All that's required is prompt corrective action. We've had none it. This bank most likely failed due to commercial real estate and development loans gone bad. It would be interesting to see how many of these loans went bad and how long they've been allowed to remAin on the books at par without LLR being increased. I'd guess at least 36 months.

"In order for the reported balance sheet to be true the bank had to lose
$16.7 million (its entire surplus)
plus the $46.9 million the FDIC is now going to lose in less than three months.


And the $14.123.000 they claimed as total equity, no ?

Excellent.

Financial fraud has been effectively decriminalized by a corrupt puppet government.

Quote:

The failure of the Department of Justice to convict any senior official of a major bank, and the almost total failure to indict any senior official of a major bank has moved from scandal to farce.

http://neweconomicperspectives.blogspot.....

Only 22% "drop" in asset prices? My math from last year shows that most of the time we've seen a "drop" of over 25% on the assets held by most of these banks going through receivership. I routinely suggest to friends that they read the press releases at http://www.fdic.gov/news/news/press/2011.... to see for themselves what's really going on.

From my aerospace experience "shall" is used as a statement of intent...not a statement of condition.

".... the developed system shall operate at no more than 100 deg C...." this does not imply the system will be at 100 deg C throughout its development- but rather specifies the goal.

This interpretation of "shall" clearly questions the state that is allowed to persist during a period of adjustment from "under-capitalised" to "adequately capitalised".

My interpretation of "shall" is supported by the accompanying use of the term "prompt corrective action" as this implies a state of resolving a position of being under-capitalised- in other words in conflict with the capital requirement.

You can't "correct" something you’re not allowed to do, if you are not allowed to do the thing you are correcting.

“Attempted Murder” is illegal, they does not then go on to say that if you nurse the victim back to health you are no longer liable for the charge.
My interpretation here is a possible explanation of this seeming mathematical contradiction.

Milton, FL. thats your neck of the woods, there was no speculation going on there right?

"our government refuses to hold the responsible parties accountable for both their actions and intentional inactions" BECAUSE OUR GOVERNMENT (The Senate and the House) ARE BEING BRIBED IN THE FORM OF POLITICAL CONTRIBUTIONS!

Bankrate.com wrote..

Bankrate believes that, as of March 31, 2011, this bank exhibited a significantly below average condition, characterized by substantially lower than normal overall, sustainable profitability, very questionable asset quality, well below standard capitalization and much lower than normal liquidity. [...] The bank revealed, as previously stated, very questionable asset quality. [...] As of March 31, 2011, the bank displayed Below Normal balance sheet liquidity and a Seemingly Greater Than Prudent Dependence upon wholesale, or non-core liabilities [...] This bank has been rated significantly below average.

Source: http://www.bankrate.com/rates/safe-sound....

Why would anyone keep money in an institution like that? I.e. why did depositors leave $286 million in there, instead of forcing this crappy bank to close long ago by pulling their money out?

Could it be that they figured that the FDIC will cover them no matter what? Why is it that hardly anyone protests the moral hazard that the very existence of government deposit insurance creates?

-Uwe-

I am confident that I will buy more PM'S AMMO AND FOOD and wait for the COLLAPSE!

They can't stop it, they may pospone it but not stop it. Its all planned out.

PREPARE PREPARE PREPARE be confident in that!

See ya on the other side of this mess.

Phev, I'm not an accountant but I think "deposits of 280 million" is a liability. You owe the people their deposits back. Their net value is 296.8 - 280.1 gives a net worth of 16.7 million, assmuing there are no 'lies' in there, which of course there are/were.

Thanks Dega for the observation that there is usually a 25% haircut on the book value of the bank assets.

Gold, real physical gold: no liabilities, no counterparties, no paper.

Inevitable hyperinflation lies ahead. The Fed will just print itself into oblivion. The ECB and the Chinese (all central banks) will be happy to just write off their US Govt debts, as gold enters a new orbit, and the paper gold market collapses. $50,000 gold in TODAY's prices.

Flappingeagle yes you're right "$16.7 million (its entire surplus)" and total common equity are [about] the same thing. Sorry...

If you apply the same numbers to BAC what does it give? I bet the FDIC goes bankrupt.

There is no cause for the market to go down. It is what caused it to go up that is causing this mess. We had academicians sit and watch the Great Depression and hardly a bit of what caused the depression made it into the history books or the schools of economics. This was an intentional act and instead of teaching what happened, there was instead some legislation to keep the wolf out of the chicken house. But, there wasn't anything put in place to limit the growth of private and federal debt.

I have a degree in finance. I took 12 hours of economics. There was a lot of nonsense about everything, but the role of increasing and decreasing debt in an economy. The 1920's was a credit bubble and it was an international debt bubble between developed economies of the world. There is nothing in the economics books about it. The stock market boom of the 1990's was a resumption of a debt bubble, propelled greatly by the expansion of the books of the GSE's. Bush had his role, but the bubble had already blown up and the free ride of the massive leverage 100 to 1 PE's or fantasy values of stocks was gone. But, the attractiveness of housing and other real estate through the presence of the lowest interest rates in several decades and 10 years of inflated housing costs were set free to set a bubble in motion. This bubble was answer to a burst stock bubble because it could generate massive amounts of cash. Franklin Raines, in a speech in front of the Mortgage Bankers Association put out the challenge to double mortgage debt in the 2000's.

