution, and could prove difficult for GMAC to raise because of the limited nature of its business and poor quality of its loans. The firm has struggled in the past to raise money from private investors and has already received $5 billion in federal assistance. It is likely that the federal government would end up providing much, if not all, of the needed capital, but it remained unclear where that money would come from.

how does that square with the bofa story from yesterday (see earlier post) that said bofa needed $34B in capital... i'm not a math whiz but it seems to me $34B is a significantly larger sum than $13.1B... am i wrong...?

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Need for an additional $34B in capital doesn't sound to ME like BofA passed the "stress test"

but, hey...! just crank those printing presses back up and toss 'em another $34B... no sweat... it's just chump change, really...

Bank of America Corp has been deemed to need as much as $34 billion in additional capital, according to the results of a government stress test, a source familiar with the results told Reuters late on Tuesday.

Bank of America spokesman Scott Silvestri declined comment.

A possible $34 billion capital shortfall is certain to increase pressure on CEO Kenneth Lewis, who was last week ousted by shareholders as chairman of the biggest U.S. bank.

That ouster could lay the groundwork for Lewis's eventual departure from the company he worked at for 40 years, including the last eight as chief executive.

It may also unnerve investors who had hoped the results of the stress tests on Bank of America and 18 other banks might show the industry was in less dire condition than had been feared. Shares of major U.S. banks have nearly doubled since bottoming out in early March.

when is somebody going to step in and declare all those bouncing dead cats really DEAD...?

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It was in the boardrooms and the CEO offices where the fraud began - and continues

read it (or watch it) and weep...

The Best Way To Rob A Bank Is To Own One

By Bill Moyers
Video - Audio and Transcript

The financial industry brought the economy to its knees, but how did they get away with it? With the nation wondering how to hold the bankers accountable, Bill Moyers sits down with William K. Black, the former senior regulator who cracked down on banks during the savings and loan crisis of the 1980s. Black offers his analysis of what went wrong and his critique of the bailout

Click Here To Watch The Video


TRANSCRIPT

Broadcast PBS - April 3, 2009

BILL MOYERS: Welcome to the Journal.

For months now, revelations of the wholesale greed and blatant transgressions of Wall Street have reminded us that "The Best Way to Rob a Bank Is to Own One." In fact, the man you're about to meet wrote a book with just that title. It was based upon his experience as a tough regulator during one of the darkest chapters in our financial history: the savings and loan scandal in the late 1980s.

WILLIAM K. BLACK: These numbers as large as they are, vastly understate the problem of fraud.

BILL MOYERS: Bill Black was in New York this week for a conference at the John Jay College of Criminal Justice where scholars and journalists gathered to ask the question, "How do they get away with it?" Well, no one has asked that question more often than Bill Black.

The former Director of the Institute for Fraud Prevention now teaches Economics and Law at the University of Missouri, Kansas City. During the savings and loan crisis, it was Black who accused then-house speaker Jim Wright and five US Senators, including John Glenn and John McCain, of doing favors for the S&L's in exchange for contributions and other perks. The senators got off with a slap on the wrist, but so enraged was one of those bankers, Charles Keating — after whom the senate's so-called "Keating Five" were named — he sent a memo that read, in part, "get Black — kill him dead." Metaphorically, of course. Of course.

Now Black is focused on an even greater scandal, and he spares no one — not even the President he worked hard to elect, Barack Obama. But his main targets are the Wall Street barons, heirs of an earlier generation whose scandalous rip-offs of wealth back in the 1930s earned them comparison to Al Capone and the mob, and the nickname "banksters."

Bill Black, welcome to the Journal.

WILLIAM K. BLACK: Thank you.

BILL MOYERS: I was taken with your candor at the conference here in New York to hear you say that this crisis we're going through, this economic and financial meltdown is driven by fraud. What's your definition of fraud?

WILLIAM K. BLACK: Fraud is deceit. And the essence of fraud is, "I create trust in you, and then I betray that trust, and get you to give me something of value." And as a result, there's no more effective acid against trust than fraud, especially fraud by top elites, and that's what we have.

BILL MOYERS: In your book, you make it clear that calculated dishonesty by people in charge is at the heart of most large corporate failures and scandals, including, of course, the S&L, but is that true? Is that what you're saying here, that it was in the boardrooms and the CEO offices where this fraud began?

WILLIAM K. BLACK: Absolutely.

BILL MOYERS: How did they do it? What do you mean?

WILLIAM K. BLACK: Well, the way that you do it is to make really bad loans, because they pay better. Then you grow extremely rapidly, in other words, you're a Ponzi-like scheme. And the third thing you do is we call it leverage. That just means borrowing a lot of money, and the combination creates a situation where you have guaranteed record profits in the early years. That makes you rich, through the bonuses that modern executive compensation has produced. It also makes it inevitable that there's going to be a disaster down the road.

