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Are We In a “Banking” Depression?
An economic depression is held by some as meaning a decline in real
GDP exceeding 10% or a recession lasting 2 or more years, usually
brought on by a banking or financial crisis. I am far from an economist,
but I do believe that anything that comes close to mirroring the
experiences of the Great Depression can, and probably should constitute a
depression. Then again, as I have stated, I am far from an economist
and those words are not even remotely authoritarian. Alas, when I look
at the condition of our banking industry and superimpose those
observations against what the mainstream media, our regulators and
corporate officers tout, there is a significant and material disconnect.
Ever since the banking lobby has succeeded in putting the kabosh on the
mark to market rules, it appears any semblance of reality in bank
valuations have simply flown the coop, and yet to return.
I am still quite bearish on the banking industry, and here are two charts to explain why…
From Lehman Brothers Dies While Getting Away with Murder: Introducing Regulatory Capture:This interesting chart featured in Bloomberg is a picture worth a thousand words…
Now that we know what sparked that big rally last year, let’s take a
glimpse at the fundamentals that the stocks rallied on… and this one
pretty much says it all!
I am sure there are those who may say that I am being alarmist in
stating that things may be worst than the previous depression, at least
in terms of banking. I will attempt to make the argument that it is
indeed possible (if not probable), but it will not be easy since back
then we didn’t have ZIRP, $100’s of billions of MBS purchases,
nationalized multi-trillion dollar mortgage machines that were designed
to operate at a loss to support policy and consequently distort the
market, perverse tax incentives to tempt buyers into an obviously
tumbling market, securitization that popularized the OPM method of no
underwriting, NINJA loans, 125 LTV no doc loans, AltA loans sold to the
general populace, the recission of mark to market rules (the list can go
on for awhile) and a plethora of other things congeal to mask the true
extent of the damage done. Banks have been, without a doubt, attempting
to hide the extent of thier inventory and valuation issues. See Anecdotal Evidence That Banks Are Hiding Depressed High End Real Estate, as excerpted…
Why are Banks Hiding High End Residential Real Estate? Courtesy of the Real Estate Channel:
- Without the FTB tax credit, the housing market is receiving
artificial demand and price support from the FHA loan guarantees and
banks sitting on mortgages of homes once valued at $300,000 - Banks in areas that were severely damaged by the downturn in
domestic real estate (Cook County, Illinois, Miami-Dade County, Florida,
Orange County, California) have significant inventories of homes
worth more than $300,000 that they will not put on the market, even
after foreclosures lasting more than 2 years
Believe it or not, things actually look a bit worse as you start to
drill down into the housing backed loans, but that will be a post for
another time. In case you think banking has really gotten that much
better, we will soon get to see if some sharp facts can burst your
bubble. I will be revisiting much of my big bank analysis in the
upcoming weeks for subscribers. I will also release some very
interesting housing data analysis throughout the day and this weekend
that you just won’t find in the mainstream media. Stay tuned to the
BoomBust!
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When the Patina Fades… The Rise and Fall of Goldman Sachs???
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10 Ways to say “No, the Banks Have Not Paid Back Their Bailout from the Taxpayer!”
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The Fed Believes Secrecy is in Our Best Interests. Here are Some of the Secrets
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Why Doesn’t the Media Take a Truly Independent, Unbiased Look at the Big Banks in the US?
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As the markets climb on top of one big, incestuous pool of concentrated risk…
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Any objective review shows that the big banks are simply too big for the safety of this country
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The ARE trying to kick the bad mortgages down the road, here’s proof!
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Why hasn’t anybody questioned those rosy stress test results now that the facts have played out?
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If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It?
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If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It?: Pt 2 – JP Morgan
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If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It?: Pt 3 – BAC (the bank
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If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It? Pt 4 – Wells Fargo
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If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It? Pt 5 – PNC Bank
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A Must Read: An Independent Look into JP Morgan. This contains the “public preview” document (
JPM Public Excerpt of Forensic Analysis Subscription 2009-09-18 00:56:22 488.64 Kb), which is free to download.
- advertisements -
Seems to me that we just trash the big banks, wipe out their shareholders and creditors and restart them from scratch and all will be fine. If we do not do that then this thing will most likely hang on for years, Japanese style. We are already screwed with demographics, consumable and commodity inflation and declining home prices.
But the banks are the biggest anchor on the boat and it is draggin the whole way.
Reggie or anyone?
Have you looked into the FDIC loan loss sharing deals they are doing with private equity coming in and taking over these banks? There was a couple reports on OneWest taking over IndyMac w/ a sweetheart deal where FDIC was covering losses based on ORIGINAL loan balances and not current balances. (losses/reimbursements baked in from the get go). OneWest was started by Soros, Dell, and a GS honcho and I think J.Paulson. They banked profits right from the start.
I'd think this may be a good oppty for some other private equity. I'm tired of these backroom private deals done w/ the financial/political elite in DC on the backs of taxpayers.
I think this would be a huge topic and a blow out story to see what is going on.
