Banking system

[Helen]

I found this on another message board:

"i spoke with a friend on the phone tonight, who said he had dinner with someone high up at one of the major banks, who told him that things in the banking sector are much, much worse than we're being told, and that a complete collapse of the banks could happen as early as the beginning of this coming week. he said that the banks were in talks with the government to be nationalized, but the transition could take weeks, during which time services could be interrupted because the flow of money and credit will be essentially stopped until things get ironed out.
his banking friend said it could be perhaps even as long as 2-3 months for things to return to somewhat normal and to go out immediately and stock up on canned goods in order to ride out the "transition". he said that that the danger isn't in a run on the banks like the depression, because the government has guaranteed those funds, but in businesses being unable to guarantee that they will be paid for goods, might stop shipping to stores. given what we;ve heard about credit markets not unfreezing even though they were provided with govt loans, perhaps this isn't so far-fetched."

Anyone care to comment?

 

[REWahoo]

Anyone care to comment?

When you stock up, I'd skip the peanut butter crackers...

 

[Architect]

I don't buy the 'head for the hills' advice, but I do agree that the banking problems are much worse than people generally believe. Biggest credit bubble in history, and we keep trying to paper it over.

 

[mark500]

and that a complete collapse of the banks could happen as early as the beginning of this coming week. he said that the banks were in talks with the government to be nationalized,

Lol. Define "complete collapse". Not even the financial porn doom and gloom site The Bank Implode-O-Meter - Your play-by-play for the end game of modern banking. is predicting that.

A large percent of Americans are overweight anyway. Many could use a 6 week diet of canned pork and beans. Maybe we should start stocking shotgun shells, condoms, bottled water and beer or wine.

 

[Bestwifeever]

I found this on another message board:

"i spoke with a friend on the phone tonight, who said he had dinner with someone high up at one of the major banks, who told him that things in the banking sector are much, much worse than we're being told, and that a complete collapse of the banks could happen as early as the beginning of this coming week.....

Now that sounds like a fun board to read!

 

[DAYDREAMER]

Alright, now the ER forum has turned into a doomer site. Common people, I read this site to set a positive "glass is half full" attitude. This site now reads like the doomers website I read. How the heck am I suppose to stay positive?

 

[yakers]

Helen, how serious do you take the post? Any reason to believe the poster has particular insight. My sister is in banking and told me many months ago to avoid bank stocks but said I did not have to get rid of the one I had. She also said about two years ago to sell my house if I was planning on moving in the next 5 years. But I did nothing and took the usual market hit to my portfolio (-32% of one IRA, -12% of target retirement IRA, and whatever Wellesley/VWIAX has lost for my wife; we have not moved and do not plan to. So what would you do different?
Retired March 08 and having a great time. I am a bit concerned about the market but our pensions cover our living expenses so our other funds determine whether we play in Tahiti Vs Tijuana.

 

[2B]

"A friend high up in (fill in the blank) tells me that everything's going to hell in a matter of days"

That's the standard "rumor" spread by shorts. If enough people believe it, it will come true. The shorts have already successfully imploded a few banks that weren't in that much trouble until the "rumors" caused massive withdrawls and a shutdown of normal business activities.

I can't help but believe that the Fed will pour an endless supply of their imaginary money (but real to us) into the banking system to keep it functioning. It's not going to create a great economy overnight but I don't see a total shutdown happening.

The other alternative is "nationalization" which would serve the same purpose but eliminate any illusion of a capitalist financial system.

Still another alternative is to do away with the idiotic "mark to market" rule that has reduced the value of performing assets to less than 50% of their face value. The market is not functioning so what does "mark to market" accomplish but a meaningless erosion of capital which creates the inability of banks to make loans.

 

[brewer12345]

Alright, now the ER forum has turned into a doomer site. Common people, I read this site to set a positive "glass is half full" attitude. This site now reads like the doomers website I read. How the heck am I suppose to stay positive?

Now you know why I read an ever lower percentage of the threads here...

