Show-me Account Talk

[Show-me]

What do the Nobel Peace Prize, welfare, and socialized health care all have in common?

 

[Show-me]

:laugh::laugh::laugh:

 

[Show-me]

What is the difference between getting your worn out painful knee replace by the VA or with private sector insurance. Answer is a true story and happened to my Dad.

In the VA my Dad was told that you would have to be dragging yourself in here with just your hands or dying from it before it would get replaced.

Private sector, "Come on in and we will schedule surgery right away." Thank God my Mom was still working and had private sector insurance. My Dad said it was the best thing he could have done.

 

[Show-me]

The trifecta.

3) Options Arm and Alt A. Loan Programs: The third leg of the trifecta issues gaining momentum is something I wrote about concerning the conversion of payment structures on Option ARMs and Alt. A. loan programs. Below is a chart of when they begin to convert and by home much.

Beginning in the 4th quarter of 2009 and going well into 2011, we'll see a sharp increase in the number of homes receiving adjustments on mortgage payments, and by a wide margin (40-80% increases). Many of those mortgages where written as a way for someone to buy a house they couldn't afford on traditional home financing terms, and when the payment adjusts they will not be able to afford that home.

If you can't afford the mortgage payment, and the house is worth less than what's owed, it's not rocket science, it's just a matter of when the bank gets to own it. The re-pricing of mortgages should cause another wave of bank owned homes and more financially distressed real estate. This sub-segment problem might take until the end of 2010 to actually hit bank balance sheets (as real estate owned by the bank) given the timing of the payment change and foreclosing process of properties.

One of the more interesting notes about these exotic mortgages is it seems like they were highly concentrated in the higher end real estate markets. As a commercial banker, I see a lot of people who have these types of mortgages on higher end homes. In California I see these types of mortgages on loans typically $700,000 or higher. So, as the mortgage re-pricing occurs we might see this problem concentrated in the higher end real estate markets, as those assets flow into bank owned and then back onto the market as distressed real estate, we should expect compression in real estate values from the top down.

Another unique note is that slightly more than 50% of these types of mortgages were underwritten in California, so the intensity of the problem should be felt in California, "The Bubble State". If so, it should negatively impact CA real estate values and those banks specializing in this lending product in California. Hmmm, I can't remember, but who bought Wachovia?

http://www.safehaven.com/article-14795.htm

 

[Show-me]

Interesting personal note.

Guy I work with had his 30 year class reunion last weekend and one of his class mates is a banker on the left coast.

The gist of the current economic conditions conversation when like this. Any bank that was not a mega bank is hurting bad because they did not get any help. His bank has been laying off people weekly trying to cut cost because they have so many bad loans on the books and it is acceleration. Every time someone comes to his office he thinks he is next on the butcher block. The next mushroom cloud is coming, just wait for it.

On the same note, it was reported that the WH is looking and using TARP fund to shore up these banks.

Bank failure Friday is here!

 

[Show-me]

I am trying to look at everything more openly and yes I missed one hell of a rally off of 666. Question is how much more is there left to go? The C, S, and I funds are up very sharply so far this year, 24%, 32%, and 32% respectively. Wow, like nothing is wrong.

We have higher return this year that in years we were hitting on all cylinders and no problems.

Did we over correct? Is the market being manipulated again?

IMO, the risk is getting higher every day for a correction to this bubble. If you have beaten the market soundly you have more room for the risk. If you are like me preservation of my gains is more important.

 

[Birchtree]

Leuthold: Good Things Coming for Stocks in Nov., Dec.

http://theguruinvestor.com/

 

[James48843]

Re: The trifecta.

3) Options Arm and Alt A. Loan Programs: The third leg of the trifecta issues gaining momentum is something I wrote about concerning the conversion of payment structures on Option ARMs and Alt. A. loan programs. Below is a chart of when they begin to convert and by home much.

Beginning in the 4th quarter of 2009 and going well into 2011, we'll see a sharp increase in the number of homes receiving adjustments on mortgage payments, and by a wide margin (40-80% increases). Many of those mortgages where written as a way for someone to buy a house they couldn't afford on traditional home financing terms, and when the payment adjusts they will not be able to afford that home.

