"From AAA to Junk"
That is a pretty good description of more than CU's.
....Does this help put a value on the assets the banks hold as well?
- - - - -
Black 
Ranch
"From AAA to Junk"
That is a pretty good description of more than CU's.
....Does this help put a value on the assets the banks hold as well?
- - - - -
Black Ranch
Even if the investments were considered permissible on account of the ratings, surely it did not escape anyone's attention that they were moving into investments they had not traditionally utilized.
All those people trying to "grow into the downturn" in the credit markets during 2006-2007 certainly didn't do so well.
I doubt we are going to get any information on those institutions.
"Sadly most of the problem securities were bought in 2006 and 2007"
--------------
The Greatest Fool has been identified.
So much for the credit unions being different. I know our local CU (I have done all my banking exclusively there for >15 years) has continued to lend pretty strongly through all of this. I had the impression they were still doing the old-fashioned loan officer weekly round-table while considering loans. I hope you aren't right in a more broad sense, BH: that this wasn't wide spread among CUs. Are the "NRSROs" the usual suspects? Moody's, Standard & Poors, etc.? BTW, BH, I share your hope for a short sharp crash and your 'inflection point' to make some subtle fundamental changes in the operation of our system.
No sense counting banks on Fridays if the entire Credit Union system is now in peril.
NCUA still sees this as a liquidity problem, not a solvency problem.
The losses that will hit the books of the individual credit unions from the corporate writedowns will be massive.
The losses related to NCUA's efforts to stabilize the corporate credit union system exceed the insurance funds' retained earnings and impair by 69% the NCUSIF deposit insured credit unions hold as an asset on their books. In total, the cost to credit unions is 99 basis points of insured shares, which equates to 72BP of ROA and 65BP of net worth on average. Many credit unions are also facing write-downs of the paid-in-capital and membership capital accounts held at corporate credit unions.
Many credit unions are also facing write-downs of the assets on their own books, both current and to be realized in the future.
This is a really good post. An excellent example of what we all suspected (or "knew") but had only guesses as illustrations. The pie charts are stunning.
Any idea how much of the problem is actually subprime?
Thanks again.
damn, I hate not knowing what banks and credit unions acted as responsible fiduciaries and have financial statements that reflect solvent, liquid banks/cu's that can be trusted.
i refuse to believe that FDIC/NCUA's guarantees will mean anything if the system collapses above the individual banks/cu's, and would do biz with any institution that would actually, you know, protect cash deposits and make them available in a crunch.
I guess the message we should learn is that the banks/cu's/government prefers protecting the institutions rather than release info that is truly believable.
From AAA to JAIL
I´m wondering what kind of miracle make possible that no rating agency hasn´t been demanded. neither the goverment (ooops)
One minor question, in the US who were the main favored player on housing? local goverments through taxes???
In my country that has a very similar bubble or worse, local goverments get financed through home markets controlling land and taxes. The bigger the asset price, the bigger the taxes.
Sportsfan - can you point to a link for a useful tutorial/primer on how the CU system works?
I like to black out the all seeing eye on the back of the one dollar bill with a black marker. It helps to ward off evil spirits. I won't carry one dollar bills in my pocket anymore without giving it a black eye first. I don't really understand what it is about blacking the all seeing eye out but I somehow feel better doing it.
--------------------------------------------------------------------------
Learn the 7TH Amendment maggot!
Red Beckman - Fully Informed Jury
http://video.google.com/videoplay?docid=7385583011526915030&hl=en
"a) Will credit agencies get away with such an obvious disregard to their duties during the credit boom?"
Whats the obvious part? All NRSOs use a published methodology. One of the three uses an open model. So please tell me genius where where you are your fellow travelers with your keen insights 3 years ago?
Is it obvious that RA misestimeted the likely hood of the even because the event has occured? No. If you win the lottery shall we say that the state was negligent in their duties?
There was a time to critisize the model and methods and the payment structure but nothing is obvious from the results.
A fine example of what happens when you let other people (ratings agencies) do the thinking for you (credit unions).
Always remember nobody cares about your money than you, unless they are trying to take it.
"I´m wondering what kind of miracle make possible that no rating agency hasn´t been demanded."
Whats the crime? Giving shoddy opinions? If so, most of the commentors on this board should be in the slammer.
