Another Friday, Another Bank Failure: Casualty #33 and More on Stress Tests 13 comments
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Just like a Swiss watch, bank failure #33 for the year is Westsound Bank, of Bremerton, Washington. The bank's assets will be assumed by Kitsap Bank of Port Orchard.
As of March 31, 2009, Westsound Bank had total assets of $334.6 million and total deposits of $304.5 million. Kitsap will not assume the approximately $9.4 million in brokered deposits. The FDIC will pay the brokers directly. Customers who placed money with brokers should contact them directly for more information about the status of their deposits.
So aside from the weekly collapse of the peripheral banking system and the gamed stress test, everything is OK.
And speaking of gaming the stress tests, the WSJ is out with this article which even a few weeks ago would have been (marginally) shocking, but at this point draws only sighs of resignation.
The Federal Reserve at the last minute significantly scaled back the size of the capital hole facing some of the nation's biggest banks, following days of intense bargaining over the stringency of the stress tests.
When the Fed last month informed banks of its preliminary stress-test findings, executives at banks including Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. were furious... At Fifth Third, the Fed was preparing to tell the Cincinnati- based bank to find $2.6 billion in capital, but the final tally dropped to $1.1 billion.
Luckily there is such a thing known as regulatory supervision of massive financial impropriety, known as the Securities & Exchange Commission, which will imminently investigate these allegations of political manipulations within the "stress" test, which has somehow ended up being merely a means of suckering yet more naive investors' cash to hurt the few brave souls still short, under the guise that everything with our banking system is OK. After all, on the charter page of the SEC, one finds the following fairy tale:
The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.
At this point one gets tired of even being indignant.
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When a people become too weary and numb for indignation and outrage at obvious and towering economic injustice and financial decit, they lose their moral compass and that makes corruption even easier for the political and Wall St elites.
In the absence of a moral compass the sole criterion for public policy and economic behavior becomes expediency. Complicity with financial expediency leads to complicity with economic and later, political tyranny.
Is this planned ?
The article was about a bank in Washington how did Citi enter into it ?
Every bank failure story has to include Citibank somewhere in the sotry right ?
On May 10 02:02 PM James Wilson wrote:
> Did you notice the link to Citi with every bit of bad news about
> banking ?
> Is this planned ?
> The article was about a bank in Washington how did Citi enter into
> it ?
> Every bank failure story has to include Citibank somewhere in the
> sotry right ?
You mean the NON Stress Test? When the comedy known as FASB 157 marked to myth on impaired assets is removed, ALL institutions listed on the "test" fail.
Maybe, and maybe not.
If there is an assertion that the test was gamed, WITh INTENT TO DEFRAUD the investing public (=potential purchasers of those banks' shares), then they have all KINDS of jurisdiction.
Trouble is, unless they can prove intent, the various agencies have sovereign immunity, so they can only hun the bankers involved.
It'd do.
Two of the biggest banks in world finance? And after our government emphatically stated (more than once) that they would never be allowed to fail?
If you shorted them and you are down today, then you were waaaaay late to the party. And you're now the official "bagholder" as our world comes to realize that western civilization didn't end with the financial crisis of 2008.
Cover and go long. They'll be up 1,000 percent within 5 years, and you can make all your losses back plus some. But only if you act soon enough!
:)
The problem is this: You use information handed to you by the companies or that is otherwise publicly available. And that information isn't trustworthy. It is manipulated over 5-year and 10-year and 20-year periods. And you are focusing on what's happening or has happened (and has been reported) in the past 6 or 12 months. Or looking only 6 or 12 months into the future.
It's an easy trap to fall into.
I started buying Goodyear when it was $22.00 a share, after it had lost more than half its value in the prior 12 months. A company that had been around for more than 100 years, and had accumulated a tangible book value of $25.00 per share in that time. When I bought them at $22.00, they continued their slide. And their quarterly reports suddenly became like some sort of magic trick, reporting huge losses and magically disappearing all the wealth they had accumulated over more than 100 years. All the way down to $4.00 or less in price, with a significant "negative" book value. And talk in the press of their imminent bankruptcy.
So I gave up and sold.
And then, miraculously, they started reporting profits. And their book value recovered, out of thin air. By many multiples of what they were earning. All the while our auto industry (their primary customer) was in the doldrums and the cost of their raw materials was going through the roof. But they were somehow suddenly earning profits in the worst of all possible market conditions, and all their land and buildings and equipment were suddenly becoming worth something again (although they counted as liabilities before).
When they more than doubled, I started shorting them because all the macro-economic indicators were that their business would suffer. And yet, from the $8.00 per share that I started shorting them at, they rose relentlessly to $15, and then to $20, and then to $25, and then to $30, and then to $35. Posting losses or minimal profits all along the way, with no rational reason to explain the huge increases in their price.
When I was forced out with big losses right at the beginning of our great economic collapse, they started collapsing again.
All the way back down to $5, but since nearly tripling with no indication that there is (or will be) a recovery in their business any time soon. They're again on a rocket here lately, with no plausible explanation.
There is no rational reason to explain what the stocks of any (and especially large and well-known and well-established) companies trade for. It's all manipulated, with a very long-term horizon. And the "facts" that you see at any given point in time are almost assuredly bogus or "doctored" to achieve a particular short-term objective.
If you want to succeed in our markets, look for those situations where the press is telling you that one of our world's biggest and best-established companies faces bankruptcy at any moment --- and buy them. And then wait 3 years, or 5.
And avoid buying when companies are reporting record profits in industries that everyone knows is in the tank.
It's not really all that hard. But you must be able to understand the company you are investing in, and its history over the last 50 years and the next 100 years, and to put 3-month and 6-month and 12-month data into its proper perspective (which is to say, it's meaningless) ...
:)
And that was after shorting stuff that was already up 300 to 500 percent over what my due dilligence indicated it was worth. I wouldn't DARE to short a great company after it was DOWN 50 or 80 or 95 percent. That's just plain foolhardy!
:)
Oops sorry Cetin didn't see ya over there.
The stress test were hooey but not because of closed-door meetings or shady political alliances. The tests were watered down because of the ignorant, panic-prone nature of people in general. I guarantee you that if the government were to have come out with not a pass/fail but rather a ranking; you would see consumers run on the bottom 1 – 5 banks the likes of which haven’t been seen since the REAL depression. Tommy Lee Jones got it correct in Men in Black when he said, “A person is smart but people are stupid.” The government painted themselves into a corner and this was the only way to get out without spilling any more paint then necessary.
So why did Westsound fail? Was it heavy into derivatives or speculative instruments or did they just make poor business decisions? Either way, the system worked EXACTLY as it should. The government spotted the failure, acted and another institution took them over. Why waste time being indignant?
The market will fix itself on its own as will the financial services industry. Then, there will be another bubble that will burst and you can be indignant about that.