How Big Will the Banking Industry Be Hit?

Not really at all
16% (288 votes)
Somewhat, but just smaller banks
17% (311 votes)
Some medium-sized banks
19% (345 votes)
A lot
42% (756 votes)
No opinion
6% (104 votes)
Total votes: 1804
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The good news

July 14, 2008 - 18:54 ET by j. frank wilson

is that we have nothing to worry about except worry itself.

The economic recession is all in our heads.  Everything is really going just peachy - I know because Sean Hannity told me so and he's always right.

Far right.

Jobs solid.  Home prices solid.  Stock market soaring.  Robust economy.  We all just need to have some faith in the economic wisdom of the Bush Administration.  We all just have to keep looking at the bright side and stop being so gosh darn negative...

wilson...

July 14, 2008 - 19:07 ET by Clear thinker

I see you are a fan of Gramm.

 

45 Communist Goals for America http://www.nationmakers.com/com_goals.htm

A financial mastermind

July 14, 2008 - 19:15 ET by j. frank wilson

of a very rare order, indeed.

The de-regulation of the financial markets he masterminded has produced quite remarkable results!

Recently I heard a radio ad from the Heritage Foundation touting President Reagan's financial de-regulation.  Remember the reorganization of the savings and loan industry caused by that?  It was the last time we saw results as pronounced as these...

Thats why I voted not at all

July 15, 2008 - 01:26 ET by Vonu

 

We need to talk up the economy because some poor sports are too selfish to see that not everyone is being evicted or crushed by rising fuel and food prices. Where do they find these losers, soup kitchens?!

Some folks are sayin' we need bigger stimulus checks next year to keep people positive on the economy. But I say shucks to that, just send everyone rose colored glasses instead. Things will be better before you can say :BANK RUN.

I had no choice but to

July 14, 2008 - 19:05 ET by Clear thinker

I had no choice but to choose "No opinion" because you left out an important piece of info from your poll question.

Hit by what exactly?

 

n45 Communist Goals for America http://www.nationmakers.com/com_goals.htm

It will be small

July 14, 2008 - 19:07 ET by Tjexcite

But, the MSM will make it seem like it is the biggest problem ever and millions will not even have a pot to use. All because they did not invest and just left the +100K in one account. Thus losing anything over the 100K but, still can't afford the pot.  And it is all Bush's fault.

It all depends on

July 14, 2008 - 19:11 ET by j. frank wilson

how they held their accounts.  A married couple, for example, can each have a $100K CD and then a third joint $100K CD - total of $300K in guaranteed deposits.

The MSM will point out

July 15, 2008 - 11:48 ET by Tjexcite

Thoes who will have all 300K in one un-guaranteed acount and cry when they lose 60% of it. Then go the story on the Katrina victims that still do not have a pot 3+ years out and blame Bush for both.

Once again the corporation

July 14, 2008 - 19:26 ET by goldbar

Once again the corporations will be calling on the citizens to  bail them out of the mess they got themselves into.

Why is it these corporate greed hounds always want to privatize the profits but socialize the losses?  What a bunch of hypocrites!

golddud, About 50% is government owned..

July 14, 2008 - 19:50 ET by upcountrywater

ever hear of Fannie Mae and Freddie Mac



America’s two largest mortgage finance companies own or guarantee USD
$5 trillion worth of mortgages - nearly half of all the country's
outstanding home loan debt - and they're crashing.

And you want MORE government control..geezz

Liberals62%


IranianUranium

@upcountrywater:

July 15, 2008 - 11:41 ET by j. frank wilson

The agencies are owned by their shareholders - not by the Federal government.

This could change.  Congress could grant permission for the Government to purchase shares.  But that hasn't happened yet.

The agencies are sponsored by the government (GSE's) but not owned by it.

Clearly Fannie and Freddie have been very poorly managed and poorly regulated.  But we can hardly look to the Bush Administration to increase oversight of much of anything, can we?  Personally I find it absurd that these entities can make political contributions. 

More trouble ahead for banks

July 14, 2008 - 19:41 ET by timothe

The problem in the banking industry right now is that there is no visability.  No one really knows how much bad paper these banks are holding.  And no one really knows the true value of many of these banks because a bank's assets are tied to the value of the homes they lend against.

I'm not an expert on housing by any means, but last year, I did some extensive research on the sub prime borrower Fremont General.  What I found hidden in their 10k was astounding.  Fremont was writing billions in loans to anybody and everybody and then selling the bad paper to just about any bank that came calling.  Large banks like CitiGroup and Bank of America topped the list of Fremont's buyers. 

At the time, I was too stupid to realize the consequences.  But it has turned out that most of the banks at the top of the list are the ones that have been writing off the huge losses. 

But there's yet another issue facing these banks.  Once the rumor mill starts about a bank being in trouble, the hedge fund managers start beating down the stock price heavily, which in turn causes more panic among the investors.  For these hedge funds, shorting financials is money in the bank.  (pardon the pun)

I think the bank problems are going to continue for some time.  And I'm afraid that the government is going to continue to provide these banks with a soft landing, which is going to elongate the problem. 