NM to both those questions...
Comrade Scott, the national site should have the information you seek:
This site has a little different info:
"A fine example of what happens when you let other people (ratings agencies) do the thinking for you (credit unions)."
That is absolutely correct. But don't forget that Credit Unions, Banks Pensions, and insurance co.s are all required to by law to purchase a securities that a rated by NRSOs. Not that they shouldnt have done their own homework on top of that.
"So please tell me genius where where you are your fellow travelers with your keen insights 3 years ago?"
I was here commenting about bad loans and shoddy underwriting standards, as were many others. You can click on old articles from 2006 and check to see for yourself.
The top 10 signs we are living in banana republic in the United States. Pretty funny. Enjoy.
http://thebarricadeblog.com/2009/04/11/the-top-10-signs-you-are-living-i...
You can have either returns or safety not both.
Or as I like to quote: "It all comes from liking honey too much." - W.T. Pooh 1966
Commentors on this board don´t sell payed coments, neither payed professional advise
If I sell a "solid" home that tomorrow falls, I´m sure I will receive a lawyer letter. won´t you?
America : From AAA to Junk .
One minor question, in the US who were the main favored player on housing? local goverments through taxes???
In my country that has a very similar bubble or worse, local goverments get financed through home markets controlling land and taxes. The bigger the asset price, the bigger the taxes.
Marco, the short answer is yes. It works the same way in the U.S. for the most part.
Comrade Scott, wait until someone takes your check numbers and withdraws 20,000 of unauthorized funds from your account. Then you'll see the difference between a CU, which is good about reversing that shit, and a bank, like, from a real life example, Wells Fargo, which embezzled the funds of a local couple, as well publicized in the local newspaper.
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http://www.afterthecrash.net - After the Crash, a blog shared by the CR Commenting Community. Hoopajoop on over.
There was a housing bust?
Marco, the commenters on this board have been critical of the rating agencies for a very long time.
If you are asking whether their conduct went beyond negligence into criminality, I would think several people would say "yes."
Whether that conduct, if criminal, will ever be prosecuted is another question.
The government must first be willing to go after malfeasance and then must devote huge resources to investigation and prosecution, while proving criminal guilt may be difficult.
So the government looks for simple, small crimes and prosecutes those people instead.
Ha! Hoop...no, I have not had that pleasure...and my CU has been leaps and bounds above my previous bank experiences as a consumer, at every level. Reading this, though, I wonder if I will have the CU option much longer. My last commercial bank was Central Fidelity - now part of Wachovia - and prior to that, First Virginia (Central) - I have no idea what became of the latter.
more cliff diving...
>>
http://www.marketwatch.com/news/story/Chinas-forex-reserves-rise-growth/...
China's forex reserves rise, but growth slows
The increase [till end of March 2009] was $272 billion higher than March 2008 and $7.7 billion more than in December.
Really wrote on Sat, 04/11/2009 - 12:34pm.
There was a housing bust?
Not really. There was a credit explosion. The housing bubble was a symptom. Housing prices right now are generally above long term trends. The bust comes over the next two years.
Bob the Builder must have lost his everloving ass, and is realizing he isn't ever getting the opportunity to get it back.
Poor Bob, day late and a dollar short.
See, Bob, the ones that saw it coming only crowed lightly, so as to let guys like you dig in deeper, thinning the herd if you will. Who would have EVER thought that converting IRA/401K to PM's (gold @250) would have been a good idea back then. Guys like us were CRAZY, remember. It truly is satisfying to laugh all the way to the bank.
Now, be a good employee/serf and get me an iced tea.
sr. american mugabe wrote on Sat, 04/11/2009 - 12:43pm.
[to Bob the Builder] Now, be a good employee/serf and get me an iced tea.
No, no, no! Didn't you learn anything? Not, employee. Not serf. Yes, contract hire with no benefits. Oh, and Bob. When you go get us those iced teas be sure to use your own car at your own expense and don't forget to park out on the street and not in the driveway.
