THE GOOD OL' U.S. OF A IS B.R.O.K.E.

GREETINGS,

AS WE WATCH AMERICA FALL OFF OF HER SELF-APPOINTED CITY ON THE HILL IMAGE WE ARE LIKELY TO SEE MORE HIDDEN BONES COME OUT OF THE CLOSET.YOU KNOW ,MANY ARE BLAMING THE FED,ECT,BUT IT IS GOD WHO IS CAUSING THE CONFUSION OF THE HEADS OF STATE.HE IS CAUSING THIS TURMOIL TO OVERTAKE AMERICA FOR NOT GIVING TRUE RECOGNITION,FREEDOM,JUSTICE,AND EQUALITY IN DEEDS(SOMETHING TANGIBLE) FOR HER 4 CENTURIES OF FREE LABOR,LOSS OF WELL OVER 600,000,000(SIX HUNDRED MILLION LIVES LOST),THE FIGHTING OF HER WARS WHETHER FOREIGN OR DOMESTIC.FOR BUILDING THIS COUNTRY INTO A MILITARY AND ECONOMIC POWERHOUSE.
I OFTEN HERE WHITE AMERICANS SAY THAT THEY ARE BLUE COLLAR AND THEY AND THEIR ANCESTORS BUILT THIS GREAT LAND….YOU ARE WRONGAND HISTORY BEARS ME WITNESS AS YOUR FOREFATHERS WERE SCARED TO DEATH TO WORK AND BUILD FOR SELF.THAT IS WHY THEY WENT TO AFRICA AND GOT ARCHITECTS,LABORS,DESIGNERS ECT…(CONTRARY TO THE IMAGES OF SAVAGES YOU POTRAY US AS BEFORE THE WORLD).DID YOU EVER WONDER WHY YOUR PLANTATION HOMES LOOK LIKE SOMETHING FROM EGYPT OR HOW YOUR CAPITAL CITY(WASHINGTON D.C.) MIMIC AFRICAN MYTHS AND CITIES?
SO TODAY EVEN RIGHT AT THIS HOUR EVEN THE AVERAGE WHITE PERSON IS AGAINST RESTITUTION (FOR THE BLACKS)AND GIVING US A COUPLE OF STATES TO GO FOR SELF INDEPENDENTLY.
SO GOD IN PERSON IS NOW DOING TO AMERICA WHAT WAS DONE TO KEMET(EGYPT) DURING PHAROAH’S RULE.STUDY THE HISTORY,PHAROAH REFUSED TO GIVE JUSTICE TO HIS EX-SLAVE(REMEMBER ).HE REFUSE TO LET THEM GO FREE…NOT FREEDOM IN WORDS,BUT FREEDOM IN DEEDS.
SO IT IS YOUR CHOICE AMERICA AND YOUR TIME IS NOW RUNNING OUT FAST.EVERY THING THAT GOING ON NOW IS SHOWING YOU THIS.MY QUESTION TO YOU IS;”WILL YOU GIVE YOUR EX-SLAVE RESTITUTION AND A LAND TO CALL HIS OWN(AND MAYBE RECEIVE AND EXTENSION OF TIME) TO GO FOR SELF OR WILL YOU REMAIN HARD HEARTED AND STIFF NECKED AND RECEIVED A FAR WORSE PUNISHMENT THAN DID PHAROAH?”—-YOUR GOVERNMENT IS FALLING AND YOUR WORLD IS BEING TAKEN FROM YOU,NOW WHAT WILL YOU DO?LOOK AT THE SIGNS;”As of Friday August 14, 2009, FDIC is Bankrupt

Bank Failure Friday is in full swing. Tonight there were 5 more failures, numbers 73 through 77 on the year. In the biggest failure since WaMu, BB&T Takes Over Colonial.

Colonial BancGroup Inc., the Alabama lender facing a criminal probe, had its banking operations closed by regulators and taken over by BB&T Corp. in the biggest bank failure since Washington Mutual Inc. collapsed last year.

