Seattle Bubble

• Can we talk? Full disclosure. What does it mean to you?
• Looking under the hood: How to save yourself aggravation and money when refinancing or purchasing.
• WaMu Failure: What it Means for Seattle
• Refinancing? GET BUSY
• Drinking the Kool-Aid

Jump to the bottom to add your comment. ↓

75 responses so far ↓

• 1 Nickle Pickle // Aug 25, 2008 at 9:32 pm

  I always appreciate your (S-crow) input in this forum. It is a delight to get an opinion from someone in the market. Very informative.

  About CDs and WaMu. WaMu may be the banks next to fold. There are some interesting charts showing how much $$ most all the banks are tied to with the Mortgage industry. (See below for link.) WaMu is definitely hurting. So it may be somewhat of a headache to set up a CD with them and have them fold next.

  I was just in my bank today (Key Bank) They were trying to sell me on the 5.5% CD. I wont do CDs now since the rate of inflation is more than 5.5% even by the governments skewed ‘low’ CPI / inflation rate. You are actually loosing money on CDs these days - even with good rates.

  Tough times still ahead.

  Market share of top mortgage lenders:
  http://matrix.millersamuel.com/wp-content/1-2008/neworder.gif

  Government CPI numbers:
  http://www.bls.gov/cpi/

• 2 TJ_98370 // Aug 25, 2008 at 9:35 pm

  Is WaMu the predicted “whopper” ?

  Large U.S. bank collapse ahead, says ex-IMF economist

  …..”We’re not just going to see mid-sized banks go under in the next few months, we’re going to see a whopper, we’re going to see a big one, one of the big investment banks or big banks,” said Rogoff, who is an economics professor at Harvard University and was the International Monetary Fund’s chief economist from 2001 to 2004…..</i?

• 3 biliruben // Aug 25, 2008 at 9:39 pm

  I saw that when I went in to cash (not deposit!) a check today.

  SPECIAL! 5% for 13-18 month CD.

• 4 Joel // Aug 25, 2008 at 9:49 pm

  They need cash. Now.

• 5 S-Crow // Aug 25, 2008 at 9:50 pm

  “‘In the heyday, we were giving 100 percent financing to people one day out of bankruptcy,’ said Smith. ‘No wonder people walked away from their houses.’” -

  Quote from chairman of government affairs and industry relations for the association of mortgage brokers in California.

  ————————

  Heck, our office closed a sale transaction or two for people who were a few MONTHS from a PRIOR foreclosure! 100% loans were very LUCRATIVE for those originating the loans. INCREDIBLY.

• 6 Richie // Aug 25, 2008 at 9:57 pm

  Biliruben:

  You did the right thing. Only the pricipals are insured by FDIC for up to $100,000.

  Wall Street analysts’ ratings for distress financial sector:
  WaMu (WM): 3.6
  Freddie (FRE): 2.8
  Fannie (FNM): 2.8
  AIG: 2.2
  Leham(LEH): 2.4
  Citi ( C ): 2.7
  Etrade (ETFC): 3.3
  National City (NCC): 2.7
  UBS: 2.3

  Yes, WaMu is the lowest. When the average rating is above 3.5, it signifies that the Street believes that Chapter 11 or Chapter 13 is imminent.

• 7 Ken Mott // Aug 25, 2008 at 10:03 pm

  Its fdic insured so not much to worry about under 100k. If you are putting it in CD’s you obviously don’t need quick access to it.

  Just moved a bunch over. beats 3.75 or whatever.

• 8 anna // Aug 25, 2008 at 11:28 pm

  In 2007 I talked w/ a mortgage agent (not wamu). I was ready to put down 50% for a condo and need only a loan of 150k. And i was told no, it will not be profitable for them, so theyd rather i put 0% down. Now they are broke and good riddance.

• 9 David McManus // Aug 26, 2008 at 7:10 am

  Do you guys think the local cheerleading will finally stop if WAMU really goes under? Will that be when everyone comes to grips with reality about the situation?

  I don’t know how they could spin a LARGE LOCAL EMPLOYER going out of business.