Now I want an Arnold Palmer!
sportsfan --> I share your opinion, my comment was an answer to other saying that they don´t have any responsability or in case they have as much as "us". Also in my opinion the problem is not the subprime, it´s prime, is the obscene price for the underlying asset
really ---> not sure if we are ending with the bust. Sometimes I feel we are bursting, sometimes we are at the beginning
Look this three:
http://img10.imageshack.us/img10/3179/48651902.jpg
http://img15.imageshack.us/img15/4243/62785900.jpg
http://img9.imageshack.us/img9/4981/59547330.jpg
The Robert Shiller one, let the previous booms in jokes. And still shows historic overpricing
RI investement to GDP some analyst think we are bottoming looking the Quaterly series of the GDP, looking the yearly series and thinking these aren´t normal times we have on the left a scariest movie.
Finally, if I didn´t deflated bad the median prices for new home sales, there´s room to lower prices.
"So please tell me genius where where you are your fellow travelers with your keen insights 3 years ago?"
How about 4 years ago or more. Check out Calculated Risk, Housing Bubble blog, Housing Panic, Patrick.net, or Mish's site. All are loaded with comments from 2005 and earlier from sensible folks with a grasp of basic math who could see the consequences of cheap money, lowered to non-existent lending standards, leveraged debt and reckless greed. So, where were you and what were you doing?
"So please tell me genius where where you are your fellow travelers with your keen insights 3 years ago?"
April 6th 2006 I closed escrow on the last of my nonpersonal use real estate sales. Keen insight? Luck? Doesn't matter, actions not intentions count.
I used to surf all those sites back then before the bust got started. Housing Panic was too funny. Learned a lot from those sites.
--------------------------------------------------------------------------
Learn the 7TH Amendment maggot!
Red Beckman - Fully Informed Jury
http://video.google.com/videoplay?docid=7385583011526915030&hl=en
cybersecurity act of 2009
http://www.opencongress.org/bill/111-s773/text
http://www.eweek.com/c/a/Security/What-Will-the-Cybersecurity-Act-of-200...
This bears watching.
Rob Dawg (member) wrote on Sat, 04/11/2009 - 3:49pm.
And use the damned back door!
May have been posted long but IMO insightful Mike Hudson Financial warfare
http://www.scoop.co.nz/stories/HL0904/S00068.htmhttp://www.scoop.co.nz/s...
CR wrote: pie charts like this for Citi and BofA, etc.
Would also be nice to see endowments and foundations. (I can imagine many unhappy alumni if such pie charts get out.)
And pension funds' pie charts of both private companies and municipalities (taxpayers of the latter would not be happy, either.)
And to think that we've talked about these time bombs on this blog (and other bubble blogs) for few years.....
OK, part of my day job is as a state-level credit union regulator, so I'll try to explain the natural-person/corporate credit union distinction.
The everyday credit union, where you get your car loans and maybe have a checking account, has $10 million to $30 million in assets (handwave) and is run by people who know their customers quite well but generally are not all that sharp when it comes to investing their excess liquidity. Most non-sophisticated credit unions invest all of their excess liquidity with a corporate credit union. Corporates have only natural-person CUs as members. Corporates offer investment options (CDs and money-market funds) and run the payments systems (check clearing, credit card processing, ACH, wire transfer) for CUs thus allowing them to run with smaller staffs. Over the course of many years, natural-person CUs have come to implicitly trust their corporate CU. In order to become a member of a corporate CU, a natural-person CU must place with the corporate a deposit and each corporate has its own rules for the size of the deposit. The key is that this deposit cannot be withdrawn any sooner than three years from the date the natural-person CU notifies the corporate that it wants out.
There are 28 corporate credit unions, each competing with the other nationwide for natural-person CU business. They didn't used to have nationwide authority, but instead were limited to a several-state area. Allowing them all to compete nationwide obviously caused some corporates to make poor decisions. These 28 corporate CUs have their own corporate, US Central Federal Credit Union, who serves the same role for the corporates as the corporates do for the natural-person CUs. The corporates must also place a 3-year restricted deposit with US Central to become a member just like the natural-person CUs do to gain corporate membership.
Because of the intense competition among corporates for natural-person CU business, corporates had to offer more yield on the investments they offered to natural-person CUs. The only way to pay for that increased cost of funds was to take more risk on the investment side. WesCorp's management appears to have wanted growth at any cost, and US Central went along for the ride.
