Second!

As of March 24, 2009, New Frontier had total assets of $2.0 billion and total deposits of about $1.5 billion. At the time of closing, there were approximately $150 million in insured deposits and $4 million in deposits that potentially exceeded the insurance limits

Bank run...

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Ouch. No one wanted this one! - CR

Probably be more of those as time goes on - red haired stepchild of a bank.

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Let's hope that our banks get closed before the FDIC's cash runs out.

That won't happen until computers run out of 1's and 0's... FDIC has a 'backstop'.

At the time of closing, there were approximately $150 million in insured deposits and $4 million in deposits that potentially exceeded the insurance limits. ...

The cost to the FDIC's Deposit Insurance Fund is estimated to be $670 million.

The cost to the DIF is 4X the amount of insured deposits... Where's the other $500M going?

Don't usually hog the thread, but check out some of the properties that New Frontier was trying to sell.

I was amazed at the prices for those repo'ed homes... but absolutely ASTONISHED at the prices they were asking for repo'ed sage brush flat empty desert... wtf were they smoking?

ehem, sorry but "The cost to the FDIC's Deposit Insurance Fund is estimated to be $670 million" has gotta hurt............

Liz, can I just add the extra into my normal payment?

My payment stubs have a place where you can designate how the extra is to be used. The choices are to reduce principle or as pre-payment. at 10% you want to reduce principle.

WTF?

Those who can't do, teach?

My answer is down on the dead thread. Go look.

I like the video hosted by Terry Bradshaw. LOL!!!
http://www.newfrontierbank.com/MSNBC_Winners_Circle_high.htm

Smartest quarterback ever...

[/snark]

Bottom line, in the world of amortization, slow & steady wins the race.

We had an 8 1/2% interest rate until it was paid off, and coulda refi'ed any number of times, but I didn't push it 'cause I couldn't bear adding principal to my mtg balance. Mighta been mathematically stupid, but not emotionally stupid.

I hear you, liz, it's just the difference in payment is huge for me. With even a 5.5% mortgage my payment would be reduced by darn near half....It would make a huge difference in our spending patterns. This is really my point. We are the type people that it would pay to help. We're not drowning, yet. Give us some breathing space and we spend. We're DIKs...we spend.

Yep, but you were saying that no one will refi you now. So add back your cushion and pay down that 100 bucks a month.

doh, meant DINKS...

I don't get the car thing. I just don't get the car thing.

I have heard of a few people sorta helped. One got her interest rate cut to 3% for a while, but is still 'way underwater. She thinks she was helped, but I'm not sure she was.

Mostly, not.

Believe me Kristina, you are one of the lucky or smart ones.

I understood what you meant K.

And linked--just wait until you make a stupid typo.

"We're DIKs...we spend. " was pretty funny.

/I snickered

Oh liz, I know. The thing is it only makes me more angry. I was lucky, not terribly smart. I was no match for the mortgage vultures. I would be now, and I take pride the amount of knowledge I've gained from this site, but back then ( a mere 25 months ago) I was but a babe in the woods. I was told by the mortgage broker that I should take as much cash out as possible, I didn't. It didn't sound right to me, I took out what I needed to pay off all debts and do some home improvements like resurfacing the pool and redoing our plumbing. I left, at the time, 80K in equity in the house, I owed 130 on 210. Now, it's worth maybe 160K on a good day but I'm paying taxes on 185K. I'm mostly, just angry.

True, but I would have to be extremely rich before I bought anything like what that car cost to lease. I mean really really really rich. And if you were that rich, why would you lease?

Ok, Kristina, when you get your "This is not a bill" notice (TRiM) in September, don't throw it away. If they haven't reduced your appraised value, you can appeal. Only costs $15.00. You only have a couple of weeks to file the appeal.

Damn. Sat with a high school band from Greeley on my Flight to Denver yesterday. They were in NYC to play near Trump Tower, see Broadway show. Told them the Donald was going BK again. Great kids, smart, polite. They knew about the North Korean missile and about failed mathematical models applied to finance. I apologized for the debt we're putting them in. But they seem to live pretty well.

I think this story has the potential to be a black eye for the SEC and justice dept, which opposed this suit. I'm surprised there hasn't been more coverage.

night all...its late..Outsider - yup felt for the kid, not so much for the Dad...

