PPY

How WaMu Failed

Wamu was solvent and had plenty of cash for liquidity; it didn't fail

"Why did regulators abruptly close Washington Mutual when it had the cash to operate?"
seattle.bizjournals.co...

*imho*

One Question for Sheila Bair

The bottom line is, FDIC't top priority is deposit protection. Ms. Bair should have asked for TARP money to build up its DIF ratio and reserve balance, instead of requesting an additional $500 billion from Congress. She should never have involved her agency in TLGP or PPIP.

Wachovia suffered an earlier demise expedited by FDIC's decision to wipe out Wamu bondholders, yet Ms. Bair insisted that a huge bank like WB had to be sold that weekend while refusing to grant more time for due diligence to a very interested WFC.

Was FDIC even the federal regulator for Wamu, Wachovia, Citi, or Well Fargo?

No.

*imho*

One Question for Sheila Bair

No, this was the original Wachovia-Citi deal set up by the FDIC and she chose to save WB bondholders by sharing losses instead of wiping them out like she did with Wamu ones:

"Citigroup Inc. will acquire the bulk of Wachovia’s assets and liabilities, including five depository institutions and assume senior and subordinated debt of Wachovia Corp... The FDIC has entered into a loss sharing arrangement on a pre-identified pool of loans. Under the agreement, Citigroup Inc. will absorb up to $42 billion of losses on a $312 billion pool of loans. The FDIC will absorb losses beyond that. "
blogs.wsj.com/economic.../

I won't even get into how she determined Citi was strong enough to "rescue" Wachovia...

*imho*
On Nov 15 05:53 PM countrybanker wrote:

> PPY. Yes, huge inconsistency in the banking sector last eighteen
> months. The reason their is inconsistency is because decisions were
> made ad hoc.Everyone in America understands debtor-creditor law and
> bankruptcy. Investors in unsecured debt on banks knew they get nothing
> in a failure. Policy makers then and now understand right and wrong.
> They all understand Americas capitalism, winners and losers and free
> enterprise. The inconsistency comes when they strayed from what they
> knew was correct, fair and the American system of the rule of law.
>
>
> WaMu was broke and the unsecured debtholders will win nothing in
> a lawsuit. Bair will prevail.
>
> Bair did not use FDIC funds to pay Wachovia unsecured debtholders.
> WFC is paying them, not FDIC. Bair was consistent.
> Still, the Treasury tax ruling was a gift from the taxpayer, so net,net
> the transaction was not correct,right or fair.

One Question for Sheila Bair

Then why did she decide to save Wachovia bondholders?

Where was the consistency?

Even more ridiculous, FDIC is now backing over $300 billion of bank bonds.

If Citi were to tank today, does Bair plan to wipe out TLGP bondholders and then pay them with FDIC money?

*imho*


On Nov 13 04:09 PM bindlepete wrote:

> I'm with Shelia. First wipe out the equity and then the unsecured
> debt. Regular rules. We'd be well through this mess if we collapsed
> the insolvent banks/institutions and fired the management and let
> the straight investors recapitalized them. The game layed as it was
> is far from over and we wouldn't have to continue to subsidze the
> failures and pay outrageous bonuses with 'Ol Aunt Mini's savings.
>
>
> We still have a very long way to go with the commercial loans/real
> estate and further failures in the adjustable rate home mortgages.
> I would most of all like to get rid of the give away of banks borrowing
> at .25% and then buying Treasury Instruments at multiples of this
> with the new capital we " Gave" them. Straight fraud.

One Question for Sheila Bair

Do you consider GMAC a crap?

If you do, then bondholders who just lent another $2.9 billion to this "crap" last week via TLGP will "not get nothing,"

FDIC will pay them because it is backing those bonds.


> Sheila bair did right. There is not suppose to be free lunches. If
> you lend to a crap company be prepared for getting nothing. The simple
> fact that people figure you can lend to any bankrupt financial organization
> and be made whole on the public's dime must stop. Congrats to her.
> Geithner is a toe kissing Treasurer who is too linked to the Federal
> Reserve to call himself independent.

JPMorgan and the Alabama Swaps

In other words, via billions of government assistance, we have been funding JPM to destroy ourselves?

JPM got $29 billion from BSC/Maiden Lane, $25 billion from TARP, $40 billion from TLGP and who knew what else AFTER making billions at the expense of county hospitals, schools, etc?

Unbelievable!

By the way Karl, I want to thank you for all your honest and super informative articles. You are an amazing writer/economist!