As we stand today the $7 billion that was in the National Credit Union Share Insurance Fund at 12/31/2008 is gone. The $1 billion directly invested in US Central has been spent and lost. The loss estimates on the MBS portfolios at US Central and WesCorp center on $6 billion, but the worst case numbers I've heard are at least twice that amount. The actions announced to date by the National Credit Union Administration (NCUA) will result in a transfer of $6.2 billion from the natural-person CU community to the NCUA to recapitalize the insurance fund, currently scheduled for September 2009. Each natural-person credit union will have to pay NCUA 99 basis points of insured shares (measured at 12/31/2008). That's just the amount needed to recapitalize the fund.
Every corporate is likely to lose the deposit they were required to invest with US Central. That loss will not stay at the corporate level, and natural-person CUs will take losses on their required deposits in their corporates. Those natural-person CUs who signed up with WesCorp have already lost their required deposits in WesCorp. Those losses will be on top of the 99bp owed to the NCUA.
How did we get here? Simple. Allowing an agency to be both chartering authority and insurer builds in an irreconcilable conflict of interest. Of all the "banking" regulators only NCUA both charters and insures. NCUA's sole goal throughout this mess has been to keep everything within the system, no matter the cost. Their worst fear is being forced into asking Congress for bailout money because they'll then have to admit that they've spent far too much time on chartering and nowhere near enough time on ensuring that their regulated population is not taking excessive risk. The two corporates at issue here, WesCorp and US Central, are both Federally-chartered. NCUA is the sole authority. They wrote the rules that allowed these investments, they wrote the rules that allowed corporates to compete nationwide, and they are the ones who devoted more resources to "growing the movement" than acting as prudential regulators.
In a regulators-only conference call 2 days after the seizure of US Central and WesCorp, a high-level NCUA official lamented the fact that these actions would "prevent the movement from getting out there and making the loans needed to get the economy going again." If my boss hadn't been sitting there next to me I would have unmuted my line and told that idiot exactly what I thought about his regulatory priorities.
Expect major changes at NCUA as this goes on. If NCUA survives, it will not do so in its current form.
Want to know what Foundations are all about?
The Hidden Agenda of Tax Exempt Foundations for World Government
http://video.google.com/videoplay?docid=8605813744843314322
--------------------------------------------------------------------------
Learn the 7TH Amendment maggot!
Red Beckman - Fully Informed Jury
http://video.google.com/videoplay?docid=7385583011526915030&hl=en
Thanks Captain Ned. Good information.
Captain Ned, wow - that was an education!
Tnx.
Why does stuff like this get me a little anxious??:
(2) may declare a cybersecurity emergency and order the limitation or shutdown of Internet traffic to and from any compromised Federal Government or United States critical infrastructure information system or network;
(6) may order the disconnection of any Federal Government or United States critical infrastructure information systems or networks in the interest of national security;
(11) shall notify the Congress within 48 hours after providing a cyber-related certification of legality to a United States person.
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Black Ranch
North Carolina Town Prints Own Currency to Support Local Business
http://www.democracynow.org/2009/4/9/north_carolina_town_prints_own_curr...
This is a protectionist activity that protects jobs and community. How revolting. (snark)
--------------------------------------------------------------------------
Learn the 7TH Amendment maggot!
Red Beckman - Fully Informed Jury
http://video.google.com/videoplay?docid=7385583011526915030&hl=en
2005 - we sold my deceased MIL's Kitty Hawk beach house at the top of the market there. WHEW! I saw this going bad then, but wasn't aware of all these good blogs. Started reading CR in late '06. I have learned an enormous amount. Thank you ALL for everything you do.
"Every man thinks God is on his side. The rich and powerful know he is."
Jean Anouilh (1910- )
That's a great Ubernerd post, Uncle Ned! I think you're ready for some steel-toed bunny slippers.
Thanks for the thought, but I'm just a microNerd.
Time to eliminate credit rating agencies. Everyone would be much safer if the provided their own dose of analysis and skepticism. Plus investor would not buy overly complex instruments. Oh I have no idea how this instrument works, but someone I never met named Moody gave it AAA rating? Must be a good deal.
A fool and his money are soon parted. Thanks rating agencies for making sure all we fools are a little poorer.
So the natural person credit unions are going to have big losses due to investments made with corporate credit unions.
