WaMu is shamu-ed: Another bank failure amid no way out

WaMu becomes the latest victim (or victimizer) in the credit crisis as it is bought out by JPMorganChase. The sale now makes JPMorganChase the 2nd largest bank until Bank of America completes its purchase of Merrill Lynch & Co, another large entity on the bands of this hurricane-strength credit meltdown.

With the inability to keep its cash, as exhibited by this quote:

Washington Mutual was shut by the federal Office of Thrift Supervision, and the Federal Deposit Insurance Corp was named receiver. This followed $16.7 billion of deposit outflows at the Seattle-based thrift since Sept 15, the OTS said.

It is clear the market (and people) are spooked. As well they should be. The Perfect Storm of financial meltdown has brewed up the seas of Wall Street, Main Street and Washington to a lather not seen in 79 years.

On Capitol Hill, the fury of this storm has generated more emotion than was supposed to happen. As this quote from Yahoo! reports:

Financial Services Chairman Barney Frank, the feisty Democrat who has been leading negotiations with Paulson, reacted angrily, saying Republicans had waited until the last moment to present their proposal.

McCain, who dramatically announced Wednesday that he was suspending his campaign to deal with the economic crisis, stayed silent for most of the session and spoke only briefly to voice general principles for a rescue plan.

After the session, Paulson, hoping to prevent any chance for agreement from being torpedoed, pleaded with Democratic leaders not to publicly disclose how poorly the session had gone, said three people familiar with the episode. Frank and House Speaker Nancy Pelosi responded angrily, and Paulson, in an attempt to lighten the mood, got down on one knee, said the sources who spoke on condition of anonymity, like the others, because the conversations were private.

Weary congressional negotiators then resumed working with Paulson into the night in an effort to revive or rework the proposal that Bush said must be quickly approved by Congress to stave off “a long and painful recession.” They gave up after 10 p.m. EDT, more than an hour after the lone House Republican involved, Rep. Spencer Bachus of Alabama, left the room.

The partisan reality of this crisis is this: Republicans, who consider bailouts taboo, are in the wrong. I hate to side with bailing out greedy, immoral Wall Street investment bankers and their 2nd class ilk, but without a market that functions, this baby is going to reach irrepairable levels.

Great Depression. No Jobs. No investment. No loans without ample capital upfront. Industrial might lost. Technology lags.

And chaos that comes from financial calamities. Crime. People acting irrational that once were rational and decent people. Emotional depressions. Suicides. And resentment toward anyone with a buck.

Additionally, we are seeing big banks getting bigger. No competition. A sign of omens to come?

So while CEOs lie, such as Dick Fuld of Lehman Brothers in this interview from June 2008 by the Financial Times:

 “Do we have some stuff on the books that would be tough to get rid of? Yes,” he [Fuld] said, referring to commercial and residential mortgage assets. “Am I worried about it? No. If you have some repricing of these things will we lose some money? Yes. Is it going to kill us? Of course not.”

Lehman is a dead bank walking, say its critics who argue the reason it has not yet suffered the same fate as Bear Stearns is the emergency facility that allows it to borrow from the US Federal Reserve. “Lehman is propped up now by the US taxpayer and nothing else,” said one financial services industry chief executive. “When the Fed window goes away, so does Lehman.”

That is why the CEOs, CFOs, CIOs and key employees of any major financial concern should be asked to come to Washington, or New York, and required to sit in a large conference room and straighten this all out. Communications via overseas is a necessity; and these jokers have to figure out what can be done to fix mortgages (within the framework of United States) and to get these markets working. If it takes 2 weeks, it takes 2 weeks and 100s of hours per man, so be it.

Time is nearly gone. This Hurricane is only hours (read: days) from landfall. And it will take this country down, and nearly the entire world, with it as this quote shows the fear of other nations:

Still, officials from France to China voiced alarm.

 

“A crisis of confidence without precedent is shaking the global economy,” French President Nicolas Sarkozy said in a speech in Toulon, France.

 

As Thursday’s meeting began, Bush warned, “We’re in a serious economic crisis in the country if we don’t pass a piece of legislation.”

So, it is incumbent on the party in power to realize the clock is nearly out and you don’t have a Plan B. At least not one that works.

