Monday August 11 Housing and Economic stories

Top Stories:

Could Your Bank Fail? (lewrockwell.com) When the FDIC becomes insolvent, now what? So what happens if nearly every bank in America is calling on the Federal Deposit Insurance Company (FDIC) to bail them out at the same time? The FDIC, which insures your bank deposits, sees the handwriting on the wall. It doesn’t have enough funds ($52.8 billion) in reserve to cover trillions of dollars in bank deposits. According to Wikipedia, as of June 2008 the FDIC insures 8471 banking institutions with total deposits of $8.575 trillion (March 31, 2008 deposit figures). The IndyMac bank failure will swallow up $4–8 billion of the FDIC's treasure chest and there are 300 other banks at risk of failure that represent another $26.8 billion of deposits the FDIC has to ensure. The failure of a large bank, like WAMU ($160 billion in deposits, with only $15 billion in cash reserves), would totally deplete the FDIC insurance fund by itself. Sheila Bair, FDIC chairwoman, trying to head off an unprecedented banking disaster, is calling for banks to take all homes covered in ARMS right now and freeze the rates/and or convert them to a fixed rate product.

What Banks And The Government Are Not Telling Us About 2009—The Next Shoes You Hear Drop May Be Very Loud Ones - (www.cuttingedgenews.com) Many people are still living in houses twelve months after making their last mortgage payment. Their banks have not started foreclosure proceedings. Is this due to incompetence by the banks, or is this a way to avoid writing off the loss? The Financial Accounting Standards Board (FASB), the little-known national agency responsible for establishing standards of financial accounting and reporting, has seemingly joined the cover-up by delaying the implementation of new rules that would have made banks stop hiding toxic waste off their balance sheets. New rules would have made banks put these questionable assets on their balance sheet and require a bigger capital cushion. Is anyone surprised that bank regulators, the Treasury and Federal Reserve urged a delay in implementation of new FASB rules. They can manipulate the facts because the average American doesn’t understand or care.
Is an FDIC Bailout in Our Future? So far, seven banks have failed in 2008, the largest being IndyMac. The FDIC has about $53 billion in funds to handle future bank failures. The IndyMac failure is expected to use $4 to $8 billion of those funds. Average Americans will lose $500 million in uninsured deposits in this failure. The FDIC says that they have 90 banks on their "watch list." They do not reveal the banks on the list, so little old ladies with their life savings in local banks will be surprised when they go belly up. Based on the fact that IndyMac was not on their "watch list." I wouldn’t put too much faith in their analysis. Some 8,500 banks operate in the U.S. Based on an independent analysis by Chris Whalen from Institutional Risk Analytics, 8 percent of all banks, or around 700 banks have been identified as "troubled." This is quite a divergence from the FDIC estimate. Should you believe a governmental agency that wants the public to remain in the dark to avoid bank runs, or an independent analysis based upon balance sheet analysis? The implications of 700 institutions failing are huge. U.S. banks hold roughly $6.84 trillion in bank deposits. Almost $2.6 trillion of these deposits are uninsured. There is only $274 billion of the $6.84 trillion as cash on hand at banks. This means that $6.5 trillion has been loaned to consumers, businesses, developers, etc. The FDIC has $53 billion to cover $6.84 trillion of deposits. Does that give you a warm feeling?

Fannie Mae admits it may need fresh capital - (www.belfasttelegraph.co.uk) The possibility of a US government takeover of Fannie Mae, the mortgage finance giant, moved a step closer yesterday after the company said it may not have enough capital to make it through next year. The company plunged to a larger-than-expected $2.3bn loss in the three months to the end of June, as American homeowners defaulted on their mortgages in record numbers. Fannie and its fellow mortgage backer Freddie Mac together own or guarantee about half of all outstanding US mortgages, worth a total of $5.2 trillion, but a collapse in house prices has wiped billions from the value of the underlying collateral. Fannie yesterday said it would open offices in Florida and California, two of the worst affected areas, because it had taken over so many foreclosed homes in these areas.

