Monday, July 14, 2008

Black Monday? Or the Monday Bump? UPDATED

With second biggest bank failure in U.S. history Friday (IndyMac) and huge troubles with Freddie Mac and Fannie Mae surfacing over the weekend, today's financial markets should be interesting. Will the markets rise based on calming assurance of the Fed's Freddie and Fannie bailout plan? Or will the Wall Street Journal's prediction: Investors Jumping Ship and Running for the Exits come true? Time will tell.

According to Bank Implode here are the 8 banks that have failed so far:

Metropolitan Savings Bank, Pittsburgh, PA, total assets $15.8 million.
Netbank, Alpharetta, GA, total assets $2.5 billion.
Miami Valley Bank, Lakeview, OH, total assets $86.7 million.
Douglass National Bank, Kansas City, MO, total assets $58.5 million.
Hume Bank, Hume, MO, total assets $18.7 million.
ANB Financial, Bentonville, AR, total assets $2.1 billion.
First Integrity Bank, NA, Staples, MN, total assets $54.7 million.
IndyMac Bank, F.S.B., Pasadena, CA, $32.01 billion.

The site also lists failed credit unions and lending institutions.

The FDIC has 50 billion dollars set aside for failed banks. The IndyMac failure alone just wiped out ten percent of the total FDIC insurance fund.

Lehman Brothers, Fannie Mae, and Freddie Mac are on ice so thin a straw would break it. Freddie and Fannie own or guarantee $5.2 trillion of U.S. home mortgages. That’s about half the outstanding mortgages in the United States. And in an AP story today,

"AP: US Government Says Other Financial Companies Will be On Their Own"

"The U.S. government is signaling it won't throw a lifeline to struggling financial companies — except for mortgage linchpins Fannie Mae and Freddie Mac — marking a shift to a new and potentially more volatile phase of the credit crisis."

You know that financial times are bad when the talking pundits on weekend cable shows plead for Americans not to run on the banks Monday morning.

Is your bank safe? Now you can find out. Here is a site that rates banks and credit unions.

"'s Safe & Sound® service is a proprietary system designed to provide information on the relative financial strength and stability of U.S. commercial banks, savings institutions and credit unions. The system employs a series of twenty-two tests to measure the capital adequacy, asset quality, profitability, and liquidity (CAEL) of each rated financial institution. Individual performance levels are determined from publicly available regulatory filings and are compared to asset-size peer norms, industry standards and key absolute benchmarks. Combined results form the basis for our Composite CAEL and Star Ratings, which are described below. When possible, the system also produces a report that provides a detailed explanation of our findings, for each rated financial institution."

I am assuming that the ratings have been done in the recent past and may not reflect immediate conditions, but if your bank rated a "2 stars" in the recent past it is a sure bet that today's financial situation is not helping it climb up to a 5 star rating.

Add here is a site that lists imploded and about to implode banks. Find out if your bank is one of them.

In my opinion there are no longer any safe paper financial investments. Invest in commodities, not paper but hard goods, and you can't go wrong. Buy hard good you will use anyway. With food in short supply and about to get shorter, fuel costs rising, droughts increasing, and your right to drill a well on your own land under attack, I'd say invest in food, shelter, and water.

Nice to know I am not totally off base here:
'Unmitigated Disaster'

July 14 (Bloomberg) -- The U.S. Treasury Department's plan to shore up Fannie Mae and Freddie Mac is an ``unmitigated disaster'' and the largest U.S. mortgage lenders are ``basically insolvent,'' according to investor Jim Rogers.
Taxpayers will be saddled with debt if Congress approves U.S. Treasury Secretary Henry Paulson's request for the authority to buy unlimited stakes in and lend to Fannie Mae and Freddie Mac, Rogers said in a Bloomberg Television interview. The chairman of Rogers Holdings, who in 2006 correctly predicted oil would reach $100 a barrel and gold $1,000 an ounce, also said the commodities bull market has a ``long way to go.'' [snip]

Education section:
FYI: pundit and TPTB-speak:

TPTB = The Powers That Be
Food Insecurity = Hunger
Writedown = Loss

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