| User Info
| The FDIC Must Be Indicted in forum [Market-Ticker]
|
Onion
Posts: 129
Incept: 2008-04-05
|
Surely this could form the basis of a class action by any depositors that lost money?
|
Mayorquimby
Posts: 13907
Incept: 2008-09-18
The Archaic Past
|
I really can't believe there haven't been more private law suits vs. the banks, .gov, TPTB etc. Either a lot of hush money's floating around or people are too scared.
----------
They who wish to hurt you, work within the law.
- Morrissey
Gold is theft.
|
Eighty6thebs
Posts: 4180
Incept: 2007-06-26
It's contained to sub-prime!
|
Outstanding Ticker Karl. Very brief but very well stated.
----------
"Sounds to me like you guys a couple of bookies" - Billy Ray Valentine
"No I am not scared, and neither should you be!" - Iraqi Information Minister
|
Themortgagedude
Posts: 8841
Incept: 2007-12-17
saint louis
|
I'm not sure that prompt corrective action would have worked here. As you are known to say the loss occurred when the bad loan was written. The real problem was that the regulatory authorities showed no foresight in dealing with the lending products in say 2004 and 2005 when they were getting ever more aggressive.
That said PCA is the law. And should have been enforced. At least the problems would be over and we would be moving forward now. As it is we are treading water in a septic pool of sludge.
TMD
----------
I'm already visualizing you with duct tape over your mouth.
|
Eighty6thebs
Posts: 4180
Incept: 2007-06-26
It's contained to sub-prime!
|
The FDIC is being allowed to cherry pick who they shutdown not based on law, but ability to cover the loss and probably higher up constraints when it comes to the too big to fail guys.
So why should a depositor in a cherry picked bank not have the same protection as one with Wachovia?
I think these people have a real case here.
----------
"Sounds to me like you guys a couple of bookies" - Billy Ray Valentine
"No I am not scared, and neither should you be!" - Iraqi Information Minister
|
Thisson
Posts: 14
Incept: 2009-07-15
NYC
|
Sovereign immunity may not apply here.
"Absolute immunity" applies to actions falling within the scope of the Government's regulatory and general oversight functions. Where the actions taken are outside that scope (as they arguably are, here), absolute immunity may not apply. See generally Barbara v. NY Stock Exchange, 99 F.3d 49, 58-59 (2d Circuit Court of Appeals, 1996).
|
Kuhio
Posts: 208
Incept: 2008-12-31
|
Karl, two words: national security. When the government controls the press, lies become the truth. So is the phrase, "national security" a lie or the truth? In the absence of absolutes, the masses can never be certain.
However, there is one absolute equal to that of death & taxes: the US economy will transition from credit driven consumption to savings generated production. How long it takes to get there, and by which processes we finally arrive are mere details to be determined during the journey.
But we do know one thing: the transition is going to be utterly horrible. How do we know this? Because of the very actions the PTB are taking to forestall the inevitable. They've looked over the abyss and they don't like what they see. Think about it - how serious would something have to be that those who have taken oaths to defend the Constitution have justified (at least to themselves) its very abrogation?
That should tell each & everyone one us something. What it tells me is we're gonna be in for the ride of our lives.
|
Thisson
Posts: 14
Incept: 2009-07-15
NYC
|
Oh, I would also point out at this time that it might be possible for the unisured depositors to bring a legal action for "mandamus" to compel the FDIC to take the actions that it is legally obligated to take under the US Code.
Of course, this is not legal advise...
|
Leicestersq
Posts: 221
Incept: 2009-10-12
UK
|
What happens when the assets of a bank reduce overnight?
It seems to me that when the credit crunch hit, there was a mass 'seeing the light' moment for most of the world. The day before, Mortgage assets fetched a good price in the market, the day after, they didnt.
When that happens, Prompt Corrective Action doesnt apply. It only works when you have a steady fall in asset values, not when you have a price dislocation.
And it looks to me, as an outsider to the US, that nearly all banks in the US have suffered the same fate, one day they were solvent, and next day, they were not.