 

[Nords]

Anyone care to comment?

.

 

[shotgunner]

A large percent of Americans are overweight anyway. Many could use a 6 week diet of canned pork and beans. Maybe we should start stocking shotgun shells, condoms, bottled water and beer or wine.

Already got tons of shotgun shells for skeet shooting, who needs condoms when your fixed, bring on the beer, wine and a lovely lady and I am ready to ride out this pending bank disaster

 

[Nords]

Already got tons of shotgun shells for skeet shooting, who needs condoms when your fixed, bring on the beer, wine and a lovely lady and I am ready to ride out this pending bank disaster

I can't wait to see what TromboneAl's beaver does with this banking-vocabulary softpitch...

 

[Trek]

I told T-AL to keep his silver coin just for this very reason.

http://www.early-retirement.org/forums/f28/redeeming-this-coin-41793.html

 

[bbbamI]

Thanks Nords...I'm going to have nightmares with that image!

Helen, I agree with Yakers. How credible is the poster?

 

[W2R]

told him that things in the banking sector are much, much worse than we're being told,

Could be. I wouldn't be surprised (but then, I also wouldn't be surprised if things in the banking sector are much, much better than we're being told).

and that a complete collapse of the banks could happen as early as the beginning of this coming week.

I doubt the government will allow that to happen, even if they have to come up with every cent the remaining banks need to operate.

he said that the banks were in talks with the government to be nationalized, but the transition could take weeks, during which time services could be interrupted because the flow of money and credit will be essentially stopped until things get ironed out.

See above. The transition very well could take weeks, but if necessary the banks could be propped up in the meantime.

his banking friend said it could be perhaps even as long as 2-3 months for things to return to somewhat normal and to go out immediately and stock up on canned goods in order to ride out the "transition".

Oh. He's one of THOSE. That explains a lot.

he said that that the danger isn't in a run on the banks like the depression, because the government has guaranteed those funds, but in businesses being unable to guarantee that they will be paid for goods, might stop shipping to stores. given what we;ve heard about credit markets not unfreezing even though they were provided with govt loans, perhaps this isn't so far-fetched."

I'll believe it when I see it. I don't think this person and I are on the same wavelength.

 

[Bikerdude]

Now that you mention this, I was listening to the "News hour" and they had two people commenting on the banking crisis on Thursday night, I think. I don't remember who they were but I do recall the woman saying at the end that "something big was going to be done" and (in her opinion) would be done soon. Don't know what that means but thought as long as we are speculating I'd join in.

 

[Rustic23]

Just read on Google News that the Feds closed a bank in CA Friday. Maybe it's not going to wait till Monday.

 

[roger r]

Well, I too have a friend who is somewhat intimate to the state of the banking system. Last week we had a short discussion about things and she was a little tight lipped, but she was indeed nervous and indicated some further big problems to surface. I even picked up that she got a little pale and quivery when we were talking about it, though that could have had something to do with the sausage pizza. She did mention a second big wave of mortgage defaults beyond the subprime and getting into more conventional loans. There was a feature on 60 minutes about this a few weeks ago, but I've not seen much else in the mainstream news.

I didn't get enough from our discussion to think the sky is falling, but I don't think Helen's info should be totally discounted.

 

[Nords]

Just read on Google News that the Feds closed a bank in CA Friday. Maybe it's not going to wait till Monday.

Brewer explained in a thread a while back that FDIC prefers Friday-night [-]massacres[/-] takeovers because that gives them the weekend to straighten the books out and to open for business on Monday as usual.

Of course if the failed bank was holding Saturday hours then the weekend customers would be outta luck.

I guess we're not going to get any Pollyannas posting here right away about banks returning to stability, or the Fed's pump-priming having an effect, or things in general getting better. So while we're waiting to see if the sun will come out tomorrow, would those of you in the doom&gloom and Chicken Little camps be able to suspend your rumor-mongering for a few minutes to see if you can produce some links tied to a credible reporting source?