How the U.S. Government Has Mismanaged the Country - (mish at globaleconomicanalysis.blogspot.com) The U.S. Government has brutally mismanaged the country. Sadly neither candidate is willing to take a stand on fiscal prudence. I asked Senator to Obama to take a stand, and to pick someone fiscally prudent as his Vice President in in my Open Letter To Obama. I cannot support Obama because the policies he espouses are more fiscally reckless ever day. Nor can I support McCain, for many reasons: The war, abortion, military spending, and for that matter, spending in general. If I had to choose one of the two I would vote for Obama because he is going to waste money in the US where we will at least get something out of it, instead of ramping up a war machine where we get nothing out of it.

Rebuilding America's Decaying Infrastructure - (mish at globaleconomicanalysis.blogspot.com) To fix our infrastructure, from dilapidated levees to congested roadways and ports, the American Society of Civil Engineers (ASCE) has estimated that the country needs to spend $1.6 trillion over five years. Only $1 trillion of that, the organization says, has been allocated or promised. Accepting those numbers, we need an additional $600 billion to reverse the slide of infrastructure, a figure that seems as difficult to produce as it is to comprehend. Or is it? Spread over five years, ASCE is calling for $120 billion per year. The economic stimulus package signed into law in February is sending $168 billion out to individuals to spend, in a best-case scenario, on new TVs and restaurant meals. That money could have bought a lot of concrete. While more funds are needed, how they’re spent is equally important. New information technology, fresh engineering and advanced materials can help us not just restore, but improve our infrastructure in the coming century. Planned and managed properly, next-gen projects can be smarter and more resilient than what came before. Engineers and construction workers know how to get the job done. But first, we must gather the national will.

8 who saw the crisis coming... and 8 who didn't (money.cnn.com) Of course, the majority of the financial media should put themselves as one of the top 5 groups/individuals that did not see the crisis coming. One year after the credit crunch began, Fortune looks back at who saw trouble ahead, and who just ended up in trouble.

Fannie Mae, Battling Losses, to End Alt-A Mortgages - (www.bloomberg.com) Fannie won't accept new Alt-A loans after Dec. 31, according to a statement today. The mortgages, which make up about 11 percent of the $3 trillion financed by the Washington-based company, accounted for almost half of second-quarter credit losses, Chief Financial Officer Stephen Swad said today on a conference call. Earlier this week, Fannie said it will double the ``adverse market delivery charge'' it introduced in March for all mortgages that it helps finance, to 0.50 percentage point on Oct. 1. The company also boosted fees on other loans. The increase in mortgage rates on Fannie loans from those adjustments will range between 0.06 percentage point and 0.18 percentage point, according to Barclays Capital.


Other Stories:

How Canada stole the American Dream - (www.macleans.ca) The numbers are in. Compared to the U.S., Canadians work less, live longer, enjoy better health and have more sex. And get this: now we're wealthier too.
Prices stabilize last, after sales volumes and foreclosures - (news.yahoo.com)
Don't Just Do Something, Stand There - (www.seekingalpha.com)
Banks tightening their credit standards - (money.cnn.com)
Mortgage Rates Creeping Up, Crimping Affordability - (www.nytimes.com)
Update: Is Downey Savings & Loan Operating Under an OTS "Memo of Understanding"? - (www.ml-implode.com) - After seeing this section from Downey Savings and Loan's 10-Q filing today for the second quarter of 2008, we have to wonder...
Fannie Mae, Freddie Mac Preferred Stock Cut by S&P - (www.ml-implode.com) - "Standard & Poor's cut the preferred stock and subordinated debt ratings of Fannie Mae and Freddie Mac, the two largest U.S. mor...
Google Maps StreetView House on Fire - (www.ml-implode.com) - "Go to Google Maps, and search for "Eagle Point Drive, Ark" then head south on Eagle Point Drive. (You can even see the fire tru...
Which way next for short-term rates? - (www.ml-implode.com) - "All the talk earlier this year about TIPS Show Inflation Expectations at Lowest Level in Five Years - (www.bloomberg.com)
Mortgage Fraud Giants to Buy Fewer Risky Loans - (www.nytimes.com)
Paulson Says No Plans to Add Cash to Fannie, Freddie - (www.bloomberg.com)
Fannie and Freddie defeated responsible lending laws - (www.newsweek.com)
Economists Try To Find Right Price For A House - (www.nytimes.com)
Did lender to the desperate cheat his investors? - (www.ocregister.com)
Real estate brokers settle Calif. kickbacks suit - (www.sfgate.com)
Subprime Blues : Lyin' on the Docs 'bout My Pay - (www.youtube.com)

