Central Bankers: Unlimited Free Money!

Today, the Fed made a statement regarding new central bank liquidity measures and boldly proclaimed that the sky is the limit on how much money banks can borrow - other central banks are following suit in their quest to give money away.




Fed statement

"Counterparties in these operations will be able to borrow any amount they wish against the appropriate collateral (my take: toxic waste) in each jurisdiction. Accordingly, sizes of the reciprocal currency arrangements (swap lines) between the Federal Reserve and the BoE, the ECB, and the SNB will be increased to accommodate whatever quantity of U.S. dollar funding is demanded."

"Central banks will continue to work together and are prepared to take whatever measures are necessary to provide sufficient liquidity in short-term funding markets."


HA! Keep pouring that money down the black hole - ain't going to work. Today we saw a nice dead cat bounce - picking up 936 points on the DOW, but 7,200 (over the longer term) won't be denied.

Did you see the report on Europe? They are putting $2.3 trillion on line for banks

European governments overcame their differences to put $2.3 trillion on the line Monday in guarantees and other emergency measures to save the banking system in their most unified response yet to the global financial crisis.

The pledges by six countries that use the euro and Britain helped soothe stock markets, along with a promise by top central banks to provide unlimited short term dollar credits.

Meanwhile Monday, the British government injected another $63 billion into some of the country’s leading banks Monday to avoid a full-scale collapse of the sector.

Can you imagine: Central bankers are now handing out unlimited free money to all the guilty bastards (big banks) who got us into this mess by creating, packaging and selling AAA rated dog-shit. Don't tell me they didn't know the longer term implications of their deceptive actions.

As an aside, what do you think the ramifications will be of all this new liquidity on G7 purchasing power?

Hyperinflationary depression here we come!

Randy

Can't Stop Kondratieff Winter!

Tim Wood, one of the writers/analysts I regularly follow, wrote an article on Friday related to the recent bailout package: It Ain't Gonna Work .

Tim feels (and I'd have to agree) that our financial powers that be (FPTB) have been working hard to fight a secular bear market that actually started in 2000, and their manipulative ways have merely delayed, but will not stop the looming Kondratieff Winter that lies in wait.

Excerpts from It Ain't Gonna Work :

By every historical measure the equity markets slipped into a secular bear market in 2000. As a result, we began to see efforts by the powers that be to keep the market afloat. I have stated all along that manipulation will ultimately not work. I have also stated all along that all this will do is make matters worse in the end. Well, I would think that everyone can now see, matters are indeed much worse. Yet, the Fed, the Treasury and the politicians continue to think that they can “fix” the problem by throwing more money at it. They do not understand that they can’t “fix” this economic crisis. They also do not understand that it is their trying to “fix” things in the past that has created the current situation. All markets as well as the economy must both inhale and exhale. They are trying to prevent the exhaling and it ain’t gonna work.

What we are dealing with is the wrath of Kondratieff Winter, which is about the purging of excess credit. Along with that comes deflation and along with that global stock markets enter into extended declines. Real estate declines, economic growth slows, commodities decline, bankruptcies accelerate as the excess credit is purged from the system, the banking system is shaken, the free market is blamed and we move toward national fascist political tendencies. We are now seeing each and every one of these symptoms of K-wave winter. For the record, I did not make up these symptoms to fit the current situation. I have original writings by Nikolai D. Kondratieff and the signs of K-wave winter were quoted from a book by David Knox Barker titled, The K-wave and was published in 1995. Don’t think the powers that be aren’t aware of Kondratieff Winter. They know full well what we are facing and that is why they have tried to hold back its wrath as diligently as they have since 2001.

...Personally, I think that the powers that be helped to make matters worse by postponing the inevitable and that they are now facing checkmate because the dye has now been pretty much cast.


So you ask, sounds pretty scary, but just what exactly is a Kondratieff Winter?

Well, a piece I wrote back in 2007 explains what it is and then goes even further by explaining why/how the Kondratieff Winter of 2001+ was delayed - to now anyway:

Suggest you become familiar with the term, as it will be our destiny: Kondratieff Winter - From Dec 2007 Post


Best Regards

Randy

Senate Overwhelmingly Passes Bailout Package

Our Elected Wall Street Cronies (Senate) overwhelmingly passed the massive bailout bill tonight with a final tally of 74-25.

Guess our only hope for failure is in the House vote on Friday - Keep sending the emails and phone calls - let them know how you feel!

DON'T LET THIS PASS! Contact your Congressional Representatives and tell them: NO BAILOUT!




The Senate added numerous sweeteners to the Bill on Wednesday and it is now 451 pages - It'll probably grow once again when the house is finished.

Sweeteners:

- The Senate modified the $700 billion financial rescue plan with a provision that gives the Treasury Department the authority to buy troubled mortgage securities.

- The bill also now includes an extension of numerous tax breaks for research and development and renewable energy companies, as well as personal tax breaks for college tuition and disaster victims.

- It proposes adjusting the Alternative Minimum Tax, so it doesn't hit more than 20 million middle class Americans in 2009.

- Another key modification is a one-year increase in the limits of personal bank savings the government insures up to $250,000.


CLOSING:

If you want to band-aid our MASSIVE economic problems only to experience hyperinflation (combined w/economic depression) later in the game, do nothing. Otherwise, get on the phones and email your Congressional Representatives.

Ultimately, we're headed for ENORMOUS economic pain - regardless of whether or not this Bill gets through the House, but we the people have a voice and we need to be heard!

If united, we can work to take down this corrupt cesspool of Banks/Wall-streeters who have pulled the strings in Washington for far too long.

Question:

Is our current status-quo gvt. the appropriate government to pass on to our children?

Before answering that question, I want you to think long and hard about Abraham Lincoln's words given at the Gettysberg Address: so "that government of the people, by the people, for the people, shall not perish from the earth."

Well my friends, that form of government has perished from the earth and Wallstreet now makes all the rules.

Again, do your part as an AMERICAN WHO DEMANDS CHANGE: DON'T LET THIS BILL PASS!

Contact your Congressional Representatives and tell them: NO BAILOUT!

Best regards

Randy

I Can't Believe It - The People Were Heard!

I'm still stunned at the outcome of today's Bailout vote - THE PEOPLE WERE HEARD!

Maybe, just maybe, there is still a glimmer of hope for our elected representatives!

Here's a list of how your representatives voted: FINAL VOTE RESULTS FOR ROLL CALL 674

But it ain't over yet yet. Looks like this package will continue to get pushed until the Cabal gets their desired YES answer:

New bailout plans

Business groups, Wall Street, the Bush administration and congressional leaders want to revive the bailout after it was defeated Monday in the House of representatives. Thursday could be the earliest the bailout could be reconsidered, in part because of House members taking time off for Rosh Hashana.

That could make for some rough days for the credit and stock markets, which tumbled after the Monday defeat in the House, setting a record Dow Jones Industrial Average drop of 777.68 points.

On Monday afternoon CNBC reported that Democratic leaders have pledged to put together another financial rescue package.

U.S. Treasury Secretary Henry Paulson said he will “continue to work with Congressional leaders to find a way forward to pass a comprehensive plan to stabilize our financial system.”

DON'T LET THEM PASS IT THIS TIME EITHER! Contact your Representative (Link) and tell them:


NO MORE BAILOUTS!

Note: A separate "No Bailout Petition link" is located at bottom of this post - for those who haven't already signed it. Come on People! This is your chance as an American to make a difference and say "We've had enough of this corrupt banking Cabal and the system must Die! (Please take the time to read/digest each of the very important quotes in blue below)


"Give me control of a nation's money and I care not who makes it's laws."-- Mayer Amschel Bauer Rothschild, Godfather of Central Banking

"Whoever controls the volume of money in any country is absolute master of all industry and commerce." -- James A. Garfield, President of the United States

"I have never seen more Senators express discontent with their jobs....I think the major cause is that, deep down in our hearts, we have been accomplices in doing something terrible and unforgivable to our wonderful country. Deep down in our heart, we know that we have given our children a legacy of bankruptcy. We have defrauded our country to get ourselves elected." -- John Danforth (R-Mo)

"It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." -- Henry Ford

"I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the government at defiance. The issuing power (of money) should be taken away from the banks and restored to the people to whom it properly belongs." -- Thomas Jefferson, U.S. President.