I didn't understand a lot of this stuff when I first arrived into the world of online debate 10 years ago. I did understand that bankers and other lenders go broke and we have a depression. I saw first hand how bankers go broke here in the 1980's. They lend too much money on bad investments. The level of debt in an economy wasn't something that was taught to me though, as the experience I had was local. Doug Noland started writing a weekly post called the Credit Bubble Bulletin for Prudent Bear about that time and I became a religious reader. Noland was on this game years before it came apart. I had read other stuff, like Prechters "At the Crest of the Tidal Wave" that gave me an idea what was coming, so a lot of this made sense.

My point here is no one of authority that is dealing with this mess knows anything about the cause or the solution. We have pariahs like Bernanke, who claim to know what caused the Great Depression, but what he thinks caused it is 180 degrees of what caused it. His solution is what caused it, because it had been done in various ways leading up to the Depression. Ponzi financing, enabled by the Federal Reserve, the Bank of England and ponzied up by Wall Street and other outfits caused the Great Depression. These were your great creators of leverage.

One thing Prechter said in "At the Crest" was one of the few things I had read at that time that made sense. He said the game of credit depended on confidence, the confidence the borrower could pay his debts and the confidence the lender would get his money back. Is there any money being loaned on confidence today? No, it is being loaned so the banker can scrape more bonuses out of it and borrowed to stay afloat. Then we have sovereign debt. Look at the change in confidence going on in this avenue?

Here is the bad news. What can't be paid, won't be paid. What is this? It is about all of it potentially, once it all starts to break down. Debt is stated in percentage of GDP, but GDP really bears little relation to anything other than what the economy looks like once the government nonsense is applied. The debts have to be paid by the private side and the bigger the government side, the smaller the private side in relation to the debt equation. Efforts to expand the government side only make the final proportion greater. Thus the debt to GDP ratio for all debt might have shrank since 2007, but the government side of the equation has increased. The actual debt has gotten larger most likely instead of smaller.

How big is the problem? I think it could be 2 years income. Being expanded credit increases GDP and aggregate demand, the effects of shrinking debt will be devastating on the economy. It will mostly shrink through loss and not repayment, which will wipe out the assets based on debt to a great extent. No one wants that, but that is where the financial structure of pigs has put us. It is what Bernanke is trying to make worse. It is what Obama is trying to make worse. It is the next bottle of scotch, the next shot of meth, the next fix of heroin to stave off the hangover, the crash and the sickness. There isn't a solution to this problem that is going to leave anyone intact. The ideas of how you increase investment when there isn't any final demand are worthless. The ideas to increase final demand when the solutions only make the problem worse are worthless. We live forever with the sledge hammer over our heads as long as this goes on. We are in a Japan situation on steroids.

There are going to have to be haircuts. The Greek situation proves how potent this mess is. As Karl says, the banks are all broke. They have to be broke because 50% of the debt in the system can't be sustained. The insurance companies are also broke. The pensions are broke. The private savings are broke at current price levels. The whole world is broke.

What fixed the Great Depression was a reorganization and time. We can't sustain the prices paid for anything and fix this. It is a mathematical joke to even propose the idea it can be done. We also can't go back to increasing debt by 10% a year after we fix this and have any kind of sustained economy. There has to be a debt destroying mechanism, whether it is periodic recessions, prohibitions, bankruptcy or what ever other kind of relief can be provided.

Flapping, the great secret is the bankers are liable for their loans. Deposits and capital are only the mirror reflection. That is save the cash they have.

What a flawless example of the true BS in the banking industry! I can't imagine where BOA actually stands today. How many Countrywide Option ARMs did they absorb (which are 100% underwater)? How many equity lines that are worthless? This problem is across the board with banks. If the public knew the truth there would be an overnight collapse; Ben Berbankie knows it, President Obamass knows it, all the PTB that are making money hand over fist on this economic collapse know it and I'm SICK AND ****ING TIRED OF IT!

Another example of left wing liberals being in agreement with Karl.

http://www.counterpunch.org/2011/09/09/e....

By the way, Mike Whitney was writing about the housing bubble and economic corruption back in 2006.

More "confidence building" by the IMF:

IMF's Lagarde: report of $273.2 billion bank hole misleading.

IMF chief Christine Lagarde said on Saturday that reports of a draft IMF document showing a $273.2 billlion shortfall in European banks' capital were misleading and the lender was still finalising its study.

"There has been misreporting about the 200 billion euros, this number is tentative," Lagarde told a news conference after G7 and G8 finance talks in the southern French city of Marseille.

"This is not a stress test that the IMF conducts nor is it the global capital need for European banking institutions, that it is not, and we are currently in discussions with our European partners to assess the global methodology until we reach a tentative draft. It will be published before the end of September."