*imho*

CIT Group: Taxpayers' Investment Is Virtually Worthless

Government policy has been inconsistent throughout this whole mess.

It handed out TARP money but then what?

Why didn't they step in here and rearrange the pay order like it did with GM to save our TARP money?

Oh yeah, that was technically illegal but rules could be bent for GM bankruptcy but not CIT's.

People need to stop blaming the creditors, the bondholders, the investors, and uninsured depositors.

With respect to bondholders whom we later found out that included teachers and police officers, our government made them look greedy and unsympathetic when they were merely protecting their investments.

"Surviving on government loans as it burns through billions a month..."
online.wsj.com/article...

Yes we were giving them "BILLIONS A MONTH" but these words were in fine prints.

"One of the saddest stories emerging from the GM bankruptcy drama is the plight of “Main Street” bondholders. Most of the investors holding $27 billion in GM debt are big banks and institutional firms, but apparently Mom and Pop-type investors hold about $7 billion in GM bonds.

Unlike the big firms, they’re generally not secured: They can’t demand collateral if GM defaults, and for the most part they didn’t buy financial insurance to hedge against the risk of losses. So in bankruptcy, they go to the back of the line, where they’ll be lucky to recover even a small portion of their investment."
www.usnews.com/money/b...

Are you kidding me that Paulson, as the former ceo of GS, did not know how to make deals in the best interests of the government investments and made us senior bondholders in many of his emergency rescues?

When OTS allowed IndyMac to backdate capital infusion, why should uninsured depositors take the hit?
latimesblogs.latimes.c...

Why did FDIC decide to help GMAC sell another $2.9 billion of bonds just last week via TLGP but not CIT at all?

" All the FDIC had to do was guarantee CIT’s debt, as it had done for many other lenders, and that TARP money would have been safe. And get this – CIT put in for guarantees back in January, but Bair sat on the application and provided no reason why."
www.cnbc.com/id/32011061

" CIT’s small-business book is largely asset-backed – very different paper than run through the stress test on the biggest banks’ corporate books. Asset-backed paper is secured through a firm’s receivables, making it essentially collateralized lending to handle borrower cash flow... There is no policy rationale to the CIT decision. GMAC got TLGP even though it was in extremis, but CIT apparently still can’t persuade the FDIC to give it up. Is this because we like lenders for autos better than small business?"
www.fedfin.com/index.p...

TLGP was launched to improve lending and Bair used it to help GS raise $20 billion. How much loan servicing to small and mid-size businesses did GS do compared to CIT?

*imho*

Is This the End of 'Too Big to Fail'?

This was just so wrong.

Our Founding Fathers believed in the checks and balances of power and thus they created three branches of government.

Throughout this financial crisis, the executive branch has been the one dictating which institutions must be saved and which ones sacrificed.

What was the point of bankruptcy laws and court when the Treasury and the FDIC could rearrange pay order?

Did Wamu and Wachovia really fail?

Did we really need to save AIG to prevent system wide collapse or was it bailed out simply for Goldman's bonus?

By the way, please be careful criticizing FDIC-

"'Inspired by your post, I looked into the agreements posted on the FDIC site and blogged about it as well. The FDIC became obsessed with my site/post (visiting my blog post over 20 times in just over 2 days). I took it down, but not sure that I should have.'
activerain.com/blogsvi...

'Once I told them who I was and my intentions to expose their role in this huge cover-up, the FDIC (as I later found out) made a call to federal agents to pay me a visit. And that they did. Soon after, I found myself in an interrogation room. Let me be clear, the FDIC ombudsman is lying crooked SOB and is guilty of providing baseless/false information to federal agents. This man should be locked up in jail.

It appears as if the FDIC misused its federal authority to put some heat on me by informing the FDA terrorist division that I was a person of interest to question regarding the white powder mailings sent to JP Morgan and the Federal Reserve. Yes that’s right, I said the FDIC misused its federal authority. You see, despite the claims made by Shelia Bair and others, the FDIC is not really an independent insurer. They are really a branch of the U.S. Treasury, which might explain why Shelia Bair used to work at the Department of Treasury'"
marketoracle.co.uk/Art...

*imho*

Bottomless Pit Watch: GMAC

Be careful criticizing FDIC if the following were true-

"'Inspired by your post, I looked into the agreements posted on the FDIC site and blogged about it as well. The FDIC became obsessed with my site/post (visiting my blog post over 20 times in just over 2 days). I took it down, but not sure that I should have.'
activerain.com/blogsvi...

