Obama to Reduce Budget Deficit on 'Fewer' than Expected Bank Failures 18 comments
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Archive this one for the funny pages. It has been leaked by administration officials (and sponged up by Bloomberg), that on August 25, when the CBO releases its updated budget estimate, the 2009 deficit is expected to decline from $1.825 trillion to $1.58 trillion. And, get this, one of the reasons for the reduction is the FDIC spending $78 billion less, presumably due to "fewer bank failures than the administration anticipated."
Pardon us, but last time we checked, not only did the FDIC have no cash left in the FDIC, and was effectively in a debtor position vis-a-vis the administration, but of the top 4 banks pending for blow up, Colonial was under (granted with some arbitrarily optimistic loss expectations), Guaranty (GFG) was about to be hawked over to a few siesta loving left midfielders, and Corus (CORS) was about to... well, we are not quite sure what the hell Corus is doing these days.
Furthermore, YTD something like 76 banks have already blown up. But for some odd reason this will now be spun as a positive, and the FDIC will get a commendation for not only letting a staggering number of banks go under (a record, except for the S&L crisis), but for actively mismarking the FMV of the loans carried by these books and thus papering over the full impact from bank failures to the DIF.
The deficit will amount to 11.2 percent of the nation’s gross domestic product, with spending totaling $3.653 trillion and revenues amounting to $2.074 trillion, the official said. In May, the administration had pegged this year’s deficit at $1.84 trillion. The estimate is for the fiscal year ending Sept. 30.
Whether anyone is gullible enough anymore to buy any optimistic budgetary projections is hopefully not debatable: just a week ago the CBO announced that the July deficit was set to grow by $181 billion.
In the grand scheme of things, the budget deficit will likely end up being revised substantially higher in Q4, but by then the economy will likely be reeling by nearly a trillion more in treasury auctions (and don't exhale or the house of treasury cards will collapse, and if we have an auction failure all bets are off), plus the new progressive tax rate will likely already be made effective... The re-revised budget will thus likely end up being swept under the rug at a time when the economy is sure to have much more critical matters to deal with.
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This article has 18 comments:
When 80% of toxic assets are covered by the loss-sharing agreement at a ratio of 80/20 or 95/5 (FDIC vs purchasing bank) there are bound to be lots of losses coming in fiscal 2010. But none of this will ever be reported publicly. In order to find the truth in FDIC reporting don't look at their "estimated loss" as reported. Rather, look at their ending balance in the Federal Deposit Insurance Fund from one period to the next. The drop in the balance has been far greater than the reported estimated losses.
So, what does this make us wonder? How many other ways is our administration hiding losses in the current period and kiting them into the next? How bad are things really?
I am guessing that the administration has learned to report like Microsoft and others. By providing guidance that is worse than the actual will be, they expect to get a bounce in perception when the "actual" number turns out better than they had led us to expect. Of course, they aren't trying to manage a stock price, just their own ratings in the polls. How long can this go on? Until America smartens up enough to figure out we are constantly being taken for fools.
Patient:"Oh no!! That's horrible!!"
Doctor:"No, see it's actually a good thing. I was going to say you have six months to live. So you should be excited."
The rest of us have the luxury of trying to predict the future with facts and reason and we should be grateful for that.
But we also have to factor in the effect of the sleep-walkers and the manufacturers of their dreams on the economy which we might as well call the Tulip Effect. It is real and perennial.
Self-identified conservatives are right to call us bleeding heart liberals when we try to disturb their sleep. Let them dream on in peace.
Profits will come in the long run but our timing will be about as good as our ability to predict the behavior of crowds.
It's the dream makers we need to fear the most, as history clearly shows. You are right to watch them closely.
Xiamen City is fantastic, on th ecean 1.5 hours to shanghai 1.5 hours to Hong Kong and international airport.
Lunch is $1.5
Beer is .4c
great home is $60,000
home keeper is $100 per month
taxi across town is $3
few hundred million ladies size 6, is that sexes remark?
