Vox Rationalis's Comments

Analyzing the U.S.'s Four Largest Banks

Mon, 09 Nov 2009 15:24:02 -0500

"Secondly I have grouped the 4 together for a number of reasons. Many investors like to invest in ETF's like the XLF and KBE and the 4 holdings are 37% of the XLF and 33% of the KBE."

If this was the reason you grouped these, why did you instead mention only the S&P 500 in your article? No mention whatsoever of why these should be grouped. But let's break this down a little further - current holdings of XLF:

1 JPMorgan Chase & Co. 12.61%
2 Bank of America Corp. 9.57%
3 Wells Fargo & Co. 9.32%
4 Goldman Sachs Group Inc. 6.48%
5 Citigroup Inc. 3.87%
6 U.S. Bancorp 3.35%

So why no GS, which makes up a much higher portion of the XLF? Or more importantly, why C at all, since its losses dramatically pull down all of your numbers while accounting for over 10% of the group's market cap?

"Now if you go to Value Lines 2010 estimates for the four banks and take out Citigroup from the picture you get a ROIC for the remaining 3 of 2.4% compared to 2.1% for the four, so the other three still do not inspire."

Wow. I hadn't even read to the end of your article: "I want to see at least 20% ROIC (return on invested capital) before I even think about investing a dime in any enterprise." You really have a complete lack of understanding about how banks work, and should have known better than to provide any advice without more study.

A banker is an intermediary who directs capital to where it can be put to good use. Take this function away, as you suggest by limiting banks to their deposits only (which, by the way, are borrowed funds with a different name), and capital no longer moves as efficiently, the cost of doing business increases, and economic activity and growth decline.

And so, since banks operate on the margin, that their returns are lower than other businesses is not just intuitively obvious to the casual observer, but NECESSARILY so. Dramatically simplifying, banks MUST be low-return businesses or other businesses couldn't afford to borrow money.

As an example, consider Hudson City Bankcorp, which Forbes named the Best-Managed Bank of the Year for both 2007 and 2008. Here are the ROIC figures, according to their annual report:

2007: 1.03%
2008: 1.27%

The big three banks have ROIC of 2.4%, much higher than the Best-Managed Bank in America, and you think they're dramatically too low? If your 20% were really a good yardstick for banks, do you think HCBK would be thought of so highly? I ran a screen just for giggles. Of the 38 large-cap banks (<$8B), only one -- Banco Bradesco -- had a ROIC higher than 10%, coming in at 11.4%. Most of the Canadian banks - which have been sailing through the trouble unscathed - run between 5% and 10% ROIC.

Banking is all about leverage and risk; if there were no risk, there would be no reason to limit the amount of money a bank borrows and then lends -- no need to limit leverage. Of course, risk is inherent in any borrowing, and the recent industry failure to manage risk is a big part of what we're all dealing with now. Do I want a banker who takes no risk? Of course not, because my returns as an investor or depositor would be surely reflect this risk intolerance. I want a banker who properly assesses risk. We pay for the banker's ability to assess and manage risk in a leveraged environment - not ROIC.

"So it seems from [2010 loan loss reserve estimates] that JPM might have a lot more bad loans on the books then the others and that C's situation may not be as bad as people think."

Man, this is just ignorance - you should follow the banks for a while before spouting advice on them. WFC has taken HUGE amounts of heat among analysts for not increasing its loan reserves more (WFC insists it is generating sufficient cash to cover its losses without adding to reserves). Citi really hasn't had to increase reserves as much as it should, because it's mostly government-owned anyway and needs every productive dollar it can get. Taking JPM's higher number as an indicator that it has more losses is just plain stupid - it could just as easily, and in fact far more likely, indicate that JPM is a more conservative operator.

Apologize to the nice people for wasting their time. DISCLOSURE: long WFC, BAC.

Analyzing the U.S.'s Four Largest Banks

Mon, 09 Nov 2009 09:03:53 -0500

Sorry, but there are big problems here. First off, source your data.