'Once I told them who I was and my intentions to expose their role in this huge cover-up, the FDIC (as I later found out) made a call to federal agents to pay me a visit. And that they did. Soon after, I found myself in an interrogation room. Let me be clear, the FDIC ombudsman is lying crooked SOB and is guilty of providing baseless/false information to federal agents. This man should be locked up in jail.

It appears as if the FDIC misused its federal authority to put some heat on me by informing the FDA terrorist division that I was a person of interest to question regarding the white powder mailings sent to JP Morgan and the Federal Reserve. Yes that’s right, I said the FDIC misused its federal authority. You see, despite the claims made by Shelia Bair and others, the FDIC is not really an independent insurer. They are really a branch of the U.S. Treasury, which might explain why Shelia Bair used to work at the Department of Treasury'"
marketoracle.co.uk/Art...

*imho*

Bank Failure Friday Shutters Seven More

FDIC was the federal regulator for four of those banks that failed this past weekend (class NM).

As to the loss sharing agreements, many of them ended up hurting short sales and loan modification effort, while benefiting primarily the new owners of the bank and at the expense of the insurance fund and taxpayers:

"So, you ask...Why does this program hurt short sales? Because, our brilliant government offers this SAME PROGRAM FOR FORECLOSURES! The only difference is, the government picks up 80% of the tab on all of the extra costs associated with a foreclosure (BPO's, upkeep, utilities/maintenance, legal fees, etc.)

So, If I'm OneWest, why would I want to waste my time negotiating through a Short Sale, when I can make the same amount of money (if not more) by just letting it go to foreclosure? And we wonder why nobody can get a Loan Modification? Why would OneWest approve a loan modification for this guy, when they can foreclose and make over $100k? And, to add injury to insult, they have held this loan for 6 months! Not a bad ROI, huh?

What infuriates me the most is that in my particular case mentioned above, they have the guts to hold my client hostage for a $75k promissory note, after they are already making more than $100k on the sale!!! This is his primary residence, 1st Position loan, and OneWest has NO RECOURSE! Imagine if they could make $100k, then get a deficiency judgement! Talk about making some big bucks!

Can you say "GREED"?

The scary thing is that over 50 banks have Shared Loss Agreements in place with the FDIC. Some of them include: Bank of America (go figure), CitiMortgage, Wells Fargo, etc. "

activerain.com/blogsvi...-

*imho*

Will the FDIC Be Able to Withstand 400 Bank Closures?

Take a look at these ridiculous loss sharing agreements signed by the FDIC that ended up hurting loan modification and short sale efforts while benefiting the new owners of the banks:

"So, you ask...Why does this program hurt short sales? Because, our brilliant government offers this SAME PROGRAM FOR FORECLOSURES! The only difference is, the government picks up 80% of the tab on all of the extra costs associated with a foreclosure (BPO's, upkeep, utilities/maintenance, legal fees, etc.)

So, If I'm OneWest, why would I want to waste my time negotiating through a Short Sale, when I can make the same amount of money (if not more) by just letting it go to foreclosure? And we wonder why nobody can get a Loan Modification? Why would OneWest approve a loan modification for this guy, when they can foreclose and make over $100k? And, to add injury to insult, they have held this loan for 6 months! Not a bad ROI, huh?

What infuriates me the most is that in my particular case mentioned above, they have the guts to hold my client hostage for a $75k promissory note, after they are already making more than $100k on the sale!!! This is his primary residence, 1st Position loan, and OneWest has NO RECOURSE! Imagine if they could make $100k, then get a deficiency judgement! Talk about making some big bucks!

Can you say "GREED"?

The scary thing is that over 50 banks have Shared Loss Agreements in place with the FDIC. Some of them include: Bank of America (go figure), CitiMortgage, Wells Fargo, etc."

activerain.com/blogsvi...-

*imho*

Time for FDIC to Back Off Citi

Here's a real kicker:

Did you know that FDIC signed loss sharing agreements in bank sales that ended up expediting foreclosure?

Yep, the champion of keeping people in their homes were actually helping kick people out of their homes?

"So, you ask...Why does this program hurt short sales? Because, our brilliant government offers this SAME PROGRAM FOR FORECLOSURES! The only difference is, the government picks up 80% of the tab on all of the extra costs associated with a foreclosure (BPO's, upkeep, utilities/maintenance, legal fees, etc.)