• 10 The MD // Aug 26, 2008 at 7:14 am

  Ken Mott, I hear what you are saying, but please be careful. The FDIC DOES indeed insure depositors up to $100,000 per Tax ID. However, there is no guarantee to getting reimbursed for lost funds for up to TEN YEARS. With all the added pressure of banks closing around the country, I’m betting the lead time to collect on lost funds is increasing everyday.

  Anyway, also be sure to ASK your banks if the investment vehicle you are placing your funds in is indeed FDIC insured. Not all banks are FDIC insured across the board of all the depository products/investment vehicles they sell. This is a little trick up their sleeve as they rely on consumers assuming they are placing funds in FDIC insured accounts.

• 11 The MD // Aug 26, 2008 at 7:20 am

  David McManus, you’re absolutely right. And then maybe we’ll all get some quiet from the realtors in our area telling us, “oh the market is just fine,” or “now is a great time to buy,” or “it will bounce back mid ‘09.”

  I think it will actually take a large local employer having to fail for people around here to actually “get it.” Our local economy (and national for that matter) is about to get more pressing. Credit is about to get even tighter for consumers. Yeah, its going to get ugly.

• 12 softwarengineer // Aug 26, 2008 at 7:37 am

  MY ADVICE: STAY AWAY FROM BANKS OFFERRING THE HIGHEST CD RATES

  Tim, a good bank education can be found on Dr. Housing Bubble, here’s an excerpt:

  “…Second - The FDIC although providing protection to depositors has created a sort of moral hazard. If you look on sites like Bankrate, you’ll notice that the highest savings rates normally come from the most capital impaired institutions. Many on the list will probably go bankrupt in 1 or 2 years. Now why would anyone invest their money in these institutions if they knew that their money wasn’t protected? If it weren’t for the FDIC, these lenders would be bankrupt and rightfully so; they have horrible and flawed business models and should be allowed to fail. Instead, they offer you a nice yield on a 6 month CD….”

  The rest of the URL:

  http://www.doctorhousingbubble.com/the-sham-of-our-current-unemployment-rate-numbers-lessons-from-the-great-depression-part-x-data-mining/

  Here’s some recent Dr. Doom (Roubini) advice on banks, as well as his URL references:

  “…The FDIC will for sure run out of money as hundreds of banks will go bust and their depositors will have to be made whole given deposit insurance. With funds of only $53 billion, already up to 15% of such funds will be used to rescue the depositors of IndyMac alone. Thus, the FDIC is already requesting to Congress that the deposit insurance premia should be raised to compensate for this shortfall of funding. Too bad that this increase in insurance premia – that should be high enough in advance (not ex-post) to ensure that deposit insurance is incentive-compatible and not leading to gambling for redemption via risky lending in banks – is now too little and too late and is requested when the damage is already done as the biggest credit bubble in U.S. history is now going bust. Also the FDIC has done a mediocre job at identifying which banks are at risk. So far there are only about 90 banks on its watch list; and IndyMac was not put on that list until last month! So if the FDIC did not even identify IndyMac as in trouble until it was too late, how many other IndyMacs are out there that that the FDIC has not identified yet? Certainly a few hundred but such honest analysis of banks at risk is nowhere to be found…”

  http://www.nytimes.com/2008/07/19/business/economy/19econ.html?pagewanted=1&_r=1

  http://www.rttnews.com/Content/TopStories.aspx?Node=B1&Id=658745&Category=Top%20Stories

  I hope your coffee wasn’t too acidity or strong before reading this pragmatic gloom; but a prepared mind doesn’t have to go through the shock of surprise later.

• 13 Pondscum // Aug 26, 2008 at 9:20 am

  I really don’t understand why people feel that they can rely on the FDIC to make them whole in the event of a huge bank failure like WaMu. The FDIC has a LIMITED balance sheet which was hit pretty hard already by the failure of IndyMac.

  If WaMu goes down you’ll see not only a lot of burned depositors there, but most likely a string of failures following it. I’d hate to be waiting around for a check.

  But good luck to the ones who are ok with it.

  As for trying to beat the rate of inflation, what investment do you suggest that is going to offer better returns than a CD with little risk? In the current economy I’d be much more interested in the return of my investment at all rather than getting a couple more points on it.