The clearest logical problem is the impact on the "analysis" of grouping these companies together. This only makes sense if one is considering buying the group as a basket. Strikes me that very few would consider this, and so it makes no sense to group them for any analysis; comparing them would be more useful.
JPM and WFC, by most accounts, are very well-run, and have done a much better job managing risk than most banks. BAC's purchases put very much it in a category of its own.

And as for C - does it make any sense whatsoever to group C with ANY other company? What happens to your numbers if you pull C from the discussion?

Berkshire will split its Class B shares (BRK.B) 50 to 1 in order to accommodate holders of smaller amounts of Burlington Northern Santa Fe (BNI) shares who opt for a share exchange rather than a cash payment.

Tue, 03 Nov 2009 10:35:49 -0500

Ricard is mostly correct; if the B share price were to advance due to improved liquidity and become more valuable than 1/1500th of an A share, one should expect A share conversion and arbitrage to push the shares back to square. This does not mean it won't happen, but rather that the A shares will provide meaningful resistance.

I think the historical premium of the A shares has more to do with poor liquidity than anything else. The increased voting rights are worth very little, considering the dominant position of Buffett and Munger.

Berkshire will split its Class B shares (BRK.B) 50 to 1 in order to accommodate holders of smaller amounts of Burlington Northern Santa Fe (BNI) shares who opt for a share exchange rather than a cash payment.

Tue, 03 Nov 2009 08:37:20 -0500

This will improve liquidity and may provide a (very) modest boost to the stock, as the current share price (~$3300 each) is an unwarranted barrier to trading.

Lost decade? With 42 trading days to year-end, S&P 500 needs a 42% gain to break even for the decade.

Mon, 02 Nov 2009 12:33:47 -0500

Some quick math shows that the S&P 500 would need to be about 53.5% higher to match YE1999 in real terms.

Sources:
www2.standardandpoors....
ftp://ftp.bls.gov/pub/...

Lost decade? With 42 trading days to year-end, S&P 500 needs a 42% gain to break even for the decade.

Mon, 02 Nov 2009 09:54:15 -0500

"With 42 trading days to year-end, S&P 500 needs a 42% gain to break even for the decade."

No. Counting dividends, the S&P needs a gain of about 19% to break even since December 31, 1999. Why do investment professionals routinely neglect to include dividends in this kind of calculation?

A growing rift at Ford (F -2%) as a Michigan Mustang plant becomes the fifth factory to reject contract concessions that United Auto Workers previously granted to GM and Chrysler. "The membership did not have a warm reception to additional contract modifications," said the UAW local president. "We did this in ‘05, ‘07 and in February and now they’re back at us again."

Wed, 28 Oct 2009 13:42:58 -0400

A more clearer asked-and-answered in the same post I couldn't write:

On Oct 27 04:25 PM Niner wrote:
> I won't willing vote to cut my retirement
> income and my medical etc. And probably everyone reading this would
> raise five kinds of H if they were asked to take the same cut in
> their pay and benefits as the UAW. Nobody willingly votes to take
> less money and that includes you.

Unless...

>However,
> a job with less pay and benefits may be better than no job at all.

A growing rift at Ford (F -2%) as a Michigan Mustang plant becomes the fifth factory to reject contract concessions that United Auto Workers previously granted to GM and Chrysler. "The membership did not have a warm reception to additional contract modifications," said the UAW local president. "We did this in ‘05, ‘07 and in February and now they’re back at us again."

Wed, 28 Oct 2009 12:58:25 -0400

Here we have a set of people - EMPLOYED people in a metropolitan area where unemployment is higher than 17% - represented by a union that has negotiated this deal on their behalf - a deal quite similar to the ones already struck with other manufacturers - rejecting a contract that keeps them employed by a manufacturer that is reducing production. You do the math.

