Tag: "banks"

Local Seminar Series – Weeks 1-4

Doug Tjaden | August 22, 2010 | 1 Comment

I gave a 4 week seminar for our local community and surrounding area.  Here is the audio for all four weeks as well as the PowerPoint presentations. Click on the title in red above to be taken to the page where you can download the audio and .pps files.

PowerPoint link Week 1

PowerPoint link Week 2

PowerPoint link Week 3

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Intersting article by Gary North

Doug Tjaden | April 21, 2010 | 0 Comments

Gary North makes some interesting observations regarding our current political climate.

“By the time of the election in November 2008, the two stimulus packages were history and the Federal Reserve had more than doubled the monetary base. For the first time since 1914, the Federal Reserve System was under widespread attack by a significant minority of the public.

Then came Obama’s stimulus package. We can date the rise of the Tea Party movement from that event. It has continued to grow. Recent polls indicate that at least 25% of the voters identify with the Tea Party movement or express sympathy with it.”

I am not sure where he gets his 25% number, but those I have seen quoted are in the 30% to 40% range.  Either way, his point which follows is significant from a historical perspective.  Furthermore, I have seen estimates that up to 60% to 70% of Independent voters sympathize with the Tea Party.  Those are the important ones.

“The speed of this development is unprecedented in modern American history. No swing voting bloc this large has ever appeared in a one-year period. This is a Congressional election year. The bloc did not exist in November 2008.

This is the wildest political wild card in modern American history. There is no organizational chain of command. Ron Paul represents its main ideas, but he does not give it marching orders. No one does.”

His last comment is the Tea Party’s strength and weakness.  My feel is that it will be a greater strength.  If nobody is able to give the party its marching orders, that makes it much more difficult to be hijacked by the Republican establishment and run down the neo-con road.

“Incumbent politicians who are up for election this fall now see what is coming. Their electoral plans have to factor in the Tea Party voters. Even Congressmen in safe districts have to think about what will be the shape of the new Congress in January 2011.

Nancy Pelosi should be making mental plans to turn over her gavel as Speaker of the House.”

Wishful thinking maybe.  It will take an act of God to move the House to Republican hands.  Strong gains yes, but there are 7 months between now and the election.  Watch what tricks the current administration pull out of their hats.  Amnesty for illegal immigrants, and a battle with the evil bankers are just a warm up.

“When Ron Paul got 41% of the vote in the Rasmussen poll a week ago, with Obama at 42%, that sent a message to Congress. No sitting House member has ever matched a sitting President in a public opinion poll. That the member has been the lone wolf in the House on spending bills for three decades indicates a monumental shift of opinion in the public’s sentiments.”

This is quite telling.  Staying power is what counts.  Right now momentum is on RP’s side.  If it peaks too soon, that is a problem and has been a mis-calculation of politicians since politicians have been around.  It’s tempting to soak up the praise when it comes your way.  The MSM would love to have RP flame out.

“Pelosi’s ramrodding operation of Obamacare was the last straw. She was adamant: the voters be damned. This was the same attitude that Congress displayed in October 2008, when it passed the Paulson-Bush bailout bill. Incumbent Republicans were swept out of office in the House in November 2008. The public got its revenge.”

The sweep by Dems in 08′ was about much more than one bill.  The independents (and some moderate republicans) bought the messiah’s message of hope and change.

“This November, the public is likely to get its revenge again. The dark cloud, no larger than a man’s hand – Ron Paul’s hand – a year ago has become a thundercloud. It is heading for Washington, D.C.”

Let’s pray he is right.  What continues to disturb me is that there is little mention about restoration of this nation to its Judeo/Christian roots.  God’s role in this restoration process is largely absent from the patriot commentary.  It is there, but often as an afterthought.  Get this saying in mind:

Patriots without God will be slaughtered.  Patriots with God will not be stopped.

It’s that simple.

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Banks in Big Trouble

Doug Tjaden | December 12, 2009 | 0 Comments

I am reprinting this nearly in its entirety because of the serious implications.  You must understand what this means.  It means even those banks that are solvent are in much worse shape than is being told the public.   It means that if the banks were to mark their loans to fair value that possibly 1000′s of banks would fall into traditional ratios of trouble that would cause the FDIC to come in and take them over. It means there is a denial of the problem at the highest levels and they are hoping beyond all hope to buy time enough to let these assets recover enough to keep the zombie banks solvent.  Finally, this has been happening now for several months – that is the FDIC waits this long to take a bank over.