• 14 Jillayne Schlicke // Aug 26, 2008 at 9:35 am

  “Plus, I’m freaking out that one of my kids is going to be a Freshman in high school starting in a week or so.”

  Transition years can be challenging….perhaps more so for us than for our kids because of what they mean to us: we’re getting older :)

  I just lived through freshman year and am hoping that sophmore year will be smoother. In other news, my 11 year old had her first major zit this morning. WaMu news means nothing compared to that.

  As much as I am also enthralled by the slow train wreck that is the mortgage industry collapse, life does go on. Thanks for reminding us that family’s more important. :)

  David McM is absolutely right. IF the bank is taken over by another, bigger bank, not all jobs will be lost but surely there will be some people on the streets.

  I’ve banked at WaMu since I had my first passbook savings acount as a kid. I am not celebrating this news.

• 15 S-Crow // Aug 26, 2008 at 9:58 am

  Yep Jillayne, LOL….

  I does mean getting old! Regarding WaMu: was with them a very long time also. They are not what they used to be. Just for fun I withdrew 5% of what I had left yesterday, so I could get Mrs. S-Crow and me a Turkey sandwich at Costco. The stupid little things we do to rage against the machine!

• 16 Markor // Aug 26, 2008 at 10:52 am

  <blockquote:Nickle Pickle: I wont do CDs now since the rate of inflation is more than 5.5% even by the governments skewed ‘low’ CPI / inflation rate. You are actually loosing money on CDs these days - even with good rates.

  Then what will you do? Lose even more by not doing a CD?

• 17 Markor // Aug 26, 2008 at 10:54 am

  Richie: Only the pricipals are insured by FDIC for up to $100,000.

  Accounts, including CDs, are insured up to $100K.

• 18 Markor // Aug 26, 2008 at 10:59 am

  The FDIC DOES indeed insure depositors up to $100,000 per Tax ID. However, there is no guarantee to getting reimbursed for lost funds for up to TEN YEARS. With all the added pressure of banks closing around the country, I’m betting the lead time to collect on lost funds is increasing everyday.

  I agree. When it gets bad enough, we can expect accounts to be frozen and devalued overnight, like they were in Argentina.

• 19 Markor // Aug 26, 2008 at 11:01 am

  Pondscum: I really don’t understand why people feel that they can rely on the FDIC to make them whole in the event of a huge bank failure like WaMu. The FDIC has a LIMITED balance sheet which was hit pretty hard already by the failure of IndyMac.

  Simple solution, just borrow more from future generations. What’s another $trillion on top of the $10 trillion already borrowed?

• 20 Mike2 // Aug 26, 2008 at 11:32 am

  Out of curiousity, do you handle many closings from WAMU? And given it looks like they’re getting closer to keeling over, how is that likely to impact your business?

  Your insights are very valuable. Keep up the good work.

• 21 Mike2 // Aug 26, 2008 at 11:44 am

  I really don’t understand why people feel that they can rely on the FDIC to make them whole in the event of a huge bank failure like WaMu. The FDIC has a LIMITED balance sheet which was hit pretty hard already by the failure of IndyMac

  With how packed the Seattle bound flights have been out of National and Dulles the FDIC folks will need to wait a few weeks before taking over WAMU. If another biggie collapses first, they may have to wait until air fares drop.

• 22 Eleua // Aug 26, 2008 at 11:47 am

  Anyone that is throwing money at a failed institution, on the bet that they will be made whole by a third party, is a fool. Look at the size of WM’s deposits. Look at the size of the deposits of the FDIC’s troubled institutions. Look how much it grew.

  Now look at the assets of the FDIC.

  You are playing Russian Roulette with your money.

• 23 Eleua // Aug 26, 2008 at 11:54 am

  The above mentioned example of someone throwing $100K into a CD of a financial institution that is teetering on the verge of BK shows how two generations of Americans have not been exposed to the concept of risk. FDIC insurance just creates this kind of moral hazard, which will ultimately be expressed in a much larger, and uninsurable banking failure.

  Enjoy the stupidity.