Welcome to the "new" America.

July 14, 2008 - 20:15 ET by R D Helm

Can'y pay your mortgage?  Call the government.

Can't run your business? Call the government. 

Loaned money to unqualified people? Call the government.

Can't make cars people want to buy? Call the government.

Have no marketable job skills? Call the government.

Have children you can't afford? Call the government.

Don't want to pay for your own health care? Call the government. 

Bought more car than you could afford? Call the government.

Don't like what other peole are doing? Call the government. 

Can't find your a$$ with both hands? Call the government. 

And what, exactly, is the federal government doing in the mortgage business, anyway?

Why is it I get the feeling that the founders of this nation have now reached several hundred RPMs in their graves?

Good grief.

The truth is insensitive. - Neal Boortz

Your a private corporation

July 15, 2008 - 11:05 ET by goldbar

Your a private corporation who overlent money. You call the government to have taxpayers bail you out.

I think the banks being hit

July 14, 2008 - 21:53 ET by Delsa

is directly related to government involvement.

The more this government gets involved the worse it will be.

As a small business person I'll never be able to get a loan again.

No more "no income verification"

Indybank's demise was as a

July 14, 2008 - 23:18 ET by jdhawk

Indybank's demise was as a direct result of the open letter that Senator (aka "Hey!  What's wrong with shouting fire in a crowded theater?") Shumer wrote to regulators.  This action on his part, caused a $1.3 billion dollar run on the bank by its customers wiping out the bank's ability to maintain the cash to asset ratio required by the Federal Reserve. 

Shumer (aka "dumb a**") ought to be forced out of the Senate for his actions.  

Not that I'm a fan of Schumer, but...

July 15, 2008 - 07:08 ET by sarcasmo

Did his letter release one new piece of information, or did it contain one false piece of information, about this poorly-managed bank?? If so, can some conservative who's blaming the idiot congresscritter for the idiot bank managers' actions please point it out for me? Thanks in advance for your help. Needless to say, I think Schumer's a horse's ass, so it's not often you find sarcasmo coming to his defense, but basic honesty demands that I ask these questions.
JMR

The tax & spend drug war looks racist in the real world.

well ,,,

July 15, 2008 - 00:38 ET by crosspatch

If Matt Drudge keeps throwing gasoline on the fire, it will get a lot worse. Screaming "fire" in a crowded theater is a sure way to create a disaster when one might otherwise be avoided.

I wish he would knock it off.

The problem in California

July 15, 2008 - 02:01 ET by crosspatch

California's problems are likely to be way different than other places. Homes were skyrocketing in price. Appreciation was in the double-digits. Nobody could afford conventional mortgages. To give an example, in my neighborhood, built in the early 1960's, three bedroom single story tract homes that originally sold for $35,000 are now available at around $1.2 million. That's right, a 40-year old housing development ranch style house for over a million bucks. And that is with no pool or air conditioning. People were getting absolutely stupid mortgages. In my neighborhood they were getting no money down, reverse amortization mortgages. The montly payments were not covering the total interest due, which was added to the mortgage principal but that was okay because they were appreciating faster than the unpaid interest was accumulating.

Then after two or three years of that, one had enough equity to get a more "normal" mortgage because they had some equity in the home. Then the Fed raised interest rates and people couldn't afford payments on a new mortgage or their payments adjusted out of their reach and they had to sell or default. This pushed the inventory up which reduced home resale values. This eliminated the appreciation. Now even more mortgages came due and there was no equity and because of the reverse amortization, people owed more than they started with. So again, more defaults or sales, either way yet more inventory on the market pushing prices down even farther. Some towns around here have seen housing prices cut in half in one year. If you bought a home for $600,000 and homes are now selling for $300,000 in your neighborhood, you are in rough shape.

Now we are seeing a third wave. These were people who, say, bought the place for $400,000 and prices went up to $800,000 so they got a huge home equity loan, added a second story, bought an RV and a boat and maybe a new car. Now home prices have collapsed and they no longer have the equity to support the loan. Even more homes on the market along with people who now face the choice between paying the mortgage and paying for gas to get to work.

And in 2011 more mortgages are set to adjust than in 2006 and 2007 combined ... at the same time the baby boomers are retiring and expected to be selling those huge 4br homes to cash in that retirement nest egg they thought they had.

The upside is that our kids are going to have a lot more affordable housing than we had.

Good post!

July 15, 2008 - 15:58 ET by j. frank wilson

However, those were "negative" amortization mortgages (often with an option payment feature).  A "reverse" mortgage is a very different product.

There were some neg-am mortgages with prepayments that came due if the loan recast because principal had increased more than 110% - and that was almost guaranteed if the borrower made the "minimum" payments each month.

On many neg-am loans, the principal has increased, the interest rates reset up - AND the amortization period shortens when curtailments finally kick in.  The rare triple whammy - which few borrowers can survive...