Two more FDIC Friday Night Specials: Franklin and Security Pacific

It is now a ritual. Every Friday night the FDIC announces which banks have been playing fast and loose with our money and need to be shut down. This week, there are two banks, Security Pacific of Los Angeles and Franklin of Houston. Franklin is the bank run by Lewis Ranieri, of Liar’s Poker fame

Fifth Third takes on assets of Freedom Bank

This past weekend, the FDIC closed yet another bank, Freedom Bank of Bradenton, Florida. The bank had total assets of $287 million and total deposits of $254 million. Super regional Fifth Third, based in Cincinnati, Ohio will take over the insured deposits of the institution and all Freedom branches have opened today as Fifth Third

Lehman was bankrupt

Just moments ago Federal Reserve Chairman Ben Bernanke gave a speech in which he said the following about Lehman Brother: “there was not enough collateral to support the lending.” This was Bernanke’s response to a question about whether the Fed erred in letting Lehman fail the way it did. I am on record for saying

Lehman Brothers: a primer on Credit Default Swaps

The bankruptcy of Lehman Brothers was a credit event which triggered a massive liability to participants in the large and potentially dangerous Credit Default Swaps (CDS) market. This is a market that represents the “weapons of financial mass destruction” label which Warren Buffett gave to the derivatives. Below, I will attempt to explain, with much

FDIC: Two Friday night special bankruptcies

They did it again. The FDIC closed down two banks on Friday night after the market had closed. The two bans in question are Meridian Bank of Eldred, Illinois and Main Street Bank of Northville, Michigan. As always seems the case for the FDIC, the two banks in question were relatively small — Meridian had

Initial results of Lehman CDS auction

This comes via Credit Fixings. The auction process to settle Credit Default Swap trades on Lehman Brothers bonds put the value of the debt at 9.75 cents on the dollar. That is much lower than one would have expected (12 cents on the dollar was the expected rate according to Market Beat). While this is

Another look at my 2008 predictions

In July, I made my ten predictions for the markets and global economy for the rest of the year. Some of my predictions were pretty pedestrians, and some were fairly bold. Let’s take a look and see how I’m doing. Here’s what I originally said: Oil prices will dip below $100 before year-end. Let’s face

Did JP Morgan cause Lehman’s bankruptcy?

According to the Times of London, that’s what Lehman’s creditors seem to suggest in Lehman’s bankruptcy filings. Apparently, JP Morgan cut Lehman off the night before it filed for bankruptcy and creditors are blaming this action for Lehman Brothers failure. RUUUBBISH! I don’t buy it one bit — Lehman was bankrupt all on its own.

Is the State of California bankrupt?

It sure seems like California is insolvent. Just today we heard that Arnold Schwarzenegger contacted Hank Paulson to let him know that the State is having liquidity problems (see pdf) and needs help. California ranks as the world’s 9th largest economy with a population of over 30 million people, so this is quite worrying

Hedge Funds

For a few months now, I have been wondering where all the hedge fund fallout from global market turmoil was hiding. Now it seems that the turmoil in the hedge fund world is becoming more apparent — hedge funds are imploding left and right according to the FT. This turn of events will mean one

The U.S. financial system is effectively insolvent

I have said before that a systemic response is necessary to deal with the present banking crisis in the United States. This crisis has nothing to do with subprime assets and little to do with things like predatory lending. Those are issues that populists will use to prosecute the scapegoats we are likely to see down the line. The crisis has everything to do with low interest rates, zero regulation and a credit bubble of monumental proportions.

The banking system of the United States is effectively insolvent. Buying up $700 billion in assets is not going to solve this basic fact. A systemic response is needed. If we do not address these issues, we may see significant dead-weight loss as many institutions fail

Bradford & Bingley may suffer Northern Rock’s fate

Earlier today I highlighted a number of banks that were under severe selling pressure in their respective home markets. This list included Fortis, Macquarie, NCC, Wachovia and CIT. The UK’s Bradford & Bingley is certainly on that list as well. In fact, the British daily “The Telegraph” is openly speculating whether B&B will be nationalized.