• 24 patient // Aug 26, 2008 at 11:59 am

  While I agree it’s unneccssary to use a bank in deep trouble I also have hard to believe that the government will not do whatever it takes to make FDIC able to payout. Even if it means printing money… Can you imagine the panic if a bank like WM goes tits up and people will loose their money and all trust in FDIC is gone? It will most likely create runs on every bank, no exception. End of the world as we know it.

• 25 Eleua // Aug 26, 2008 at 12:01 pm

  FDIC troubled institutions: 117. Up from 90.

  Assets in troubled institutions: $78.3B. Up from $26.3B.

  FDIC has less than 2/3 of that.

  The problem becomes a matter of dynamic instability. The more institutions that fail and cause the FDIC to move in, the more attention it will bring to other institutions, which will cause them to experience withdrawls, thus tightening the vortex.

  Total protonic reversal.

• 26 Herman // Aug 26, 2008 at 12:02 pm

  If there’s one thing bubblers don’t get, it’s how to use the US taxpayer to offset the risk of high yield investments. This is the same community that has been diligently been saving because we don’t count on investor bailouts.

  Well, bailouts are a fact. I, for one, am going to park 100,000 dollars at WAMU at 5% and let the taxpayer pick up the risk premium. The taxpayer will be forced to bail out the FDIC if needed, just like FNMA, et al, due to the potential impact on such a broad base of account holders and on trust in the banking system in general.

  By the way, thanks for that.

• 27 S-Crow // Aug 26, 2008 at 12:02 pm

  Mike 2,

  WaMu closings? Used to. Quite a few back in the Glory days. We used to get work from the WaMu home loan center in Everett, until they closed it among scores across the country. Closed loan products all over the board (Option ARM’s, I/O products, etc..)

• 28 Eleua // Aug 26, 2008 at 12:04 pm

  Patient,

  True, except the government does not “print’ money. That would only exacerbate the problem. The remaining institutions would instantly pay higher interest rates, which would kill them.

  We have very few good options left. This is what happens when you mask the failed banks, rather than forcing them to take their marks and fold. The healthy banks (what few we have) fail along with them.

• 29 David McManus // Aug 26, 2008 at 12:05 pm

  CNBC reports that 117 financial institutions are on the FDIC’s trouble list, up from 90 in the first quarter. However, the number of troubled institutions is still well below the levels seen during the savings and loan crisis of the 1980s. Still, financials (-0.9%) fall to session lows on the news, although losses are relatively well contained.

  So banks are in the crapper but not as many as in the 80s S&L crisis.

  One important word was left out of this news.

  Yet.

• 30 uptown // Aug 26, 2008 at 12:08 pm

  For all you youngsters out there…

  “Between 1980 and 1994 more than 1,600 banks insured by the Federal Deposit Insurance Corporation (FDIC) were closed or received FDIC financial assistance.” (wikipedia: savings and loan crisis)

  Wake me up when we start getting near those levels.

• 31 vboring // Aug 26, 2008 at 12:14 pm

  uptown,

  back in the day, local banks were the norm instead of the exception. we won’t see those numbers of failures ever again. we might see an equivalent value of bank fail, though.

• 32 S-Crow // Aug 26, 2008 at 12:16 pm

  Uptown,

  Yikes! You mention a 14 yr time period. Hope this situation recovers in a 14 yr time period. I was on Wall Street and in Times Square on August 15th of last year, which is what many would say was the start of the unfolding (basically August). So that was one year ago and how many banks are on the watch list today?

• 33 old timer // Aug 26, 2008 at 12:27 pm

  All this money stuff.
  Interest rates, inflation, bankruptcy, FDIC, Federal Reserve, Goldman Sachs, CDO’s, Sub-Prime, Alt-A - it just does not stop.
  Well, so far it doesn’t.
  I’m waiting for the announcement, one Monday morning, that: “Due to the financial emergency caused by: (fill in the appropriate causal factor) the President has declared a bank holiday”.
  Then, when the banks re-open in a week hence, they will be operating under the aegis of The Department of Homeland Security, with co-operation of the Federal Reserve, The FDIC, and The U.S. Treasury. Withdrawls of cash will be strictly limited and accessible only through specially developed access cards, a la Katrina debit cards, available at your local banking center.
  Payments for obligations with checks may still be made, and will be, for a period of time, be automatically converted to the new monetary denomination. All outstanding Federal Reserve notes are, from this time forward invalid, and no longer legal tender. Conversion of those notes to the new currency will be done at the same rate and in conjunction with the above cash withdrawal rules.
  These new ‘procedures’ will be sold as necessary for the smooth return to a functional economy with jobs, prosperity, and great futures for all of those who were in on the switcheroo .
  For the rest of you schmucks, you and your progeny will pay taxes to cover this disaster for all eternity.
  “We’re Screwed ‘08″

