U.S. Shuts Big Bank As Crisis Intensifies

Wall Street Journal ^ | July 11, 2008 | Damian Paletta and David Enrich

[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. ...

[Chuckster]

It’s a great time to be broke!

I was broke until Wednesday, less than $10K in the bank and no income (But no debt). On Thursday, I received my lump sum retirement payout and put 40% into a gold ETF, 30% into Australian Dollars, 10% in an oil fund, 10% in high cap dividend cows (All Morningstar 5 star stocks) and 10% in cash.

We also have some hard currency and bullion - the wife is a coin collector.

All in all, I think that is a pretty good financial setting for us.

[LaurenD]

I’m not going to get into this toooo much because I don’t understand enough about the global economy to weigh in on whether we are headed for a depression or not.

That said, it is NEVER a bad idea to be prepared to survive on your own for a while. Most parts of the country are prone to some sort of natural disaster. My grandmother who is not an end of the world type of person at all, always told us to have food and water stocked up, know how to use a gun in case of riots or chaos outbreaking, and have plenty of ammo. That is just being smart and one does not need to be waiting for the apocalypse to know that. I keep stocked up in my pantry of non perishable food, water, toilet paper, and even some MREs, and plenty of ammo in the house. Came in quite useful during the last flood I was in too. Not the ammo, but the food and water. My kids and I were stranded with all roads out flooded. Was I supposed to wait for the govt to come rescue us?

[politicket]

I'm a Colorado native and even I didn't realize all of the history (in a bad way) that Colorado has had.

For example, Colorado was the first state in the US to legalize abortion - before the issue was even considered by the US Supreme Court.

Colorado is also made up of lazy people. Just last week it was reported that the "Unaffiliated" voters in this state now outnumber both the Republicans and Demonrats. So, these voters have no power except to cast their single vote in the General election. Contrast this to the fact that I was a delegate to my county convention/assembly, house assembly, state senate assembly, judicial assembly, US congressional assembly, and state assembly. My vote as a delegate carried enormous power and candidates were falling all over themselves in an effort to earn it.

[Polybius]

The libs told the banks that if you they didn’t loan money to sub-prime borrowers, the majority of whom were minorities, then they were “racist”. So the forced them to loan the money to people who couldn’t pay it back.

How did the libs start doing that at a time when Republicans controlled the White House and both Houses of Congress?

With a Jimmy Carter era law that worked just fine throughout the 1980's and most of the 1990's?

The law says you cannot turn down somebody for a loan because of race, creed or color but nowhere does the law say you cannot turn down somebody for a loan because of the fact that they can't possibly repay what you are loaning.

Not everything in life boils down to libs vs conservatives.

Some things in life simply boil down to getting hoodwinked by a sleazebag that wants your money in his pocket.

What happened was a scam, a con game, a swindle.

Specifically, it was a classic Pigeon Drop " in which a mark or "pigeon" is convinced to give up a sum of money in order to secure the rights to a larger sum of money, or more valuable object. In reality the scammers make off with the money and the mark is left with nothing."

Unless you understand how the con game worked, you will not understand that the props (not the pigeons - the props) of the con game involved not only poor minority "house buyers" that borrowed $300,000 they could never repay to buy a $100,000 house but also included middle class "house buyers" with good middle class jobs that borrowed $850,000 they could never afford to repay to buy a $300,000 house.

***IMPORTANT***

The "pigeon" of this scam was the mutual fund manager of your own 401K. Therefore, you, by proxy, were the pigeon of the con game.

The illegal aliens, the deadbeats without jobs or low income workers borrowing $300,000 they could never hope to repay or the middle class guy with a middle class job borrowing $850,000 they could not afford to repay were merely the props of the con game.

***IMPORTANT***

The mortgage mess was created by loan brokers who were not lending their own money. They were just creating phony Pigeon Drop mortgages to sell to gullible investors. Let's be clear here. That "gullible investor" was NOT the house "buyer". It was a mutual fund manager, maybe in a mutual fund in your own 401K, or a foreign investor wanting to invest in the U.S.

At the time, the stock market was not red hot like it was during the Tech Bubble and interest rates on CD's were pretty low.

However, Americans were lining up for big mortgages that they promised to repay at a good interest rate after a few years at an introductory "teaser" rate.

As a long term investment, buying the rights to those mortgage loans seemed a pretty good investment and Wall Street's customers wanted to buy them up.

So, loan brokers would write up mortgages, they would be bundled up in financial instruments and would them be sold off to your 401K manager or to that foreign investor.