"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and it's issuance." -- James Madison

"A great industrial nation is controlled by it's system of credit. Our system of credit is concentrated in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the world-- no longer a government of free opinion, no longer a government by conviction and vote of the majority, but a government by the opinion and duress of small groups of dominant men." -- President Woodrow Wilson

"Most Americans have no real understanding of the operation of the international money lenders. The accounts of the Federal Reserve System have never been audited. It operates outside the control of Congress and manipulates the credit of the United States." -- Sen. Barry Goldwater (Rep. AR)

"The financial system has been turned over to the Federal Reserve Board. That Board administers the finance system by authority of a purely profiteering group. The system is Private, conducted for the sole purpose of obtaining the greatest possible profits from the use of other people's money" -- Charles A. Lindbergh Sr.

"The Federal Reserve banks are one of the most corrupt institutions the world has ever seen. There is not a man within the sound of my voice who does not know that this nation is run by the International bankers." -- Congressman Louis T. McFadden (Rep. Pa)

"Capital must protect itself in every way...Debts must be collected and loans and mortgages foreclosed as soon as possible. When through a process of law the common people have lost their homes, they will be more tractable and more easily governed by the strong arm of the law applied by the central power of leading financiers. People without homes will not quarrel with their leaders. This is well known among our principal men now engaged in forming an imperialism of capitalism to govern the world. By dividing the people we can get them to expend their energies in fighting over questions of no importance to us except as teachers of the common herd." -- Taken from the Civil Servants' Year Book, "The Organizer" January 1934.

Now that I've got your attention, it's time to wake up folks - send this link to everyone you know.

WHY?

Well, if you haven't already figured it out, our government is under siege by Goldman Sachs and company (the money masters) who are trying to heist more power/control and stick a $700 Bailout on the US taxpayer - to save our corrupt banking/financial systems. ENOUGH!

If you feel the same way, please sign the Petition below - Say "No Deal" to the MASSIVE Bailout!

Click Link: Stop The Bailouts!

Regards

Randy

Social Consequences of an economic meltdown?

Back in Jan 08, I pondered aloud several questions related to the potential Social Implications of (what was then) a looming economic crisis. Turns out, many readers were wondering the same and this was one of my highest traffic posts ever.

If you haven't already done so, read the info at the following link then come back to read the rest of this post.

SOCIAL IMPLICATIONS of a SIGNIFICANT ECONOMIC DOWNTURN



Well, nine months have passed since those words were written and there can now be no doubt (1) that this crisis is one of the most significant economic downturns in history and (2) the Massive bailout package being worked is just a bandaid to slow the controlled financial implosion. Even John McCain realizes this and recently stated in his debate with Obama: "This is not the beginning of the end, but the end of the beginning - if we come out with a package that will keep these institutions stable..

With that digested and the knowledge things are likely to get far worse, what can we anticipate for our future - just how bad could things get for the little guy living in the suburbs - trying to raise a family?

I'll refrain from trying to list all possible consequences, as there are far too many potential outcomes, but I would like to highlight several major consequences that could be initiated by a worst-case financial panic...

Note: I'm not trying to scare anyone here, but merely trying to create an awareness and food for thought - so that you can use the information to better prepare your family (in the event the worse-case scenario actually happens).

Let us hypothetically propose the economic crisis intensifies:

Hundreds more banks/financial institutions implode and the FDIC runs out of money - a nationwide run on the banks ensue; consumer credit has consistently gotten worse and available credit-card credit-lines have finally been turned off/reeled in - unemployment skyrockets due to the lack of new credit/spending; inflation rages as the dollar falls sharply; the economic crisis deepens and trillions in unpayable derivative contracts unwind quickly - stock markets collapse around the globe and the crushing pressure is exacerbated by foreign holders of US Debt who finally rush to the exit doors.

The Gvt panics and Stock Markets are closed indefinitely while ATM machines, banks and electronic commerce are shut down across the nation (as the government tries to figure out what to do). People grow anxious as their credit cards and debit cards don't work, and with no cash on hand, they can't buy food or gas... Those who do have cash rush to fill up their gas tanks and empty the shelves at their local grocery stores. The real economy comes to a screeching halt as deliveries of food, gas, etc can no longer make it to market.

Social unrest and general panic set in as our just-in-time economy breaks down. People are confused and scared while the government repetitively tries to reassure that they have everything under control. Hysteria eventually sets in as social chaos, looting, and roving gangs terrorize the masses (taking what they need from the unprepared). Similar situations take place across the nation as people who were on the fringes of society become hungry/desperate and/or take advantage of the lawless situation.

Martial law is ultimately declared and National Guard troops are deployed to major cities around the nation - to help restore order, distribute food, etc.

So many unknowns

Could this actually happen? I don't know - you be the judge; but it's probably better to be a prepared alarmist than an unprepared victim... Think about it.

If you've watched Paulson, Bernanke, Bush and the rest of our worried leaders over the last couple of week, you've probably been able to sense their state of alarm - Yes, they truly realize how big this crisis is...

What can you do to prepare?

I could list a thousand things here from generators, flashlights, etc, but the most important (I believe) are:

1) Have at LEAST a couple of weeks worth of non-perishable food/water on hand
2) Have enough cash on hand to make it through a possible electronic commerce shutdown
3) Maintain close relationships with friends/neighbors (help each other out)
4) If you have a gun, know how to use it - to protect your family, friends and valuable assets (cash/food).


Closing:

Yes folks this could be bad, but we Americans are an industrious/resolute bunch and (though it will take some time) we will find a way to pull out of it.

However, be aware: regardless of the ultimate significance of this downturn, America is likely to forever change as the US Dollar loses it's reserve currency status in the not too distant future.

At a MINIMUM, this economic crisis will cause our standard of living to fall and our cost of living to increase significantly.

Bottom Line:

Our future is uncertain, and we're definitely in for some difficult times ahead, but the world will NOT end - and we will survive.

Again, this post was no meant to scare, but to inform by thinking outside the mainstream box. Use this information as you may, but it's probably not a bad idea to prepare for whatever the outcome.

Best regards

Randy

The Federal Reserve and the Stock Market Meltdown

To most Americans, the Federal Reserve is just another name on their dollar bill. They don't know that this secretive private bank controls America's entire economic system. The Federal Reserve is no more federal than Federal Express. Created with no constitutional authority in 1913, the Fed prints money out of thin air and loans it to the U.S. treasury at interest. This can only lead to one outcome: debt. Currently, the Federal Reserve is printing billions of dollars to bail out Wall Street while destroying the middle class and the dollar. If our country wants a sound and transparent monetary system, we need to abolish the Federal Reserve and bring the power back to the American people.

Another Taxpayer Bailout - Under Who's Authority?

I can't believe this crap - let Lehman fail and two days later bailout AIG with taxpayer funds. Who authorized this? Certainly not me - I think we should let them fail.

The main reason we're in this crisis today is because we've been living a lie - an economic facade caused by too much easy credit/money, followed by excessive fraud, corruption and manipulation... For too many years TPTB prevented us from taking the required harsh medicine (recessions) needed to cure our economic ills. Now, once again, we are delaying the inevitable and laying a larger (unpayable/unsolvable - except for default or hyperinflation) economic bill on our children - absolutely reprehensible!

Dammit folks - don't you think it's time to take the medicine?