• 34 The MD // Aug 26, 2008 at 1:12 pm

  WaMu will not be taken over by any bank. This past March/April, TPG Capital infused over $7B into WaMu in exchange for 51% ownership of the company (small price to pay for it) and a seat on the board (without shareholders’ approval mind you).

  Anyway, TPG is not in the business of allowing other Banks to purchase what they already own. They’re in the business of dissolving companies into parts as they are more valuable and more easily sellable in that manner.

  Other banks had approached WaMu in the past about a potential deal, but cards are off the table now. Since then, those other banks have either moved forward with purchases of other institutions (which means they’re capital is now depleated for purchase of another company), and Bank don’t want “junk” right now. It wouldn’t be a good business practice.

  WaMu simply will not be purchased by another Bank. WaMu is done… and rightfully so with their shady lending practices and deplorable board.

• 35 The MD // Aug 26, 2008 at 1:21 pm

  Patient, you stated the following:
  “While I agree it’s unneccssary to use a bank in deep trouble I also have hard to believe that the government will not do whatever it takes to make FDIC able to payout. Even if it means printing money…”

  Do you understand the implications that printing copious amounts of money would mean for individuals who have managed their money in a responsible manner? That does not heal ANYBODY to just print money out of thin air. All it does is devalue the U.S. Dollar and EVERYONE loses in that game. NOT a good strategy. FDIC is absolutely a moral hazard, even though I understand the intent is good, it really isn’t good from a wholistic and healthy macro-enconomic perspective.

  Without FDIC, Americans would either choose to educate themselves with their finances, or they would continue being stupid. Overall, that would create a system that weeds out idiots and rewards/incentivizes better cash management.

• 36 TJ_98370 // Aug 26, 2008 at 1:30 pm

  FDIC says problem banks rise to 117 from 90
  .

  The number of problem U.S. banks on a regulatory watch list increased to 117 by the end of the second quarter from 90 at the end of the first quarter, the Federal Deposit Insurance Corp said on Tuesday…..
  .
  ……Nine banks have failed so far this year, including IndyMac Bancorp Inc, which became the third-largest U.S. bank failure and was on the FDIC watch list in the second quarter.
  .
  (FDIC Chairman Sheila) Bair also said the agency will consider a plan in early October to replenish its Deposit Insurance Fund, which had a large drop due to IndyMac and other bank failures.
  .
  The fund, which is used to cover insured deposits, fell to $45.2 billion at the end of the second quarter from $52.8 billion at the end of the first quarter….
  .

• 37 Eleua // Aug 26, 2008 at 1:33 pm

  Yup. Stocks rallied on this. I guess more money for more bank failures is bullish when compared to less money for more bank failures.

  Idiots.

• 38 patient // Aug 26, 2008 at 1:50 pm

  Eleua and The MD, I understand the the implications of printing money, it was just to highlight that I think the government will do whatever it takes for FDIC to be able to honor the insurance. The implications of the government not honoring an insurance to the people/depositors is something so enormous that it can’t be allowed. If the government don’t honor it’s contractual obligiations to the people why should the people honor obligations like paying taxes and laws in general? You can endup with chaos like anarchy with a resulting police state. To let the GSEs fail is peanuts compared to now honoring FDIC.