How much will insurance fund for natural-person have to come up with to protect depositors like me?
-------
Also Rosebud Junk Co
Ten years from now when the dust has finally settled, the ratings agencies had best be taking a large chunk of the blame.
Thank you Captain Ned
NCUA - I don't know anything about them. Do they have a board? If yes, how is their board organized - are they elected or appointed? Who ultimately controls their decision making?
Captain Ned. Wow! Thank you.
06 and 07 OA mezz bonds, those are basically worthless.
those loans are going DQ at a 70% clip when they hit their recast.
"So please tell me genius where where you are your fellow travelers with your keen insights 3 years ago?"
-----------
Aug 10th, 2006?
I was predicting the Crash.
http://www.realmeme.com/roller/page/realmeme/?entry=pivot_point
Marco, I think most people who are informed about the current state of the economy think real estate prices will continue to fall.
The key word these days seems to be 'to stabilize,' as was just used by the NCUA, which, when used, seems to mean 'to stop the rate at which things are falling apart.'
Captain Ned, good stuff, thanks. It's looks like we're in for a round of mergers and consolidations in the CU world. Those who were so interested in 'growing the movement' are going to have to learn about contraction.
@Rufus:
The only portion of an NPCU's investement that's subject to loss is the 3-year deposit. These are not large items on the balance sheet of the average NPCU and losses there will hurt earnings but should not have a major effect on solvency on their own. Add that to the 99bp that NCUA is sucking out of them, though, and it's clear that some marginally-capitalized NPCUs will not survive this business cycle.
As a depositor in an NPCU you're currently protected to $250,000 on any type of account. Since deposit insurance rules are complex, arcane, and understood only by those employees of the insurers (NCUA & FDIC) responsible for paying out claims, I'll refer you to the NCUA publication "Your Insured Funds".
http://www.ncua.gov/Publications/brochures/insured_funds/funds.pdf
@locust:
NCUA has a 5-member board, all Presidential appointments. They're an Executive Branch agency, so in the end the decisions are made at 1600 Pennsylvania Avenue.
Predicting The Crash in Sept 6, 2006, too.
http://www.realmeme.com/roller/page/realmeme/?entry=real_estate_bubble
"The appreciation rate of Los Angeles real estate implies that the current bubble has at least 30% greater amplitude than the 1990 bubble. It's duplicated in at least 50 major metro areas in the United States. For the past three years, the bubble has been sustained by mortgages based on short-term interest rates because long-term rates bottomed in 2003.
Most Americans under forty don't realize that the gold standard was abandoned only thirty-five years ago under Nixon. Many of them also don't know that gold has risen over 100% since 2000 and silver has risen 150% since 2003. The gold standard existed for centuries, for reasons which modern economics is re-discovering. Occasionally, governments have abandoned the gold standard (the United States during the Cold, Civil and Revolutionary wars), but the question is...
why have they always returned to it?
It's hard to imagine a future where the dollar retains any value, which means that the current trend towards international outsourcing will draw to a close soon. Most Americans also don't realize that the major international blocs have been planning to abandon the US dollar as an international currency for several years. The Euro is one example, but the Asian and Arab regions have their own schemes underway.
Dishonest money breeds dishonest people"
Nice post, Ned!!! You're traipsing around the borders of ubernerd territory with clear, informative expositions like that.
-----
"Hope for the best, prepare for the worst"
Halo-ized comments at http://users.thelink.net/bobn/CR
No javascript.
No left "gutter"
Should load on anything.
Good stuff, Captain Ned!
"Everyone would be much safer if the provided their own dose of analysis and skepticism."
------------------
Yes, and we should all be our own doctors and build our own houses.
Ahhhhhhh and through all this , i can still enjoy the azeleas in Augusta..... once a year i can play with the color controls on my TV and hone them to all the green and red...
Augusta in April, there is a God.
yours in crisis,
Doodie
Capt Ned, that's exactly what I was afraid of.
Captain Ned, many thanks for the inside scoop on NCUA. My wife and I recently moved ~10% of our capital out of Wells Fargo / BofA and over to our local credit union, in order to hedge against the possible failure of a too-big-to-fail bank. Now we see that the national credit unions drank the same Kool-Aid... and of course there's the problem that our local credit union is in bubble territory (east side of San Francisco Bay Area). But the posted quarterly reports, while not stellar, show a healthy institution (at least as of the end of 2008).