Evening Reports:

The Fed will not comment on reports that it was considering placing AIG into conservatorship, saying it did not have the legal authority to do so.

So, policymakers were called into an emergency meeting tonight:

Attending the meeting on the Capitol Hill were Democratic Senate leaders that included
- Charles E. Schumer of New York
- Richard Durbin of Illinois
- Christopher J. Dodd of Connecticut
- Kent Conrad of North Dakota

The contingent of Republicans included
- Mitch McConnell of Kentucky, the minority leader
- Richard Shelby of Alabama
- John Kyl of Arizona
- Judd Gregg of New Hampshire

House leaders included
- John Boehner of Ohio, the Republican leader
- Spencer Bachus, Republican of Alabama
- Barney Frank, Democrat of Massachusetts.

Members of the leaders’ staffs were asked to leave the meeting shortly after it began.

If the emergency talks fail, the collapse of AIG will be far worse than that of Lehman Brothers.

Many banks and investment funds in the US and around the world would lose their insurance cover at a time when defaults on payments are likely to rise





Insurance giant on a knife edge

The future of insurance giant AIG hangs in the balance as fears grow that it could be the next firm to fold in the wake of the credit crisis.

The state of New York has enabled the firm to access a "multi-billion dollar" finance plan in the short term, but it needs further funds to remain intact.

Analysts say the collapse of AIG would have a devastating impact on markets.

Senior banking executives are reportedly holding negotiations at the US central bank, the Federal Reserve, in an attempt to arrange a rescue bid.

But on Tuesday, Mr Paterson said AIG now had one day to raise another $80bn (£45bn) to save itself from collapse.

The plan appears to be for some form of private sector rescue, perhaps with backing from the Fed, says the BBC's economics correspondent Andrew Walker.

US Treasury Secretary Henry Paulson refused to bail out Lehman Brothers, the fourth-largest investment bank in the US, at the weekend.

But our correspondent says he may deal differently with AIG if he feels the damage caused by its collapse to the wider financial system would be too great.



Fed Readies A.I.G. Loan of $85 Billion for an 80% Stake

In an extraordinary turn, the Federal Reserve was close to a deal Tuesday night to take a nearly 80 percent stake in the troubled giant insurance company, the American International Group, in exchange for an $85 billion loan, according to people briefed on the negotiations.

All of A.I.G.’s assets would be pledged to secure the loan, these people said, and in return, the Fed would receive warrants that could be exchanged for an ownership stake. Stock of existing shareholders would be diluted, but not wiped out.

A person briefed on the matter said the agreement does not require shareholder approval.

The Fed’s action came after Treasury Secretary Henry M. Paulson and Ben S. Bernanke, president of the Federal Reserve, went to Capitol Hill on Tuesday night to meet with House and Senate leaders. Mr. Paulson called the Senate majority leader, Harry Reid, Democrat of Nevada, about 5 p.m. and asked for a meeting in the Senate leader’s office, which began about 6:30 p.m.

A.I.G.’s board approved the proposal at a meeting Tuesday night, the same individual said.

Without the help, A.I.G. was expected to be forced to file for bankruptcy protection.


Fed nears a deal to take over ailing AIG

The Federal Reserve is close to a deal to take an 80 percent stake in American International Group in exchange for an $85 billion loan, according to sources familiar with the negotiations.

AIG’s failure could open the ugliest chapter yet of the financial meltdown.

“The glimmer of hope has turned into a ray of hope,” said the person, who asked not to be named because of the sensitive nature of the talks to help AIG.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke met with members of Congress to brief them on options the government is considering. The meeting ended without Bernanke and Paulson commenting.

Hoping to stave off what would be the ugliest chapter of the financial meltdown, AIG executives huddled with Fed officials and representatives from top banks at the New York Fed in downtown Manhattan to find the cash the huge insurer needs to stay in business.

One solution: A plan to have the government provide financial backing to ensure that AIG could secure a short-term loan from banks worth up to $100 billion to stay out of bankruptcy court, the person, who had direct knowledge of the talks, said.

He said the discussions had stalled because AIG did not have enough collateral to obtain a loan of that size. Both sides were trying to figure out how to close the gap between the amount AIG needs and the amount of collateral it has.

The person said it was increasingly likely the Fed would step in with taxpayer money.

Shareholders would be severely diluted by the bailout, which involves a bridge loan, according to sources. The government would receive warrants for most of AIG's equity in the bailout being negotiated. CNBC said the deal would give AIG incentive to sell its assets quickly to help pay off the bridge loan.

“This would mean another shareholder wipeout,” said David Ader, head of government bond strategy at RBS Greenwich Capital in Greenwich, Conn.

Just days ago, Paulson said the government would not help Lehman Bros. with the kind of taxpayer-backed funding that JPMorgan Chase & Co. received six months ago to buy ailing Bear Stearns.

“They’re too big to fail. AIG touches too many people and too many companies globally, and it would be much more of a disorderly event if it went bankrupt than it was with Lehman,” said Anton Schutz, president of Mendon Capital in Rochester, New York.

Earlier, New York Governor David Paterson told CNBC that the insurer had “a day” to solve its problems. A failure would result in a “catastrophic problem” for the market, said Paterson, whose administration oversees regulation of AIG.

If AIG were to file for bankruptcy, billions of dollars of insurance contracts known as credit default swaps would likely be wiped out. Much of those losses would be absorbed by the companies holding the contracts, which were sold by AIG.

Investors Worry Over AIG's Future - DOW will be down 1,000 points tomorrow if AIG can't find solution

US heading for Depression?

Just got home from a busy business trip and trying to get my head around current events/issues. My inbox is full! Apologies for lack of posts and correspondence the last couple of days

Hat tip FoFoa for the following video tip!

Bailouts Will Push US into Depression:

The end result of the global economic slowdown may be the U.S. announcing national bankruptcy as the government cannot afford the bailouts that it promised and the market will not bail out the government, Martin Hennecke, senior manager of private clients at Tyche, told CNBC on Thursday.

MSNBC: Shuster and Klein on More Government Bailouts

Lehman likely to be dead by Monday morning

Tonight, the Federal Reserve Bank of New York held an emergency meeting with top Washington policymakers and major financial institutions to discuss Lehman's future.

Attendees included Treasury Secretary Henry Paulson; Christopher Cox, chairman of the Securities and Exchange Commission; and Timothy Geithner, president of the Federal Reserve Bank of New York.


NYT: U.S. Gives Banks Urgent Warning to Solve Crisis Hat tip Justin

As Lehman Brothers teetered Friday evening, Federal Reserve officials summoned the heads of major Wall Street firms to a meeting in lower Manhattan and insisted they rescue of the stricken investment bank and develop plans to stabilize the financial markets.

Timothy F. Geithner, the president of the New York Federal Reserve, called a 6 p.m. meeting so that bank officials could review their financial exposures to Lehman Brothers and work out contingency plans over the possibility that the government would need to orchestrate an orderly liquidation of the firm on Monday, according to people briefed on the meeting.

Flanked by Treasury Secretary Henry M. Paulson Jr. and Christopher Cox, the chairman of the Securities and Exchange Commission, he gathered the executives in person to impress on them the need to work together to resolve the current crisis.

Mr. Geithner told the participants that an industry solution was needed, no matter what, and that it was not about any individual bank, according to two people briefed on the meeting but who did not attend. They said he told them that if the industry failed to solve the problem their individual banks might be next.

A spokesman for the New York Federal Reserve Bank in New York confirmed the meeting but declined to provide details on the discussions. The Wall Street executives included the following chief executives: Lloyd Blankfein of the Goldman Sachs Group, James Dimon of JPMorgan Chase, John Mack of Morgan Stanley, Vikram Pandit of Citigroup and John Thain of Merrill Lynch. Representatives from the Royal Bank of Scotland and the Bank of New York Mellon were also present. Lehman Brothers was noticeably absent from the talks.

