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Banks die too fast for regulators (BANK RUNS???)
Wall Street Journal ^ | 1/23/09 | Staff

Posted on 01/23/2009 12:27:03 PM PST by Golddigger3

Banking regulators across the country are struggling with a new phenomenon: Banks are failing with accelerating speed, exposing holes in the regulatory infrastructure designed to catch collapsing institutions. . . .

Of the 25 banks that failed in 2008, nine toppled before regulators publicly cracked down, including IndyMac Bank and the banking operations of Wahington Mutual Inc., two of the biggest seizures in U.S. history. . . .

The problem illustrates a fundamental weakness in the country’s regulatory infrastructure. The government is positioned to help banks if there is erosion in their capital levels, referring to the cushion banks hold against unexpected losses.

But that isn’t what happened last year. Instead, many banks faced a liquidity crisis as customers and business partners lost faith, shutting off the banks’ access to short-term cash. [Have we already had runs on various banks?]

“In 2008, we have seen institutions fail with greater velocity than in prior years,” says Scott Polakoff, senior deputy director at the Office of Thrift Supervision. “That greater velocity is driven by liquidity crises, not capital crises.” . . .

“For the most part, I think it was a tidal wave,” says Rob Braswell, the top bank regulator in Georgia, where five banks failed last year. Only one was under a public enforcement action at the time. [If last year was a tidal wave, what will this year be since the loses are now seen as much, much greater]. . .

Liquidity kills banks faster than anything, and regulators just don’t have time to issue cease-and-desist orders and take formal enforcement actions,” says Jaret Seiberg, a Washington analyst at Stanford Group, a financial-services company. “We’ve seen banks die within a matter of days and weeks, You go from having a cold to buried.”

(Excerpt) Read more at online.wsj.com ...


TOPICS: Culture/Society
KEYWORDS: banklist; economy
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To: AvOrdVet
I’m starting to use the bank of Serta for my primary banking ;-)

I hear they give nice pillow cases as gifts for opening an account.
21 posted on 01/23/2009 12:56:19 PM PST by Sig Sauer P220 (Our constitution protects aliens, drunks and U.S. Senators. ---- Will Rogers)
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To: Palladin

LOL!


22 posted on 01/23/2009 12:56:22 PM PST by Red in Blue PA (If guns cause crime, then mine are defective.)
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To: Kenny500c

1) Will people have uninterrupted access to their money?

2) Can the Fed just wire any bank instaneous money?

3) What about credit cards?


23 posted on 01/23/2009 12:56:51 PM PST by Golddigger3
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To: rabscuttle385; TigerLikesRooster; PAR35; Travis McGee; bamahead; AndyJackson; Thane_Banquo; ...
LOL, LOL !

I'm dying out here because I'm laughing so loud. Cannot stand this anymore. Where all the dirty, obnoxious, Wall Street brick throwers now ________________ ?

Please check my freeper page for more enlightening info. Or click here to learn other stuff. If you are so inclined. Otherwise, just go back to sleep . . .

24 posted on 01/23/2009 12:57:59 PM PST by ex-Texan (Ecclesiastes 5:10 - 20)
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To: Red in Blue PA

There’s a story on FR that says that Capital One, the credit card giant, is seeing defaults from people who have “stunningly high” credit scores.


25 posted on 01/23/2009 12:58:19 PM PST by Golddigger3
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To: Red in Blue PA
Two words: Credit Union.

Credit unions aren't any safer. They depend on other banks to "interact" with the Federal Reserve banks.

How do you think that a credit union gets the armored car to roll up with cash? They're not member banks of the Federal Reserve.

Be careful, all credit unions are dependent on other banks.

26 posted on 01/23/2009 1:02:19 PM PST by politicket (Barack Obama - "Chains we can believe in")
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To: gondramB
The problem is that the notional value of the worthless assets of any given one of todays institutional failures is equal to the entire value of failures of the S&L crisis...
27 posted on 01/23/2009 1:04:31 PM PST by Axenolith (Government blows, and that which governs least, blows least...)
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To: politicket

Gold presently right around $900.


28 posted on 01/23/2009 1:04:36 PM PST by Golddigger3
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To: Golddigger3
Scott Polakoff, senior deputy director at the Office of Thrift Supervision: 'That greater velocity is driven by liquidity crises, not capital crises"

OMG.

He should have his tongue cut out and mounted.