Note: I have been following this story for nearly a year. Books that might be of help:

• Bad Money – Kevin Phillips
• Trillion Dollar Meltdown – Charles R. Morris
• Chain of Blame -Mathew Padilla, Paul Muolo
• Twilight in the Desert – Matthew R. Simmons
• The Dollar Crisis – Richard Duncan
• The New Paradigm for Financial Markets – George Soros

Weekend Mega Posts: A Nation of Whiners and John Hancock

Since I last left the building, a few things have happened:

A Nation of Congressional Idiots, Sir.

Former Texas Senator Phil Gramm called us a “Nation of Whiners.” I wonder why, sir. I wonder why a man who has been a key ingredient in the mixing bowl of economic disasters, from Enron’s rise and fall [wife tied to that mess] to a lobbyist in the subprime arena at banking giant UBS would be so utterly contemptuous as to say, “we are a nation of whiners.” Yes, we complain. About 4,100+ troops dead on a battlefield of disgraceful miscalculation and subterfuge. We complain about the billions in taxpayer’s money spent funding that war of idiocy and ideology. We complain that our infrastructure, schools and healthcare are much less that ideal, unless you make a significant salary, get bennys and can spend your off time dabbling in the stock market, that’s off 20% from it’s highs.

That you are complicit in this whole economic malaise might not be so troubling if it were not the fact, now, you are implicitly blaming us, the victims of this mess. That our nation is in the early-middle, not the end, of this current fallout, one triggered by idiot politicians, like you, that dropped the regulatory ball, former federal reserve Alan Greenspan’s ultra-low interest rates in the wake of 9/11 which gave way to a train of abuses in offering loans to under (and unqualified) applicants and this whacked idea that you can spend thrift in a time of war, lower taxes and just not hurt us economically. (Value of the U.S. Dollar anyone???) But you, sir, are a twit. Leading a septuagenarian’s campaign to nowheresville. Hocking us and hocking America right down the drain. Sure, your well-educated, well-to-do and wealthy-to-no end golf buddies and fav 5 additions are tickled pink-o to be at the trough of these ‘fast money’ ideas. To just forget the details of how to build a logical and trustworthy financial system is Bad Money policy.

Read up here on the debt, economy and a train of abuses...

Meanwhile, we are back to the future. You remember 1987? Bailing out savings and loans? I was 15 – and understood that wasn’t something to be happy about. But the seeds of that fiasco were sown in a multitude of policy gaffs – like now, Dr. Phil Gramm.

If you do read Bad Money by Kevin Phillips (I read the first 150 pages), you will get (from reviews):

• In the last 30 years, financial services have grown from 11% of GDP to 21%, and manufacturing has declined from 25% to 13%.
• in the last 20 years public and private debt has quadrupeled to $43 trillion.
• Cognizance of our problems has been somewhat covered up with revisions to the CPI (understating costs of home ownership) and unemployment measures (not counting those who gave up and quit looking). Thus, the 2-4%/year CPI increase 2005-2007 would have been 5-7%/year, and unemployment would have been 8%.
• OPEC has reduced its foreign-currency reserves held in dollars from 75% to 62.5%, and Iraq and Venezuela began selling oil in euros and yen (admittedly for political purposes, at least at first). Meanwhile, the U.S. has antagonized major oil producers (Iran, Russia, Venezuela), and effectively dismantled Iraq - raising the risk of nations being unwilling or unable to supply the U.S. as supplies grow tighter
• That securitized debts or CDOs (collaterilized debt obligations) were sold and resold throughout the global financial system and no longer did anyone know how to measure their value or their risk. Add to this the fact, that homeowners were using the rising equity of their homes as atms and pumping another $4 trillion into the economy.  Also add to the mix $700 billion annual trade deficit that indicates that much more consumption over production.

These are but a few of my favorite highlights, Dr. Phil.

That over the past 30 years, America, has been sold like a slave in the common market. We aren’t stupid or ignorant. Unfortunately, those in power stay in power because the spine needed to stop their abuses is not readily present. That our will is shattered because you forgot that this is America.

Many here won’t get rich, or have multiple homes or send their kids to some private brainwashing school, but instead will be working 50 hours a week for 50 years of their lives and might get a death bed at the nursing home. It will be their American Dream because they hope for more, and sometimes, might have received it.

 But That’s the problem.

If only John Hancock could see us now.