The meeting was reminiscent of the circumstances that preceded the near-collapse 10 years go of Long Term Capital Management. At that time, William J. McDonough, then the president of the New York Fed, summoned the heads of big Wall Street banks to the Fed to stop the failure of L.T.C.M., a hedge fund firm that had made big bets on esoteric securities using borrowed money and which had already lost $4.5 billion.

The bankers ended up committing $3.65 billion to save L.T.C.M., though Bear Stearns, the hedge fund’s clearing broker, refused to contribute to the investment. Traders from the banks wound down the fund over time, averting what might have been big losses across the financial system. But the fallout from a failure of Lehman Brothers could be even more severe, given the firm’s much larger size and its entanglements with trading partners around the globe.

Policy makers fear its losses could ripple through the financial industry at a time when banks and securities firms are trying to overcome $500 billion in write-downs.

One observer briefed on the situation described the session as a “game of chicken” between the government and the heads of the major banks.

Bank of America and two British firms, Barclays and HSBC, have expressed interest in bidding for Lehman Brothers, according to people briefed on the situation. But they have indicated that their bids are contingent upon receiving support from the government, just as it did with the rescues of Bear Stearns, and the government-sponsored agencies, Fannie Mae and Freddie Mac.

But Mr. Paulson and Mr. Geithner made it clear to the company, its potential suitors and to the meeting participants on Friday that the government has no plans to put taxpayer money on the line. The government is deeply worried that its actions have created a moral hazard and the Federal Reserve does not want to reach deeper into its coffers. Instead, Mr. Paulson and Mr. Geithner insist that Wall Street needs to come up with an industry solution to try to stabilize Lehman Brothers and calm the markets.

Still, some of the other Wall Street banks, facing billions of dollars in losses themselves, have resisted this approach. They argue that Lehman Brothers overreached and brought its current troubles on itself. If there are no bidders for Lehman Brothers, these banks say they can collect their collateral and liquidate the troubled firm’s assets. In this high-stake game, they may also be trying to call the government’s bluff, knowing that if push came to shove, it would provide financial support.

Mr. Geithner, who led the session, firmly stood his ground. He told the banks that this was about fixing the system and preventing the crisis from worsening.

By the time Lehman’s shares went into a spiral this week, Fed and Treasury officials were convinced that Lehman posed far fewer real risks than Bear Stearns had back in March. The confidence by Washington officials stemmed from the fact that, after the Bear Stearns collapse, they obtained stronger regulatory powers that gave them the ability to peer into the activities and risk exposures of institutions on Wall Street.

Fed officials, for example, are now embedded at each of the big Wall Street investment banks and have at least some capacity gauge the firms’ exposure to hedge funds and other big players, as well as their positions in financial derivatives and other opaque markets. Fed and Treasury officials have also been taking the daily pulse of executives and traders on Wall Street for months, and much of that discussion has been about Lehman.

Officials detected a rising number of defections by Lehman’s institutional customers to other firms, but nothing near the panic that caused Wall Street executives to bombard Mr. Paulson with dire warnings about a Bear Stearns collapse in March.

Fed officials also saw few signs that fears about the future of the investment bank were spilling over to fears about its customers and trading partners.

And in practice, taxpayers could still end up on the hook for at least as much money as they were in the case of Bear Stearns. Lehman’s successor will still be able to borrow from the Fed’s new lending program for major investment banks, which the Fed created in response to the collapse of Bear Stearns in March. If Lehman were to borrow money and then default on its loans, the Fed’s losses would reduce the amount of money it turns over to the Treasury.

For political and economic reasons, both the Federal Reserve and the Treasury Department are loath to save financial institutions from their own folly.

But as the housing crisis has deepened, they have abandoned free-market orthodoxy, fearing that the collapse of institutions like Bear Stearns or either Fannie Mae or Freddie Mac could cripple the financial markets, and perhaps the economy itself.

One of the biggest differences between the challenge facing Lehman and the one that faced Bear Stearns is the availability of the Fed’s emergency lending program for investment banks.

When confidence evaporated in Bear, with major hedge funds pulling their prime brokerage accounts, Bear’s financing ran out almost overnight, creating a panic situation. Lehman has had the power to plug any cash shortfalls by borrowing from the Fed, though it has not actually borrowed any money from the program since March.

Bailouts for everyone!

Stock Markets rallied around the globe on news of the largest bailout in history... Hurray!


Hell, F&F got bailed out, why not the Big-3 next -- they only need $ 50 Billion...

Big Three auto makers prepare to lobby for as much as $50 billion in loans

DETROIT -- Ford Motor Co. Chief Executive Officer Alan Mulally said that more legislators are "in our corner" as the three U.S. auto makers prepare to lobby the government for as much as $50 billion in low-cost loans.

"I think last year was a real turning point," Mr. Mulally said following a speech in Dearborn, Mich., on Monday. "I think a lot of people [in Washington] believe in the industry."

Ford, along with General Motors Corp. and Chrysler LLC, are hoping to persuade the U.S. government to provide as much as $50 billion in low-cost loans as slumping sales in the U.S. market eat into profitability. A bill signed into law last year authorized loans of as much as $25 billion to help car makers and suppliers retool plants to produce new, highly fuel-efficient vehicles.

"I absolutely don't think it's a bailout," Mr. Mulally said. "I think it will be a loan at lower interest rates with the caveat to pay it back. It is written for $25 billion but there are a lot of people who believe that more would help speed the transition," he said.


Once the Big-3 are taken care of, Paulson might want to start taking a look at the FDIC, because once WaMu goes kaput, they too will need a fresh cash infusion

WaMu replaces CEO, signs agreement with regulator

Washington Mutual Inc. replaced its chief executive on Monday as the nation's largest thrift tries to find a new leader to guide it through the housing crisis.

The lender also said it signed an agreement with its main regulator, the Office of Thrift Supervision, which requires it to provide an updated business plan and forecasts for results, asset quality, capital and the performance of business segments.

Kerry Killinger, who was CEO of WaMu from 1990, will be replaced by Alan Fishman, the company said.

"Like everyone else in the business, WaMu is facing very significant pressures," Fishman said during a conference call Monday.

WaMu shares have slumped on its exposure to the housing market and risky mortgages, and questions have arisen about its capitalization and further losses. It has cut thousands of workers and slashed its dividend. Through Friday's close, WaMu shares were down about 88% over the previous year.

Credit quality may deteriorate and that could mean WaMu needs to raise more capital, the analysts said. The company could probably raise $1 billion to $3 billion of capital from TPG, the private-equity firm that already owns a big stake. It could also raise that amount by selling some bank branches, they explained.

"If it needs more than that, it could have a tougher time finding it," they warned. "In that case, we could not rule out a regulatory intervention."

The memorandum of understanding WaMu signed with the OTS may be the first intrusion into its affairs by regulators. If the company's condition worsens, the OTS can restrict WaMu's business operations, as it did with another thrift, Downey Financial on Friday, the analysts said.


While you have the checkbook open, may as well write a check for the PBGC too, as they will soon need it

PBGC Panned for Risky Investment Plan

America's pensions could be in safer hands. The Pension Benefit Guaranty Corp., the government agency that backs the retirement benefits for more than 40 million Americans, is about to take a step to make overly risky investments, according to the Government Accountability Office. And it suggests that the PBGC move may be a dangerous path to easing its own debts.

The congressional watchdog says that the PBGC has $68 billion in assets, but that its $14 billion deficit places it on the GAO's "high-risk" list of federal programs. The pension insurer used to limit its investments in equities to a range of 15 to 25 percent of its holdings, but announced plans to lift that rule in 2008.

The agency's investment targets now include 40 percent fixed-income, 39 percent equities, 10 percent real estate and private equity, 6 percent alternative equities, and 5 percent alternative fixed-income. The PBGC has about $55 billion to invest under the new investment policy.