Everytime that happened, the loan broker would get a good commission.

Life was good for a loan broker.

There was one problem, however. Although there was a high demand for that product and investors wanted to buy up more and more of those mortgage loans, the supply of creditworthy borrowers was running out.

What to do?

Simple.

Just sign up borrowers without a snowball's chance in hell of repaying the loans. Mix those loans up with better loans in a package and the pigeons would still eat then up on Wall Street.

So, the loan brokers started creating mortgages by getting anybody, ANYBODY with a pulse (and even some dead people without pulses, as investigators discovered) to get their names on mortgages. The worthless mortgages were then sold to eager Wall Street investors, maybe the manager of your own 401K.

As the demand for these "great investments" grew, illegal aliens, native born Americans without jobs or good credit, people with good credit wanting to borrow three times what they could actually repay to buy a house at three times the price a real market could actually bear and even dead people had their names put on these Pigeon Drop mortgages.

And Wall Street's customers just kept buying that worthless paper up.

For the loan brokers, it was just like writing a commission check to themselves, having a drunk downtown sign it, taking the check to your 401K manager than then having your 401K manager give him you 401K money in exchange for that check.

That is why loan brokers were getting filthy rich.

Every time such a worthless Pigeon Drop mortgage was sold on Wall Street to a 401K mutual fund manager ....KA-CHING..... the loan brokers got richer with commissions.

The loan brokers who rounded up illegals and dead people's names to put on the dotted line for "loans" they could never hope to repay knew exactly what they were doing: They was swindling YOUR mutual fund manager out of YOUR money and they knew it.

How's your 401K doing lately?

The mutual fund managers and investors around the world, plus the legions of Freepers who used to argue that there was no such thing as the Housing Bubble all swallowed the loan broker's Pigeon Drop swindle hook, line and sinker.

The loan brokers who left the game early got filthy rich. The ones who stayed in the game too long are now in deep kimchee because the "pigeons" wised up and are no longer buying their worthless product.

[Freedom_Is_Not_Free]

Very thoughtful response with realistice possible outcomes. Thanks.

[Freedom_Is_Not_Free]

Great contribution. That correlates with my developing thoughts based on what I’ve read to date.

[Freedom_Is_Not_Free]

Thanks for the link. I assumed China held the most T-bills. I didn’t realize Japan is the largest holder. I knew both were way up there, being exporting nations and being it is in their financial interest to keep us fiscally healthy so we can keep buying their exports.

[Freedom_Is_Not_Free]

God has NEVER abandoned us, rather many in the USA have abandoned God.

[Chuckster]

“Be prepared” as they say in the BSA. You don’t have to be a kook about it.

Own some land; 20 to 40 acres or more. Forty acres in a rural setting with good water and a woodlot will support a family.

Hold some hard currency; my wife is a coin collector and has had great fun watching her collection of gold and silver coins increase in value.

Invest wisely; right now that means, IMHO, gold and foreign currency ETFs, commodities like oil and food products and a few dividend yielding stocks if you can pick them up at a bargain (Monday would be a good opportunity I’m thinking)

Own and know how to use guns; not a huge arsenal, one rifle and one pistol for each adult and sufficient ammo, perhaps a shotgun. Think about it logically. If it comes down to needing guns, you don’t need more than you can carry on foot, do you.

Carry no debt. I know it’s un-American d;^)

IF everything collapses, your land will support you, your guns will protect you and your hard currency will get you anything else you need. If not, your investments will support you, your land will provide a very pleasant retirement home in the country, your guns will be good for hunting and protection, and your coin collection will be a nice hobby and rainy day fund.

[Freedom_Is_Not_Free]

You are ahead of me in deciding which will win out in the long run, but frankly, I’m leaning your way, and Mish’s. Short term painful inflation followed by long term deflation and economic stagnation. But I just don’t know. Is Weimarization completely impossible at this point? Could massive printing lead to Zimbabwe currency collapse? I just don’t know...

In my heart of hearts, I guess (and I mean WAG), that the economic pain will not be on the scale of the Great Depression, but will be more painful and more severe than the 1970s. I don’t think we will see 25% unemployment, but we will damn well see 15%. I can’t see at this point the economy or the dollar completely collapsing. I can see your view and the resulting pain. I think that has odds to come about. In the meantime, I am still just not sure how this will end up...

