FDIC to Open a Temporary East Coast Satellite Office - Large bank failures expected in September

[TwixVoy]

I have NOT seen this reported in the MSM... but this is direct from the FDIC web site. I have been doing lots of digging. Looks like they are expecting a wave of banks to fail on the east coast.... (which just happens to be where some of the nations biggest banks are located) and guess when they are opening this office folks? September 2009.

http://www.fdic.gov/news/news/press/2009/pr09068.html

"The Federal Deposit Insurance Corporation (FDIC) today announced it will open a temporary satellite office in Jacksonville, Florida, to manage receiverships and to liquidate assets from failed financial institutions primarily located in the eastern states.

The new office will provide facilities for up to 500 nonpermanent staff and contractors. Staffing will be based on the workload needs of this office, based on the number of closings in the eastern states, the resulting number of receiverships, and the post-closing workload.

The FDIC expects to gradually move into the space starting in mid-September 2009."

[Renew Deal]

1. Maybe it has something to do with this...

By DU's Junkdrawer

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=5121095&mesg_id=5121095

The Worst is yet to come….The Alt-A / Credit Default Swap Crisis….
Some weird happened. It seems that our biggest banks, investment houses and insurance companies woke up one fine day 10 years or so ago and decided they were actually London betting houses.

And they didn’t make millions or billions of dollars of bets. No, they made HUNDREDS OF TRILLIONS OF DOLLARS of bets.

How the hell did this happen? Well, let’s put it this way: Suppose I told you that an event was 99.999 % sure to happen 3 years from now and that you could legally bet on it, backed by the nation’s largest banks and insurance companies, and that the bet would pay off 100 to 1. Would you place the bet?

And, on the other side of the betting window, if I told you that if you constructed a bet that would attract billions of dollars of wagers, but wouldn’t pay off for several years; I’d give you a $50 million bonus that wouldn’t be taken back no matter how much would be lost when the wager came due. Would you construct the bet? Oh, now you might think that you have the moral fiber to resist such a temptation, but it doesn’t matter. Just about every decision maker in High Finance said “Yes! Yes, I’ll take those bets!”

So here we are. The bets were called Credit Default Swaps (CDS) and a large portion of them were made against so-called Alt-A mortgages. In case you haven’t been following the story, The “Alt-A Mortgage Crisis” is the upscale, time-release version of the Sub Prime mortgage crisis we just suffered through. I say “upscale, time-release” because the loan amounts were much larger and included teaser interest rates for the first several years of the loans that made them affordable until the rates reset. The biggest part of the resets are due latter this year:



And it wasn’t just one bet per mortgage. With the repeal of Glass-Steagall Act, hundreds or thousands of bets could be made against each mortgage and by parties that had no relationship to the mortgage. Hence the “London betting house” analogy. That’s why the numbers are so astronomical.

So, what can be done? Well…

1.) We do nothing and watch the nation’s largest banks and insurance companies go bankrupt. Lehman Brothers on steroids.

2.) We try to make the bets good. How we can make tens or hundreds of trillions of dollars of bets good is anyone’s guess.

3.) We step in and make sure that almost no Alt-A loan goes bad. BTW: I think that’s in the “Economic Stimulus Bill”. But even with more favorable rates, I’m not sure people won’t default – they still have real-estate taxes and utility bills on houses they could never afford.

4.) We could nationalize the banks and insurance companies after declaring all their current CDS contracts null and void. That should prove interesting to all the foreign bettors who currently fund our deficits.

Finally, what I find interesting is that so little of all the above is talked about openly in the press. Oh, we hear a lot about "The Sub Prime Crisis", but only a little about CDS and Alt-A. I’m guessing the thought is that if the full extent of the horror were known, people would retreat to their basements with stockpiles of canned goods and ammunition. Looking at the stock market for the past few weeks, I’m not sure that hasn’t already happened.

By DU's Junkdrawer: http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=5121095&mesg_id=5121095

[TwixVoy]

2. Damn interesting timeing

According to that graph you posted the resets hit the roof in September. Same time this office of the FDIC opens.

This thing is not even close to being over.

[Junkdrawer]

3. They peak around December- but it usually takes a few months for the defaults...

This is going to be a lousy Christmas.. :(

[aquart]

Ah. You noticed. Think it will be a big surprise to Bernanke?

I mean, he's telling us it's all over, except for the unemployment.

[Junkdrawer]

4. Here's what surprises me...

On the original thread, almost everyone agreed that Option #3 was a no-brainer: Give the Alt-A borrower every chance to keep the home and prevent the CDSs from kicking in.

BUT the Senate just vetoed that idea. It's almost like the CDS holders jumped in and said "Hey! No Fair. We want those bets to payoff and helping the homeowners queers the deal."

[onenote]

5. widely reported and not a sign of "large bank failures" coming in September

The announcement that the FDIC is opening a temporary east coast office in Jacksonville has been widely reported, as was the announcement last November of the opening of a temporary west coast office in Irvine CA. And it doesn't signfify an expectation of a wave of "large bank failures" in September; rather it is a reflection of the reality that there have been, since last fall, around four dozen bank failures -- most relatively small -- across the nation and its more efficient for the FDIC to have offices on the same coast as the banks that they have taken over. (To put the workload change in perspective -- between 2003 and fall 2008, there were only 20 bank failures, and most of those were in 2008; there no bank failures from June 2004 to Feb 2007).
Thus, a west coast office and now an east coast office.

on edit: as for the claim that this has something to do with the bank re-sets expected in the fall, I guess it would be fair to ask why the west coast office was opened last december at a time when re-sets were low.

[DemReadingDU]

7. Many banks today are huge

In the last 15-20 years, many small local banks have been bought out and merged into larger city banks, and those banks have been merged into even larger regional banks. So one regional bank, such as KeyBank or Fifth Third, now are comprised of dozens of smaller banks.

Think of a bank failure today, as all those dozens of small local banks as having failed. When these large banks start failing, it will be like all those thousands of banks that failed in the 1930's. It is going to get ugly.

[CoffeeCat]

6. You must read this article (FDIC reserves low)

First off, in Sept 2008, when Washington Mutual failed, buried in nearly all articles about this failure--was a sentence about how WaMu's failure "stretched the FDIC's reserves".

That's one bank failure. One. And the FDIC was "stretched"?

Look at this article. It details the actions that FDIC head Sheila Bair is attempting to take (in early 2009)--to stave off an FDIC crisis:
---First she tries to enact fees on banks, to shore up FDIC reserves. Banks reject the fees outright.
---Bair turned to the Senate. Senator Chris Dodd wrote legislation that permanently raises "FDIC borrowing authority to $100 billion, with access
to $500 billion through Dec. 31, 2010."

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=al5Bk3gHNOXA

Looks like they're preparing for massive failure to me.The Senate is considering a bill to