"While the new investment policy aims to reduce PBGC's $14 billion deficit by investing in assets with a greater expected return, we found that the new allocation will likely also carry more risk than acknowledged by PBGC's analysis," according to the GAO.


Additionally, the state of California is not looking too good - could you spare some chump change (~ $15B) ?

States pay price for binge in spending

State and local government spending has been rising three times as fast as revenue amid warnings from governors that their finances are nearing crisis stage.

As many Americans face stagnant wages, high gas prices and job uncertainty, new government figures show that state and local governments boosted spending 7.8% in the second quarter compared with 2007 while revenue rose 2.5%. Government is on a hiring binge, too, even as private-sector jobs disappear.

In a move to curb spending, California Gov. Arnold Schwarzenegger took sweeping action Thursday to pressure the Legislature to pass an overdue budget. He signed an order laying off up to 22,000 part-time and temporary state workers and cutting the pay of 200,000 others to the minimum wage of $6.55 per hour. The state is on track to spend $15 billion more than it will take in during the next year.

May want to keep a few blank taxpayer checks available for hedge funds too - if you haven't noticed already, they are having a tough time these days

Hedge funds deliver worst returns in decade

Hedge funds, which often promise to make money in all markets, are delivering their worst returns in a decade, according to new data released on Monday.

In the first eight months of the year, the average hedge fund lost 4.83 percent, according to data from Chicago-based hedge fund tracking firm Hedge Fund Research. In 1998, when hedge fund Long Term Capital Management collapsed, the average fund was off 5.5 percent, HFR said.

As fund managers find it ever more difficult to find a trend, more are posting heavy losses that are prompting clients to ask for their money back, several investors said.


Lastly, because it's getting close to dinner time, what about the CDS market - will you please bail them out too?

Fannie, Freddie Seizure Triggers Credit-Default Swaps

The government seizure of Fannie Mae and Freddie Mac triggered what may be the biggest settlement of credit-default swaps in the market's decade-long history.

The International Swaps and Derivatives Association will set rules by which parties to credit-default swap trades can demand payment on the net amount covered by the contracts, according to a statement today.

According to an ISDA memo yesterday obtained by Bloomberg News, 13 Wall Street firms agreed unanimously that the government takeover of the biggest U.S. mortgage-finance companies qualified as a so-called credit event on contracts covering more than $1.4 trillion in Fannie and Freddie debt.

``The market is not experienced at settling a credit event for a name of this size, so it is a bit of an unknown,'' said Sarah Percy-Dove, the head of credit research at Colonial First State Global Asset Management in Sydney.


Closing:

Will a line in the sand eventually be drawn, or will taxpayer bailouts be available for everyone?

Wife is calling - time for dinner

Best Regards

Randy

Silver State Bank Fails - Another Banking Domino Down

Hat tip to several of my readers - I just returned from a night out with the family and was unaware until I opened my inbox (Thanks)



Though a wee bit early on my Silver State Bank call, looks like they finally bit the dust tonight.

Recall some of my earlier posts:

July 28: Dow Update and Silver State Bank

Andrew McCain, son of Republican nominee, John McCain, has resigned from Silver State Bank's board of directors this weekend.

Would a banking failure under son McCain's leadership look bad for dear old dad's election prospects? Hmmm...

Well, I suggest you keep an eye on Silver State Bank. Word on the street is they are not doing well.

Take a look at Bankrate and Safe and Sound ratings for Silver State Bank, Henderson Nevada: One Star (The Lowest Possible Rating) and 5G (Lowest Possible Rating).

Aug 07: SilverState Bank - FDIC Seizure in the works?

Take a look at SilverState Bancorp's Stock price: Yes, this is a picture of a failing bank - The same bank where Andrew McCain (son of presidential candidate John McCain) served as a director and as a member of the bank's Audit Committee until he abruptly resigned (for personal reason of course) in late July.

A banking failure under son McCain's leadership would probably look quite bad for dear old dad's campaign and I imagine the FDIC, working disaster/cleanup plans for the bank decided it's probably time for Andrew to get out of the picture before the bomb goes off.


Tonight: Regulators Shutter Silver State Bank

State and federal regulators on Friday shut down Silver State Bank, the latest in a series of bank failures and one that could ripple through the presidential campaign.

Until recently, the son of Republican nominee Sen. John McCain sat on Silver State's board and was a member of its three-person audit committee, which was responsible for overseeing the company's financial condition.

Andrew McCain left the Henderson, Nev., bank July 26 after five months on the board, citing "personal reasons." He is Sen. McCain's adopted son from his first marriage.

The lender, the 11th bank to fail in the U.S. this year, was overexposed to risky real-estate loans, a problem that's vexing many banks amid the worst financial crisis in a generation. Silver State had nearly $2 billion in assets and 17 branches in Arizona and Nevada.

The FDIC said Nevada State Bank, a Las Vegas-based unit of Zions Bancorp., is taking over the insured deposits of the failed bank, as well as some of its assets. Some $20 million of Silver State's $1.7 billion in deposits were uninsured by the FDIC, representing about 500 customer accounts, the agency said.

Silver State's failure will be costly to the FDIC's already-strained deposit insurance fund. The FDIC estimated it will incur a $450 million to $550 million hit.

The Federal Deposit Insurance Corp. had been preparing to shut down Silver State late last month, but the agency encountered resistance from the Nevada Division of Financial Institutions, according to people familiar with the matter. The Nevada regulators had final say over whether to pull the plug on the state-chartered bank, and wanted to keep it open. (My Note: Maybe I wasn't too early w/my prediction?)

Founded in 1996, Silver State specialized in construction and land-development loans to finance real-estate projects in Nevada and Arizona. In July 2007, Silver State raised about $30 million through an initial public stock offering. Its shares debuted at $20.

The business unraveled this year. By June 30, borrowers had fallen behind on about $252 million worth of loans, compared to about $11.5 million six months earlier, according to the Federal Deposit Insurance Corp. The bank's capital ratios, which represent the bank's cushion to absorb losses, have dropped sharply.

If Mr. McCain had remained on Silver State's board another four days, his position on the audit committee would have required him to sign off on the company's second-quarter financial statements.

Three weeks after Mr. McCain quit, Silver State had to revise those second-quarter numbers to reflect a loss of $72.3 million, which was larger than previously reported. It warned in the Aug. 15 regulatory filing of "uncertainty about the company's ability to continue as a going concern," a sign the bank's survival was in doubt.

Silver State said at the time its insurance carrier planned to cancel policies protecting Silver State's directors and executives from liability due to the bank's elevated risk profile, effective Oct. 7.

Note: This is the Sixth Nevada Lender to fail since Great the Depression

Las Vegas Review Journal (excerpts below)

State and federal bank regulators late Friday announced the seizure and sale of Henderson-based Silver State Bank, which bet its future on Las Vegas real estate values and lost.

The bank had $1.7 billion in deposits. Nevada State Bank is taking over the deposits insured by the Federal Deposit Insurance Corp., leaving only $20 million in uninsured deposits, which may not be wholly recovered.

Following the bank takeover, when called by a reporter, Silver State Bank President Calvin Regan said he had "no comment" and hung up the telephone.

"It would be premature at this point to comment on the situation," Silver State spokesman Steve Stern said.

Silver State Bank branches in Nevada will open Monday as part of Nevada State Bank.

Silver State became the sixth bank to fail in Nevada since the Great Depression and the 11th bank failure in the country this year.

Federal regulators in July closed $3 billion-asset First National Bank of Nevada, which also operated in Arizona and had a small affiliate bank in California.

"Clearly, Silver State and First National were the most stressed of the institutions in Nevada," Gibbons said. "I'm glad that these issues are being resolved."

News of bank failures is causing concern for depositors at community banks, said Timothy Coffey, vice president of research at FIG Partners, a broker dealer specializing in financial institutions.