Ford needs to shut one of these factories where the sentiment is so obviously against any further concessions. The company cuts costs, the other factories get the fear of God, and the workers at the shuttered factory get to join MANY of their neighbors on unemployment assistance.

In this economy, in that city, those workers should be counting their blessings every day.

On Oct 27 04:31 PM user 489326 wrote:

> Just remember there are real live people with families working in
> those factories. How would you like someone to drop kick your butt
> out the backdoor in these tough economic times? Let's negotiate
> some more.
>
> On Oct 27 03:48 PM Vox Rationalis wrote:

A growing rift at Ford (F -2%) as a Michigan Mustang plant becomes the fifth factory to reject contract concessions that United Auto Workers previously granted to GM and Chrysler. "The membership did not have a warm reception to additional contract modifications," said the UAW local president. "We did this in ‘05, ‘07 and in February and now they’re back at us again."

Tue, 27 Oct 2009 15:48:06 -0400

They need to make an example out of one of these factories.

General Electric Generally Down

Tue, 27 Oct 2009 08:51:14 -0400

So what you're saying is that it's going to go up unless it goes down.

Wonder if the sudden plunge has anything to do with this: Richard Bove downgrades Wells Fargo (WFC) to Sell. WFC -3.6%. Dow -0.6%. S&P -0.5%. Nasdaq -0.3%.

Wed, 21 Oct 2009 15:55:38 -0400

Hmmm. Methinks depending on Bove for banking stock wisdom has been a losing proposition for any time frame longer than 7 months.

Bank analyst Dick Bove is disgusted by the "witch hunt" which forced Ken Lewis out of Bank of America (BAC). "The guy has been phenomenally good... to push him out now because of a witch hunt is totally inappropriate," he said on CNBC this morning.

Thu, 01 Oct 2009 09:38:54 -0400

Yeah - never mind that he was completely derelict in his fiduciary duties, withholding material information from his shareholders that cost them BILLIONS of dollars.

How The Federal Reserve Is Monetizing Debt

Wed, 26 Aug 2009 13:46:29 -0400

On Aug 26 01:29 PM MinAkkar20 wrote:

> You educate yourself with this basic article on why governments prefer
> inflation in a fiat-currency regime.
> Then you can use logic to see that maintaining interest rates at
> zero % and boosting excess reserves at banks to $1 trillion dollars,
> Congress passing new home-buyer credits, increasing purchases of
> GSE bonds all promote inflation.

I don't need to read anything to understand the argument. Unfortunately for folks like you who prefer theories to reality, we have actual pricing data which shows that all of these extreme measures undertaken by the Fed over the last year have resulted in a price level which is pretty darned close to where it was a year ago. In case you're in need of a basic education, inflation relates to prices; if prices are flat, there is none.

By the way, the Fed didn't boost excess bank reserves. Banks did that on their own, in the face of losses they couldn't quantify. And for the record, it was very much DEflationary.

> Or you can believe that the boom-bust cycles that have been created
> since the existence of a central banker in the US occur in the pursuit
> of price stability and only believe what you read on government websites.

I know you won't believe me since it doesn't fit into the storybook world in which you live, but the boom-bust cycle was MUCH worse before the Fed than it has been since, especially since the U.S. began to abandon the gold standard in 1933.

How The Federal Reserve Is Monetizing Debt

Wed, 26 Aug 2009 12:03:21 -0400

On Aug 26 11:18 AM MinAkkar20 wrote:

> I think the real estate bubble and resulting collapse, followed by
> the official goal of reinflating asset prices is evidence enough.

Please provide a link to the government website describing the "official goal of reinflating asset prices."

> I don't need a Fed policy statement as proof - actions speak louder
> than words.

Of course you don't need a policy statement - it's part of your assumptions. Facts be damned.

During the last year, when the actions under your umbrella of the "official goal of reinflating asset prices" have occurred, what has happened to prices? Basically flat.

The Zimbabwe comparisons are the work of ignoramuses.