>wtf am I going to do w/ a SLR McLaren where the lease costs are $3200/month

Get real, Barley. What did you offer him?

Agree with Rich, Barley. You should have at LEAST told him you needed to test-drive it, just to make sure it was in working order.

BTW... I worked in a BMW shop with a Porsche shop next garage over in high school.

Don't give a teenager the keys to your M-badged Bimmer unless you're not around to see how he and the mechanics make sure they fixed it correctly by ragging the hell out of the gears, brakes, and tires... LOL!

The wall was only a foot away from the back end of that M3 when I shot it through the alleyway from the back of the garages to the parking lot for payment/pickup in the front... promise it wasn't any closer than that... honest.

Interesting post by Brad Setser on China's March trade data - here's the money quote at almost the very end (you will find it under the very last graph):

Call me crazy, but judging from the trade data alone, I would say China experienced a recession in q4 2008 and q1 2009.

http://blogs.cfr.org/setser/2009/04/10/big-changes-but-not-much-adjustme...

:: ::

energyecon (member) wrote on Fri, 04/10/2009 - 9:57pm.

Call me crazy, but judging from the trade data alone, I would say China experienced a recession in q4 2008 and q1 2009.

:: ::

I have buddies running plants over there and they concur - 6% growth feels like a recession to them... 2-3% feels like a depression.

ASTONISHED at the prices they were asking for repo'ed sage brush flat empty desert... wtf were they smoking?

Whatever they're smoking, it wouldn't grow on that land.

Won't be long until the buffalo will roam in neighborhood yards, grubbing for garbage because there's nothing green to eat.

WFC? They make nice profits by changing their accounting methods whenever necessary. Or they buy a big bank like Wachovia and change their methods. BAC? Supposed to need 36 billion. C? Hahahahah.

And what of the $118 billion loan pool backstop? Why did they have to do that?

From the NYTimes:

Showdown Seen Between Banks and Regulators
Some of the healthier banks want to pay back their bailout loans to avoid executive pay and other restrictions that come with the money. But the banks are balking at the hefty premium they agreed to pay when they took the money.

After listening to them talk about sanctity of contract regarding mortgages, bonuses, etc., there's a certain irony about the banks objecting to terms that they agreed to...

As of March 24, 2009, New Frontier had total assets of $2.0 billion and total deposits of about $1.5 billion. At the time of closing, there were approximately $150 million in insured deposits and $4 million in deposits that potentially exceeded the insurance limits. ...

The cost to the FDIC's Deposit Insurance Fund is estimated to be $670 million.

Hmmm. $670m/$2,000m = 33% impairment before the FDIC moves in. Is anybody as uncomfortable with that threshold as I am?

Maybe the headline should be: " New Frontier steals 670 million from the system, no one indicted." This will continue until the FDIC has been fully fleeced.

CR

i thought -basel too - asked an interesting question of the board at 647

why the difference between the insured deposits and the cost to fdic

-rajesh- at 711 ,posited that fdic covered some interbank loans

is that it??? ...anyone?

Can you provide a link so I can follow what you are writing about?

NorkaWest

Sorry. I was referring to the attempt by Madoff investors to take him into personal bankruptcy, which was opposed by
justice dept and SEC, but upheld on friday by a judge. I suspect this may be related to possible clawbacks.

[BAC has $90bn more in deposits than assets]

That's relevant. Especially when you believe their as-reported asset values on HELOCs & whole loans. Deposits are liabilities.

I'd love a line item breakout that shows the book value of their Option ARM outstanding balance accruals.

Basel, the deposits don't cost anything. The liabilities do.

If the deposits are stuck in a vault, they equal the liabilities.

It's only when the bank lends out the money (levered up of course) and takes as collateral the kind of crap New Frontier had listed for sale that the liabilities become unmanageable, i.e., never to be satisfied.

The only creditors who are made whole are the insured depositors and the FDIC, for its administrative costs.

Absolutely. That's why there is a loss to be realized on every takedown.

sportsfan
Deposits are liabilities for banks. That cash isn't on hand in a vault, it is loaned out. The FDIC's DIF refills their accounts, and then the FDIC sells the accounts to another bank because it is a cheap way to grow marketshare

EHP, I understand that deposits are liabilities for banks just as loans are assets. My point is that the deposits qua deposits don't cost the FDIC a dollar. It's only the liabilities that cost money. When the FDIC transfers its funds to the bank that acquires the deposits (often for a small premium), that transfer is the payment of a liability.