• 39 Lanny Poffo // Aug 26, 2008 at 2:26 pm

  Eula #25 - Total Protonic Reversal

  I think I have to quibble with this. From the Uncyclopedia:

  Total Protonic Reversal - Protonic reversal, if fed with high enough amounts of PKE and ecto-protinic radiation, can produce an unstoppable chain reaction known as TOTAL PROTONIC REVERSAL. This is really bad. The radio-biological hazard of TOTAL PROTONIC REVERSAL is essentially a long-term one because of the potential accumulation of long-lived radioectostopes (such as ectonium-90 and protonium-137) in the ethereal body as a result of ingestion of energies containing the radioactive materials. This hazard is much less serious to the living than those which are deceased, which is of much greater immediate operational concern.”

  I’m thinking that the current hazard is much more serious to the living than the deceased. :-)

  Great reference BTW - made me look.

• 40 Pondscum // Aug 26, 2008 at 3:37 pm

  Leapin’ Lanny comes through again!

• 41 mark // Aug 26, 2008 at 4:26 pm

  “The IndyMac debacle was interesting because we received work from their Bellevue office. It was interesting because about a week prior to their FDIC takeover (which many argue quite effectively due in large part to the lovely Senator from New York, Mr. Schumer’s letter to the OTS which subsequently initiated some $1.3 Billion in depositor withdrawals in an 11 day time period) we e-mailed staff that we worked with and they indicated no talk of problems at all. Why is it that staff sometimes is the least likely to see the writing on the wall? Anyway, the rest is history. Losing the IndyMac work was not helpful.”

  The powers that be want the public to remain ignorant. If everyone that had more than 100K on deposit with WAMU reduced their accounts down to the 100K limit WAMA would fail. Indymac ain’t nothin compared to the size of WAMU.

• 42 jonasb // Aug 26, 2008 at 8:11 pm

  We have a lot of cash spread among different accounts at ING Direct and Bank of America. What do you think about these institutions? In case ING goes bk, where should we go to get the money, I don’t know if they have a branch here in the Seattle area. And for all bank accounts, how do you prove how much money you have , even if you print statements everyday they can always claim that you printed it right before you widthdrew a certain amount ….

• 43 jonasb // Aug 26, 2008 at 8:13 pm

  widthdrew = withdrew , or however you spell it :>

• 44 hzg // Aug 26, 2008 at 8:40 pm

  quote:
  “I’ve banked at WaMu since I had my first passbook savings account as a kid. I am not celebrating this news.”

  note:
  WaMu has been at or near the top of the CD yield list for a long time. What is so magic about 5%? It was 4.75 for some time. They’ve been teetering on the brink for some time. Now, they may go bankrupt that is true, but they’ve been on the brink of that for a long time. I don’t see why all of a sudden when the number is an even 5 that it’s “news”

• 45 mukoh // Aug 26, 2008 at 9:28 pm

  Its big news since S-Crow has been whining about WaMu still being in business for months.

• 46 Nickle Pickle // Aug 26, 2008 at 11:16 pm

  Markor: Then what will you do? Lose even more by not doing a CD?
  Your investments should be in things that do well in inflation. Sure, it is better to loose 1.5% of your money in a CD than say 6.5% to inflation with the money sitting in your checking, but that does not even begin to cover your choices. There are plenty of ,say, “inverse” inflationary investments. Housing is definitely not one of them at this time - Perhaps Gold or Silver is - for example.

• 47 mikal // Aug 26, 2008 at 11:28 pm

  hmz, you are right.

• 48 Markor // Aug 27, 2008 at 12:55 am

  Nickle Pickle: There are plenty of ,say, “inverse” inflationary investments.

  None with as little risk as a CD, though. I’d rather not take a chance on being negative for five years just to have a chance on getting a couple points better return. I’d rather lose money to inflation with a CD.

• 49 Markor // Aug 27, 2008 at 1:04 am

  patient: Eleua and The MD, I understand the the implications of printing money, it was just to highlight that I think the government will do whatever it takes for FDIC to be able to honor the insurance.

  I agree. Not shoring up the FDIC would be like the US defaulting on its debt: game over either way. Even the tax cuts for the rich would be suspended before the FDIC would not be replenished. Plus we’re talking about mere hundreds of $billions, when $trillions are still being wasted elsewhere.

  I wouldn’t be worried about WAMU going belly up while I have a CD with them. I would expect no delay in statements. Might have a different opinion when things get worse, but we’re not there yet.