Federal Debt Prediction: Dollar Bearish, Gold Bullish

Wed, 26 Aug 2009 11:10:51 -0400

Imagine, GoldCore's bullish on metals.

How The Federal Reserve Is Monetizing Debt

Wed, 26 Aug 2009 11:09:15 -0400

"the fundamental picture concerning the dollar has not changed since I first became wary of its fortunes in 2002."

Wait, you're admitting that you've been singing the same song related to the dollar for the last seven years? You're saying you think the situation for the dollar today is the same as it was in 2002, when it was some 50% higher?

"The Federal Reserve has effectively been monetizing far more US government debt than has openly been revealed, by cleverly enabling foreign central banks to swap their agency debt for Treasury debt."

Pretty much nonsense, since the government agreed last year that it would stand behind agency debt. If the government stands behind agency debt in the same way it stands behind Treasury debt, what you are describing is a wash.

"This is very nearly the same path that Zimbabwe took, resulting in the complete abandonment of the Zimbabwe dollar as a unit of currency. The difference is in the complexity of the game being played, not the substance of the actions themselves."

No, the difference is that Zimbabwe abandoned price stability as a goal. There is no evidence -- not the tiniest bit -- that any relevant government official has even considered such a thing.

A dramatic visual of how an earnings-less rally can produce a historic P/E ratio.

Fri, 21 Aug 2009 23:35:07 -0400

On Aug 21 02:31 PM Moses wrote:

> I'm not going to bother responding to the rest of your comment but
> the simple fact that you cite operating income for P/E valuations
> says enough about your argument not to mention those pesky recurring
> "non-recurring" charges for GAAP.

Just so everyone understands - you're so offended by my mention of operating earnings (which are tracked by S&P) IN ADDITION to GAAP earnings, that you're unwilling to waste your precious time rebutting my critique.

Do you know how pathetic that is?

> Clearly we can revert back to
> the good 'ole days of 2007 but with double the unemployment rate.
>

This graphic - which charts the plunge in foreign outflows from U.S. debt - has Jim Sinclair counting down the dollar's implosion. More from the Hat Trick Letter.

Fri, 21 Aug 2009 14:23:40 -0400

"which charts the plunge in foreign outflows from U.S. debt"

First, I think you mean "the plunge in foreign inflows."

But look more carefully - it shows no such thing. It shows that funds continue to flow in, though at a reduced rate. The only lines that have crossed into negative territory -- showing a year-over-year decline -- are agency bonds and now US corporate bonds. The overall picture - the red line - shows that money is still flowing in at what was a prodigious rate just 10 years ago.

Shame on you, Seeking Alpha, for not taking the time to understand what you're looking at.

A dramatic visual of how an earnings-less rally can produce a historic P/E ratio.

Fri, 21 Aug 2009 14:11:46 -0400

On Aug 21 12:49 PM Moses wrote:

> Wow the idiocy of these comments is amazing.

Gee, the arrogance of name-calling morons is incredible. Wait, I just called someone a name...

> First, financial companies
> have not made huge writedowns this year...

Completely irrelevant. The financials' losses during the last year have skewed trailing 12-month P/E data to the point that it's meaningless. THAT's the point here.

> Second, the
> S&P through two quarters has about $15 in earnings; with a multiple
> of 15 for the overall market the S&P would need to earn $53 for
> the last two quarters, something which it has never done!

1. Wrong. Counting all data to date, S&P earnings through Q2 were: GAAP - $21.34; Operating - $24.11.

2. So you think the market's horizon is two quarters ahead. Brilliant.

3. Backing up, the last time the S&P 500 had something close to these earnings for the first two quarters was... well, let's just look at several years' data. Hope this comes out okay:

Year | H1 GAAP | H1 Oper | S&P close
2009 | $21.34 | $24.11 | 919.32
2003 | $23.02 | $25.40 | 974.50
2002 | $16.06 | $22.49 | 989.81
1999 | $23.47 | $24.94 | 1372.71
1998 | $20.16 | $22.35 | 1133.84
1997 | $20.91 | $21.69 | 885.14

Comparing these years (which is somewhat arbitrary, in that the sole selection factor was 1H earnings "close" to this year's), this year's market at 919 is on the cheap end. Take this as you will, it's just another data point.