BILL MOYERS: So you're suggesting, saying that CEOs of some of these banks and mortgage firms in order to increase their own personal income, deliberately set out to make bad loans?

WILLIAM K. BLACK: Yes.

BILL MOYERS: How do they get away with it? I mean, what about their own checks and balances in the company? What about their accounting divisions?

WILLIAM K. BLACK: All of those checks and balances report to the CEO, so if the CEO goes bad, all of the checks and balances are easily overcome. And the art form is not simply to defeat those internal controls, but to suborn them, to turn them into your greatest allies. And the bonus programs are exactly how you do that.

BILL MOYERS: If I wanted to go looking for the parties to this, with a good bird dog, where would you send me?

WILLIAM K. BLACK: Well, that's exactly what hasn't happened. We haven't looked, all right? The Bush Administration essentially got rid of regulation, so if nobody was looking, you were able to do this with impunity and that's exactly what happened. Where would you look? You'd look at the specialty lenders. The lenders that did almost all of their work in the sub-prime and what's called Alt-A, liars' loans.

[...]

BILL MOYERS: So if your assumption is correct, your evidence is sound, the bank, the lending company, created a fraud. And the ratings agency that is supposed to test the value of these assets knowingly entered into the fraud. Both parties are committing fraud by intention.

WILLIAM K. BLACK: Right, and the investment banker that — we call it pooling — puts together these bad mortgages, these liars' loans, and creates the toxic waste of these derivatives. All of them do that. And then they sell it to the world and the world just thinks because it has a triple-A rating it must actually be safe. Well, instead, there are 60 and 80 percent losses on these things, because of course they, in reality, are toxic waste.

BILL MOYERS: You're describing what Bernie Madoff did to a limited number of people. But you're saying it's systemic, a systemic Ponzi scheme.

WILLIAM K. BLACK: Oh, Bernie was a piker. He doesn't even get into the front ranks of a Ponzi scheme...

BILL MOYERS: But you're saying our system became a Ponzi scheme.

WILLIAM K. BLACK: Our system...

BILL MOYERS: Our financial system...

WILLIAM K. BLACK: Became a Ponzi scheme. Everybody was buying a pig in the poke. But they were buying a pig in the poke with a pretty pink ribbon, and the pink ribbon said, "Triple-A."

and there ya have it...

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Enough is enough...!!

olbermann's special comment...

Visit msnbc.com for Breaking News, World News, and News about the Economy

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B.O.H.I.C.A. - the bailout continues as the financial meltdown shows no signs of abating

b.o.h.i.c.a. = bend over, here it comes again...

bank of america is the latest financial vampire to sink its teeth into the already-dessicated american taxpayer...

[T]he government agreed early Friday to provide an additional $20 billion infusion of capital into the bank and to cover the bulk of up to $118 billion in losses, largely arising from the bank’s Merrill acquisition.

Overall for 2008, Bank of America posted a net profit of $4.01 billion compared with net income of $14.98 billion a year earlier.

It said earnings were driven reflected “the deepening economic recession and extremely challenging financial environment, both of which significantly intensified in the last three months of 2008.”

but, wait...! there's MORE...! hold on to your wallets... citi is probably next in line...

Citigroup capped a devastating 2008 by announcing Friday that it would split into two entities and that it had posted an $8.29 billion loss for the fourth quarter.

When John A. Thain, left, of Merrill Lynch and Kenneth D. Lewis of Bank of America announced their companies’ merger in September, it looked as if Mr. Lewis had scored a coup. But now Bank of America is in need of more federal money to deal with Merrill’s losses.

Citigroup’s rival, Bank of America, also posted a loss, just hours after receiving a new infusion of government support.

Underlining the depth of the problems that have emerged from its acquisition of Merrill Lynch, Bank of America said Merrill had a fourth-quarter net loss of $15.31 billion, or $9.62 per diluted share, “driven by severe capital markets dislocations,” before the acquisition was completed.

Even as Bank of America was coping with the challenge of absorbing Merrill, Citigroup was announcing the latest steps in dismantling its own financial supermarket.

Citigroup confirmed that it would divide, for management purposes, into two separate businesses — Citicorp and Citi Holdings.

and, if you think things are slowing down in the financial meltdown department, check this out...

Last fall, as Federal Reserve and Treasury Department officials rode to the rescue of one financial institution after another, they took great pains to avoid doing anything that smacked of nationalizing banks.