• 50 Eleua // Aug 27, 2008 at 11:48 am

  Markor,

  It’s not that one bank like WM would destroy the banks, but that another big bank may cause people to start to draw from others. If this gets critical mass, then the FDIC will not be able to keep up financially or operationally.

  With as tight as most Americans run their cash flow, they can’t take much of a delay in being paid out.

• 51 mikal // Aug 27, 2008 at 12:07 pm

  Markor, you are correct. The government has to cover all the deposits PERIOD. Who ever made the comment about anarchy and not paying taxes is correct. It simply won’t be allowed to happen and to suggest that well maybe it will is delusional. After $5 trillion tacked on over the last eight years what would a few trillion more be.

• 52 cheapseats // Aug 27, 2008 at 12:46 pm

  I agree that the government has to cover the banks, but at what cost? It would probably put more pressure on interest rates upwards. It would also probably make less money available for other things, like GSE’s…

  But again, I agree that there is no option, the government would/will cover another bank collapse.

• 53 mikal // Aug 27, 2008 at 12:53 pm

  Even if the value of the dollar became much much lower it would happen. At some point the value of the dollar will become less as this nation continues to borrow. At some point other countries will stop buying the dollar and we will have to learn to live within our means. Then everything is going to change.

• 54 Markor // Aug 27, 2008 at 1:23 pm

  Foreigners will still buy the US debt, only they’ll demand a higher interest rate. Americans will have to work more (Saturdays too, like the Japanese do) and forgo their retirements.

  The money to shore up the FDIC can come from moving the fire hose of cash from Iraq onto the FDIC for a few days. The no-bid contractors building all those pre-condemned facilities in Iraq can do data entry for the FDIC via satellite link.

  I agree about the critical mass thing, Eleua. That’s why people should use multiple banks, and credit unions too. When things get bad enough, esp. if we-know-who gets elected, it will be time to convert to euros and bury it.

• 55 mikal // Aug 27, 2008 at 1:24 pm

  Whom Mccain? He isn’t planning on changing anything and that is a road to disaster.

• 56 mikal // Aug 27, 2008 at 2:32 pm

  If the government doesn’t cover the banks as promised then the dollar would be worthless anyway. Foreigners buy dollars because it is one of the few safe currencies in the world. If the government doesn’t back the banks that would also end.

• 57 Richie // Aug 27, 2008 at 2:40 pm

  Unlike IndyMac’s sudden death, WaMu is slowly bleeding to death. The stock just lost another six pennies in a strong market today. I doubt seriously it will survive beyond December 31, 2008.

  When it dies, it will create a storm in the local real estate market like Indy did in LA.

• 58 Markor // Aug 27, 2008 at 5:24 pm

  But if it dies, it’ll look just like it does today, doors still open. It’ll have to die twice to really die. The second time would be the death of the country too.

• 59 TJ_98370 // Aug 27, 2008 at 6:22 pm

  Tim,
  .
  A minor detail that maybe you should be aware of -
  .
  Re-reading this thread I find posts that were not there previuosly and other posts that seem to reference quotes that I can’t find elsewhere on the thread.
  .
  For example, when I made my post #36 about the increase in the number of troubled banks, posts #25 and #29 made by Eleua and David McManus who posted about the same subject did not come up. I would not have posted if I would have known the subject had been covered. It is a minor problem, but can result in redundancy.

• 60 jonasb // Aug 27, 2008 at 9:37 pm

  I am a frequent lurker here, and very interested to any answers on my question post #42. Thanks.
  We also sold our house late last year and decided to rent closer to our jobs, we wanted to try out the area and kids’ schools first before committing by buying. A lot of our money are from being frugal and saving and a good percent is also from the sale of our home (owned in Seattle from 2000-2007). We hope that we can buy someday without having a big loan or no loan at all…. hopefully our money is safe in that bank (ING & Bank of America).

• 61 Alan // Aug 27, 2008 at 10:03 pm

  I know two people who were turned down for mortgage loans and Bank of America in 2005-2006 in Texas. I’ve wondered if my super small sample suggests that BofA may be in a stronger position than other banks.