Banks have managed to get out of insolvency before, by trading through it. In the US, the hope that this might happen has lingered, and perhaps caused inaction where positive action was required.
And when you wake up one morning, when all the banks are underwater, where they were afloat the day before, how do you get the resources together to wind them all down? Resource levels at the FDIC were probably little more than that required for the good times, closing down the best part of an industry wasnt something that you could plan for.
I am also not sure about being able to sue the government over this. Why should the taxpayer be liable for the failings of one branch of government? Why should someone who had nothing to do with a failed bank, pony up to make good on someone else's deposit?
Tragic as it may be, you have to make the taxpayer immune from any liability. If you do not, then you then have to remove the institution that caused that liability on the taxpayer to be created. That may or may not do a lot for confidence in the banking industry, depending on your point of view.
Depositors have to be exposed to some risk of loss. They are after all, looking to make some sort of gain when depositing. The taxpayer must remain immune to whatever happens.
|
Reza30
Posts: 289
Incept: 2009-02-15
|
This entire "economic recovery" has been based on transferring all the losses from the wealthy to the tax payer, and then much of the wealth the tax payer has to the wealthy. FDIC is no exception. The only time people will wake up is (unfortunately) when they lose their deposits. By the way, Happy Halloween everyone.  |
Sondog
Posts: 75
Incept: 2009-05-18
|
@Leicestersq
Overnight? No. It happened over years, and in little bits at a time. When you hand out $500,000 to a McDonalds employee, you lost something. When you give out a loan to someone who is immediately underwater, you just lost some of your assets. When you hear a few voices talking about a housing correction and continue throwing money at anyone willing to borrow it, you lose a little asset value. When you find yourself having to fudge books to make things look kosher, and you yet continue issuing loans instead of liquidating existing loan debt, you lose asset value.
You are right in theory, but this is not what happened.
|
Throxxofvron
Posts: 10299
Incept: 2009-02-17
Hyper-Speculative Psycho-Facsistic Parabolic Blow-Off
|
Quote:You were, in essence, robbed by the government. Thus the Government FORFEITED Legitimacy. Taxpayers are not Responsible for This Debacle. Those INDIVIDUALS that are Responsible should be stripped of Their Titles, Positions, Assets & Freedoms. Let the Punishments Suit the Crimes. Putative Prosecution in a Court of Laws will be Infinitely Kinder than the Braids of the Boiled Ropes; -& the Time for having a Choice betwixt the Civility of the Law and the Invocation of the Fourth Box is Fast Running Out.
----------
DIONYSUS: " Thou hast no knowledge of the life thou art leading; thy very existence is now a mystery to thee. " -from 'The Bacchantes' By Euripides “During times of universal deceit, telling the truth becomes a revolutionary act.” -George Orwell
|
Kuhio
Posts: 208
Incept: 2008-12-31
|
@Leicestersq - What's playing these days? To address your main points, your observations are the essence of Bernanke's thesis. As a student of the '29 crash, Ben believed (still believes?) the markets were experiencing a liquidity squeeze, not an insolvency crisis.
What he has failed/fails to recognize (which often seems to be the case when generals continue to fight the last war), is that it really was and continues to be an INSOLVENCY crisis. Bank asset values really are OVERVALUED relative to their underlying liabilities. The proof is really quite simple: house prices are still wildly overpriced in relation to income (to support the mortgage). For example, those purchased with the $8k credit + FHA 3.5% down are only "affordable" if they are flipped within a few years.
Unlike '29, the US economy is completely & utterly out of balance. We have an economy completely wed to credit driven consumption rather than savings generated production. In '29, we were already the world's manufacturer. We had vast, untapped domestic oil supplies. Immigration had effectively ceased 5 years before in 1924. National/state debt to GDP was practically nil; there was no such thing as SS or other, completely unsustainable & unfunded obligations. The nation's defense requirement didn't include policing the world.
In other words, the underlying facts couldn't be more different. One year out, and we see that it is indeed an insolvency crisis. $Trillions have been made available at -0- cost, and yet rather be lent (as there is no demand for credit), they are dispatched to chase elusive returns in various asset classes, creating yet once again various bubbles and pricing distortions.