Again, if all deposits were just put in a vault (which of course would not be practical), there would be sufficient assets to cover the liability to the depositors. This isn't just semantics to me.

Okay . . . the deposits were not the problem with the bank. It's WTF they did with the deposits that was the problem.

http://www.fdic.gov/llp/LLPcomments.html

PPIP (whatever) public comments were released.

they should just call those whatever bailout #1 , #2, # etc (easier to keep track)

sportsfan gets it. I should have read the whole post first. But I don't think the passive aggressive attack on fractional reserve lending is with merit. The problem was stretching for yield at every level as a result of the credit bubble which had 2 parts: there was no real growth in production (sales, for sure... but not stuff that requires cap-ex) because the dollar was above its natural value, the credit allocated to the domestic US economy was above the natural level and it drove margins on lending down. Because of the strong dollar or as a part of it central banks bought big into agencies, which displaced existing investors into securitized lending, which drove down the yields on the regular mortgage business which drove sub-national banks into areas like CRE. It's not like we introduced fractional reserve banking in the last 10 years. Definitely it increases the risks of a bank failure, but its absolute absence would be an anathema to the economy. All that needs to be done is to better connect risk/reward in a quicker/more responsive feedback loop. Because of their present backstopped nature, and partly because anti-regulators were at the helm during the final extension of this credit bubble, banks will as a crowd go after any deal they can write. If they have a limitless supply of credit, which they effectively did, they will take on stupid risks. It is possible to structure the system such that they would say: "No, I'm not going to write that deal because it is stupid. If I did, I would promptly lose an order of magnitude more than I could stand to gain."

Didn't help that Greenspan systematically gutted reserve requirements throughout his tenure.

EHP, I hope I wasn't the source of what you perceived as a passive aggressive attack on fractional reserve banking. I will state categorically that the idea has been around for so long that I don't believe a modern banking system could function without it.

Taking the deposits in the vault concept a step further, that is what buying Treasuries does during normal times. The interest on the Treasuries just has to be no less than the interest, if any, paid to the depositors.

Switching to the metals, yeah, you may have to pay rent to make a deposit that will be kept in the bank's vault.

The problem I saw over the last several years was absolutely ridiculous lending practices based on absurd appraisals.

Some on this board have taken a whole conspiracy approach, saying in essence that bankers intentionally made ridiculous loans because they understood that the government would bail out their failure and, in the meantime, the fees were good. I don't see any evidence of that myself.

What I have seen was abject stupidity on the part of a whole lot of lenders, a nationwide crack high that didn't last forever.

NorkaWest, my short answer is that the $2.0B in assets on the books can't be sold for $2.0B in the market.

Probably CDs don't count as insured deposits?

EHP: thank you. I wonder who brokered the deposits. FDIC should draw up a list and ask FINRA and the SEC to review their advertising materials.

sportsfan
I didn't mean passive aggressive to be an insult, it's a technical form of debate. I do agree on the irresponsible lending, but my solution would be both to tranche the financial system into different levels of economic necessity and complexity or risk. Chequing/deposits/collateralized small business loans/mortgages at the low end, CDO^2s/Interest rate swaps/bridge loans/ dynamic hedging/direct foreign lending at the upper end. Establish methods of feedback that encourage good results within each of those tranches, of course they will be looser when it comes to the high finance stuff. I would also say at the low end, insure deposits but only if the customer chooses a zero risk, zero reward, high fees account, bank keeps money in the vault. Let the banks create their own tiers of yield/risk to offer depositors, maybe even with dynamic lockups, they could be targeted to pools of loans to municipalities, revolving lines of credit, credit cards, auto loans, mortgages, etc.

EHP, in the quoted portion from your recent post [below], you have a whole explanation for a series of events that is consistent with my empirical (and local) observations. Where we differ in perspective is that I'm not trying to find all the causes or posit the solutions.

There is no doubt that classic SFR mortgages were taken away from local banks by the national outfits. The credit bubble (however it came to be) led directly to a real estate bubble (especially here in Bubbleville, Cal), thanks to the astounding leverage that was being offered on highly speculative projects. As a result, C&D loans became the mainstay of local banks and, for a few years at least, rather profitable.

They are now all in trouble. Big trouble. I can't identify one that I expect to survive. There has even been some talk about staring a new community bank since there won't be one left.