If you can't afford the mortgage payment, and the house is worth less than what's owed, it's not rocket science, it's just a matter of when the bank gets to own it. The re-pricing of mortgages should cause another wave of bank owned homes and more financially distressed real estate. This sub-segment problem might take until the end of 2010 to actually hit bank balance sheets (as real estate owned by the bank) given the timing of the payment change and foreclosing process of properties.

One of the more interesting notes about these exotic mortgages is it seems like they were highly concentrated in the higher end real estate markets. As a commercial banker, I see a lot of people who have these types of mortgages on higher end homes. In California I see these types of mortgages on loans typically $700,000 or higher. So, as the mortgage re-pricing occurs we might see this problem concentrated in the higher end real estate markets, as those assets flow into bank owned and then back onto the market as distressed real estate, we should expect compression in real estate values from the top down.

Another unique note is that slightly more than 50% of these types of mortgages were underwritten in California, so the intensity of the problem should be felt in California, "The Bubble State". If so, it should negatively impact CA real estate values and those banks specializing in this lending product in California. Hmmm, I can't remember, but who bought Wachovia?

http://www.safehaven.com/article-14795.htm

That is the scariest visual I have seen yet.

This deserves much greater discussion.

Thanks for posting.

 

[Show-me]

James,

I have been focusing on this issue personally and it seem the public is either complacent again or completely unaware of the coming tsunami of bank failures due to the future loan defaults. The next wave is coming, it has just been delayed by TARP.

The Administration is starting to see it coming and I read a article in USA Today that they are going to throw some TARP money at the small banks.

Problem is that it will only prolong the inevitable.

All of the monster mega banks are flush with cash right now. Why? They know the second wave of defaults, ALT A and PRIME loans, are coming with a vengeance. It won't get better until jobs come back to the USA.

Don't forget there is trillions of dollars of derivatives still floating around unregulated when the next wave hits. Do you think the tax payer backed AIG can handle those?

We're not only seeing lenders work through the pent-up foreclosure inventory, we're also seeing foreclosures move to the higher end of the market. In the early stages of the downturn, subprime mortgages were the hardest hit, but now we're seeing more and more foreclosures among prime mortgages, as well as Alt-A and Option ARMs. In 2006, about 55 percent of foreclosures were on subprime loans; in 2009, subprimes represent just 35 percent of foreclosures, while another 35 percent are in the middle tier and 30 percent are in the top tier.

According to the Amherst Security Group, this problem won't go away any time soon, because:

• Loans are transitioning into delinquency/foreclosure at a rapid pace, but moving out at a slow pace;

• Cure rates are low. In other words, fewer people are paying their past-due amounts and getting back on track.

• Loans are taking longer to liquidate. In other words, the length of time between the start of the foreclosure process and the point when the lender gets control of the property is growing.

http://www.dailyfinance.com/2009/10/15/foreclosures-jump-to-new-record-high/

Here’s a sobering thought for those excited by recent signs that the housing market may be bottoming out: Homeowners who fall behind on their mortgage payments have become much less likely to catch up again.

The report from Fitch Ratings Ltd., a credit rating firm, focuses on a plunge in the “cure rate” for mortgages that were packaged into securities for sale to investors. The study excludes loans that are guaranteed by government-backed agencies as well as those that were never bundled into securities. The cure rate is the percentage of delinquent loans that return to current payment status each month.

Fitch found that the cure rate for prime loans dropped to 6.6% as of July from an average of 45% for the years 2000 through 2006. For Alt-A loans—a category between prime and subprime that typically involves borrowers who don’t fully document their income or assets—the cure rate has fallen to 4.3% from 30.2%. For subprime, the rate has declined to 5.3% from 19.4%.

“The cure rates have really collapsed,” said Roelof Slump, a managing director at Fitch.

Because borrowers are less willing or able to catch up on payments, foreclosures are likely to remain a big problem. Barclays Capital projects that the number of foreclosed homes for sale will peak at 1.15 million in mid-2010, up from an estimated 688,000 as of July 1.

Cure rates have plunged despite the Obama administration’s prodding of banks to ease the terms of mortgages for millions of borrowers to try to prevent foreclosures. Without those loan-modification efforts, the cure rates would be even lower.