This is the tragic (at least for ourselves) flaw in Ben's thesis. He thought it was a liquidity squeeze, as it was in '29, and committed our nation's wealth to that diagnosis. What do you do when it really is an insolvency crisis? That's for the next "genius" who is a student of the '08 crash to understand 70+ years out the next time a big crash occurs.
|
Risingcream
Posts: 4406
Incept: 2007-09-07
|
We can feel that large something, something in our arse but we don't know whose it is. Karl tells us who is packing our fudge. When is Uncle Sam going to finish his deeds and perform the money shot.
----------
Civilization...ancient and wicked. --Subotai
“The distance between insanity and genius is measured only by success”
|
Leicestersq
Posts: 221
Incept: 2009-10-12
UK
|
Sondog,
I agree with you that these loans were made over many years, and at the point of inception, each onewas really worth less than the value ascribed to it.
The point I was making though was that the point of realisation, that 'oh no' (replace no with another word if you like) moment came later, and the marketable value of all US originated mortgages disintegrated almost overnight, with the collapse of those two Bear Stearns funds. As I recall, at that point, house prices in the US were only just about going into to decline (please correct me if wrong). As long as those underlying assets were not falling in value, most mortgages would have held their value as marketable securities. And then BAM!!!! The whole system was underwater.
Kuhio,
I dont really understand your post. Where did I challenge the idea that this was a solvency crisis in my post? My post said, if you had an overnight dislocation in asset prices, how would the FDIC deal with it, given the 'shock' of the event, and the limited manpower resources available to carry out their mandate?
It most certainly is a solvency crisis. I would guess that Ben Bernanke knows that, he is not stupid, whatever else you might say about him. I guess that he is trying to pump money into the system, knowing that if you increase the supply of something, you decrease its value. And as loans are denominated in something (dollars) that would decrease in value, if you can manufacture some monetary inflation, you can in theory decrease the real burden of the debt. Maybe, just maybe, if the burden were lifted a bit, you could have a gradual debt unwind.
Huge risks in this policy, as you say, as bubbles can be blown left right and centre. Probably the only place that wont bubble up is the place where you would like it to.
I have no idea what the solution is. On the one hand you might collapse the entire financial system if you try and balance the US budget and stop printing dollars, along with closing all the underwater banks. Who knows where that might lead? And the other solution, print like crazy, bailout openly and surreptiously at the same time, is moral hazard gone mad, to say nothing of the illegality of it all.
What policy would you advocate?
|
Ribbit
Posts: 1779
Incept: 2007-09-10
Wales, UK
|
I really don't know how the USofA handles Sovereign Immunity. In the case of the UK, so that "If the Law makes the King, then the King is subject to the Law" holds sway, it is the Sovereign's advisors that are highly accountable, via for example, Malfeasance in Office. I 'think' it's the Treason Laws that handle situations where individuals may put Her Majesty in breach of the Coronation Oath, but so many Treason Laws have been pulled on the quiet lately (yes the Politicians and Bureaucrats know they are committing Treason), it might prove difficult to proceed on that particular front here presently.
Now the Founding Fathers were most definitely on the same wavelength as John Locke and that scientifically proven principle that is "If the Law makes the King, then the King is subject to the Law".
So there must be clear and coherent discussion of it, and accommodation for it, somewhere?
eta: if this 'isn't' accommodated, then "If the Law makes the King, then the King is subject to the Law" would not apply, and America would be in the dire predicament of suffering from "The Divine Right of Kings" and "The Royal Prerogative" with no recourse available.
I don't see the Founding Fathers tolerating that indefensible position, for a minute.