Because of the strong dollar or as a part of it central banks bought big into agencies, which displaced existing investors into securitized lending, which drove down the yields on the regular mortgage business which drove sub-national banks into areas like CRE. It's not like we introduced fractional reserve banking in the last 10 years. Definitely it increases the risks of a bank failure, but its absolute absence would be an anathema to the economy. All that needs to be done is to better connect risk/reward in a quicker/more responsive feedback loop. Because of their present backstopped nature, and partly because anti-regulators were at the helm during the final extension of this credit bubble, banks will as a crowd go after any deal they can write. If they have a limitless supply of credit, which they effectively did, they will take on stupid risks.

sportsfan,
I wasn't aware we were differing. I'm treating this place like a salon, like from the days when everything was still in black and white. As Dostoyevsky said in Crime and Punishment, you can't talk sense without first talking a lot of nonsense.

my solution would be both to tranche the financial system into different levels of economic necessity and complexity or risk

That sounds like a good idea, though, as I said, I'm not working on macro-solutions to anything. I certainly don't possess the knowledge necessary to critique your efforts in that regard.

Blackhalo
Well if you want to bug me, a lot of the reserves go to the local Federal Reserve bank

"Reserves are a lot less than one-twelth."

FDIC is in for a hard time then.

To all who have the energy and aptitude to find big solutions to big problems, more power to you. I hope you succeed. G'night.

patientrenter
I would say mortgages are normally safe, you of course make any kind of loan less than worthless with the right context. I try not to let recent results suggest anything about fundamentals

patientrenter
agreed on the debt to income. CR or Tanta have posted it in terms of the 3 Cs. Carrying Capacity (DTI), Collateral, and Credit history.

My thinking is that by making the depositor's choice in what loan pool to invest, there will be a feedback loop to encourage transparency / quality through 'market forces'. That way you don't have to explicitly regulate details, which either become something easy to dodge or difficult to comply with. So check the incentive, check the ability for incentives to affect decision making, require fair play as always in terms of information and then let it run with broad safety limits. There is no free market, but you can design games/systems that provide an optimal outcome and that's all that counts.

vp3434 wrote on Sat, 04/11/2009 - 4:24am.
Broward,
While I agree that the increase in national debt is bad, I don' think we're even near the default point. Japan's debt to GDP is approaching 200% and they're still doing ok.

Agreed with Dik Scrubber, wtf are you talking about?

They got their interest rate up to what, uhh, .25% at the absolute height of the credit bubble? Hawkish! Banks that were solvent because they counted equities as core capital! There's no social safety net and everyone's a temp! Power rotation in government? They've had it, sorta, like twice now!

Other than that, it's fine.

danm wrote on Sat, 04/11/2009 - 6:59am.

Nothing inherently wrong with a car thing, or any other "hobby" as long as it remains in proportion to disposable income.
--------------------
That's exactly the problem with the car thing. It's all about power and to show you've got it you've got to outdo the other men. And that's when it gets out of porportion with disposable income more often than not.

Don't be an American Puritan.

You're re-inventing the sumptuary laws. Will chasing boys down the street to ticket them for overly-droopy trousers never get old?

Try teaching them, not hitting them. Speaking of power to push the other men around, "I hold your lifeways in contempt and I WILL see them perish" is not really what I'd call an emotionally even stance. Way to honor that person's right to self-determination.

NYT, Showdown Seen Between Banks and Regulators (yeah, right)
http://www.nytimes.com/2009/04/11/business/economy/11bank.html?_r=1&hp

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kidbuck (member) wrote on Sat, 04/11/2009 - 5:19am.

Are trees illegal in Colorado?

Kid - You ever been out on 'sagebrush flats'? In many places GRASS doesn't even grow. Those views are pretty common just below the 'Front Range' where Greeley is... you will find a few cottonwoods & western juniper in the river valleys & around 'borrow pits'... other than that it is just sand and sagebrush and foreclosed homes.

dryfly writes, "...other than that it is just sand and sagebrush and foreclosed homes."

I've never had the pleasure of being outside the Denver airport on stop overs. That's some bleak terrain. Do the locals who grow up there really ever learn to love it? I'm thinking those folks are going to get wickedly skinny if they have to rely on their own victory gardens. Is there even enough vegetation to support squirrels?