I do feel for those people retiring or nearly so who will have no time to recover from massive losses to home equity and investment savings, unless their savings is parked in safe vehicles. Those people who counted on selling a home to fund part of their retirement are going to be in a world of hurt as it takes many many years to recover house prices. Same for the stock market as it takes many years to recover after this Bear market. Retirees who aren’t sitting on sufficient money today are going to be in a real world of hurt, because they won’t be seeing any solid returns in either housing or equities for up to a decade.

Those who are loaded and can take the inflationary hit to their T-bills will be just fine. But those looking for housing and stock market appreciation are going to be returning to work or waiting much longer to retire. I really feel for them. It must be a real punch in the gut to slave away all your life and then when you get close to the brass ring, it gets pulled back by greedy bankers and a corrupt system.

[DeaconBenjamin]

Some gulf states are already loosening their peg to the US dollar.

[Freedom_Is_Not_Free]

We begged them to keep the dollar strong. We begged Bernanke not to crash interest rates this last go around. What benefit has come from the FFR of 2.0% Yes, he is trying to prevent deflation, but is it working?

Housing is still crashing. The stock market is slumping. The economy is not growing, unless you believe the dummied numbers reported by those “from the government and I’m here to help.”

All Bernanke has accomplished is helping to continue the decay in the dollars value that Bush was able to do so well before. You would think they would realize that a stronger dollar is in our best interest. Nope. They are making the same old mistakes. Idiots.

Now I’m no financial genius and maybe I’m dead wrong, and maybe Bernanke is dead right, but articles like this cause me to think he was dead wrong in slashing the funds rate and tanking the dollar as a result. Idiots.

[FlyVet]

It all depends on whether or not one has a still-marketable skill. While my mother’s parents struggled, my father’s parents were pretty well off. He was a contractor, and FDR had all those public works programs. As bad as it was, peak unemployment was about 25%, which (”glass half full”) means 3/4 of people had some kind of job. Sometimes my other grandfather would be paid in food instead of money, because his boss didn’t have enough money to pay him. They raised 5 kids through all that somehow. He was too humble to write memoirs, but I wish he would have. He had quite a hard, interesting life.

[Ron H.]

Thank you for putting what politickets has been saying into focus. I couldn't agree more with what you two are expressing here. I too am 57 and I too never thought I'd live to see the day that our society would fall so far so fast in decadence. I too believe that God has removed his protective blessing from us as we continue the slide into moral oblivion. We need prayer to see us thrpough as Christians but I hold out no hope for those who choose to shun Him in favor of worldly things and worldly ways.

[Ron H.]

There's some logic hidden somewhere in that statement.

I too was thinking along those lines as well when I read that statement.

[CGASMIA68]

yea me to CD’s no more than 75 Gs at 1 institution....BFD

[Purrcival]

The libs told the banks that if you they didn’t loan money to sub-prime borrowers, the majority of whom were minorities, then they were “racist”. So the forced them to loan the money to people who couldn’t pay it back. And that’s where we are...

There's a lot of truth to that. But of course, this will all be laid at the feet of President Bush and his so-called "failed economic policies". And the dumb masses will swallow it hook, line, and sinker.

[Chuckster]

I can see more and more “stimulous” packages, including schemes such as reparations for slavery, the “Indian genocide” etc.

Well, If the Feds hand out $50K checks to all the Negroes and Indians (Can we use those terms or must we use the PC versions?) that would give the auto industry a shot in the arm and help Ford and GM sell their Pickups and SUVs. Not trying to offend anyone here but, based on my observations and strictly in my personal opinion, if you hand out large sums of money to lower economic level people they will very likely run out and buy an expensive status symbol. Usually one that they cannot afford to maintain and that will wind up on blocks in the front yard in two or tree years.

[durasell]

They loaned the money because the loans could be sold. Debt is a product.

[wolfcreek]

During the 1920’s, America enjoyed a decade of prosperity, fueled by the easy availability of credit. Between 1923 and 1929 the Federal Reserve expanded the money supply by sixty-two percent. When the stock market crashed, many small investors were ruined, but not “insiders.” In March of 1929 Paul Warburg issued a tip the Crash was coming, and the largest investors got out of the market, according to Allen and Abraham in “None Dare Call it Conspiracy.”

With their fortunes intact, they were able to buy companies for a fraction of their worth. Shares that had sold for a dollar might now cost a nickel, and the buying power, and wealth, of the rich increased enormously.

Louis McFadden, Chairman of the House Banking Committee declared: “It was not accidental. It was a carefully contrived occurrence...The international bankers sought to bring about a condition of despair here so that they might emerge as rulers of us all.”

http://www.conspiracyarchive.com/NWO/Council_Foreign_Relations.htm

Sound familiar?

They're at it again!