• 62 Ubersalad // Aug 27, 2008 at 10:13 pm

  ING had some very risky loans late in the game, i.e. stated income, no asset and 1 day on the job. Oh, no add for this loan to go 100% CLTV with outside 2nd.

• 63 Ubersalad // Aug 27, 2008 at 10:59 pm

  I won’t be surprise if ING comes out with some interesting news.

• 64 Ubersalad // Aug 27, 2008 at 11:00 pm

  ING had some very risky loans late in the game, i.e. stated income, no asset and 1 day on the job. Oh, no add for this loan to go 100% CLTV with outside 2nd..

• 65 jonasb // Aug 27, 2008 at 11:07 pm

  oh no, ING? Wouldn’t it be harder to get out money from this bank since it’s internet-based?

• 66 S-Crow // Aug 27, 2008 at 11:09 pm

  Jonasb-

  Wish I could help regarding your question #42, but don’t have any info. on that.

• 67 jonasb // Aug 27, 2008 at 11:15 pm

  i meant to get out money when it goes bankrupt.

• 68 Ubersalad // Aug 27, 2008 at 11:19 pm

  I am not sure, but ING had some great ideas before anyone else. It was the biggest internet bank before internet bank was even known by the public and offering some crazy CD-like yield for very little deposit in the savings.

  Then came another great idea, let’s become the craziest alt-a lender in the land…

• 69 Ubersalad // Aug 27, 2008 at 11:20 pm

  Oh btw, I do give them full credit on sharebuilder, which is pretty cool for small investors. Overall, ING do try to target your everyday Joes and offer some great deals. But the whole alt-a mortgage, not sure what they were thinking…

  Does anyone have number on their alt-a mortgage such as how much they funded?

• 70 Ubersalad // Aug 27, 2008 at 11:22 pm

  Ahh…sorry for flooding, feel free to combine all of this.

  Technically their loans could have been categorized as prime instead of alt-a, so that number may be off.

• 71 The MD // Aug 28, 2008 at 10:41 am

  Jonasb, right now, liquidity is absolutely necessary to surviving the market and what could ensue. Because it is much to difficult to sleep with money in our mattresses, we must use banks as our holding tanks. Rate should be secondary to the financial health and solidity of credit rating of the bank. Bank of America is a A to AAA Credit Rated Bank given any month. If it were me, I would put my money in B of A and settle for a smaller return in exchange for peace of mind my money is safe.

• 72 patient // Aug 28, 2008 at 11:26 am

  What I’ve seen Bofa was pretty conservative in the subprime area and was considered very healthy. The corpse in the closet is the Countrywide takeover. There’s very little info on what’s going on there or how it impacts Bofa’s finances. I’m about to transfer about $100k out of WM and have started to visit banks to get a better idea of where to put them. First out was Bofa, at that time, ( couple of weeks ago ) they offered a very competetive 6m CD of 4%. That and the fact that they closed to refused to even discuss the Countrywide impact and instead quoted that Bofa had been in business for about 100y and would not fail made me a bit suspicious. I’m now leaning towards Wells Fargo. Take this for what it is, one persons obervations without any data to back up suspicions. It’s not really advice just observations.

• 73 Notorious ART // Aug 28, 2008 at 1:58 pm

  patient,
  Wells Fargo(WFC) and US Bank(USB) are the best managed banks. The proof is in their strong second-quarter performance given the current environment. As more banks go out of business they will only gain market share. I like US Bank the best since their business model is conservative and is geared towards fees and wealth management. USB was content with slow sustainable growth unlike Washington Mutal(WM).BTW, Buffet as been adding to his position in both USB and WFC.

  Here’s a good MSN Money Article

• 74 Markor // Aug 28, 2008 at 6:09 pm

  Here’s a link to “FDIC may borrow money from Treasury”:

  http://news.yahoo.com/s/nm/20080827/bs_nm/fdic_treasury_dc_1?ref=patrick.net

• 75 LUC // Aug 29, 2008 at 4:09 pm

  You guys will like how they promote the 5% CD in Vegas. Courtesy of Calculated Risk.

  http://lastnightinvegas.blogspot.com/2008/08/this-is-end-my-only-friend-end.html

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