FedUpUSA

Archive for the ‘bank bailouts’ Category

Look folks, it’s simple — what the IMF wants, what the banksters want, here, there, everywhere, is the same thing:  Your money, as much as they can get, and they don’t care what happens to you.

Evidence?  Right here:

Austerity policies are now widely regarded as having failed, and this failure is increasingly obvious in the country elected to act as Austerity’s Child. The banking collapse, and the legacy bequeathed by the Irish state’s extraordinary September 2008 bank guarantee, has seen society in Ireland reshaped as a petri dish for IMF, European commission and ECB experimentation. Successive waves of cuts have been stipulated by the Troika in return for its loans, but implemented without resistance, and arguably, a degree of enthusiasm, by the two governments of the “post-sovereign” era.

Yep.  I said originally that Ireland should give the finger to the banksters, and if the government refused then the people should give the finger to the government, ejecting and replacing it.

What is “give the finger”?

Simple; you tell them this: You made a bad loan, you’re going to eat it.  Period.

Yes, I know, pension funds and others bought the paper.  Guess what — they did no diligence (or insufficient diligence) and they’re going to lose money as a result.  That’s what’s supposed to happen when you do something stupid!

In point of fact it is the only way by which the market works.  When you do smart things you make money.  When you do dumb things you lose money.  When you do really stupid things you go bankrupt.

Well?

There’s still time Ireland.  Tell the banksters to get stuffed.  Right here, right now.

As for Europe, same deal among their governments — including Greece.  Tell the banksters to go to Hell.

As for here?  Same deal.  Got a loan out and are you tired of the “ethics” of these firms?  Consult a tax and legal advisor, find out what can be done to you (if anything) if you tell them to go to Hell, and if that’s the correct business decision then tell them to blow their alleged debt out their ass.

Note carefully folks: American Airlines — a big corporation — just did exactly that.

They filed a preemptive bankruptcy to avoid paying for things they had agreed to pay for because they determined it was no longer to their advantage to do so.

WAKE UP IRELAND.  WAKE UP GREECE.

And wake up AMERICA and AMERICANS.

There is NO moral obligation to pay.  There is only the ability (or not) to enforce a contract.

That’s all.

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[Bernanke's Office]

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BTW, did you catch Banzai7 on Today’s Keiser Report? Watch the bit about Timmah and Fatso…”It’s war, btut we have the Art…”

And now for a brief public service announcement:

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ZeroHedge

Here we go again:

The First National Bank of Florida, Milton, Florida, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with CharterBank, West Point, Georgia, to assume all of the deposits of The First National Bank of Florida.

All fine, right?  All insured depositors are protected, we’re all ok.

Right?

Yes, from that point of view – so far.

So what’s the problem, you ask?  Right here:

As of June 30, 2011, The First National Bank of Florida had approximately $296.8 million in total assets and $280.1 million in total deposits. In addition to assuming all of the deposits of the failed bank, CharterBank agreed to purchase essentially all of the assets.

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The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $46.9 million. Compared to other alternatives, CharterBank’s acquisition was the least costly resolution for the FDIC’s DIF.

Let’s “do the math.”

As of June 30th, less than three months ago, if you believe this bank’s balance sheet the institution had an excess capital position (that is, assets .vs. liabilities) of 5.96%.  That is, it had 6% more assets than liabilities and thus was (almost) within regulatory capital minimums.

Today, we are told that the FDIC is going to lose $46.9 million on this transaction. 

In order for the reported balance sheet to be true the bank had to lose $16.7 million (its entire surplus) plus the $46.9 million the FDIC is now going to lose in less than three months.

That is, it had to lose $63.6 million in asset valuation in three months or about 22% of it’s asset value.

Note that this institution has been claimed to be “troubled” for quite some time with non-performing loans.

If you believe that the alleged balance sheet presented on June 30th of this year was materially accurate in all respects as to the valuation of those assets, and that in less than three months time the bank lost 22% of its asset value and thus placed the FDIC in the position of losing $46.9 million on this transaction you’re dumber than a box-o-rocks.

If you want to know why bank stocks are collapsing around the world and why credit markets are at risk of another seizure, you need only look right here for the reason.  12 USC Sec 1831o requires:

Each appropriate Federal banking agency and the Corporation (acting in the Corporation’s capacity as the insurer of depository institutions under this chapter) shall carry out the purpose of this section by taking prompt corrective action to resolve the problems of insured depository institutions.