 

[Purron]

I'm very concerned about the banking crisis but am far from the point of digging a bomb shelter and filling it with bottled water and canned goods. IMHO, the truth lies somewhere between those blissfully unconcerned and the doom and gloomers.

It appears as though the first installment of the TARP bailout money did little good, but I wonder if things would have been worse if not for this action. I am very concerned about the price tag since this makes the S&L bailout look like chump change. It looks as though serious consideration is being given to resurrecting the Resolution Trust Corporation and creating a "bad bank" to hold toxic assets. Sheila Blair, Chairwoman of the FDIC, favors this approach. Will it work better than TARP? Given the cost, it better or I will be thinking about stocking up a bomb sheter. Here's a recent article from Barron's on this subject:

Obama's Rush to Save America's Banks - Barrons.com

 

[Rustic23]

Nords,
Guess I failed to post the Smile after my comment. I don't believe the banks will fail Monday. In fact if you read most of my post on the economy, I think it is brought on by a press that manipulated stories to further their own agenda. In fact I also think politicians are doing the same thing. I also believe that the recovery of the US economy is based largely on the consumer spending, and a consumer that has been convinced that his job is in jeopardy is not going to spend!

 

[Helen]

Thanks Nords...I'm going to have nightmares with that image!

Helen, I agree with Yakers. How credible is the poster?

The poster is a stranger to me, but I don't think he was lying. It wasn't a financial message board. I think he is honestly worried, but I don't know how reliable his information is.

I read a post maybe in August from someone who worked at Bear Stearns who was saying things were really bad and people had no idea how bad. He was telling people to bail from the stock market, some people actually took his advice.

At this point, I'm just hanging on for the ride. I'm putting all new 401k contributions into the stock market, other than that I haven't changed anything.

I'm still putting after tax savings in MM accounts and stock piling savings.

I certainly don't know what the solution is, but it seems like the problem was too much liquidity in the economy. I hope the Government doesn't go over board with pumping too much liquidity back into the market. Just my uneducated perspective.

-helen

 

[roger r]

"....would those of you in the doom&gloom and Chicken Little camps be able to suspend your rumor-mongering for a few minutes to see if you can produce some links tied to a credible reporting source?"

I don't know about the others, but my source is credible.

If you like to read some links about the second round of mortgage defaults, here are a few references:

"...the next round of mortgage defaults is coming from two classes of mortgage lending that are slightly (but barely) more financially responsible than sub-primes. There were nearly $1 trillion in sub-prime mortages, but these new (to most Americans) forms of mortgages, the Alt-A and Option ARM mortgages, total roughly another $1.5 trillion. Given the fact that the banking industry has already sustained some devastating shocks, there is increasing doubt about the continued viability of many of the largest banks still left standing."
The Next Round of Mortgage Shocks

"Subprime was the tip of the iceberg," said Thomas Atteberry, president of First Pacific Advisors, a investment firm in Los Angeles that trades mortgage securities. "Prime will be far bigger in its impact."
A second, far larger wave of U.S. mortgage defaults is building - International Herald Tribune

My banking friend actually suggested that there were more problems in the works than this alone.

It would be nice if some "credible" source would actually tell us in advance of all of these financial crisis. Seems like we would just wake up one day and another big finanacial institue was in dire staits. My Fidelity advisor was telling me to buy more stocks through much of the early stages of our recent meltdowns. Nor did I see articles in the WSJ advising people to get into allr cash positions. I think hearsay, a little common sense and some prudent apprehension are about the best we're going to have if there is indeed a new crisis in the works.

 

[calmloki]

See, now that was the good thing about Y2K - still have my stockpile of candles, kerosene lamps, MREs, 22 shells, water purification devices, betcha there's even a 100 $1 bills in my bug out bucket. And i doubt any of it is any worse (or better) than it was back then.

 

[2B]

Here's another scare story. His premise is that the CDS will sink our economy when all the loans they are designed to protect against start to fail.

Saving The US Economy