> Falling
> credit, consumer spending, home prices, rising unemployment does
> not bode well for a recovery.

Actually, it bodes very well for a recovery; you can't have a recovery without a recession. The deeper the recession, the more likely a strong recovery. Think of a trampoline.

> Face the facts, the peak earnings
> of 2007 are not coming back in real dollar terms for a long, long
> time

How long is a "long, long, long time"? From the September 1979 S&P 500 earnings peak it took almost 4 years to reach the earnings bottom, and then it took 5.5 more years to regain the 1979 level. THAT was a long time. Do you think it's going to take us until 2016?

> especially with the growing public sector which will drag down
> overall growth for the economy.

Recently, the public sector was the only thing growing the economy - completely appropriate during a recession. The trick lies in backing the government out as the private sector recovers. Some of this happens automatically, since entitlement spending declines as the economy improves. But we're all looking at the same numbers, and we all know that much more will be needed.

Today May Be Markets' Turning Point

Fri, 21 Aug 2009 13:16:09 -0400

I think the turning point is now. I mean now. Right... now. How about...now? Now? Maybe now. Now! NOW! Now now now now now...

Is the Recession Finally Ending? I'm Hopeful but Not Convinced

Fri, 21 Aug 2009 13:10:55 -0400

NBER, not NBEA.

"I doubt that they well declare the recession over while payrolls continue to decline, even if we get positive GDP growth in the current quarter, especially if the growth results primarily from an inventory rebound and one-time clunker rebates."

No, payrolls continuing to decline following the trough is typical. But I wouldn't expect NBER to declare a bottom until two quarters of growth have followed it.

"The BCDC declared the last recession over in November 2001."

No. In November 2001, NBER identified the beginning of the recession to be March 2001. It didn't identify the November trough until July 2003.

"My point is that the BCDC didn't declare the recession over while employment was still falling."

True, but irrelevant. That NBER waited a long time to declare the trough doesn't mean the recession wasn't over. In its July 2003 release, it explained the reasoning. (www.nber.org/cycles/ju...):

"The committee waited to make the determination of the trough date until it was confident that any future downturn in the economy would be considered a new recession and not a continuation of the recession that began in March 2001. The committee noted that the most recent data indicate that the broadest measure of economic activity-gross domestic product in constant dollars-has risen 4.0 percent from its low in the third quarter of 2001, and is 3.3 percent above its pre-recession peak in the fourth quarter of 2000. Two other indicators of economic activity that play an important role in the committee's decisions-personal income excluding transfer payments and the volume of sales of the manufacturing and wholesale-retail sectors, both in real terms-have also surpassed their pre-recession peaks. Two other indicators the committee focuses on-payroll employment and industrial production-remain well below their pre-recession peaks. Indeed, the most recent data indicate that employment has not begun to recover at all. The committee determined, however, that the fact that the broadest, most comprehensive measure of economic activity is well above its pre-recession levels implied that any subsequent downturn in the economy would be a separate recession."

NBER will wait long enough so that it is confident a further deterioration will be considered a separate recession. The 1991 trough was identified 21 months later, the 1982 trough 8 months later; the latter recovery was much stronger than the former.

"Employment resumed falling after the recession end had been called. If they had delayed their pronouncement a few months, I doubt that they would have been pegged as the end month."

No - I think you don't have the announcement date correct. It's true that employment continued to decline for a couple of months after November 2001, but this is typical.

"Recent declines in payrolls have moderated, but are still large in historical context."

Typical of the latter stages of recessions.