One thing you didn't mention is that credit union deposits, like deposits at FDIC-insured banks, are backed by the "Full Faith and Credit of the United States Government". Which in fact means either we have to borrow more to pay for this, or we start running the printing presses at the Treasury... But folks with deposits at credit unions will still get their "dollars" back.
How doomed do you think the credit system is? (Versus just being in need of systemic reform to avoid further problems?) If I understand your message, you're saying that the CUs which serve natural persons are all being forced to ante up to the corporate and national systems to cover the overruns on the insurance funds, because the NCUA doesn't want to exercise the "full faith and credit" guarantee since that act would bring down the wrath of Nancy Pelosi and Harry Reid (Congress). Presumably this will deplete the reserves of the natural-person CUs and have a sharp negative impact on the solvency of the natural-person credit unions, won't it?
My site: http://ic4mg.com
.
Yes, and we should all be our own doctors and build our own houses.
:: ::
Come on BH - more than a few here 'self-medicate'... doesn't that qualify as 'doctorin'?
Speaking of reserves, my other question for today has to do with an article I saw about Goldman potentially doing a stock offering in order to raise capital to repay their TARP loan and get out from under Geithner/Obama's thumb.
Not every bank can do this.
But it tends to indicate that even profitable banks will not resume lending with their new influx of capital. They'll have to pay back Uncle Sam first. So even a mild outbreak of bank "profitability" this quarter will not signify a real end to the corporate credit crunch, and thus the recession will continue...
My site: http://ic4mg.com
Holey moley, Cap'n Ned.
All I can say is I'm glad I didn't save any more money than I did, and that I didn't borrow too much either. How does one find out who one's credit union is in with. Are there any which are in not-so-bad shape?
Also, there are still some who are clueless.
I didn't predict this, but I marvelled at the prices on the houses I was closing at peak.
And in fall of 07 I understood where we were (in deep doodoo) while the stock mkt was high.
It's really hard to see where you are, not just where the future is.
I had thought many times over the years--30 years--that house price appreciation was just crazy. But house prices, except in the early 80s just kept going up and up and up, year after year. After a while I began to believe my lying eyes, instead of my common sense.
For Credit Unions that remain solvent after paying the new NCUA charges, the depletion of capital (sent to reload the corporate and national insurance funds) will mean reduced local lending until the capital ratios are rebuilt...
My site: http://ic4mg.com
Also thanks cap-n-ned... you might want to email that comment to CR - it would probably end up on the 'front page' as opposed to being buried in the back with us obits & yard sale notices.
@Wisdom Speaker:
You're spot-on WRT full faith & credit.
Given the uproar in the CU industry over the first round of recapitalization payments, I think that NCUA will be forced to to hat-in-hand to Congress if the situation at US Central and WesCorp gets worse. As they ask for ever-increasing amounts from within the system, they close ever more NPCUs. At some point the calculus will finally fall on the side of going to Congress. As a state-level regulator, I'll find out where that point is at the same time the rest of the world finds out.
As for the CU system as a whole I don't see this as a death blow. The CUs in trouble, IMO, will be those who tried the most to look like banks and ran bank-like capital ratios (7-8%). The mom 'n' pop credit unions with 15-20% capital will have an ugly year but will still be around.
For me the big thing, on the federal side, is splitting the insurer from the chartering authority. It's the only way to make sure the insurer focuses on what's truly important.
Does any of the analysis show what portion of their bonds are in default? I own a lot of noninvestment grade bonds, and not a single one has gone into default. I've chosen carefully.
This is one of the really annoying things about ratings in this market. Unless something is actually in default, the ratings aren't doing a lot of good.
I read part of Alo's post about the evil taxpayer in the prior thread. I suggest people read the first page. I kept thinking it was super snarky satire. But it wasn't. It seems we evil taxpayers are pulling one over on the poor gov't and banks.
"I had thought many times over the years--30 years--that house price appreciation was just crazy."
-----------------
That's the nature of the K-wave.
The upcycle is three decades long so it conditions the population to expect trends to continue.