We have a nearly-unbroken chain of bank failures going back to 2008 in which (c)(3) critical capital levels have been massively invaded without FDIC response and which in turn have led to these failures.

Incidentally the word shall appears in that statute 47 separate times.  The word “may” appears only 13 times.  The word shall has, quite simply, been repeatedly and intentionally ignored for the last four years and continues to be ignored today.

It is therefore only reasonable for the market to assume that all large financial institutions are similarly underwater on any sort of honest accounting basis and thus the only thing preventing them from blowing up is the ability to continue to roll over indebtedness and pick up dropped pieces of crack from between carpet fibers with which they can claim all is ok as they take another hit from the pipe.

This is where the confidence problem is rooted in the current market volatility and neither political party in the United States Congress nor either of the other two branches of government has done a damned thing about the wanton and outrageous violation of this section of law — law that was put into place after the S&L crisis which arose due to the precise same willful and intentional aversion of regulatory eyes.

If this crap is not stopped the market will continue to press this bet on insolvency whenever it sees an opening to do so and eventually one or more large financial institutions will collapse exactly as occurred with Creditanstalt.  Since the governments of the world have “blown their wads” with lower interest rates, balance sheet expansion and outrageous deficit spending trying to cover up their own internal corruption and willful refusal to enforce the law that led to the 2008 market collapse when, not if, the market manages to tip one or more of these institutions “over the edge of the cliff” there will be no ability to stop the cascade of defaults and bank failures.

This is the legacy of our government on both sides of the aisle and will be written in the history books as the root cause capital market implosion that appears at this time to be utterly inevitable – not because we can’t stop it but because our government refuses to hold the responsible parties accountable for both their actions and intentional inactions.

Costs to bail out bondholders of Irish banks has now soared to $142 billion. Worse yet, the new Irish government completely caved in to the EU and ECB and will attempt to balance the entire amount on the backs of taxpayers.

Please consider Ireland Bows to Trichet on Bondholders as Bank Rescue Reaches $142 Billion

Ireland yielded to the European Central Bank to protect bondholders even as its bailout bill for the region’s worst banking crisis moved to as much as 100 billion euros ($142 billion) after stress tests.

The ECB in Frankfurt was “solidly opposed” to imposing losses on investors in senior bank debt, Finance Minister Michael Noonan told broadcaster RTE today. The ECB agreed to provide “ongoing” funding for the banks, he said.

Ireland agreed yesterday to inject as much as 24 billion euros into four banks, while leaving bondholders untouched. The government already funneled 46.3 billion euros into the financial system and set up an agency that paid more than 30 billion euros to assume risky property loans. The total equates to about two-thirds the size of the Irish economy.

During an election campaign last month, Eamon Gilmore, now deputy prime minister, dismissed ECB President Jean-Claude Trichet as a “civil servant” who would answer to politicians. As recently as March 28, Agriculture Minister Simon Coveney said the government planned to impose losses on senior bondholders in the banks to cut the costs of its bailout.

“Taking all of the losses of the banking system and putting them on the balance sheet of the government doesn’t make sense,” Nouriel Roubini, co-founder of Roubini Global Economics LLC, said today in an interview from Cernobbio, Italy, with Maryam Nemazee on Bloomberg Television’s “The Pulse.” “Eventually, the back of the government will be broken.”

“Rather than go after over 20 billion euros in unguaranteed bonds, the government is making ordinary citizens bear the burden of this debt,” Gerry Adams, leader of nationalist party Sinn Fein, said in statement today. “Rather than act in the interests of the Irish people they are acting in the interest of the banks.”

Backs of Irish Taxpayers Will be Broken

What is the point of throwing the bums out in a massive repudiation of government policy if the new bums have the identical policies as those they replace?

The Euro reacted positively to this turn of events and also to expected interest rate hikes by Trichet. Those hikes with further exacerbate the problems of Greece, Ireland, Portugal, and Spain.

I am sticking to my long-held position “what can’t be paid back, won’t.” The timing is uncertain, and Roubini phrased it well: “Eventually, the back of the government will be broken.”

I might add, so will the backs of taxpayers. The pertinent question is how long the taxpayers put up with another set of politicians who cave in to bankers.

Mike “Mish” Shedlock
Global Economic Analysis