"The decline in inventories contributed 0.8 percent of the 1 percent decline in real GDP. That plus the inventory decline in the previous quarter sets the economy up for a significant inventory rebound in the current, third quarter. GDP would be boosted in a technical sense, but not, in my opinion, in a fundamental lasting way."

If you're saying that GDP will be artificially high in Q3 because of inventory replenishment, wasn't GDP artificallly low in Q2 because of inventory reduction? Isn't this a wash at worst?

"Note that both exports and imports have declined recently, but imports declined more, suggesting a weak U.S. economy relative to our trading partners."

Perhaps. Remember to include at least two things in the analysis: the price of oil and exchange rate changes, both of which have had dramatic swings in the last year.

Buffett Finally Admits the Dollar Is Doomed

Fri, 21 Aug 2009 10:33:24 -0400

The author wrote:

"The US debt is currently financed by foreigners."

No. At the end of June, foreign holders accounted for $3.38 trillion or 29.3% of the U.S. national debt (www.treas.gov/tic/mfh.txt, www.treasurydirect.gov...).

"...consumers refinanced their homes every year..."

When rhetoric is hyperbolic, it loses all meaning.

"Retail spending has dropped off a cliff."

You're 8 months late to this party - retail sales fell off a cliff in 08Q4, falling 9% in three months (the previous benchmark in the series, which starts in 1992, was a 4.25% decline following 9/11/2001). Since then, retail sales have been flat - the seasonally adjusted numbers show an increase of 1.7% between December and July [FRED series RSXFS].

"Buffett... has slowly been converting his hoard of of billions of dollars in to foreign currencies like the Brazilian real."

Now I believe you're talking out of your @$$. Please substantiate this claim.

"At least I’m sure I did the right now when I started buying gold at $495/ounce!"

How very nice for you, and how irrelevant now that gold is $950/ounce.

The Ups and Downs of Deflation

Fri, 21 Aug 2009 09:38:17 -0400

On Aug 20 11:49 PM Michael Clark wrote:

> Actually, the Black Hole will eat the world -- and then it will spit
> out a new version of the world. That's what happened after World
> War II. World War II was the Black Hole. And the Black Hole spit
> out a new world.
>
> Throwing money into the Black Hole just gets us more in debt.

Then you should change your analogy; black holes spit nothing out.

The Ups and Downs of Deflation

Thu, 20 Aug 2009 15:51:04 -0400

On Aug 20 02:13 PM Michael Clark wrote:

> The Hindus believe that God inflates the world during the Day of
> Brahma and deflates the world during the Night of Brahma. If you
> throw money at the Black Hole when the world is deflating, the Black
> Hole just eats the money.

If throwing money keeps the black hole from eating the world, THROW FASTER.

Stocks Are Doomed, Only Cash or Precious Metals May Survive

Thu, 20 Aug 2009 14:27:53 -0400

Update, six months later:
Gold +2.4%
S&P 500 +21.4%

No Great Depression Redux

Thu, 20 Aug 2009 13:15:17 -0400

On Aug 20 08:46 AM John Galt wrote:

> Abolish the fed and we won't have such wild economic swings.

Empirically speaking, the pre-Fed era was MUCH more volatile than the Fed era.

>Your dollar also won't lose 95% of it's value in less than a 100
> year span. It's insanity.

Why is this important?

> Ben Bernake and his cronies burned down your house...

Wait, a bunch of college professors burned down the house?

Why Higher Deficits Don't Mean Higher Income Tax Rates

Thu, 20 Aug 2009 12:19:13 -0400

On Aug 20 09:23 AM The Geoffster wrote:

> I think JFK proved that lower tax rates and higher tax revenues were
> not mutually exclusive. Too bad his democrat brethren haven't followed
> suit but they're too busy waging class war and playing Robin Hood.

Lowering a rate from 90% to 70% is a far cry from cutting one from 39% to 35%. The potential effects aren't even comparable.