"It puts significant pressure on other community banks in the Las Vegas region to show depositors that they have the financial strength to survive," Coffey said.

Silver State Bancorp, the bank's holding company, is publicly owned and its failure affects numerous investors. First National was privately held.

Silver State shot across the Southern Nevada banking scene like a comet, posting some of the highest profit margins among banks before fading after the collapse of the area's real estate values.

A year ago, the bank was charging more than 10 percent on average for loans, compared with 7.8 percent for comparable banks. Many of its borrowers provided raw land for collateral, leaving the bank exposed to losses when land values plummeted and borrowers began defaulting.

The company failure comes a little more than a year after the bank completed an initial public offering of stock at $20 a share. Shares closed on Friday at 56 cents, unchanged from the prior day, on the Nasdaq National Market

Regards

Randy

FDIC: Getting Ready for the Worst

The US banking system has over $8.5 Trillion in deposits, $4.4 Trillion of which are backed by the FDIC. With a paltry $45B in insurance money and a growing list of ailing banks, the FDIC is becoming very concerned they will likely run out of money if significant issues are encountered... Problem is: Significant issues are popping up everywhere and they are nearly surrounded.

Note: The failure of just one large institution (i.e. Wamu) could wipe them out.

So what's going on in the US Banking system?

From Mike Larson, Money and Markets: Latest FDIC Report Reads Like a Horror Novel

Bank income PLUNGED 86.5%! Insured commercial banks and savings institutions reported net income of $5.0 billion for the second quarter of 2008 — down a whopping 86.5% from a year earlier.

Loan loss provisions QUADRUPLED! Loss provisions totaled $50.2 billion, more than four times the $11.4 billion quarterly total of a year ago. Second-quarter provisions absorbed nearly one-third of the industry’s net operating revenue — the highest proportion in 19 years.

Actual loan losses nearly TRIPLED! Bad loan losses soared to $26.4 billion in the second quarter. That’s almost triple the $8.9 billion that was charged off in the second quarter of 2007 and the highest quarterly charge-off rate in 17 years.

Credit card losses rose 47% ... commercial and industrial loan losses more than doubled, increasing 128% ... home equity loan losses jumped 633% ...

Plus, loan defaults on residential mortgage loans soared 822%.

And get this: Bad construction and land development loans skyrocketed a staggering 1,227%!

Surging loan delinquencies signaled MUCH more pain to come! The number of past-due loans and leases rose for a ninth consecutive quarter, posting the second-largest quarterly increase in the nine-quarter streak — a dead give-away that bank losses will continue to surge for the foreseeable future.

List of Problem Banks Grow:

Guardian.UK: FDIC sees 117 problem banks; most since 2003 (Remember, INDYMAC wasn't even on the list)

The number of troubled U.S. banks rose 30 percent to 117 in the second quarter, the highest level in five years, and a top regulator warned that conditions will worsen as the housing slump and credit crisis continues to pound profitability.

Nine U.S. banks have failed so far this year, including mortgage IndyMac Bancorp Inc, which has drained the FDIC's Deposit Insurance Fund used to repay insured deposits at failed banks.

The FDIC said the sector's earnings fell 86 percent from a year earlier to $5 billion in the second quarter, mainly due to a fourfold rise in provisions for bad loans to $50.2 billion. With the exception of the fourth quarter of 2007, industry profits were the lowest since the fourth quarter of 1991.

Delinquent loans -- those more than 90 days past due -- jumped by almost 20 percent during the quarter to $162.9 billion, the FDIC said.

"The numbers are alarming, but we are coming off of an incredibly low base of problem institutions and failures," said Mike Stevens, senior vice president for regulatory policy at the Conference of State Bank Supervisors.

FDIC Lifeline:

Reuters: FDIC may borrow money from Treasury

Federal Deposit Insurance Corp (FDIC) might have to borrow money from the Treasury Department to see it through an expected wave of bank failures, the Wall Street Journal reported.

The borrowing could be needed to cover short-term cash-flow pressures caused by reimbursing depositors immediately after the failure of a bank, the paper said.

The last time the FDIC had borrowed funds from the Treasury was at nearly the tail end of the savings-and-loan crisis in the early 1990s after thousands of banks were shuttered.

The fact that the agency is considering the option again, after the collapse of just nine banks this year, illustrates the concern among Washington regulators about the weakness of the U.S. banking system in the wake of the credit crisis, the Journal said.

FDIC Getting Ready for Bigger Problems:

Bloomberg: FDIC Adds Office Space in Dallas, Ready for More Bank Failures

The Federal Deposit Insurance Corp. is preparing to sign a five-year lease to add five floors of space at its Dallas regional office as the agency prepares to increase scrutiny of failing and troubled U.S. banks.

The federal agency, which insures deposits and disposes of failed banks and their assets, will add 125,000 square feet to the 185,000 square feet it rented last year at 1601 Bryan St., a 49- story tower in downtown Dallas. That agency will add about 300 staff at the building, including some of the 69 retirees it is bringing back to help handle the increased workload, said spokesman Andrew Gray.

``Already you've seen nine failures of institutions this year,'' said Gray. ``While historically this isn't a large number, it does represent an increase over the past two years. We anticipate additional failures and thus we would anticipate additional workload.''

The staff additions would bring the total number employees at that location to about 850.


Closing:

We're currently dealing with a self-perpetuating, downward, nearly out-of-control spiral:

Debt ladened US Consumers are strapped, defaults are increasing across the spectrum, and the housing, commercial real estate and construction markets are getting worse. These issues are increasing writedowns/losses, impairing already severely deteriorated banking system capital ratios and hampering future credit creation/banking system earnings - all exacerbating the perpetual feed-back loop.

So, is there light at the end of the tunnel?

Unless the real estate markets and credit conditions improve soon (highly unlikely) I don't expect to see light at the end of the tunnel for quite some time. As a matter of fact, the odds are probably higher for a tunnel collapse than for catching a glimmer of emergent light.

Regards

Randy

FDIC May Borrow Money from Treasury

27 Aug 2008: Federal Deposit Insurance Corp (FDIC) might have to borrow money from the Treasury Department to see it through an expected wave of bank failures.

The borrowing could be needed to cover short-term cash-flow pressures caused by reimbursing depositors immediately after the failure of a bank.




Bottom line: After the recent Indymac failure, only $45 Billion of FDIC capital remain - to back over $4 TRILLION in insured banking deposits. Just the failure of ONE LARGE institution (i.e. Washington Mutual, etc) could wipe out the FDIC... We're so screwed!

Unbelievable - Now US Mint suspends "Gold" Eagle coin sales

This is big folks! First Silver and now Gold... hmm, could TPTB be aware of something bad that may be about to happen in the world?

From APMX: News Alert - US Mint suspended sales of the 1 oz Gold American Eagles

We just received word, the US Mint has suspended sales of the 1 oz Gold American Eagles until further notice and are not accepting new orders from precious metals dealers. This is in addition to the shortage of 1 oz Silver American Eagles.

This comes at a time when many investors around the nation are scrambling to locate silver bullion and US gold coins while prices are attractively low. These low prices seem to be one of the driving factors in this recent shortage, as investor demand has dramatically increased.


From Reuters UK: Mint suspends red-hot Eagle gold coins

NEW YORK (Reuters) - A shortage of American Eagle bullion coins due to soaring demand following a recent sharp retreat in gold prices has forced the U.S. Mint to temporarily suspend sales of the popular coins.

"Due to the unprecedented demand for American Eagle gold one-ounce bullion coins, our inventories have been depleted. We are therefore temporarily suspending all sales of these coins," the U.S. Mint told authorized coin dealers in a memorandum dated on Friday.