But, just watch, as the bs piles up and eventually can no longer be hidden from the average Joe, we are going to have one massive event to distract us (again) from reality. I would bank on it.
The distraction could be anything, anywhere. Hell Mother Nature may even gift them with something, but with the talk about MANDATORY swine flu "vaccines" I have a feeling I know what this distraction will be. This vaccine has never been tested and is being injected into millions around the world and already the governments are lining up to use their own citizens as pharmaceutical guinea pigs. Since we all know there has NEVER been a mistake with medicines from Big Pharm, I'm sure all is well and the fact they were granted immunity from any repercussions of a rushed process won't have anything to do with it.
Except that IF these shots are mandatory and IF the government uses the protocols spelled out in numerous post 9/11 laws, there WILL be mass social disruption as some try to exert their "rights" in a "free" country.
Or, the riots as a spoon fed, brain dead public mobs to get the shots before they run out.
There are just so many cards that the administration can pull out of its hat to divert our attention away from the continuing destruction and theft of our standard of living.
Watch for it. A few of us will sit back and see it for what it is. The rest will be panicked and lose sight of their own destinies.
Scary things are brewing. Scary, scary things.
That being said; you'd better give up the ghost on the DOW going down. It will close the week above the Fibonacci .382 retracement thus announcing to the bears that their toast.
I only hope to have a whole bunch of red thumbs down so the volitiility to the up side is big.
what about the NY Post article about you this morning???
www.nypost.com/seven/0...
> Tyler,
>
> what about the NY Post article about you this morning???
>
> www.nypost.com/seven/0...
I find it interesting that the "Comments" on this New York Post article seem to be "Disabled".
The source of information is not as important as "Validity And Correctness".
"Sordid Past" or possibly "Not Getting Along With The Other Club Members" to the point of "Removal"?
I Appreciate The Information - Apparently TD Is A Threat To The "Establishment". The Possibility Of "Past Actions" Or "Anonymity" Is The Focus Of Detractors => NOT THE MERIT OF THE THINGS HE DISCUSSES. This should be considered "Remarkable".
In Dire Times Truth Becomes Dangerous.
> I found out recently that it's not necessary for the FDIC to withdraw
> from its coffers when a bank goes insolvent. Typically the FDIC will
> take a bank under conservatorship, then act as a broker and sell
> said bank to another bank. So there is the opportunity for the FDIC
> to take advantage of arbitrage. I am still seeking knowledge on this
> process, so I'm not speaking as an expert, but it would take an insolvent
> bank that is in this escrow process with the FDIC to have an old
> fashioned bank run to actually deplete those funds. Clarification
> encouraged here.
I have been involved in bidding for "Failed Bank" assets taken into receivership by the FDIC.
Info for research:
Managing The Crisis - Written After The S&L Debacle - Long Overview - Insight into philosophical approach
www.fdic.gov/bank/hist...
Current Program:
The FDIC when it takes over a "Failed Bank" it uses the "Deposit Insurance" to "Reimburse Depositors" by the transfer of accounts and monies to "The Bank That Assumes The Deposits" (if no bank can be found to take the depositors the FDIC issues checks - your money is not your money until the Bureaucracy gets it to you, Sorry For The Inconvenience)
Assets are taken into "Receivership" By The FDIC and deposited into an LLC.
Managing Interest is "Bid Upon" by "Qualified Parties" for a 20% stake in the LLC. Bids are for "Value Of Total Assets". FDIC supply 80% of "Bid" and winning bidder supply 20% at closing. (FDIC provides 80% Leverage At Closing; Most winning bids are between 50% to 10% "Loaned Value Of Assets").
Winning Bidder manages "Loans and Assets" and "Shares Profit and Operational Costs" with the FDIC according to the 80/20 split.
Once a threshold value of return has been reached the ownership percentages shift to 60% interest for winning bidder and 40% interest FDIC.
After 7 Years All Assets Must Be Liquidated Out Of The LLC.
I know of banks that have used TARP funds to participate and win bids. Most are hanging on to the assets waiting for the "Market To Come Back". Pretty Good Gig If You Can Get It.