Branches and deposits of Colonial, Alabama’s second-largest bank, were turned over to Winston-Salem, North Carolina-based BB&T in a deal brokered by the Federal Deposit Insurance Corp., the regulator said today. The failure of Montgomery-based Colonial followed a Florida expansion that saddled the lender with more than $1.7 billion in soured real-estate loans.

Colonial’s failure will deplete the FDIC’s deposit insurance fund by $2.8 billion, the agency said. The fund, which the agency uses to pay customers of a failed bank for deposit losses up to a $250,000 limit and is generated by fees paid by banks, stood at $13 billion at the end of the first quarter, according to the FDIC. The agency has set aside an additional $25 billion for bank failures, agency spokesman David Barr said.
Is There Any Money Left In The Fund?

Tonight, inquiring minds are asking “Is There Any Money Left In The Fund?”

For clues, please consider Saxo Bank Research FDIC’s Shrinking Deposit Insurance Fund – A Testimony of Current Accounting Standards.

As late as in the end of April just before the release of the bank stress tests, Ms. Bair Chairman of the FDIC said they would not need any additional bailouts from the U.S Treasury within the immediate future according to The Bulletin. After three new bank failures last Friday, the FDIC’s Deposit Insurance Fund (DIF) diminished by another $185 million for a total remaining balance of $648.1 million.

Below is a graph showing the DIF capital as a percentage of total bank deposits insured by the FDIC. Note that this graph is based on the old insurance limit with a maximum coverage of $100.000/account. This limit has been changed to cover up to $250.000/account until January 1st 2014. Estimates say that the change increases the deposits covered under FDIC insurance to approximately $6 trillion in total.

FDIC Reserve Ratios & Insured Deposits

click on chart for sharper image

The current reserve ratio of 0.014%1 strongly indicates how bad this crisis has affected U.S financial institutions. However, this is not the entire story. If we take a closer look at non-current loans and charge-offs from banks one realizes that the FDIC still has a lot of work to be done. Combined non-current loans and charge-offs amounted to nearly $100 billion in Q109 compared to $15 billion/quarter pre-crisis. Moreover, according to analysts at the Royal Bank of Canada the U.S still has banking failures in the thousands to face before the crisis is over. In turn that should result in the FDIC requesting the pre-approved funding signed by the Congress in May 2009, including $100 billion from the U.S Treasury Department.
Tonight’s Bank Failures

Dwelling House Savings and Loan Association, Pittsburgh, Pennsylvania

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $6.8 million. PNC Bank, National Association’s acquisition of all the deposits was the “least costly” resolution for the FDIC’s DIF compared to alternatives. Dwelling House Savings and Loan Association is the 73rd FDIC-insured institution to fail in the nation this year, and the first in Pennsylvania. The last FDIC-insured institution to be closed in the state was Metropolitan Savings Bank, Pittsburgh, on February 2, 2007.

Colonial Bank, Montgomery, Alabama

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $2.8 billion. BB&T’s acquisition of all the deposits was the “least costly” resolution for the FDIC’s DIF compared to alternatives. Colonial Bank is the 74th FDIC-insured institution to fail in the nation this year, and the first in Alabama. The last FDIC-insured institution to be closed in the state was Birmingham FSB, Birmingham, on August 21, 1992.

Union Bank, National Association, Gilbert, Arizona

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $61 million. MidFirst Bank’s acquisition of all the deposits was the “least costly” resolution for the FDIC’s DIF compared to alternatives. Union Bank, N.A. is the 75th FDIC-insured institution to fail in the nation this year, and the second in Arizona. The last FDIC-insured institution to be closed in the state was Community Bank of Arizona, Phoenix, also today.

Community Bank of Arizona, Phoenix, Arizona

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $25.5 million. MidFirst Bank’s acquisition of all the deposits was the “least costly” resolution for the FDIC’s DIF compared to alternatives. Community Bank of Arizona is the 76th FDIC-insured institution to fail in the nation this year, and the first in Arizona. The last FDIC-insured institution to be closed in the state was NextBank, Phoenix, on February 7, 2002.

Community Bank of Nevada, Las Vegas, Nevada

The cost to the FDIC’s Deposit Insurance Fund is estimated to be $781.5 million. Community Bank of Nevada is the 77th bank to fail this year and the third in Nevada. The last bank to be closed in the state was Great Basin Bank, Elko, on April 17, 2009.

