You people need some research & education on money & banking. Every bank under fractional reserve banking is inherently bankrupt. That is a fact. Because if everyone or even most went to withdraw deposits, no bank in US, except maybe some local ones, could meet the demand. If you think the US system is bad, try checking the reserve ratios in China & Russia. Almost all of the world runs this type of system. Practically every "civilized" nation has a financial system like USA.
When excess withdraws take place the "bank" calls uncle Sam that trucks over more cash to shore up the required reserve ratio. Our international banking system is build on exponential lending. If a whole bunch of lending goes bad then all of a sudden the bank is out of a lot of $. History has taught us this already.
Also who saw the news that AXA was putting a freeze on withdraws from one of its funds. How much crap do you think those guys are hiding??!! This ain't over folks. Get short or protect before the fecal matter gets thick.
I just recd an email from a economist in a USA bank , well known, I dont have permission to state who is it, but I ask her/him to review the charts from the FED. The response was....brief but interesting.. QUOTE.."Banks ARE IN TROUBLE but the drop in nonborrowed reserves is because of the new TAF not capital evaporating."... I put the capitals in.
Home ATMs (HELOCs) are drying up. http://www.latimes.com/business/la-fi-loans1feb01,1,6837580.story?ctrack=1&cset=true Trying to tap into home equity? We'll see Countrywide and others tell thousands of homeowners that they can no longer borrow against their credit lines as the companies tighten standards. By Kathy M. Kristof,, E. Scott Reckard and David Colker, Los Angeles Times Staff Writers February 1, 2008 Tens of thousands of homeowners with home equity lines of credit are getting a rude surprise: They've been told by their lender that they can no longer take money out on their credit lines because sinking home prices have left them with little or no equity. Among the lenders taking such action is Countrywide Financial Corp., which sent 122,000 letters to customers last week telling them they could no longer borrow against their credit lines. In some cases, according to the company, the borrowers are now "upside down" -- the total debt on the home exceeds the market value of the property. Calabasas-based Countrywide, the nation's largest mortgage lender, says it uses computer modeling that factors in changes in home prices to determine which customers will have their money tap shut off. The cutoffs are coming as a shock to some. "We didn't deserve this," Thaleia Georgiades, a real estate agent in El Dorado, Calif., said Thursday, two days after she and her husband, a builder, learned that their Countrywide credit line had been frozen. "When you are self-employed, that's the money you count on to bridge the gap during tough times. And this is a particularly tough time in both the building and housing industries," Georgiades said. In Phoenix, Kristen McEntire said she received a letter from San Antonio-based USAA Federal Savings Bank about two months ago saying the credit limit on her home equity line had been slashed by $40,000 because the value of her home had declined. "They froze everything but about $5," she said. "That's what I had left in the line of credit" after the bank's action. A USAA spokesman said the bank had cut credit limits in "a small number of cases" because of lower home values. McEntire, 33, who works for a mortgage broker, said she had been using the credit line to help make payments on another home that she owned and had rented out. "I thought that if I only had to keep doing that for five or six months, I could make it up later," she said. Instead she found herself borrowing $12,000 on credit cards. "I want to act responsibly, so I don't foreclose on either property," she said. The moves to rescind credit lines are part of a pullback by lenders nationwide on home equity loans, which are often used to finance home improvements and consumer spending. Such loans, also known as second mortgages, were widely available until six months ago, when delinquencies and foreclosures began to soar. Now, with new evidence of sinking home values, many lenders are requiring that homeowners maintain a much larger percentage of equity in their homes as a cushion against financial problems. Pasadena-based mortgage lender IndyMac Bancorp last week sharply cut back on issuing new home equity lines as part of a move to focus on loans that can be sold immediately to investors. An IndyMac spokesman said he couldn't say whether the lender was looking at existing credit lines with an eye to suspending them. Chase Home Lending, a unit of banking giant JPMorgan Chase & Co., one of the country's largest home equity lenders, is imposing new guidelines next week that will further restrict who can get a new credit line, the company said. Through this week, Chase customers in California can tap as much as 90% of the equity in their homes. Starting Monday, however, that limit goes down to 85% in most of the state. In six counties, including three in Southern California -- Los Angeles, Orange and Imperial -- Chase won't let homeowners borrow more than 70% of the value of their homes. The bank wouldn't say how the six counties were chosen. In Florida and Nevada, Chase's loan limits are going down Monday to 70% and 65%, respectively. The percentages will be even lower for people who don't have the best credit. "Our goal is to always make sure that for both our sake and our customers' sake that our customers don't owe more than their equity," Chase spokesman Thomas Kelly said. Chase is still assessing whether to rescind existing lines of credit, he said. SINGLE PAGE 1 2 >>
I have found the final world the matter..its a red herring.. http://piggington.com/bank_reserve_r...ts_and_the_taf There's a post, apparently from someone over at Calculated Risk, that's posted in the middle of the thread that's approximately correct. (Most importantly, the poster correctly points out the difference between "liquidity reserves" and "capital," two very different things.) I'm not going to go through all of the balance sheet math here because it would take too long and wouldn't accomplish very much. Suffice it to say that banks have five major sources of funding for loans: (1) Common Equity, (2) Trust Preferred and Sub Debt, (3) FHLB Borrowings, (4) Other "Fed-related" borrowings (such as the TAF, currently), and (5) Deposits. If the rates offered through the FHLB system or the TAF are as good or better than the terms that would have to be offered to depositors, then many banks will go with the past of least resistance - FHLB borrowings or the TAF. Remember, deposits not only cost money from the rate side of things but you also have to pay employees, etc. to process them; that is, deposits are "operationally expensive." Sometimes it's just cheaper and easier to use the "government's money" (for lack of a better term), especially when Fed is practically throwing the money at them. Merely the fact that the banks are availing themselves of the opportunity to use these funds doesn't mean a whole lot. Nor is it really meaningful to look at liquidity reserves in relation to these funds. If the government gives warning that these funds will no longer be available as of "x" date, the banks will just raise deposit rates, take in sufficient deposits and repay the borrowed funds. Yeah, they'll see a margin squeeze, but it's not the end of the world. Look, the regulators understand liquidity really well. This is a non-issue in the aggregate. The REAL issue is with capital and solvency. And regulators aren't particularly good at that because it's hard to analyze a loan portfolio that you didn't underwrite yourself or a complex MBS portfolio that you didn't purchase yourself. Liquidity will only become an issue AFTER more capital/solvency issues crop up, as in the recent case of Countrywide. People should keep their eyes on the losses in the loan and securities' portfolios. These FHLB/TAF borrowings, while not entirely unimportant, are a red herring. ************************************************** ** BUT THIS IS STILL A GOVT FUNDED SUPPORT FOR BANKS, as the margin they make on TAF funds is more than the would make on public deposits. So welfare for the banks..poor them !!
This video broke the story...it's great stuff and very interesting..and scary!!! http://www.youtube.com/watch?v=EBZ81hmZuNk
I was going to say this, but you beat me to it. The folks in this thread are under the odd belief that this is only a US problem. Additionally, screaming "Wake up US" in an ET thread is not a very effective way of waking up the populace.