Vinny’s Blog

[Views and opinions expressed here are mine and you must not make any investment decisions based upon information provided here. For your investment needs you must seek professional help from a qualified person.]

I hope you remember my earlier post on FDIC if not please read it here

[ http://www.diwakars.com/wordpress/?p=199 ] this one is only an update to that post.

Let us take another look at FDIC and what is on it ’s plate, just a couple of weeks later.

FDIC shutters two more regional banks

The 28 branches of 1st National Bank of Nevada and First Heritage Bank, operating in Nevada, Arizona and California, were closed late Friday.

Last Updated: July 26, 2008: 3:22 PM EDT

The FDIC also said accountholders can access their funds during the weekend by writing checks or using ATM or debit cards. As of June 30, the closed banks had total assets of $3.6 billion. That ’s down from $4.1 billion six months earlier.

http://money.cnn.com/2008/07/26/news/companies/nationalbank_firsthertigage_takeover.ap/index.htm?postversion=2008072615

Now if you ‘re keeping a tally here is where we are at this point in the game. FDIC has approx 53 billon dollars 8 billion or so are gone in supporting IndyMac bank failure. What is left is approx 45 billion out of which 3.5 will now be allocated to these 2 banks that leaves FDIC with approx 41 Billon dollars.

Here is that kicker again ..

As of March 31, the fund was $52.843 billion and insured deposits were $4.431 trillion,

http://www.courier-journal.com/apps/pbcs.dll/article?AID=/20080715/BUSINESS/80715020

Now 41 billon dollars are insuring $4.4 trillion dollars which is everyone ’s money in the bank. Your mine and our neighbor ’s.

Most banks are safe €¦ so is the FDIC

The IndyMac failure will take a chunk out of the fund the FDIC has to insure deposits. But bank experts aren ‘t worried about it running out of money.

http://money.cnn.com/2008/07/21/news/economy/fdic/index.htm?postversion=2008072104

Believe me I couldn ‘t have found a better joke than this one. But bank experts aren ‘t worried about it running out of money. 41 billon dollars are insuring 4.4 trillion dollars and bank experts ‘ are not worried.

Only in America man only in America they are still called experts ‘. Next thing you know these experts ‘ might be given an award or something like that in a big public ceremony. No wonder kids from all other countries do so well in math.

In one of my earlier posts [ http://www.diwakars.com/wordpress/?p=194 ] I remember mentioning this -

Funny thing is how the mess always un-folds over a weekend. Bear was on a weekend, Indy Mac bank was on a weekend, Fannie was on the weekend and generally on Saturday.

Why can ‘t this happen on a weekday ? hum ! Let me guess, it would be too risky wouldn ‘t it €¦market may react so badly that they may actually go down deep into bear territory and who wants that. So it ’s safe to declare all bad news during the weekend. That gives enough time (almost 2 days) for people to digest the bad stuff. Amazing how it ’s done. But then again if -2+-2 could be made to look like 4. Accounting rules could be bent to meet the balance sheet this is just news €¦..big deal €¦get over it !

Sure enough this bad news was published again on you guessed it

Last Updated: July 26, 2008: 3:22 PM EDT (Saturday ).

If all this is making you nervous no please don ‘t be €¦.these experts ‘ have you covered.

Deposits overwhelmingly ‘ safe: FDIC

http://money.cnn.com/2008/07/15/news/fdic_deposits.ap/index.htm?postversion=2008071508

Let us look at these experts ‘ again closely. After a bank fails it is taken over by FDIC obviously consisting of many more experts ‘ as we know them now. So one would imagine that once these experts have taken over the bank they will bring it out of trouble right ?

FDIC Faces Mortgage Mess After Running Failed Bank

http://online.wsj.com/article/SB121641296022866029.html

In a recent court filing, the FDIC estimated that about 1,500 of the 5,315 loans it sold to Beal either have defaulted or are nonperforming. The FDIC already has bought back another 247 of the mortgages, most of them for violations of federal anti-predatory-lending laws intended to protect borrowers from unreasonably high fees or deceptive practices. Beal Bank has said in court filings that 73 of the repurchased loans were originated while the FDIC was running Superior.

Long story short banks are failing due to subprime lending. After a bank fails FDIC takes over and what does it do ? more of subprime lending. To your surprise you would imagine a Federal agency to be fully aware of federal laws but that ’s too much expectation.

The FDIC already has bought back another 247 of the mortgages, most of them for violations of federal anti-predatory-lending laws intended to protect borrowers from unreasonably high fees or deceptive practices

An internal FDIC legal assessment, obtained by Beal Bank and filed in court last month, acknowledged numerous appraisal deficiencies in the portfolio and a small number of loans that appear to be fraudulent from inception. Calling the FDIC ’s legal position poor, the undated 26-page assessment suggested that the agency ’s liability could be as much as $70 million. Another FDIC official, in a deposition, estimated that the cost of settling the case could be less than one-third that amount.

A federal agency holds poor position under federal law ? hum ! But hey ! what ’s the problem here ? These guys are experts ‘ remember ?

And there are only some 300 banks that are expected to fail ..with these experts ‘ on hand this is not going to be a problem at all.

Many more bank failures likely after IndyMac

More than 300 banks could fail in the next three years, said RBC Capital Markets analyst Gerard Cassidy, who had in February estimated no more than 150.

Among the other banks high on the list include Newport Beach, California ’s Downey Financial Corp (DSL.N: Quote, Profile, Research, Stock Buzz), with a 95.4 percent ratio; Fort Lauderdale, Florida ’s BFC Financial Corp (BFF.P: Quote, Profile, Research, Stock Buzz), which invests in BankAtlantic Bancorp Inc (BBX.N: Quote, Profile, Research, Stock Buzz); Coral Gables, Florida ’s BankUnited Financial Corp (BKUNA.O: Quote, Profile, Research, Stock Buzz); Chicago ’s Corus Bankshares Inc (CORS.O: Quote, Profile, Research, Stock Buzz); Los Angeles ‘ FirstFed Financial Corp (FED.N: Quote, Profile, Research, Stock Buzz); Troy, Michigan ’s Flagstar Bancorp Inc (FBC.N: Quote, Profile, Research, Stock Buzz), and Washington Mutual, at 40.6 percent.

And here is what I like the most from one expert ‘ to another expert ‘

We ‘re surprised to be near the top of that list, said Bert Lopez, BankUnited ’s chief financial officer, in an interview. Our underwriting standards have been very conservative, we have insured a substantial portion of our loan portfolio, and our losses remain low on an overall basis.

http://www.reuters.com/article/email/idUSN1336701420080713?sp=true

Bank is on FDIC high list and CFO is surprised. Either FDIC does not know what they are doing or the CFO does not know what he is doing.

May be they both don ‘t know what they are doing - but that is my point of view. And that is it. It is my point of view, get your own view about this, let mine not influence yours.

I am not worried about my money it ’s safe. I have FDIC on my side.