I've realized over the past several years that very few people are as analytical as I am. They rely heavily on personal experience, somewhat on second-hand experiences of others and very little on mathematics or history.
Many, perhaps the majority, of people in the U.S. are low-grade trash now. Maybe they always were. Yesterday I initiated another harassment suit against someone outraged by the words "I am looking for sex & fun" in my personal profile. They actually threatened to call the police over "implications" of my profile. The delusion is unreal.
I could probably make a living off lawsuits if I worked at it.
"So please tell me genius where where you are your fellow travelers with your keen insights 3 years ago?"
Exactly three years ago? Well...
Anyone expecting politicians to "do the right thing" is delusional, which is high on my hit parade of reasons why we're headed for a depression.
You know, World War I was universally known as "The Great War" until World War II came along. Guess the name "The Great Depression" is living on borrowed time.
FTR, I posted that comment on a blog back in April of 2006. Among the many choice comments I've made since 2004 I felt this one was particularly appropos given current events.
It truly is amazing how long this stuff takes to play out, since I've been prepping for it for 6 years now.
-----
"Hope for the best, prepare for the worst"
Benny did not extend (FNDF) Fraud NonDisclosure Facility to them
Well, I bought my first house in 1970, and sold it for 20% more than I paid, 18 months later. In Newark, Delaware.
And prices were going up prior to that too. So you have 40 years. At least. I didn't know what I was doing in 1970. Now I sorta do.
@lawyerlizinMI:
There's no way to find out which NPCU has investments in which corporate CU. Financial privacy and all that.
As for the corporates, their financials, just like the financials for any NPCU, are available from the NCUA web site:
For NPCUs (5300 Call Report):
http://www.ncua.gov/indexdata.html
Type in your CU's name and click Find. On the next screen, click the View Report button. Page 1, line 9, titled "Membership Capital in Corporate Credit Unions" shows the amounts at risk due to pushdown from US Central.
For Corporate CUs (5310 Call Report):
http://www.ncua.gov/data/5310/5310rpt.html
Use the drop-down box to pick a corporate. The 3-year accounts show up on Schedule A-3 as "Membership Capital Shares". These are amounts invested in US Central that a corporate CU stands to lose.
"Nice post, Ned!!! You're traipsing around the borders of ubernerd territory...."
Are you watching, CR? Ned seems to be a good resource.
@some investor guy:
The analyses used by NCUA are not based on default but are based on the performance of the loans making up the MBS. When loan default rates in any one MBS hit 20% or more, default on the MBS itself isn't really an issue. It's clear that the MBS will not pay in full, so the tough part now is calculating just how much you'll lose as OTTI.
Message from President/CEO of xxx Credit Union where I have my money ( which is better than 'zombie banks' with other commercial banks with FDIC insurance ) NET NET: make sure you park you $$$ in a strong and sound credit union.
**********************************************
Several times in recent months you have heard from me regarding xxx position and the financial stability we have maintained. That stability continues, but as you know our troubled national economy continues to create problems affecting governments, businesses, individuals, and financial institutions alike and the ripples are still being felt in every region and community.
Late in January and again in late March, the National Credit Union Association (NCUA), regulators for every credit union with federally insured deposits, mandated that all credit unions be assessed special charges to build and recapitalize the insurance fund that protects deposits. This was required because of the difficulties in the real estate and investment markets across the nation that continue to hurt financial institutions and consumers alike. Even though this was not the result of our actions, we are a part of the larger 'Credit Union System', and all credit unions have a legal obligation to share in maintaining reserve funds for insurance of accounts.
Although such a charge is significant, it does not alter these facts:
* xxx is well positioned, healthy and sound.
* Members can rest assured that their money is safe in xxx (your $250,000 insurance of accounts is not impacted).
* We continue serving members with loans, deposit accounts, and other fine products and services.
* We are committed to keeping you informed.
I wanted to let our members know up front that the expense of these "special charges" to xxx and a deepening recession will negatively affect the earnings and net capital (reserves) of every credit union including xxx. While these "special charges" are painful, we have more than the necessary reserves available for unforeseen situations and economic times such as these. We will remain strong and able to serve our members' needs.