They may no longer have that luxury. With two of the nation’s largest banks buckling under yet another round of huge losses, the incoming administration of Barack Obama and the Federal Reserve are suddenly dealing with banks that are “too big to fail” and yet unable to function as the sinking economy erodes their capital.

Particularly in the case of Citigroup, the losses have become so large that they make it almost mathematically impossible for the government to inject enough capital without taking a majority stake or at least squeezing out existing shareholders.

nationalized banks... cool...! it will be the absolute death knell for the capitalist, free-market, "invisible hand" quasi-religious ideology... and about goddam time, too...! < /snark >

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WaMu goes down

wamu is a really big card and i don't think its fall is going to help those who are pushing for the bailout...

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37 bank failures since 2000, 24 since 2003, 9 in 2008

from the federal deposit insurance corporation via atrios...

[B]anks which have failed since October 1, 2000

Bank Name Closing Date Updated Date The Columbian Bank and Trust, Topeka, KS August 22, 2008 August 22, 2008 First Priority Bank, Bradenton, FL August 1, 2008 August 1, 2008 First Heritage Bank, NA, Newport Beach, CA July 25, 2008 July 25, 2008 First National Bank of Nevada, Reno, NV July 25, 2008 July 25, 2008 IndyMac Bank, Pasadena, CA July 11, 2008 July 11, 2008 First Integrity Bank, NA, Staples, MN May 30, 2008 July 25, 2008 ANB Financial, NA, Bentonville, AR May 9, 2008 July 25, 2008 Hume Bank, Hume, MO March 7, 2008 July 25, 2008 Douglass National Bank, Kansas City, MO January 25, 2008 July 25, 2008 Miami Valley Bank, Lakeview, OH October 4, 2007 July 25, 2008 NetBank, Alpharetta, GA September 28, 2007 July 25, 2008 Metropolitan Savings Bank, Pittsburgh, PA February 2, 2007 July 25, 2008 Bank of Ephraim, Ephraim, UT June 25, 2004 April 9, 2008 Reliance Bank, White Plains, NY March 19, 2004 April 9, 2008 Guaranty National Bank of Tallahassee, Tallahassee, FL March 12, 2004 July 25, 2008 Dollar Savings Bank, Newark, NJ February 14, 2004 April 9, 2008 Pulaski Savings Bank, Philadelphia, PA November 14, 2003 July 22, 2005 The First National Bank of Blanchardville, Blanchardville, WI May 9, 2003 July 25, 2008 Southern Pacific Bank, Torrance, CA February 7, 2003 July 25, 2008 The Farmers Bank of Cheneyville, Cheneyville, LA December 17, 2002 October 20, 2004 The Bank of Alamo, Alamo, TN November 8, 2002 March 18, 2005 AmTrade International Bank of Georgia, Atlanta, GA September 30, 2002 September 11, 2006 AmTrade International Bank of Georgia, Atlanta, GA Spanish Version September 30, 2002 September 11, 2006 Universal Federal Savings Bank, Chicago, IL June 27, 2002 April 9, 2008 Connecticut Bank of Commerce, Stamford, CT June 26, 2002 July 25, 2008 New Century Bank, Shelby Township, MI March 28, 2002 March 18, 2005 Net 1st National Bank, Boca Raton, FL March 1, 2002 April 9, 2008 NextBank, N.A., Phoenix, AZ February 7, 2002 July 25, 2008 Oakwood Deposit Bank Company, Oakwood, OH February 1, 2002 July 25, 2008 Bank of Sierra Blanca, Sierra Blanca, TX January 18, 2002 November 6, 2003 Hamilton Bank, N.A., Miami, FL Spanish Version January 11, 2002 July 25, 2008 Sinclair National Bank, Gravette, AR September 7, 2001 February 10, 2004 Superior Bank, FSB, Hinsdale, IL July 27, 2001 July 25, 2008 The Malta National Bank, Malta, OH May 3, 2001 November 18, 2002 First Alliance Bank & Trust Company, Manchester, NH February 2, 2001 February 18, 2003 National State Bank of Metropolis, Metropolis, IL December 14, 2000 March 17, 2005 Bank of Honolulu, Honolulu, HI October 13, 2000 March 17, 2005

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Let's get on with the economic melt-down and the financial collapse

a follow-on from the previous post about the dow jones free-fall...

So much for that second-half rebound.

Truth be told, that was always more of a wish than a serious forecast, happy talk from the Fed and Wall Street desperate to get things back to normal.

It ain't gonna happen. Not this summer. Not this fall. Not even next winter.

This thing's going down, fast and hard. Corporate bankruptcies, bond defaults, bank failures, hedge fund meltdowns and 6 percent unemployment. We're caught in one of those vicious, downward spirals that, once it gets going, is very hard to pull out of.

