This should make for an interesting open on Wall St. Monday morning.
Paulson and Bernanke both admit the next shoe to drop is going to be the smaller regional banks. Fanny and Freddy on the ropes too…
INDY MAC IS THE SECOND LARGEST FINANCIAL INSTITUTION TO FAIL IN U.S. HISTORY!!! :shocked
The REALLY scary part of this is…like Bear Stearns, Indy spent the last 2 weeks making press statements that IT WAS SOLVENT and had PLENTY of capital. The problem I see is, if this continues to happen with more regional banks, depositors WILL eventually lose confidence. In the last week depositors at Indy Mac withdrew over $1 BILLION!!
From It’s a Wonderful Life…
“Now I’ve never actually seen one, but that’s got all the makings of a run on the bank!!”
So much for CONTAINMENT!!! :banghead :banghead :banghead
I found it interesting that the government didn’t release the info about IndyMac until after the stock market closed on Friday! Obviously, they were hoping that the news would die down before the market opens on Monday morning. However, as you said, this thing is snowballing on the goverment (and the rest of us peasants). How many more shoes can drop before we have a crash?
One of the small local banks that I deal with was recently purchased by another bank. I didn’t think too much about it until I was talking to the vice-president of the other local bank I use. He said that the bank had a bunch of bad loans and he implied that they had to sell to remain solvent.
I still believe that we’re in for a DEPRESSION. Even without the credit crisis, the housing crisis, and high fuel prices, the US government can not pay for all the entitlements they’ve promised, let alone all the silly promises of the socialists who will soon be in office. To make matter worse, they’re printing money from thin air to bail out everyone in sight. The bill WILL be paid - one way or the other!!!
When the FDIC takes over a failing bank it is standard operating procedure to go into the bank on Friday at close of business. This gives the regulators all weekend to make press announcements, take control of the books and records and accounts and prepare to reopen the bank as a new federally chartered financial institution on Monday morning or complete the sale to a third party bank.
Regulators only take over a bank when it is apparent that they will fail their minimum capital requirements (usually due to losses or credit write downs), there is a complete lack of confidence in management’s ability to salvage the bank or as in this case there is a collapse of public confidence in the bank causing a run on deposits which can spread throughout the system.
I find it interesting that in this case the quick closure came about as a result of statements made public by a member of congress…
" The immediate cause of the closing was a deposit run that began and continued after the public release of a June 26 letter to the OTS and the FDIC from Senator Charles Schumer of New York. The letter expressed concerns about IndyMac’s viability. In the following 11 business days, depositors withdrew more than $1.3 billion from their accounts."
Right now in Florida we have an interesting senario. Because large banks like Wachovia, BOA, etc are having capital problems, they are paying 4-4.25% on their CDs. In the banking world that is the money that we turn around and lend at a spread. Given this fact, smaller banks are trying to plan keep up so expect rates to go up even if the Feds don’t raise rates. Additionally, the FDIC will continue to look at credit quality which effects all banks. Smaller banks are generally an investors best choice in a market such as this.