Michael White, a U.S. Mint spokesman, said that only the one-ounce 22-karat American Eagle coins are sold out, but the half-ounce, quarter-ounce, and 1-10th ounce coins as well as the less popular 24-karat American Buffalo coins are still available.

"We are working diligently to build up our inventory and hope to resume sales shortly," the Mint said.

Coin dealers from the United States to Canada reported a surge in buying of bullion coins and other gold products since prices plummeted from highs last month. The buying spree contributed to supply fears and helped boost gold prices sharply on Thursday.

Rand LeShay, senior vice president of Los Angeles-based A-Mark Precious Metals, an authorized purchaser for the U.S. Mint, said that there was a big spike in demand for gold and silver coins and ingots after a recent price tumble.

He said that A-Mark currently has no one-ounce American Eagle gold coins for its customers.

"Until the U.S. Mint can supply us with more coins, we won't be able to supply any to our customers," LeShay said.

The move by the U.S. Mint to halt sales caught market participants by surprise as it came at a time when the metal was sharply falling, rather than rising.

In contrast, the Mint needed to allocate its Silver Eagle coins to dealers due to overwhelming demand as the price of silver soared earlier this year.

Produced from gold mined in the United States, the American Eagles have been novel items among collectors and investors since their introduction in 1986. Each coin has a face value of $50 but it is sold by authorized dealers at a premium to the price of gold.

COIN DEMAND SPIKES

Blanchard and Co., one of the largest U.S. retail dealers of rare coins and precious metals, said the American Eagle and American Buffalo one-ounce gold coins are sold out.

"Nobody has the Eagles or the Buffaloes right now. We bought 2,000 ounces late last week, and those were the last 2,000 ounces that we can find in the marketplace," said David Beahm, vice president of New Orleans-based Blanchard.

"If we don't have them, nobody has them," Beahm said. He added that he has been recommending customers to buy the one-ounce Canadian Gold Maple Leaf gold coin instead.

Jon Nadler, senior analyst at top Canadian dealer Kitco, said that the shortage of the Eagle coins could be due to a combination of high demand and a temporary lack of supply in coin blank, which is a flat metal disk used to mint coins.

On Thursday, spot gold surged as much as 3 percent to $839 an ounce, while U.S. gold futures for December delivery scaled a one-week high at $845 an ounce. Gold hit a five-month peak of $987.75 on July 15, and it set an all-time record of $1,030.80 on March 17

In hindsight, A-Mark's LeShay said that neither the U.S. Mint nor the coin dealers could anticipate the coin shortage.

"This kind of spike in demand is something no one can foresee, and no business runs itself waiting for this to happen," LeShay said.

Shifting gears a bit for a closing comment:

This is certainly a supply/demand driven situation as people rush for real money and an inflation hedge (at a good price).

Just think for a moment about the problems we're going to see when the US runs out of dollars...

What - come again? With a total US money supply of $14T and growing, how in the world can we ever run out of dollars? What an idiot!

Ok, I agree, but allow me to explain my point...

Currently, the FDIC is backing over $4 TRILLION of insured electronic deposits (of ~ $6T total electronic deposits) w/~$38 BILLION in insurance money. When we finally see the inevitable major banking system failures, followed by a nationwide run on banks (which WILL follow), people will quickly find out that there is only ~ $400B in COLD HARD CASH circulating in the US (the rest are ones and zeros on computer hard drives) and the majority who try to "get theirs" will soon find themselves completely out of luck.

Bottom Line: You may want to get some cash on hand too - while you can... Before it too runs out of stock.

Regards

Randy

SilverState Bank - FDIC Seizure in the works?

Take a look at SilverState Bancorp's Stock price: Yes, this is a picture of a failing bank - The same bank where Andrew McCain (son of presidential candidate John McCain) served as a director and as a member of the bank's Audit Committee until he abruptly resigned (for personal reason of course) in late July: My 28 July SilverState Post

Weekly Chart

Daily Chart

To paraphrase comments from my July 28th post: a banking failure under son McCain's leadership would probably look quite bad for dear old dad's campaign and I imagine the FDIC, working disaster/cleanup plans for the bank decided it's probably time for Andrew to get out of the picture before the bomb goes off.

Well, If you've been paying attention to recent banking failures, you probably already know the FDIC has been seizing banks at the close of business Friday evenings -- in the hopes of keeping depositors calm and avoiding banking runs.

Guess what? Tomorrow is Friday, and based on recent stock price action, I don't think a FDIC seizure for SilverState Bank is out of the question.

Regards

Randy

More bad news for Vegas

Echelon Place Complex, a $4.8 Billion Boyd Gaming Construction Project, initially scheduled to open in the third quarter of 2010, was put on a nine to 12-month delay this last Friday.

The new casino development was designed to include five hotels, including two built and operated under a joint venture with Morgans Hotel Group Co. It was also to have two theatres, a convention center and a retail ``high street,'' -- which is a joint venture with General Growth Properties Inc., the second- largest U.S. owner of shopping malls.

Las Vegas-based Boyd said it won't resume the project for three or four quarters while the U.S. economy slows and banks remain reluctant to lend.

``This is a very prudent, tough decision by management in light of the capital markets, the slowdown in Las Vegas and significant shareholder opposition,'' Joel Simkins, an analyst at Macquarie Securities USA Inc. in New York, said today.

``The delay of Echelon indicates the unprecedented downturn that Las Vegas is currently undergoing and the extreme difficulty in securing capital,'' Steven Kent, an analyst at Goldman Sachs Group Inc. in New York, said today in a note to clients.

Project shutdown leaves many workers worried

~ 800 ironworkers, carpenters, electricians, laborers and just about everyone else working on Boyd Gaming's partially finished resort left the job Friday, not knowing when or if they'd return.

Rapp, an ironworker, said he was hopeful there would be jobs at other projects. But he was also afraid the shutdown marked the end of a Las Vegas boom where jobs at decent wages were plentiful.

"It is kind of a scary thought, you know," Rapp said. "I don't think work will ever be as good as it was for the last 10 years, not for the middle class."

Rapp said he has a wife and five kids, three of whom are in college.

"They are going to have to start paying their own rent," he said.

My Note: In addition to the 800 jobs lost, Echelon was projected to add 10,000 new Las Vegas jobs when it opened in 2010 - Guess they will have to wait...

Though LV unemployment (currently at 6.5%) is already higher than the national average, If this trend continues (which I expect it will), we may have a 7.5% or better unemployment rate by the end of this year. Heck, we're already in a Recession: Las Vegas Economic Recession is here

Echelon Delay Could Have Major Economic Impact

The economic troubles could be a financial red flag at a time when other projects are facing financial woes. As Wall Street rethinks Las Vegas, jobs and housing could be hit hard.

That seems to be the perception on Wall Street. And when the projects do poorly, that means fewer jobs and houses that were expected to come online. Everything is tied together.

UNLV Professor Keith Schwer says when a project is delayed or cancelled suddenly, the impacts are felt beyond the Strip, "That's the nature of economics. It's like a cloth and each fiber is tied to the next."

Allow me to switch gears a bit -- LV Banking:

If you recall,, I warned you about SilverState Bank last weekend (excerpts below):

"Andrew McCain, son of Republican nominee John McCain, has resigned from Silver State Bank's board of directors this weekend. "

"Would a banking failure under son McCain's leadership look bad for dear old dad's election prospects? Hmmm... Well, I suggest you keep an eye on Silver State Bank -- word on the street is: they are not doing well."

"Take a look at the Bankrate and Safe and Sound ratings for Silver State Bank, Henderson Nevada: One Star (The Lowest Possible Rating) and 5G (Lowest Possible Rating)."

"I can only imagine the FDIC is working disaster/cleanup plans and decided it's probably time for Andrew to get out of the picture before the bomb goes off. "

Well, based on news reports today, it looks as if we're getting closer to the implosion:

Bank reports $62.7 million loss, replaces key officials

Silver State Bancorp, the $2 billion-asset holding company for the similarly named Henderson bank, lost $62.7 million in the second quarter and replaced its CEO as the number of bad loans grew huge.