Only this will be a different kind of recession -- a recession with an overlay of inflation. That combo puts the Federal Reserve in a Catch-22 -- whatever it does to solve one problem only makes the other worse. Emerging from a two-day meeting this week, Fed officials signaled that further recession-fighting rate cuts are unlikely and that their next move will be to raise rates to contain inflationary expectations.

and then there's that $142 a barrel oil...

Oil leapt to a new record high above $142 a barrel on Friday, extending gains after surging nearly 4 percent in the previous session, as tumbling global stock markets helped to trigger a wider commodities rally.

U.S. light crude for August delivery was $1.70 up at $141.34 a barrel by 8:12 a.m. EDT, off a record high of $142.26.

London Brent crude was $1.39 up at $141.22, off a record high of $142.13.

World stocks fell to a three-month low as a fast deteriorating global inflation picture intensified concerns over the outlook for corporate profits, hastening the rush of investors' funds into commodities.

i don't wish anyone any pain, but, c'mon... the house of cards is tumbling down and i'm sick and tired of watching those who continue to profit the most scrambling to preserve their super-rich, elite status at the expense of the peasantry...

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Add this story to the three in the previous post - somethin's goin' on, I tell ya...

so, here we have a big bank on the brink of failure...

National City Corp, a large U.S. Midwest regional bank, has entered into a memorandum of understanding with federal regulators, effectively putting the bank on probation, the Wall Street Journal said on Friday, without saying where it got the information.

Terms of the confidential agreement with the Office of the Comptroller of the Currency are not known, the newspaper said. The agreement was entered into over the past month or so, the newspaper said.

Neither Cleveland-based National City nor the OCC immediately returned calls seeking comment.

The agreement reflects the growing regulatory pressure that financial institutions face, as they struggle with the fallout from the credit market turmoil.

Memoranda of understanding allow banks to work with federal regulators to address financial problems, without necessarily triggering alarm among depositors. Regulators have been pushing lenders to raise more capital and cut lending risk.

Banking experts estimate that a handful of medium-sized banks have recently entered memoranda of understanding, the newspaper said.

but, wait just a cotton-pickin' minute...

national city has been on the brink of failure for ALMOST A MONTH and they've been COVERING IT UP...!?!?!

and that ain't all...

there's ALSO "a handful of medium-sized banks" poised on the brink of default...?!?!?!?

somethin' big is goin' on... i can smell it...

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"The U.S. banking sector is headed for a credit downturn that will be 'the worst in generations'"

all it's going to take is the failure of one major bank and all hell is going to break loose...

The U.S. banking sector is headed for a credit downturn that will be "the worst in generations," featuring widespread defaults on a range of debts and a national housing price slide not seen since the Great Depression, one of the most influential analysts on Wall Street says.

The banks face massive loan losses -- "far more dramatic" than most bank executives and ratings agencies have forecast -- as the next chapter in financial-sector turmoil unfolds, said Meredith Whitney, an analyst with Oppenheimer &Co. Inc.

"We believe loss rates will exceed the highest levels since 1990 by a significant margin," she said in a note Monday.

"Bank losses will be the highest in the past 20-plus years as a result of greater numbers of individual defaulting on mortgages and/or other loans and from [loan balances that] are far higher than they were in the last housing cycle."

Whitney -- who is also a panelist for Fox News and the No. 2-ranked analyst on a Forbes list of top stock pickers for 2007 -- shot to global infamy last year after her gloomy, but accurate, predictions about the scale of subprime problems facing Citigroup Inc. led to a worldwide sell-off of banking stocks.

In Monday's note, the Oppenheimer analyst slashed her already-depressed forecasts of what large U.S. banks will earn in 2008 by 29 per cent and by 13 per cent for 2009, citing concerns about mortgages, credit-card balances and other loans.

bring it on... let's get this collapse underway and stop kidding ourselves that everything is going to turn out just peachy-keen...

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When the first one falls, stand back...!

bank failures are comin'... bet on it...

from the wsj...

The Federal Deposit Insurance Corp. is taking steps to brace for an increase in failed financial institutions as the nation's housing and credit markets continue to worsen.

The FDIC is looking to bring back 25 retirees from its division of resolutions and receiverships. Many of these agency veterans likely worked for the FDIC during the late 1980s and early 1990s, when more than 1,000 financial institutions failed amid the savings-and-loan crisis.

[...]

"Regulators are bracing for well over 100 bank failures in the next 12 to 24 months, with concentrations in Rust Belt states like Michigan and Ohio, and the states that are suffering severe housing-market problems like California, Florida, and Georgia," said Jaret Seiberg, Washington policy analyst for financial-services firm Stanford Group.

(thanks to calculated risk via atrios...)

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