Borrowers have become less likely to catch up partly because job losses have made some of them unable to make payments, Mr. Slump said. In addition, he said, some people who could make the payments probably are no longer willing to do so. That may be because the values of their homes have fallen below their loan balances and they see little hope of ever recovering their initial investments.

http://blogs.wsj.com/developments/2009/08/24/more-prime-borrowers-who-fall-behind-arent-catching-up/

The long recession and rising joblessness are taking an increasing toll on the nation's most credit-worthy borrowers, who are now falling behind on their mortgage and credit-card payments at a faster pace than people with poor financial histories.

The mortgage-delinquency rate among so-called subprime borrowers reached 25% in the first quarter but appears to be leveling off, rising only slightly in the second quarter. The pace of delinquencies for prime borrowers is accelerating. Since prime loans account for 80% of U.S. bank exposure to mortgages and credit cards, these losses could ultimately exceed those from weaker borrowers.

http://online.wsj.com/article/SB125202003216284895.html?mod=relevancy

 

[Show-me]

Whew, 4:22 in the morning. What was I thinking about?

 

[alevin]

I hope you weren't up so early due to sweating about banks, mortgages, foreclosures. Tho there's certainly sweat-worthy doings going on there.

Yep, sweatworthy and the light at the end of the tunnel's not our friend.

 

[Show-me]

Not the banks.

 

[Show-me]

What's wrong with these pictures. I told you they are not lending because they know what is coming. Man your life boats!

 

[Show-me]

Everyone, do the Country a favor tell all of you family and friends to take their money out of mega banks and sell any stock they own from them.

 

[Show-me]

The titans that survived last year's tumult have gathered deposits by the bushel. But they have shown less of a knack for lending it out.

A river of cash has flowed into the biggest banks over the past year. But for borrowers, it has been more of a meandering stream.
Deposits at the top five bank holding companies soared 29 percent in the year ended June 30, according to the Federal Deposit Insurance Corp.

All told, the five biggest deposit-taking banks added $852 billion in core deposits over the past year -- essentially checking and savings accounts of less than $100,000.
Over the same period, their loan portfolios rose by just $564 billion.
This is noteworthy because these five banks received more than $100 billion in direct taxpayer assistance via the Troubled Asset Relief Program (TARP) -- a program that was set up to replenish the depleted capital levels of banks and allow them to boost lending to consumers and small businesses.

Federal Reserve governor Daniel Tarullo told Congress this month that commercial bank lending has declined through most of 2009, "with particularly severe consequences for small- and medium-sized businesses, which are much more dependent on banks than on the public capital markets that can be accessed by larger corporations."

http://finance.yahoo.com/loans/article/107997/big-banks-take-your-money-and-run

 

[Show-me]

This is a perfect set up if you think like me. The mega banks have staked out the permanent claim in the banking industry by absorbing the failures, taking TARP, and increasing their balance sheet while not lending any money out.

I am hearing too many back stories about how the regional and small banks are on the verge of collapse because credit is so tight or nonexistent.

Who got the tax payer help and who is hording the cash? Who became too big to fail? Why?

First the mega banks have to stave off the next wave of loan failures. After that they will be in prime position to scoop up regional and small banks on the cheap, making them bigger yet just like the big three automakers and the oil companies. When that is done the world will be their oyster just like the oil companies. If you want to make the big bucks own all the competition.

Am I cynical, nuts, or realistic?

 

[alevin]

Show-Me, the smallest banks are sinking out of sight because they weren't offered TARP $. The "Too-Bigs" have so much hidden undeclared losses on their balance sheets they'd already have sunk if .gov had forced them to declare the losses. Their reserves will get swallowed up when the losses finally become visible. That's why they aren't lending and why our small-biz sector is failing.

Go to Bankrate.com. The 5-star rated banks may not be as safe as they appear on the surface, but they're a whole lot safer than the ones with ratings 1-3 star. I've been slowly draining my BAC account this past year, my new deposits go to CU and/or a 5-star regional bank.

 

[nnuut]

This is a perfect set up if you think like me. The mega banks have staked out the permanent claim in the banking industry by absorbing the failures, taking TARP, and increasing their balance sheet while not lending any money out.

I am hearing too many back stories about how the regional and small banks are on the verge of collapse because credit is so tight or nonexistent.

Who got the tax payer help and who is hording the cash? Who became too big to fail? Why?