the Federal Reserve raising interest rates in the second half has proven to be just that -...
"Informal" SEC Probe of Nat'l City About First Franklin Financial Corp. - (www.ml-implode.com)
Thought Process of Many in Foreclosure. - (www.ml-implode.com)
ALT A is Broken? Really? - (www.ml-implode.com)
Stockton CA is Foreclosure Town, USA - (www.guardian.co.uk)
America's Most In-Debt Households - (finance.yahoo.com)
California Tax Board Forcing You To Pay Speculators' Taxes - (patrick.net)
Why bother with Oakland? To escape the cube! - (www.nothingugly.com)
I.O.U.S.A.: The Movie - (www.iousathemovie.com)
Lost US sovereignity - (www.nypost.com)
Bringing Down Bear Began as $1.7 Million of Unsuspected Options - (www.ml-implode.com)
Unable to sell homes, split-up spouses stay put, postpone divorce - (www.ml-implode.com)
This credit crisis is like the plague and nobody is safe yet - (www.ml-implode.com)
Should unelected officials choose who benefits from taxpayers’ money? - (www.ml-implode.com)


Federal Reserve finds deepening credit crisis - (www.washingtonpost.com)
Fed Says Banks Toughen Standards for All Loan Types - (www.bloomberg.com)
Are central banks getting it all wrong? - (www.financialweek.com)
CA: State budget impasse looks poised to worsen - (www.stateline.org)
Exporting our addictions - (www.chron.com)
Students Face Hit As Private Lending Dries Up - (online.wsj.com)
Economic Slump in U.S. to Worsen as Consumers Get `Squeezed' - (www.bloomberg.com)
Business-school applications pick up as the economy slows - (www.cfo.com)
Mission creep at the Fed - (www.economist.com)
Fed has bias toward slower growth - (www.nypost.com)

Fannie sinks on downgrade - (money.cnn.com)
UPS in talks to buy Europe's TNT for $15 billion - (www.ajc.com)
Bank bosses and big losses - (www.economist.com)
Broadband Internet growth plummets in 2Q - (www.azcentral.com)
Fannie's capital to remain under pressure: analyst - (www.reuters.com)
Uncorking a new asset class with investment-grade wines - (www.financialweek.com)
Heat from car exhaust could improve mileage - (www.cnet.com)
Greenspan's `Age of Froth' Is Over for Decade: John F. Wasik - (www.bloomberg.com)
Monterey desalination plant approved - (www.stateline.org)

China shares plunge 5.21 percent - (news.yahoo.com/s/afp)
Georgia War Sours Investor Mood In Russia - (www.forbes.com)
Mortgage-Market Trouble Reaches Big Credit Unions - (online.wsj.com)
At last, compensation consultants get the pink slip - (www.financialweek.com)
Financial Giants Suffer ARS Freezer Burn - (www.cfo.com)
Getting Ready to Reveal Credit-Swap Risks - (www.cfo.com)
Auction-Rate Probe Expanded - (www.thestreet.com)
How did this happen? - (www.economist.com)
Credit Unions Report Big Mortgage-Related Losses, Report Says - (www.nytimes.com)
Wave of subprime suits could boost cost of D&O - (www.financialweek.com)
More banks are tightening lending standards - (www.ap.com)
Asset-Backed Bond Sales Drop to Lowest in Decade, Deutsche Says - (www.bloomberg.com)
FDIC Fund Strained by Bank Failures May Have to Raise Premiums - (www.bloomberg.com)