I agree it is much worse than publicly admitted. Today's "tools" are buffers that can help absorb shock, BUT, only if underlying behavior is changed. The "tools" are used by the wall street and DC elected elite tools to extend and pretend and enable business as usual.
The public is running out of options. Homes equity tapped. check. Credit cards tapped out. check. Jobs picture not improving. check 401k/savings drawn down. in process now. After the public draws down their savings and 401k, there are no options. That is when the "recognition" point hits and shit really hits the fan. Americans have a short attention span unlike Europeans and the rest of the world, we will not stand for this long. Action will be swift. Most of us will be in shock like WTF just happened?
The administration knows it. Look at who is fleeing the Obama admin first? All people who have to do with budgets/finance and on the ground reality.
Summers
Orszag
Emmanuel
Romer
Geithner will prob be next or he may be guaranteed some perks to stay on by the banksters but the others who left weren't.
"The Twofold Roots of the Great Depression: Inflationism and Intervention"
by Lionel Robbins
http://mises.org/daily/4691
Yep! The majority of DIMMS! Dumb Ignorant Mental Midget Sheeple; are long paper all kinds of paper stacked to UrANUS! Just know that dead head fed gangster central banksters can print all the paper the vermin want but can't step into an empty bullion vault corner & shit .999 gold/silver deliverable bricks!! The squeeze happing now in precious metals with those protecting/hedging paper ASSets, and taking delivery on metals, has the banksters wonder? What's the next plan? Single head shots in empty bullion vaults??
"Then again, as I have stated, I am far from an economist"
Be thankful that you aren't, "God created economists so that meteorologists would have a reason to feel good about themselves."
Sir Reggie,
In a word yes.
Everyone of the 820+ will fail........and these Nimrods are wondering why PM's are running apeshit.
BS, they know exactly why, and their PAID SHILLS in the MSM, keep on playing Charades.
I'm on the "Superfast" ferry from Ancona Italy to Greece and I've got an off topic comment to contribute as part of my ongoing series on the EU's economic problems as observed and discussed with real people in the EU. I got tired of the BS from the media and said going into the heart of the beast was the best way to get a sense of what is happening to real people Most recently I spoke with someone familiar with gun running that worked out of a Russian satellite state before moving to Italy. I won't go into the details of how we met. She said Yemen has the lowest prices for AK-47's, and that the more unstable the state the lower the prices of the rifles. Sort of like deflation with a twist.
As for the some of the other posts today on ZeroHedge, especially the Fed's central planning; do we remember after the most recent G-8 meeting when President Obama met Bernanke afterwards and Bernanke was pale almost sick looking. I'm willing to take a friendly wager that Obama is betting the house on central planning. That is, I'm guessing Bernanke was told to hold the market up "what ever it takes, not matter what happens". In other words Obama is willing to take this end game to the point of armed insurrection. I suspect there will be attempts on peoples lives soon if this secret FED market intervention continues. By the way did I say how inexpensive the Kalashnikov is in Yemen? About the cost of a life. Not much. I think we need a concerted effort to identify,tag and find a breach in the FEDS Human Resource apparatus. That is find the patriot who will spill the beans. Any operation this expensive and widespread has collaborators. There will be another US civil war soon because central planning or central anything leads to corruption and the usurption of power from the public at their figurative and literal expense. Think about it. Iran Contra, the US army moving cocaine into LA (a little research will show this to be a fact). So, having the FED central plan is well within the framework of possibility and reality.
I'm on the "Superfast" ferry from Ancona Italy to Greece and I've got an off topic comment to contribute as part of my ongoing series on the EU's economic problems.
I spoke with an arms dealer/seller that worked out of Russia before moving to Italy. He told me Yemen has the lowest prices for AK-47's and that the more unstable the state the lower the prices of tghe rifles. Sort of like deflation with a twist. He added that sales are really doing well. I guess that beats selling houses although I can't condone his work.
From his viewpoint people all over are scrambling for safety. Go figure a gun dealer selling safety. As for the some of the other posts, especially the Fed's central planning, do we remember after the most recent G-8 meeting when President Obama met Bernanke afterwards and Bernanke was pale almost sick looking. I'm willing to take a friendly wager that Obama is betting the house on central planning. That is, I'm guessing Bernanke was told to hold the market up "what ever it takes, not matter what happens". In other words Obama is willing to take this end game to the point of armed insurrection. (I wish my arms dealer acquaintance was here, he would know how to help out). That said, I suspect there will be attempts on peoples lives soon if this secret FED market intervention continues. By the way did I say how inexpensive the kalashnikoff is in Yemen? About the cost of a life. Not much.
I think we need a concerted effort to identify, tag and find a breach in the FEDS Human Resource apparatus. That is find the patriot who will spill the beans. Any operation this expensive and widespread has collaboraters.
