Tuesday, September 16, 2008

GREAT MOMENTS IN WALL STREET HISTORY

Reuters, 2007 - Lehman Brothers has hired Jeb Bush, brother of the President of the United States, as an advisor to its private equity business, a source familiar with the situation said. Lehman hired another relative of U.S. President George W. Bush last year--George Walker, a second cousin, who heads up the bank's asset management business.

2 Comments:

At September 17, 2008 3:56 AM, Anonymous Anonymous said...

And was the following upon Jeb's recommendation?:

Lehman is going to hide behind the bankruptcy, thereby minimizing the impact of its secondary market holdings. And, with that, also proceed selling out to the Brits---one more former US asset gobbled up:

 
At September 17, 2008 4:35 PM, Anonymous FDIC has $53 billion to cover $6.84 trillion of deposits. said...

During the S&L crisis in the early 1990s, 1,500 banks failed. So far, seven banks have failed in 2008, the largest being IndyMac. The FDIC has about $53 billion in funds to handle future bank failures. The IndyMac failure is expected to use $4 to $8 billion of those funds. Average Americans will lose $500 million in uninsured deposits in this failure. The FDIC says that they have 90 banks on their “watch list”. They do not reveal the banks on the list, so little old ladies with their life savings in the local bank will be surprised when they go belly up. Based on the fact that IndyMac was not on their “watch list”, I wouldn’t put too much faith in their analysis.

There are 8,500 banks in the U.S. Based on an independent analysis by Chris Whalen from Institutional Risk Analytics, they have identified 8% of all banks, or around 700 banks as troubled. This is quite a divergence from the FDIC estimate. Should you believe a governmental agency that wants the public to remain in the dark to avoid bank runs, or an independent analysis based upon balance sheet analysis? The implications of 700 institutions failing are huge. There is roughly $6.84 trillion in bank deposits.

It is almost beyond belief that $2.6 trillion of these deposits are uninsured. There is only $274 billion of the $6.84 trillion as cash on hand at banks. This means that $6.5 trillion has been loaned to consumers, businesses, developers, etc. The FDIC has $53 billion to cover $6.84 trillion of deposits. Does that give you a warm feeling?

Based on the chart below, I would estimate that we are only in the early innings of bank write-offs. The write-offs will at least equal the previous peaks reached in the early 1990s.

If a large bank such as Washington Mutual (WM) or Wachovia (WB) were to fail, it would wipe out the FDIC fund.

If the FDIC fund is depleted, guess who will pay? Right again, another taxpayer bailout. What’s another $100 or $200 billion among friends.

 

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