Why Higher Deficits Don't Mean Higher Income Tax Rates

Thu, 20 Aug 2009 12:14:21 -0400

The top marginal tax rate, by itself, offers very little to the discussion; for the same reason that the U.S. corporate tax rate is fairly meaningless: the exemptions and deductions and other nuggets in the tax code have to be included in any analysis. So, while the U.S. corporate tax rate is higher than almost any other developed country, the effective tax rate - the rate actually paid - is much less.

In this case, the overall average tax rate would be far more meaningful.

The Ups and Downs of Deflation

Thu, 20 Aug 2009 12:08:31 -0400

"But today the debate is over. In spite of the inflationary forces unleashed to fight it, deflation has cleary won."

Nonsense. Your graph shows something related to year-over-year CPI changes, right? Well, take a closer look at the latest CPI numbers, which shows CPI-U down 2.1% from last year. But look at the components. Every line item except housing and transportation shows an increase:

Food: +1.1%
Housing: -0.7%
Apparel: +1.1%
Transportation: -14.1% (heavy energy inputs)
Medical care: +3.2%
Recreation: +1.2%
Education: +2.8%
Other: +7.5%

Here's the bottom line:
ALL ITEMS LESS FOOD AND ENERGY: +1.5%

Oil was roughly 100% higher a year ago than it is today. Is it any wonder that the overall price level is slightly lower? This is NOT indicative of deflation - it's indicative of the petroleum/commodities bubble we saw last year.

"Since the real estate top in 2005, deflation has festered its way into almost all asset classes, ravaging the portfolios of millions."

The Case-Shiller housing peak was in mid-2006, not 2005, and since then, CPI-U has INCREASED by 5.8%. I understand your confusion but asset depreciation, even widespread, is not deflation.

End of Recession Is Premature; GDP Will Slide Further

Thu, 20 Aug 2009 11:36:18 -0400

"Between 2007 and 2008 – GDP rose 2.6% and that should not have been declared a recession."

According to current data, real GDP declined during 08Q1, grew during 08Q2, and has declined for four straight subsequent quarters. Considering the impact of the Economic Stimulus Act of 2008 in 08Q2, it's entirely reasonable to consider the recession to have started no later than 08Q1. NBER's current determination of a peak in December 2007 fits the data, and it looks pretty clear that this recession will be longer in duration than any since 1933.

"Look for more declines right through 2011."

You're saying this recession will last another 30 months, making it the longest since the 1870s. What sort of odds would you like to make a wager along those lines?

"Another sham of the mortgage meltdown was not requiring homeowners to escrow property taxes. Now this issue is... draining budgets of state and local governments."

1. Homeowners not having escrow accounts is irrelevant to their ability to afford their homes.

2. This doesn't have much impact on state and local government budgets; they quite easily attach liens to properties on which taxes are owed. Eventually, these taxes (and penalties and interest) will be paid.

"Current lending standards requires 20% down with property taxes, homeowner insurance, community fees and homeowner association fees managed by the servicing bank and paid as a part of the homeowners monthly mortgage payment."

Lenders will often allow homeowners to manage their own payments for taxes; they will charge a fee during closing to offset the lost interest they would have collected by holding the money for the homeowner.

"My big concern is the lack of jobs. The stated unemployment rate is about a point higher than the reported 9.4%."

Stated by whom?

"Hiring will lag even if the firing ends, and if people don't have jobs, they can't buy stuff or pay their mortgage."

And yet, peak unemployment has regularly lagged the GDP trough in previous recessions. Why should we expect this one to be different?

"Community and regional banks face huge fees for FDIC Deposit Insurance Fund."

Considering the historically high spreads on which banks are earning money, I'm not very concerned about this. What's the average interest rate paid by banks on all insured deposits?

"When the FDIC responded to my question about the Deposit Insurance Fund they neglected to mention that they assessed the banking system $5.6 billion in May."

Based on what you have written, you didn't ask them anything specific about premiums collected. How could they neglect to mention something about which you didn't ask?