There will be another US civil war soon because central planning or central anything leads to corruption and the usurption of power from the public at their figerative and literal expense. Think about it. Iran Contra, the US army moving cocaine in to LA (a little research will show this is a fact). So, having the FED central plan is well within the framwork of possibility and reality
It will end up happening with or without the arms traders present. My guess it will be an internal schism like the Catholic Church, then the inevidable assination of each other's leaders.
Best just to stay out of the way and let them polish each other off.
THE NEW UNECONOMY
Banks unstable and undercapitalized
RE unstable
Consumer underwater
US debt unsustainable
Pension funds underfunded
Entitlements unsustainable
Politicians unrealistic and unsavory
Wars unwinnable
Jobs unavailable
Business uncertain
State budgets underwater
Economists unwise
Stock market unseemly
Reg's analysis unrivaled
Yes. And a confidence depression. And an ethics depression. Stealing/Fraud = Cash.....Doing it the "right" way - fucked.
Thanks for posting that First Trust Advisors chart. That is the one chart that explains the entire charade with valuations. Without an orderly plan to recognize and purge bad assets, the underprovisioning will continue to haunt even the remote performance metrics.
I suppose King Kash Flow will eventually be the executioner of the fraud-4- eva plan.
George Ure (urbansurvival.com - add him to your daily reading list) compares the bank closures of GD I to the current situation - he points out that in GD I, when a bank failed, it locked its doors and was done - in the current GD we have the FDIC, Bernanke and his printing press, shotgun marriages between the failed banks and surviving banks, etc so when a bank 'fails' there is little or no impact to the people using the failed bank
another difference between then and now is the numerous ATMs and mini-banks in grocery stores - when a bank fails today, how do you compare it to GD I? is each ATM considered a branch? what about the grocery store location, is that a branch as well? George delves into details like this
the key point I get from George's analysis is that in GD I, when a bank failed the people using that bank were immediately impacted - their money was gone, POOF! with no recourse - today there is a delay factor between the bank failing and when the bank users will be affected and, instead of just the failed bank user's being impacted, the pain is shared among all the taxpayers
By forcing private bankster losses onto the public, the only question becomes what straw or wet bale of hay breaks the camels back ?
Then again, George also thinks that the Internet can predict the future. He's on the same level of credibility as an astrologer.
reggie, the best analyst i've ever known, bar none.
hope i see you posting on the other side of the event horizon.
we can make some money
Reggie,
Gold = aprox $1320/oz, Silver = aprox $22/oz - what impact is this having on JPM's massive naked short positions in gold and especially silver?? is it or will it be material??
according to Stewart Thomas the banksters are short $20B in the metal markets and they are long $400B by taking the other side of the short-of-gold derivatives - ie, their short positions are chump change when you look at the big picture
when the banksters provide financing to a metals miner they require the miner to enter into a short-of-gold derivative contract (see Jim Sinclair and Stewart Thomas for more details) - at some point during gold and silver's coming moonshot, the banksters will make a margin call on these derivatives and take over ownership of the mines when the miners are unable to meet the margin call
end game: the metals are priced at a level that allows the banksters to continue their fiat money games ($55K/oz gold?) and the banksters own most of the mines
bronzie, i dont understand this??? how did the bullion bankers suppress the price of PM's for so long if they were net long??? i am understanding that the bullion bankers had naked shorted 11 year supply of 'yet to be mined' gold and silver....this is a naked net short..... please help me understand...thanks..
Yeah it makes no sense. Where do you find the cash to cover 400B in long positions and no one notices.
bronzie
Name some names. Which bankers and which PM miners ?
Reggie,
You need to learn the expression "This time is different!" LOL.
Seriously now- GREAT STUFF! I mainly lurk but not post, and I find your articles to be great analysis. Congrats on the Bloomberg interview the other day as well. The blog and website are great.
Thanks Reg
You can't build an economy on a foundation of FRAUD. We have a long, long way to go to get out out of this runaway criminality.
I think one of the fundamental reasons we are seeing such outrageous bonuses for the Fraudsters is they all are planning to get out of Dodge.
Another interesting one RM...
The real question being how can economic recovery happen ....as a result of accounting fraud and money counterfeiting....?? Just how do the Prince Harvard Yale Club experts reconcile this one ? Other than forming self prescribed bail outs for the "appointed ones"....
Seems like the message could not be made any clearer....One does not have to be an economist to realize this one....
...............
Tax structure change...not gimmicks.... would provide true resolve....ie the FAIR TAX....
Just how do the Prince Harvard Yale Club experts reconcile this one ? They have no idea what the fuck they are doing. But they paid allot for a supposed education that makes people think they do.
As i posted on another tread the other day.
"I just want to know, who or what is long financials right now?"
Seriously?
You have a 401K?....yup..you are long financials.
You have a pension?.....yup...YOU are long financials.
You have an annuity?...YUP....you are most likely long financials...
Bob Pisani?
"I am not an economist or anything of the sort, but the bank loss situation looks an awful lot like it did during the great depression"
Are you kidding ? We will be lucky to repeat a GD1 here even though some folks think we will be lucky to repeat a Japan here.