Posted on 07/11/2008 4:18:12 PM PDT by politicket
IndyMac Bank, a prolific mortgage specialist that helped fuel the housing boom, was seized Friday by federal regulators in one of the largest bank failures in U.S. history.
The Pasadena, Calif., thrift was one of the largest savings and loans in the country with about $32 billion in assets. It now joins an infamous list of collapsed banks, topped by Continental Illinois National Bank and Trust Co., which failed in 1984 with $40 billion of assets.
IndyMac specialized in Alt-A loans, a type of mortgage that can often be offered to borrowers who don't fully document their incomes or assets. ...
(Excerpt) Read more at online.wsj.com ...
No need to apologize about replying to my reply to another. I think I barged in on his/her conversation.
Your summation of the 70’s can be transported to 2008 very easily. There have been some terrible financial decisions made by both individuals and the government.
Low interest rates can be as detrimental as high interest rates. I guess it depends on which horse you are riding.
I don’t find that Defined Benefit Plans being shifted to Defined Contribution Plans is a bad thing. Most employers provide a match. Why should my employer take care of me for the rest of my life, if I don’t choose to participate? (the automobile industry is a great example) AND the stock market has done very well with the advent of 401k’s. Call me pie in the sky..I think it will continue to do so..eventually.
I can’t debate the de-pegging of the dollar from gold except to ask if that happened in the 70’s...or before.
So is what you call derivates the same thing as the future market? If so, we may also be in agreement. If so, that is a gamble that may only affect that multi-layered market. Many, many people have gone belly up in that market in the past and the whole US economy didn’t go down.
You can have the final word here.
Would I be correct in assuming that inflation within the modern(post 1936) economies of the west is a given, and that if the governments of said economies print more and more money that it will create hyper-inflation? If that is true, even before the rampant printing of money(like in Zimbabwe)there was devaluation of the currency.
If the currency is devalued either by policy or process, the only way it would become hyper-inflationary is if the government of said economy continued to try to print its way out of it.
Would I be correct is saying that you are wondering if our government will try to follow the same old worn path that Zimbabwe is doing, or they stop printing gobs of money and let the past catch up to us?
Interesting read on the deflation possibility. Thanks for posting it...
Do you think so? I live in Utah, and I have a small garden going. I have 2 hills of summer squash and 2 hills of winter squash. In one hill, I have what I thought was Acorn squash.(they were seedlings started in pots from store)Upon noticing that they weren’t developing vines, I suspect that I unknowingly bought some summer bush squash of some sort!
So, I bought some Acorn squash seeds, and planted them in a pot to get them going. Hopefully, it’s not too late! I’m not too worried if it is, I have some other winter squash(Spaghetti Squash), and the summer ones. But I really wanted at least one other Winter Squash! I did get one Pumpkin Plant to tuck in the garden for my little grandkids and great-niece to have for Halloween. I could use pumpkins too, if possible!
Essentially, there is a hierarchy of asset classes. At the bottom are the most basic - subsistence food, water and air. Just above that are survivalist needs of minimal clothing, shelter, whiskey and ammo.
Above that are basic utilities such as transportation, electricity, Internet and phone. Some of these weren't so basic in the 1930's, but they are vital now.
The hell in a hand basket crowd is figuring we will be down to the whiskey, ammo and stock piled food level before this is over. I doubt that. I'm figuring we will be down to the basic utilities, perhaps, but not lower. I am however prepared to adapt, if I was insufficiently pessimistic.
This ordering of asset classes all rather resembles Maslow's hierarchy of needs.
What's happening is that we are working our way down that hierarchy. One by one, from the top down, things to toxic or worthless. Lower layers become more valuable at the same time.
Mortgage Backed Securities and Credit Swap Derivatives and stock in Bear Stearns or IndyMac have all gone bad. Stock in American car companies, banks, Fannie Mae and Freddie Mac has lost much value. Overpriced real estate in California, Detroit, Nevada, or Florida has lost perhaps 25%, so far. Stock in Dow (DJIA) or S&P 500 index funds has weakened perhaps 20%. These losses stated so far are relative to the dollar, hence those of us who sold the above weaker assets and went to the dollar were ahead of the game.
The dollar itself, relative to gold, oil, gas, various foods, industrial minerals or the stronger currencies, has weakened, perhaps 50% over the last couple of years, varying in detail. The dollar is higher up in this stack of basic needs than is oil, gas, minerals and food. The strongest currencies roughly manage to track energy and food.
Gold, in times of great distress, has historically been money, but in these times is buffeted by the manipulations of some large banks and by some major investor mood swings, making it difficult for me to tell what it means, or where it is going next.