Michael Thorell, 42, former president of an Arizona bank that Silver State acquired, was named acting CEO, replacing Corey Johnson, 50, who resigned.

The board named Phillip Peckman, 59, acting board chairman to replace Bryan Norby, 51, of Boise, Idaho.

Thorell declined to comment on Johnson's resignation. Attempts to reach Johnson were unsuccessful.

Silver State shares dropped 30 percent, or 38 cents, to 90 cents in heavy trading on Nasdaq following the announcements. Its shares hit a 52-week high of $24.10 last summer

Michael Threet, chief operating officer and chief financial officer, said the quarter's financial numbers stem from "the severe economic downturn in our nation, in our region and in the real estate values in the markets we serve."

Silver State's nonperforming assets, which include bad loans, were 83 percent larger than the total of reserves it set aside for problem loans plus its tangible equity or ownership interest in the company.

The company has been trying to raise $40 million in additional capital since June 5. It has been difficult to raise capital, because "all of the capital raised in the first quarter (for commercial and investment banks) is under water," Threet said. -- to increase deposits, the bank recently offered 4.25 percent on some certificates of deposit.

Moving on to LV Housing:

HousingTracker.net is reporting some rather awe inspiring numbers for Las Vegas today:

Inventory (28,581) continues to grow while Median prices plunged a dramatic - 30% YoY.

Additionally, RealtyTrac is showing that 36,161 homes are in some state of foreclosure for Clark County -- about 1/2 of the numbers are in preforeclosure, 1/4 in auction and another 1/4 Bank Owned.

LV Industrial Market:

Vegas Industrial Vacancy at 7.7%, Heading to 9%

LAS VEGAS-An industrial building boom than began in better economic times has been overwhelming the now tepid market over the past year or so, elevating vacancy to 7.7% from 4.5% one year ago, according to the latest report from Applied Analysis, a locally based business advisory that tracks the commercial market. Company principal Jeremy Aguero predicts the rate will rise to approximately 9% in coming quarters before demand rebounds and vacancy begins falling again.

The Las Vegas industrial market continues to be impacted by a declining economic climate, elevated fuel pricing for regional distributors, and increased caution on the part of business decision makers,” he says. “Company expansions and relocations are much more limited today than any point during the past five years.

Other LV News:

LVSands Corp. Trimming Las Vegas headcount by 1,500 --“through attrition, not layoffs”-- as part of a plan to find between $70 and $90-million in annual savings in the market. “It’s a challenging market that could continue for some time,” he said.

Businessman drops out of Tropicana bidding -- A New York developer whose group had offered $950 million to buy the Tropicana Casino and Resort says they're no longer interested. Joseph Palladino tells The Press of Atlantic City his group is looking at other casino properties in Atlantic City and Las Vegas, but no longer wants the Tropicana. The Tropicana has been for sale since last December

Airlines sound alarm for Vegas tourism -- Airlines serving McCarran International Airport have issued the bleakest economic forecast yet for Las Vegas, recommending that officials reconsider the need for a terminal that is under construction because there may not be sufficient tourism traffic to justify it. The airlines’ message to Las Vegas: The industry will not quickly recover from the tourism decline wrought by a combination of higher fuel prices and a sputtering economy.

McCarran Flier Count Dips 7 Percent in June -- Passenger counts at McCarran International Airport fell 7 percent in June, another indication that the nation's shaky economy is undermining the leisure travel industry. McCarran's top five carriers all posted declines in June, including Southwest, the No. 1 airline in Las Vegas and the only major domestic carrier making more money than it spends.

Casino bankruptcies making gaming sector a real gamble -- Already, casino owners such as Tropicana Entertainment LLC, Legends Gaming LLC and Greektown Holdings LLC have all gone bankrupt this year, but more are teetering on the brink, too... Herbst Gaming Inc. popped up on Bankruptcy Insider's Zombie Watch list three months ago... Even gaming giants Harrah's Entertainment Inc. and Station Casinos Inc. aren't immune. Moody's slashed the ratings for both on July 17 to B3, citing a deterioration in the Las Vegas gaming markets.

LAKE LAS VEGAS: Bankrupt project still alive -- tries to borrow $127 million. So what does one of the largest bankruptcies in Nevada history look like from street level?

On Monday, a Las Vegas bankruptcy judge will hold a hearing to determine whether Lake Las Vegas should be allowed to borrow $127 million from a Wall Street investment banking firm.

Company officials say they need the money to pay for repairs to the 2-mile-long man-made lake and maintain payroll, employee benefits and day-to-day operations. The company employs 260 workers, mostly for its golf courses.Rapoport said this bankruptcy "might well be" the largest Nevada has ever seen... Already it's large enough to prompt wild speculation about the city of Henderson getting dragged into bankruptcy, too. But city officials literally laugh that off.

It looked like business as usual Thursday morning at Lake Las Vegas. Golfers golfed. Mowers mowed. Waterfalls fell... But there wasn't much business.

At 10 a.m., a single player had the tables to himself at Casino MonteLago. The nine other people in the 40,000-square-foot casino confined themselves to the slots.

Outside, MonteLago Village was a ghost town of boutiques, coffee shops and high-end eateries...

Bottom line:

I feel the last few sentences above capture the Las Vegas condition/situation quite nicely, and believe we're much closer to the beginning of this unprecedented LV economic downturn than we are to the end.

You may want to hold on to your hat, because this wild downturn will likely get quite ugly in the not too distant future... As you'll see when the significant casino layoffs begin - and soon.

Again, going back to 1970, there has only been ONE OTHER time (since this recent economic downturn) where gambling revenues actually fell -- in the aftermath of the Sept. 11 terror attacks. During that timeframe (2001-2002) gaming revenue fell 1 percent. Today, LV gaming revenue is down ~ 6% for the year (16% just last month), but we've yet to see massive layoffs experienced after 9/11.

Are things different this time around? I wouldn't bet on it, as you 'd probably lose to the house - the layoffs are coming... and probably just in time for Christmas 2008.



With that, I hope you have a great weekend!

Randy

Dow Update and Silver State Bank

The DOW fell another 240 points today on weak financials and rising oil. Since the peak of 14,093 reached on October 12 last year, the index is down ~ 3,000 points or 21.4% - but we're not done yet!

Keep an eye on 10,800, as it's the next downside resistance - followed by 10,680. I expect them both to be broken - however timing is the only uncertainty.

With that said, tomorrow we will see data released from the International Council of Shopping Centers showing major retail chain sales data -- Note: Consumer Spending is 70% of the US economy.

Additionally, Monthly Consumer Confidence data will be released tomorrow -- a survey of consumer attitudes on present economic conditions and their expectations of future conditions.

I just checked opening futures for tomorrow, along with current Overseas markets: They are currently a sea of red.


Changing gears a bit:

Last Saturday I told you about two new bank failures that took place over the weekend - One being First National Bank of Nevada: Two more bank failures this weekend! .

Certainly, that was big news, but what I think may be even BIGGER news is: Andrew McCain, son of Republican nominee, John McCain, has resigned from Silver State Bank's board of directors this weekend -- McCain's son resigns from two Boards of Directors

Would a banking failure under son McCain's leadership look bad for dear old dad's election prospects? Hmmm...

Well, I suggest you keep an eye on Silver State Bank. Word on the street is they are not doing well.

Take a look at Bankrate and Safe and Sound ratings for Silver State Bank, Henderson Nevada: One Star (The Lowest Possible Rating) and 5G (Lowest Possible Rating).

I can only imagine the FDIC is working disaster/cleanup plans and decided it's probably time for Andrew to get out of the picture before the bomb goes off.

Politics at it's democratic best - gotta love it!

Regards

Randy