----------
If the State was a Nanny, it would have been fired for incompetence, unreliability, and having its hands in the till, a very long time ago now.
|
Imaboomerdropout
Posts: 305
Incept: 2009-09-13
NY
|
I understand the tickers logic but anyone keeping more than the FDIC insured amount in any bank has to be a fool or very naive. My MIL falls into the latter but we keep tabs on her accounts. Is there any bank operating today where depositors with >250K wouldn't take a loss? Aren't all bank closable right now? Do they know which non systemic risk banks that will give the most bang for their buck? In other words pick the banks where the most depositors get screwed being over deposited? These are questions mind you; I don't know the answers.
|
Kab
Posts: 1857
Incept: 2009-04-02
Colorado
Banned
|
Quote:As you are known to say the loss occurred when the bad loan was written It's the size of the loss that is important. That changes on a daily basis. |
Thisson
Posts: 14
Incept: 2009-07-15
NYC
|
@Leicestersq - there was no "sudden" moment when it all fell apart. It took a considerable amount of time. The mortgage orinators started to fail in *2006*
For example, Ownit Mortgage Solutions filed for bankruptcy in December '06.
Fast forward to March '07: "The impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained" - Ben Bernanke.
April '07 - New Century files Bankruptcy.
June '07 - Bear pledges $3.2 billion to bail out hedge funds.
July 19 '07 - DOW Closes over 14,000 for the first time ever.
July 20 '07 ; Bernanke warns of $100 billion subprime loss.
August 07 - Bear Stearns hedge funds declare bankrupty.
August 07 - American Home Mortgage files Bankruptcy.
August '07 - FOMC leaves fed funds rate at 5.25%
Sept '07 - Goldman announces $1.5 billion *profit* hedging against MBS.
October 07 - UBS reveals 3.4 billion loss. But Citi reports only .31 billion loss.
Shall I continue?
|
Thisson
Posts: 14
Incept: 2009-07-15
NYC
|
[duplicate post]
|
Genesis
Posts: 130663
Incept: 2007-06-26
|
I'm well-aware that you're a fool for keeping more than insured limits in a bank BUT that doesn't change the fact that the insurance is in fact only there to cover government MALFEASANCE, as if PCA is actually followed NO LOSS WILL EVER HAPPEN.
----------
I don't care if it makes sense -- only if it makes money. -- Me
Bank (n): See scam, fraud and theft. Eat a bankster -- they're low-carb.
What part of "shall not be infringed" was unclear?
|
Leicestersq
Posts: 221
Incept: 2009-10-12
UK
|
Thisson,
yes, it is good to be reminded of the exact events when they occurred.
The ones I remember were HSBC announcing huge writedowns at their Household subsidiary (I think it was Household at least), from early 2007.
Then in July and August 2007, it all happened. The Bear Stearns funds hit the rocks. Then in August 2007, BNP Paribas announced they could not value the assets in their funds.
I liken it to a volcano. It rumbled, then late July/early August, it erupted.
It was that moment at which the US banking system found itself underwater. Not overnight perhaps, but it didnt take long.
Up until then, the failures such as New Century, were seen as just isolated examples of those who hadnt managed things properly, something that wouldnt affect the 'proper' lenders.
Now we can see that it wasnt just the 'improper' lenders that were underwater, but practically all of them. The FDIC is now closing some of them down, but not any big ones as of yet.
But the point remains, it was the announcement by BNP Paribas that changed everything and unleashed the Credit Crunch upon the world. It was a sudden event. Banks at that point realised they were either underwater, or about to be. Perhaps if the FDIC were manned by superbeings, they could have acted to close down all the bad banks in the US overnight. In the world of ordinary human beings, we have the corrupt who have mis-marked loans and stolen what they can.
But as for the FDIC, it looks to me as if they were slow to realise what hit them, are trying to get on with their mandate, albeit late, but remain politically constrained as to what they can achieve.
|
Genesis
Posts: 130663
Incept: 2007-06-26
|
Politics do not trump black-letter law.
----------
I don't care if it makes sense -- only if it makes money. -- Me
Bank (n): See scam, fraud and theft. Eat a bankster -- they're low-carb.
What part of "shall not be infringed" was unclear?
|
Knobcreek
Posts: 980
Incept: 2009-02-06
|
Gen: spot on. We don't have a chance as a nation unless we get back to that rather basic ideal.
|