Taxpayers Bailout FDIC

If indeed $641 million was all that remained of the DIF, the FDIC is now bankrupt. Of the $641 million left, Community bank used up 781.5 million and Colonial Bank $2.8 billion

Here is more from the Saxo Report

The real total cost for Q1 09 turned out to be almost twice the amount of the estimates. If that will be even close to reality for Q2 09 the FDIC’s DIF will (very) soon be out of funds completely. [Mish: as of tonight the DIF is bankrupt.]

We believe the main reason for this observation lies in a de facto relaxation of accounting standards, even before the FASB 157 amendment on March 15th earlier this year. Basically the relaxation allows banks to only write-off parts of their losses due to market impairment and they may themselves decide a fair price that the asset could have been sold for during normal market conditions to keep in their books. Allowing banks to control how they mark-to-market their assets, will likely backfire and when they ultimately end up failing, imply greater closure costs for the FDIC. From the graph [below] one can infer that the average yearly DIF costs/bank assets have increased at an alarming rate to almost reach 31% in 2008 and 2009.

Yearly Average DIF Costs / Bank Assets

click on chart for sharper image

So, what does that imply? Basically it means that when valuating any U.S bank, their assets should probably be marked down significantly relative to their book value, much because of how they nowadays are allowed to manipulate their balance sheets in order to appear more solvent than they in fact are.
The Moral Hazard of FDIC Insurance

Friday, In reference to Colonial, Shelia Bair made the following galling claim:

“The past 18 months have been a very trying period in the financial services arena, but the FDIC and its staff have performed as Congress envisioned when it created the corporation more than 75 years ago,” said FDIC Chairman Sheila C. Bair. “Today, after protecting almost $300 billion in deposits since the current financial crisis began, the FDIC’s guarantee is as certain as ever. Our industry funded reserves have covered all losses to date. In fact, losses from today’s failures are lower than had been projected. I commend our staff for their excellent work in assuring once again a smooth transition for bank customers with these resolutions. The FDIC continues to stand by the nation’s insured deposits with the full faith and credit of the U.S. government. No depositor has ever lost a penny of their insured deposits.”

The Seen and the Unseen

Nowhere does “Shelia the Fool” state the cost of this insurance. Without FDIC, banks like Colonial, Bank United, Corus Bank, and possibly even banks like Washington Mutual would have failed long before they mattered.

By offering above market rates on CDs, those bank attracted plenty of capital to the detriment of banks lending responsibly. In order to offer high rates on CDs and deposits, the banks had to take high risks.

Bank United and Corus Bank funded all sorts of risky housing projects including condo towers in the biggest bubble cities. Colonial Bank is under investigation for Fraud.

No one in their right minds would have deposited money at those institutions without FDIC. And if they did it should be their problem not yours or mine.

Total Up The Unseen

Looming taxpayer bailouts of the FDIC
Taxpayer bailouts of failed banks
Taxpayer bailouts of mortgage reductions to keep people in their homes
Rising property taxes because of increased speculation
The FDIC’s role in the housing boom and bust
Fraud costs
Investigatory costs
Stock market crash
Cost to pension plans dumb enough to buy debt in failed banks simply because they were “growing”————-NOW LOOK AGAIN——-;
“Brace for a Wave of Foreclosures, the Dam is About to Break

A summary of Second Quarter 2009 Negative Equity Data from First American CoreLogic shows that Nearly One-Third Of All Mortgages Are Underwater.

• More than 15.2 million U.S. mortgages, or 32.2 percent of all mortgaged properties, were in negative equity position as of June 30, 2009 according to newly released data from First American CoreLogic. As of June 2009, there were an additional 2.5 million mortgaged properties that were approaching negative equity. Negative equity and near negative equity mortgages combined account for nearly 38 percent of all residential properties with a mortgage nationwide.