Remember, the FDIC is a zombie institution itself – insolvent and dependent on bookkeeping tricks and under the table money to keep it solvent. Got gold and silver?

Jim Sinclair’s Commentary

Here is some continued evidence of the worrisome trends in this week’s bank closings. Courtesy of CIGA Richard B.

Dear Jim,

Yesterday’s bank closings (three total) evidence a continuation of the worrisome trends we have been seeing over the past several months. These are:

(1) It is costing the FDIC a great deal more than it has historically to protect depositors in the failed banks.

(2) In other words, these banks are in much worse shape financially than they have been historically by the time the FDIC gets around to closing them.

(3) The fair market value of the assets held by these banks is turning out to be dramatically lower than the value at which they are being carried on the banks’ balance sheets. This most likely reflects unrealistic valuations assigned by bank management in the wake of the Financial Accounting Standards Board (“FASB”) having suspended fair value accounting rules this year.

(4) The acquiring banks have so little confidence in the value of the assets they are purchasing that they are requiring the FDIC to enter into loss sharing agreements with respect to the vast majority of these assets. Another explanation for this may be that the FDIC prefers to share downside risk rather than accept the amounts the acquiring banks are willing to pay for these assets absent the loss sharing.

The largest of the banks closed this week, Solutions Bank of Overland Park, Kansas, is another example of a bank that on paper appeared to be very well capitalized. It claimed to have assets of $511.1 million against deposits of $421.3 million. Yet the FDIC’s estimate of the cost to close it is $122.1 million, about 29% of deposits. This implies the FDIC and the acquiring bank concluded the fair market value of Solution Bank’s assets was about $299.2 million, only 58.5% of the value claimed.

The acquiring bank purchased essentially all of the assets of Solutions Bank, but the FDIC had to enter into a loss sharing agreement with respect to $411.3 million of these assets. This implies the acquiring bank was only confident in the value of about $99.8 million – approximately 19.5%.

An emerging concern is that the magnitude of the loss sharing agreements the FDIC is entering into is substantially increasing the risk that its cost of closing these banks will be far more than originally projected. For example, there was an article posted on JSMineset yesterday reporting that the closing of Colonial Bankgroup, Inc., was likely going to cost the FDIC $5.8 billion – more than twice its original estimate of $2.8 billion. The FDIC is not specifying the precise terms of the loss sharing agreements it is entering into with acquiring banks. Depending on the terms, the FDIC’s downside risk may be significantly more than 50%.

The second largest of the banks closed this week, Republic Federal Bank of Miami, Florida, on paper had assets of $433 million against deposits of $352.7 million. Yet the estimated cost to the FDIC in this case is $122.6 million – about 34.8% of deposits. Percentage-wise, this is one of the costliest closings so far.

This implies that the FDIC and the acquiring bank valued Republic Federal’s assets at about $230.1 million – only about 53% of the value claimed. In this case the acquiring bank was only willing to purchase $267.1 million of Republic Federal’s claimed assets of $433 million, and it required that the FDIC enter into a loss-sharing agreement with respect to $210.4 million. This indicates the acquiring bank had confidence in the value of only $56.7 million of Republic Federal’s purported assets – about 13.1%.

The third bank, Valley Capital Bank, N.A. of Mesa, Arizona, was relatively small, and its closing illustrates a phenomenon seen several times recently. It is the only one of the three that appeared insolvent on paper. It had stated assets of $40.3 million against deposits of $41.3 million. Yet the FDIC’s estimated cost of closing it was only $7.4 million – about 17.9% of deposits. This is the least costly percentage-wise of the three.

This provides additional evidence that banks that appear on paper to be the healthiest may in fact be in far worse shape than banks that appear weaker. Once again, the problem appears to stem from the FASB’s suspension of fair value accounting requirements this year with respect to banks’ least liquid assets.

This gives bank management far too much leeway to value assets at levels far beyond what they could fetch in the open market, resulting in banks’ balance sheets becoming increasingly less reliable indicators of their true financial health.

Respectfully yours,
CIGA Richard B.

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