He could keep it in the bottom drawer of his desk.

Whenever he openned the drawer he could see and read the inscription, "WA TAN ASS IAM"

29 posted on 01/23/2009 1:05:36 PM PST by delacoert
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To: Golddigger3
If you lose your job the first thing most people are going to do is default on unsecured debt. Why jeapordize your house when you can keep up the payments on it while letting the CC's go hanging?
30 posted on 01/23/2009 1:07:53 PM PST by Axenolith (Government blows, and that which governs least, blows least...)
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To: Golddigger3

I’m not worried, Obamamagic will save us!


31 posted on 01/23/2009 1:08:31 PM PST by Brett66 (Where government advances, and it advances relentlessly , freedom is imperiled -Janice Rogers Brown)
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To: steve86

Lee Iaccocca?


32 posted on 01/23/2009 1:08:45 PM PST by Spktyr (Overwhelmingly superior firepower and the willingness to use it is the only proven peace solution.)
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To: AvOrdVet
I’m starting to use the bank of Serta for my primary banking ;-)

You'd be better off investing in Colt, Ruger, S&W, Glock, et al. In a year or two, what you have in your Bank of Serta won't be worth enough to buy new sheets for your bank.

33 posted on 01/23/2009 1:09:55 PM PST by IYAS9YAS (Obama - what you get when you mix Affirmative Action with the Peter Principle.)
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To: Golddigger3
Gold presently right around $900.

Yeah, with my timing and luck, it'll drop to $300 the day after I buy.

34 posted on 01/23/2009 1:12:27 PM PST by IYAS9YAS (Obama - what you get when you mix Affirmative Action with the Peter Principle.)
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To: Golddigger3

I live here in Clark County, WA, and yes there was indeed a run on the Bank of Clark County. Reportedly, $28.3 Million was withdrawn over the three days prior to the FDIC arriving to seize the bank on Friday the 16th.

I can believe that these banks can go under faster than any Federal of State agency can react, especially if word leaks out that all hell is about to break loose...


35 posted on 01/23/2009 1:14:12 PM PST by Bean Counter (Stout Hearts.....)
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To: IYAS9YAS

Oh, I’ve been “investing in those “commodities” for years,and actually sped up the purchases a couple of years ago...


36 posted on 01/23/2009 1:15:34 PM PST by AvOrdVet ("Put the wagons in a circle for all the good it'll do")
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To: Bean Counter

What if . . .

What happens if a bunch of banks go insolvent in the course of a couple of days; this becomes widespread knowledge and people withdraw billions from other banks; and then a bunch more become insolvent and so on?


37 posted on 01/23/2009 1:20:20 PM PST by Golddigger3
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To: Golddigger3

maybe the market is saturated with too many banks? Maybe they should die off.

If high inflation hits.. you’d be better off spending money than saving it. It would be worth less and less each day.


38 posted on 01/23/2009 1:22:56 PM PST by GeronL (DAY 4, YEAR 0 - Obama and the Groupie Corps "I can't hang with ya, if yo dogs keep axin ma' stuff')
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To: steve86
No non-founder CEO has ever contributed more than $200,000 of actual value -- anywhere, anytime, any industry. They would like you to believe otherwise.

That is a patently ridiculous statement that you can in no way defend. I personally know of at least one case where sound judgment and the ability to understand the mortgage business and the secondary markets have resulted in leveraged negotiations that saved at least one company many times over his annual salary.

39 posted on 01/23/2009 1:24:12 PM PST by cspackler (There are 10 kinds of people in this world, those who understand binary and those who don't.)
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To: gleeaikin
Companies don't go broke because they can't afford excessive executive compensation packages. They go broke because these packages actively discourage stewardship.

The purpose of a good executive compensation package is to align executive interest with shareholder interest. However, once compensation passes a certain point this alignment is no longer effective. Indeed, it is counterproductive since it focuses executive energy on short-term goals (this year's mega-bonus) rather than long-term business success.

Aside from pure greed/ego, what real incentive does a CEO have to look out for the best interest of a company and its employees/shareholders if he knows that no matter what happens to the company this year's bonus gives him set-for-life financial independence?

Nobody should be surprised that these lotto-sized payoffs lead to reckless disregard for anything beyond the big payday.

40 posted on 01/23/2009 1:24:51 PM PST by AustinBill (consequence is what makes our choices real)
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