• The aggregate property value for loans in a negative equity position was $3.4 trillion, which represents the total property value at risk of default. In California, the aggregate value of homes that are in negative equity was $969 billion, followed by Florida ($432 billion), New Jersey ($146 billion), Illinois ($146 billion) and Arizona ($140 billion). Los Angeles had over $310 billion in aggregate property value in a negative equity position, followed by New York ($183 billion), Miami ($152 billion), Washington, DC ($149 billion) and Chicago ($134 billion).

• The distribution of negative equity is heavily skewed to a small number of states as three states account for roughly half of all mortgage borrowers in a negative equity position. Nevada (66 percent) had the highest percentage with nearly two‐thirds of mortgage borrowers in a negative equity position. In Arizona (51 percent) and Florida (49 percent), half of all mortgage borrowers were in a negative equity position. Michigan (48 percent) and California (42 percent) round out the top five states.
There are some interesting tables and graphs in the article that inquiring minds are investigating. Here are some partial alphabetical lists.

click on any chart in this post to see a sharper image

Negative Equity Share

Property Values and Loan-To-Equity Ratios

Nevada, not shown has a near-negative equity share of 68.9% and a Loan-To-Value ratio of a whopping 115%!

It is disingenuous to say there are only a half-dozen or so problem states, when the problem states are where people live. It is wrong to treat Alabama and Alaska the same as California or Florida.

Mortgage Facts and Figures – Select States

California has $2.4 trillion in mortgages debt. 42.0% of the properties have negative equity.
Florida has $923 billion in mortgage debt. 49.4% of the properties have negative equity.
Illinois has $447 billion in mortgage debt. 29.4% of the properties have negative equity.
Arizona has $298 billion in mortgage debt. 51.0% of the properties have negative equity.
Nevada has $149 billion in mortgage debt. 65.6% of the properties have negative equity.
Nationwide there is $10.1 trillion in mortgage debt. 32.2% of the properties have negative equity.37.6% of the properties have “near-negative” equity.

32-37% Of All Mortgage Holders Are Stuck, Unable To Sell

Take a look at that first line. California has $2.4 trillion in mortgages debt. 42.0% of the properties have negative equity. Think Wells Fargo (WFC) sitting on its massive share of California pay-option-arms is “Well Capitalized”? If so, think again.

Now take a look at that last line again. Nationwide there is $10.1 trillion in mortgage debt. 32.2% of the properties have negative equity, another 5.4% are nearly underwater. Counting real estate commissions of 5% or so, 37.6% are effectively underwater right now.

Unless those people bring equity to the table at closing, those mortgage holders are stuck in their houses, unable to sell.

And the situation is about to get worse. It will only take a small drop in the Case-Shiller home price index to put a whopping 50% of mortgage holders underwater, stuck in their houses, unable to sell.

Foreclosure Wave Is About To Hit

The biggest factor in foreclosures and walk-aways is whether or not someone is underwater. If someone with equity always has a chance to sell. The second biggest factor is “skin in the game”. Those who put down 20% are far less likely to abandon their properties than someone who put down 10% or less.

In light of the above, and given the preponderance of “liar loans” and low down payments in the problem states, those thinking clearly might be expecting to see a giant wave of foreclosures striking shore right about now. And they would be correct.

Mark Hanson discusses the above theory in “The Foreclosure Wave” — Now a Tsunami of Sorts.

There’s plenty of commentary in the article worth reading so please take a look. Here are some charts.

California Foreclosures

Nationwide Foreclosures

California Pent Up Foreclosure Demand

Mark notes “Foreclosure supply (yellow) has been artificially held back, which has allowed the low end of the real estate market to perform very well over the past several months. But the reservoir of foreclosures (blue + pink) is getting full and at some point the dam will crack and break.”

Six Reasons the Dam Will Break Sooner Rather Than Later

The number of people underwater in their mortgages is high and rising fast.
The reported nationwide unemployment figure is 9.4% with the real unemployment above 16% and rising.
Wages are falling.
The jobs market will suffer losses for another year.
Notices of Default and Trustee Sales are high and rising.
Social attitudes towards walking away and bankruptcy have changed.

In light of the above, those expecting a rebound in home prices and consumer sales, and/or a sharp V-shaped recovery are in Fantasyland.”

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