Discussion in 'Economics' started by gastropod, Aug 22, 2009.

  1. I think anybody here (with half of a brain) could talk about the Kindleberger book (Manias, Panics, and Crashes: A History of Financial Crises) and understand his concept of the "Lender of Last Resort and the concept of bubbles ("It is different this time").

    For the previous parts of this recession/depression the US banks that have failed have either had their assets taken over by other US banks or the FDIC. It would appear that the FDIC is no longer playing the role of lender of last resort. When Guaranty Bank failed yesterday...things WERE different - there was NO US bank to take them over! The FDIC courted - yes, courted BBVA for BBVA to take over Guaranty. - fourth paragraph down.

    Heads up folks...we are now relying upon foreign entities to save our banks! This will last only as long as foreigners will save our banks...and then may God have mercy upon all of us within the US!

    (Courtesy of ET and gastropod news services :D )

  2. OK, I am not above asking for a reality check on myself :D Am I completely out in left field in thinking this is fairly big?

  3. WOW!!! Harsh! Too true, but harsh none the less. Now that you say it, I should have thought of that! In looking at the posts of BLSH and others...many just don't want to see the present bad news or that this is not an "ordinary" recession!

    Thanks for your input!

  4. I don't see why this is such a huge deal... I also don't see how you manage to conclude that the FDIC is not a lender of last resort. It's gonna cost them $3bn and they have to backstop some of the assets. How is that not being a lender of last resort?

    This is a global financial mkt. If a Spanish bank can take over a failed UK bank, why not a US one? If a US bank like Citi can establish operations in Europe, why can't a European bank take over a US one?
  5. Ahhh, a bit of the history of the thing. I could be wrong, but if I read the stories right (and I posted a link in the original post) the FDIC had "shopped" this pig around to US buyers...and couldn't find one. Is that saying that there wasn't a financially stable enough US bank to take Guaranty over or was it saying that the FDIC could get the best deal for the money from a bank outside of the US? My point was that if they couldn't find a US bank that was financially able...God help us all!

    Added from an edit: The FDIC has taken over banks and created "bridge" banks - for customers to transfer to another bank -> Why not in this case?

    Thanks for the reply!

  6. Read the 4th paragraph down, not seeing where BBVA was courted, just a matter of fact statement that they were the acquiring bank.
    As for this being out of the ordinary for a recession, yes it is. But my contention is that this ain't the big one.
    The big one's out there, but it's waiting for us to think everything's just fine. Bernanke is even now doing a victory lap over at Jackson Hole, talking about how we're past the worst. The standard story over the next few years will be how he saved the world.
    And then the big one will hit, and Bernanke, or whoever's in his place, will find that their policy tools aren't working, and that will truly be when the SHTF.
  7. Huh - looks like they edited the article and the fourth paragraph no longer has the stuff about Guaranty being shopped around....but, here is a nice article from the NY Times that says the FDIC is going through "extraordinary" measures to pawn...errr, "attract buyers" for the banks that are in trouble...

    Thanks for the reply!

  8. I honestly think you're being paranoid here, gastro...

    More likely nobody wanted Guaranty, 'cause it's big and 70% of its assets are real-estate related. I think it was a real coup that the FDIC managed to offload this steaming turd onto the unsuspecting Spaniards. Apparently, estimates of the wind-down cost to the DIF were a lot higher than the $3bn that they're estimating they'll pay with BBVA in on the deal.

    See here:

    What's a bigger mystery to me is why BBVA, probably already limit long Spanish real estate, would actually want to take on something like Guaranty...

    EDIT: I think the US banks' exposure to real estate is the reason why the FDIC has to work so hard to sell these things. In which case, if you think about it, selling to a foreign bank is sorta like sweeping the issue under the rug, rather than solving it...
  9. LOL!!! It wouldn't be the first time I was paranoid :D

    edit: BTW - I liked your analogy of sweeping under the rug. All I can picture is some sleazy used car salesman type from the FDIC talking to the Spanish like, "Have I got a deal on a beautiful little bank - you're gonna love it!"


  10. I'm lost. (nothing new there)
    Did BBVA actually BUY Guaranty outright?
    No stealth backup deal from GS or JPM or "da Gubmint?
    I'm suspicious, to say the least.
    #10     Aug 23, 2009