First the mega banks have to stave off the next wave of loan failures. After that they will be in prime position to scoop up regional and small banks on the cheap, making them bigger yet just like the big three automakers and the oil companies. When that is done the world will be their oyster just like the oil companies. If you want to make the big bucks own all the competition.

Am I cynical, nuts, or realistic?

I think you hit the nail on the head Show-me, makes sense to me. The deck is stacked and the little guys haven't got a chance, as usual.:worried:

 

[Show-me]

Citi, Bank of America Managers Averaged $18 Million Pay in 2008

By Bradley Keoun

Oct. 24 (Bloomberg) -- Citigroup Inc. and Bank of America Corp. paid top executives an average of $18.2 million each last year as the banks accepted $90 billion of bailout funds, records from Treasury Department paymaster Kenneth Feinberg show.

Citigroup paid $390.2 million to 21 people, an average of $18.6 million each, the records released Oct. 22 show. Bank of America paid $227.8 million to 13 executives, or $17.5 million apiece, according to Feinberg, who didn’t name them. The review excluded top-paid employees from 2008 who have since left.

Average pay for managers at the two banks was almost double that of the other five bailed-out companies reviewed by Feinberg. He ordered 2009 pay cuts averaging more than 50 percent for 136 executives at the seven firms after President Barack Obama said “it does offend our values” when company executives “pay themselves huge bonuses even as they continue to rely on taxpayer assistance.”

Overall, the employees whose pay was reviewed by Feinberg will get $339.7 million this year, or an average of $2.5 million. The totals for 2008 and 2009 were derived using figures Feinberg provided on the dollar amount and percentage decline between the two years.
Citigroup spokesman Stephen Cohen and Bank of America spokesman Scott Silvestri declined to comment.

Feinberg cut the Citigroup executives’ pay by $272 million, or 70 percent, from last year. They’ll still get $118.4 million this year, or an average of $5.6 million each. Most of the pay is in the form of restricted stock, complying with a Feinberg requirement that the companies encourage executives to focus on long-term performance.
Pandit’s $1 Pay

Citigroup’s 2009 total includes $1 for Chief Executive Officer Vikram Pandit, 52, who in January volunteered to slash his pay after getting $10.8 million in 2008.

Feinberg stipulated “$0” in pay for Andrew Hall, the former head of Citigroup’s energy-trading unit, who was paid about $100 million in 2008. Citigroup agreed earlier this month to sell the unit, Phibro LLC, to Occidental Petroleum Corp., which will foot Hall’s 2009 tab.
Citigroup sought aid from the Treasury Department last year as it posted a record net loss of $27.7 billion.

Citigroup previously had only disclosed the 2008 pay for Pandit, former Chief Financial Officer Gary Crittenden and Citi’s three other highest-paid officers, former Asia head Ajay Banga, trading chief James Forese and Vice Chairman Stephen Volk. The five of them made a combined $56 million, or an average of $11.2 million each.
Bank of America

Charlotte, North Carolina-based Bank of America will pay the 13 top executives a total of $78.6 million in 2009, according to Feinberg. While the total is down by 66 percent from last year, the executives will still get an average of about $6 million each.

CEO Kenneth Lewis, 62, who plans to step down at the end of the year, is working for free this year.

He still stands to collect pension benefits that earlier this year were valued at $53.2 million, David Schmidt, senior consultant at James F. Reda & Associates, a New York compensation consulting firm, said Oct. 1. Lewis also has accumulated common shares worth about $57 million, deferred compensation of about $10 million and restricted stock of about $5 million, Schmidt said.

The other five companies reviewed by Feinberg were GMAC LLC, American International Group Inc., General Motors Corp, Chrysler Group and Chrysler Financial.

The 22 GMAC executives covered by Feinberg’s review will get an average $3.17 million in 2009 pay, while AIG’s 13 top executives will average $2.42 million. The average was $1.1 million at General Motors, $507,424 at Chrysler Group and $310,506 at Chrysler Financial.

The highest approved pay among all the covered executives was $10.5 million for Robert Benmosche, the CEO of AIG, whose bailout totals $182 billion.

To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net.
Last Updated: October 24, 2009 00:00 EDT

 

[Show-me]

Did the morons that voted for TARP think for one minute that these people would not want to get paid what they negotiated? Idiot Congress. I hope the massive campaign contributions make them sleep better at night.

Now if they were left to fail would these people have gotten paid?