SOURCE: http://www.reuters.com/article/2011/09/1....

Mannfm11, great post!

There's a certain arrogance at play in Congress. Witness another upping of the borrowing limit by 500 billion overnight.

I suspect that campaign contributions are the least of the bribes and extortion that are in play.

Rule #1: When the government is involved, things are always much worse than they first appear.

Mannfm11 needs a donation bucket by his name.

Mannfm11, re: "How big is the problem? I think it could be 2 years income."

Comstock Partners give a glimpse at those numbers:

Quote:

http://www.comstockfunds.com/(X(1)S(41z2....

...We are convinced that, after the latest 100% rally since March of 2009, that this was the last time the public could be fooled again. And this time we are able to determine that consumers are saving more and consuming less; we believe this change in attitude will continue for a long period of time, creating severe headwinds against strong economic growth...

...The key 18 year bull market we experienced here in the U.S. ending in 2000 was driven by excesses in household debt. Although wage growth had flattened out, consumers wanted a larger home, a nicer car, and nicer clothes whether they could afford it or not. If they ran out of money with their credit cards and bank loans they would take out a second mortgage on their homes that they felt could never decline in value. Household savings rates, which usually averaged about 9%, fell to near zero. Household debt as a percentage of GDP generally averaged about 50% of GDP and 65% of personal disposable income (PDI). However, starting in the early 1980s (as the stock market started this amazing bull market run discussed earlier) household debt rose to 100% of GDP and 130% of PDI by 2008...

... The U.S. stock market will not be able to rise in a sustained manner if we are correct in believing that U.S. households will continue deleveraging for the next few years to as many as 10 more years. The key is that household debt will have to decline to the levels of the 1950s, 1960s, and 1970s of 50% of GDP and 65% of PDI. That would mean the weak consumption will continue and that should lead to disappointing economic growth. The average annual growth in consumption over the last 50 years was about 3.5%, but only 0.6% over the seven quarters since the recovery started. That is the lowest growth rate since the Great Depression...

I heard Suzi Orman on TV the other day and if I have the quote right, 'The American Dream is Dead'. The context of her statement was that using excessive credit to 'keep up with the neighbors' is done/over/no more.

The audience responded, you could almost hear them lose their breath as if they were suddenly hushed by a great warning - then total silence. Suzi went on to state 'Live in Your Truth'. That is, if you can't afford a vacation you don't take a vacation, etc.

Comstock continues in another article:

Quote:

http://www.comstockfunds.com/(X(1)S(csxw....

...This bearishness is mostly due to the enormous debt built up over the last few decades (total debt-including private debt-- was $11 trillion in 1984 and grew by over $40 trillion to over $52 trillion today). Of that $40 trillion increase over 27 years, $26 trillion came in the last decade (see attached chart).

In fact, the eight years between 2000 and 2008 the debt grew from $26.5 trillion (265% of $10 tn GDP) to $54.5 trillion (or $28 trillion from 2000 to 2008)...

...The private sector debt that grew the most was the household debt, mostly because of the massive purchases of homes and goods imported largely from emerging economies. This sector of debt was historically about 50% of GDP and 65% of Disposable Personal Income, but by the mid 1980s it starting growing exponentially until it was in a full blown debt bubble. This sector debt rose from $6.5 trillion in 2000 to almost $15 trillion in 2008. This sector is presently deleveraging and is down to about $13 trillion on its way to below $10 trillion (in our opinion) as the deleveraging continues to take a toll on the U.S. (as well as the global economy, since the rest of the world needs U.S. consumption)...

And the most recent Comstock report:

Quote:

http://www.comstockfunds.com/(X(1)S(bq5g....

...To put some numbers on this debt, if housing prices would have just appreciated with the inflation rate from 2003 to 2007, the total debt from household mortgages would have been about $5.5 trillion. However, since the Administration, Congress, Wall Street-- banks, and the rating agencies made sure that anyone that wanted to have a home, whether they could afford it or not, got the "American Dream," the total household mortgage debt is presently about $10 trillion. This extra $4.5 trillion of household mortgage debt is a terrible burden on the economy since consumers make up over 70% of our economy...

...This is why consumer spending has been so tepid over the past few years as can be seen in the chart ( credit to NDR-Ned Davis Research two charts) on Personal Consumption Expenditures (PCE) during recoveries. U.S. consumers spent well beyond their means for decades and now that they are so overleveraged their PCE will stay constrained for years. The consumer spending didn't seem too onerous over the past few years until the Commerce Department lowered their earlier estimates significantly (see attachments). Also, consumer confidence by any measure you chose is signaling another recession (see attachment-credit to NDR), and any cuts in federal or state government spending could only exacerbate that...

Boz, I feel like Congress is trapped by their own previous voting record.

How can Congress vote NO on stimulus targeted towards individuals after all the corporate stimulus that has been wasted? How can they blatantly vote YES for the bank bailouts but NO for people bailouts without riots in the street.