More big banks failing...
Sep 16, 2008 at 6:48 PM Post #61 of 317
Quote:

Originally Posted by Todd R /img/forum/go_quote.gif
So what happens to the people who have a home loan with one of these failed companies?
Does someone else take over the loan?
Do you get out of making payments for a while?
wink.gif



I wonder about that myself. Citi holds my 2nd mortgage and i have to admit that i have nothing but antipathy for them.

They behave as though i owe them some sort of favor because they bought my mortgage from another company. My payment is due on the 15th and they start calling me on the 3rd. Funny thing, I've never had a phone call from the bank that holds my 1st mortgage, and they get 4x as much money 100% as reliably.

So, frankly, i hope they burn to the ground.
 
Sep 16, 2008 at 10:22 PM Post #62 of 317
I had the same problem with xhitigroup many years ago when they took over my mortgage. They operate as though they have been taken over by a collection agency. They should never be calling anyone with a history of paying their bill on time.
 
Sep 16, 2008 at 10:52 PM Post #63 of 317
I think it's the Amero looming just beyond the horizon.
 
Sep 16, 2008 at 11:13 PM Post #64 of 317
Do any of you remember the famous Christmas movie starring Jimmy Stewart called "It's A Wonderful Life"? He ran a small town bank. When a competitor smeared him, the depositers at Jimmy Stewart's bank rushed to liquidate their deposits. While every despositor tried to withdraw all of their money, Jimmy Stewart asked each of them how much they really needed, doling out that amount to each of them. At the end of the day, the bank had one dollar in desposits and were officially still in business. That was a happy occasion.

Despite what you are hearing in the media, your deposits are safe. The companies 'going under' had good business models and could have continued to generate plenty of cash, but, like the 'It's A Wonderful Life' story above, investor confidence fell and all wanted their money NOW. That, in turn, forces a bank to come up with cash it does not have on hand because it is invested elsewhere. Add to that downgrades in credit quality by the likes of S&P and Moody's and you can no longer borrow money at a low rate. Put this all together and you have a serious problem of liquidity.

If you are invested in the stock market for the long term (+15 years), today is simply a blip on the screen. Yes, it may take 12-24 months to purge the poor investment vehicles created by many smart people who made stupid decisions, but this is not a fatal blow to the financial sector in the long run. If you have a shorter view of the market and financial industry, you better rethink your position.
 
Sep 16, 2008 at 11:25 PM Post #65 of 317
Quote:

Originally Posted by AlanY /img/forum/go_quote.gif
This crisis would likely have happened even with Glass-Steagal though... it certainly didn't prevent either the Savings & Loan crisis or LTCM, and the current crisis is a mixture of ideas from both. But it also transcends banking and crosses over to the role of the Federal Reserve and its behavior.


Bingo.

Glass-Steagal would have reduced commercial bank exposure to this mess, but enforcement was spotty at best while it was still around and was progressively weakened in the 80's and 90's before it's death. Other than that, it doesn't have much of an affect on the structural issues of the subprime meltdown.
 
Sep 16, 2008 at 11:29 PM Post #66 of 317
Quote:

Originally Posted by breakfastchef /img/forum/go_quote.gif
That, in turn, forces a bank to come up with cash it does not have on hand because it is invested elsewhere.


When the money elsewhere is invested in garbage loans on an over inflated asset class to people who can't repay the loans it doesn't really help matters.
 
Sep 16, 2008 at 11:39 PM Post #67 of 317
If a bank failed completely and utterly, what exactly would happen for people with money in those banks? How does FDIC exactly work? I imagine it would a tremendous PITA and not be a simple matter of a them writing a check to you for $100k or less (whatever was in your accounts.)

-Ed
 
Sep 16, 2008 at 11:48 PM Post #68 of 317
Quote:

Originally Posted by breakfastchef /img/forum/go_quote.gif
Do any of you remember the famous Christmas movie starring Jimmy Stewart called "It's A Wonderful Life"? He ran a small town bank. When a competitor smeared him, the depositers at Jimmy Stewart's bank rushed to liquidate their deposits.


It's been a while since I've watched "It's a Wonderful Life", but I believe the incident that started the run was Black Tuesday.
 
Sep 17, 2008 at 2:29 AM Post #72 of 317
i don't think the fed had a choice.

unlike Bear Stearns - which in retrospect was a mistake -, AIG really is too big to let fail. Lehman was bigger than Bear which shows that point. but Lehman who dealt mostly with investments/underwriting had few counter parties and thus the effects of their collapse was relatively contained. AIG though deals with insurance. this involves innumerable counter parties and the repercussions from an AIG failure would be wide spread across many industries and very, very messy.
 
Sep 17, 2008 at 2:45 AM Post #73 of 317
Quote:

Originally Posted by Edwood /img/forum/go_quote.gif
If a bank failed completely and utterly, what exactly would happen for people with money in those banks? How does FDIC exactly work? I imagine it would a tremendous PITA and not be a simple matter of a them writing a check to you for $100k or less (whatever was in your accounts.)

-Ed



Likely, one of two things will happen:
They'll either sell the bank to a newly created federally-backed bank (example:IndyMac)
They'll sell most of the bank's assets to a larger, more financially secure bank (example: Most smaller bank failures)
In most cases, it's reasonably seamless.
 
Sep 17, 2008 at 5:54 AM Post #74 of 317
Quote:

Originally Posted by JadeEast /img/forum/go_quote.gif
Privatize profit, socialize risk.


I have decided not to publish what I just posted. I am too angry to be rational.

Edit: O.K., I'll allow myself this. The next person who tells me that this is a capitalist country had better be sure he can outrun me.
 
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