So, If I'm OneWest, why would I want to waste my time negotiating through a Short Sale, when I can make the same amount of money (if not more) by just letting it go to foreclosure? And we wonder why nobody can get a Loan Modification? Why would OneWest approve a loan modification for this guy, when they can foreclose and make over $100k? And, to add injury to insult, they have held this loan for 6 months! Not a bad ROI, huh?

What infuriates me the most is that in my particular case mentioned above, they have the guts to hold my client hostage for a $75k promissory note, after they are already making more than $100k on the sale!!! This is his primary residence, 1st Position loan, and OneWest has NO RECOURSE! Imagine if they could make $100k, then get a deficiency judgement! Talk about making some big bucks!

Can you say "GREED"?

The scary thing is that over 50 banks have Shared Loss Agreements in place with the FDIC. Some of them include: Bank of America (go figure), CitiMortgage, Wells Fargo, etc.

This entire agreement between the FDIC and OneWest can be found here, on the FDIC website. It's all there, for the world to see! They have it all layed out. All of the formulas, worksheets, etc. "
activerain.com/blogsvi...-

*imho*

On Oct 09 03:07 PM tommiegun wrote:

> Sheila Bair has allowed bank leverage ratios to go through the roof
> during her 3 years at the FDIC. She did nothing to abate excessive
> risk levels; she was given a job by president Bush that she has not
> been able to do. ""She is totally incompetent"".
>
> Its time for sheila Bair to resign and go to work as a low level
> analyst and learn from somebody else how to regulate banks to preserve
> shareholder and gov't interest. She is one person that could have
> curbed the high levels of bank leverage by establish capital ratios
> to insure that banks would be able to absorb losses and restrict
> lending.
>
> She now stands like a deer caught in the headlights trying to fiquire
> out how to raise capital for the bankrupt FDIC.

Why Banking Is Insolvent

Please help explain this:

Next up, the stupid and unreasonable loss sharing agreement at OneWest, where FDIC gifted these new IndyMac owners with profits at the expense of taxpayers and Bair's own loan modification effort?
trulia.com/blog/bob_he...

Thanks
On Sep 29 08:01 PM Karl Denninger wrote:

> You folks who are smoking things need to put down the pipe.
>
> The number on "no mortgage" homes is 30%, not 50%. The single family
> housing units I got from multiple published sources (and used an
> average.)
>
> All of the other assumptions are stacked to FAVOR a low-ball figure.
> Homes in California are much more expensive than in Arkansas, for
> example, and that's where the foreclosure percentages are higher.
>
>
> The point of this article is that the claim that "only 5%" of loans
> will ultimately foreclose (based on 120+ delinq) is a FARCE. That's
> not my claim - it's the claim made on Bloomberg this morning by a
> group that has done the math and which is now backed up with a written
> opinion by them in the published media.
>
> Karl L, I have no duty to respond to you. I will deal with your
> unwarranted harassment in the filing of "disputes" with SA - you
> can count on it.

Why Banking Is Insolvent

Hi Karl

Please write a post and help explain this:

Next up, the stupid and unreasonable loss sharing agreement at OneWest, where FDIC gifted these new IndyMac owners with profits at the expense of taxpayers and Bair's own loan modification effort?
trulia.com/blog/bob_he...

Thanks

PPIP: Just Baffling

I forgot to mention earlier this year she even tried to drag pension funds (who already lost billions of dollars in investments) into PPIP by telling them these assets would end up being profitable for taxpayers.

How ethical was that when FDIC was getting pennies on the dollar for its auctions?

*imho*


On Sep 26 07:27 AM PPY wrote:

> No, the author is right. Whatever FDIC was doing with PPIP was baffling.
>
>
> Nothing Sheila Bair did was consistent. If her goal was to limit
> the downsides, then why were there still so many zombie banks out
> there? Why did the agency not seize these banks when there were
> still some sort of values attached to their toxic assets?
>
> If FDIC did not even have enough money to even pay depositors, it
> should not be involved in TLGP or PPIP.
>
> If, for instance, Citigroup were to tank and taken into receivership,
> would FDIC wipe out bondholders like it did with Wamu? That would
> make FDIC responsible to pay these bondholders but with what money?
>
>
> Just like if economy continues to spiral downward, with what money
> is Bair going to pay these private investors?
>
> Sheila Bair should be protecting deposits. She didn't even spend
> a penny on Wamu or Wachovia and now we are getting less than $0.5
> for every $100 we save?
>
> *imho*