In summary, you want to get out of the asset classes higher up in the order before the mob does, to preserve your net worth. So long as there are asset classes of substantial dollar denominated value that are higher in this order (intrinsically less essential) than the dollar itself, these classes (like bank stocks) will get lower in dollar denominated value, at the same time as asset classes lower in the order (more essential assets like food and energy) will gain in dollar denominated value.
The dollar still has, and for Americans likely will continue to have, substantial value for its liquidity. I can't just go put my entire life savings in canned food, ammo and whiskey because I can't easily pay my bills and conduct my ordinary financial affairs using such stuff, and would have to pay to store it meanwhile.
Investing dollars in asset classes that are liquid, like stocks, bonds, currencies, ETF (Exchange Traded Funds) shares in gold or commodities is like sailing in a typhoon, without satellite weather. Most things are going down most of the time, but there are dramatic swings back and forth, which one might be able to gain on, if one doesn't get soaked or washed overboard and drowned.
So I recommend moving down, to the more basic end, of this hierarchy of asset classes, while staying as liquid as one can, which includes lowering ones standard of living and reducing ones cash flow needs. Get the heck out of any leveraged asset classes (such as overpriced, highly mortgaged, real estate) and get your life to a point where you could imagine living on half your current income.
Stay healthy, each nutritious food, keep your job, and avoid debt. If you do lose your job, do your best to remain out of debt.
If inflation means rising prices, we will see both rising and falling prices, depending on which asset class, when.
If inflation means too much money and credit chasing too little goods and services, we will see great dislocations in that area, as huge assets classes providing credit, such as mortgage lending funds, collapse, even while Congress and the Fed try to pump more funds into the economy.
This "inflation" versus "deflation" debate is of little more use than the analysis of the six blind men in the Fable of Jaswant the elephant.
Some of the “real” women are too! Yes, I agree. If that happens, we know what we have to do. Even if we have to drag some of them kicking and screaming along with us! Hopefully, if we’re lucky, many of the immigrants from countries that lived under a “real” tyranny will rise up with us.
Hopefully, they’ll recognize what is happening, and go along with us, and help us! Also, people from countries such as Iraq, Afghanistan, Kuwait, etc.., will come over and help too! That may be wishful thinking, but who knows? I don’t think they want us go under!
Interesting analysis. Thanks...
Keynesian Economics at it’s worst—it doesn’t matter where the money goes, as long as it keeps moving!
You’re welcome.
Thank you for the info.
I know that the futures market and the others you mention are very risky. A lot of money to be made. A lot of money to be lost. In the 80’s I seem to remember that market taking a severe hit.
But we are still here. So it could be that a recession is being manipulated by the folks that stand to make a lot of money....or stand to lose a lot.
Not being an economic major, I will take your word.
I surely agree the “perfect storm” could erupt.
But if I look around at life in our world, restaurants are pretty full, malls don’t seem to be vacated and the $10 dollar movies seem to be populated.
When that stops.....
Good Nite :)
There's some logic hidden somewhere in that statement.
The 1982's World's Fair was a bust from opening day till closing day. Two banks behind it were Southern Industrial S&L and United American Bank. Both banks were ran by two brothers who had it all. When the planning began for the fair everyone from city office holders to homeowners began making plans. People were converting carports into apartments to rent out for the fair at anywhere from $100-$400 per night. Apartment buildings were emptied out as well. That means renters were tossed onto the street. Within a 50 mile radius there were a dozen or more Airstream trailer campgrounds waiting to be rented. Each campground held about 200 or more of them.
The brothers along with some developers also had the city invest heavily into it as well as even the federal government who build a building that was not suitable for any type of use after the six month long fair was over.
As the opening day approached the local media was still playing up the hype. Reality sat in when on the first day even with President Reagan at the opening most rental rooms were empty. The anticipated daily attendance was 100,000. The reality was on a real good day 25,000.
The bankers also had made bad loans to shell companies that existed only on paper. To cover it on paper funds were transfered between the two banks.
I worked with a guy there who told me the banks were fixing to go under and the Feds were coming. I was skeptical at first but the gates had barely closed on the last day when the audits began. It was far reaching and one Tennessee former congressman Harold Ford Sr was linked but not convicted in connection to the banks.
In the mean time innocent people many who had their entire life savings in the uninsured S&L because of the good reputation of the CEO lost all they had.
The developers left town and a lot of debt. The city got stuck with a lot of debt and unusable buildings. The only ones who made out fairly good was the ones who did the construction work before the fair or the hourly employees at the fair itself. Airstream as well I'd say made a hefty profit from it. The sphere {tower} of greed and arrogance can still be seen just to the south of I-40 in downtown Knoxville.
This is a great..the best country in the world.
Name one better.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.