At this time, there remain many unanswered questions and specific issues yet to be determined in this matter, but we will communicate additional information as it is finalized. I am confident we will, as a credit union and nation, continue to weather this economic storm.
I welcome your comments and questions. You may contact me at ____
Respectfully,
_____, President/CEO
xxx Credit Union
@km4:
That message was written by the largest NPCU trade association for use by their members. The same message can be found flashing on the home page of any NPCU that's made it into the 21st century.
some investor guy (member) wrote on Sat, 04/11/2009 - 2:38pm.
Does any of the analysis show what portion of their bonds are in default? I own a lot of noninvestment grade bonds, and not a single one has gone into default. I've chosen carefully.
This is one of the really annoying things about ratings in this market. Unless something is actually in default, the ratings aren't doing a lot of good.
If they are issued by companies that actually make something (i.e. not financials), try calculating the Altman Z-score for the issuer. You can update the score whenever the issuer files updated financial statements with the SEC.
NorkaWest
:: ::
The analyses used by NCUA are not based on default but are based on the performance of the loans making up the MBS. When loan default rates in any one MBS hit 20% or more, default on the MBS itself isn't really an issue. It's clear that the MBS will not pay in full, so the tough part now is calculating just how much you'll lose as OTTI.
:: ::
Plus the CUs probably paid full price for these MBS when they bought them originally - correct? So any discount comes out of their hide. While I'm guessing some-investor-guy buys them way the hell discounted... yes/no SIG? So the yield is way better & the only way he losses is if they actually default.
The price you buy these things at matters a ton... which we all knew if we'd been paying attention to the toxic asset purchase schemes being floated about.
@ Captain Ned OK then show me the proof positives...Like I said I'll put my $$$ in a strong and sound credit union over TARP bailed out 'zombie banks' and other commercial banks with tenuous FDIC insurance. Do you own due diligence....I have !
@km4:
The uptick in deposit insurance to $250,000 isn't going away anytime soon, if ever. Keep your money spread out amongst several institutions and under the insured limit and Uncle Sugar will bail you out if necessary.
Anyone who deposits under the insured limit has no worries. You can chase yield to your heart's content. The only way you'd lose money is if the printing press broke down ...
"A fool and his money are soon parted. Thanks rating agencies for making sure all we fools are a little poorer. "
But hopefully a little smaller.
The key problem was when it became institutionalized. i.e. funds/pensions that prohibited investment in anything not rated high enough. That provided the incentive for issuers to "convince" ratings agencies to give ratings, higher than they otherwise would.
It would have been far better if they had been grading on a curve. Say if only ~5% of overall ratings were allowed to be AAA. Not that that would eliminate the issuers making under the table deals, but at least everything would not have been AAA. Just the ones with the biggest kickbacks...
Ned, some mighty fine posting. I breathed a sigh of release when i saw what a tiny fraction of reserves line 9 was.
" The only way you'd lose money is if the printing press broke down ..."
Gotta disagree with this tho. The more they print the more you will lose on a real basis.
Captain N: A salute to you. Thanks for the info. I emailed it to a relative who is a loan officer at a credit union.
LawyerLiz: You're kiddin' me...I thought Ben Dover's letter was pure snark. He was SERIOUS! Nah, can't be....
Still readin' the previous thread.
Kudos to Mike Morgan....Speaking to The Daily Telegraph, Mr Morgan explained how he went through a similar battle with US homebuilder Lennar a few years ago after he set up a website to collect information on what he alleged was shoddy workmanship in its homes. The pair eventually settled out of court.
"Since I went through this with Lennar, I've had advice from some of the best intellectual property lawyers, and I know exactly what I can and can't do. We're not going to back down from this," he promises. Mr Morgan adds that if Goldman manages to shut down his site, he has a number of other domain names registered.
• Speculation is mounting that Goldman Sachs is set to raise several billion dollars via a share sale, possibly next week, in order to pay down a $10bn (£6.8bn) US government loan, as revealed in The Sunday Telegraph last week.
US Banking Oligarchs ( first and foremost Goldman Sacks) to Obama
Larry Summers = OK we own him
Tim Geithner = OK we own him
Ben Benanke - OK we own him
Sheila Bair = OK we own her
Volcker = not OK we don't own him so put him out to pasture because he is a proponent of essential reform needed to break the financial oligarchy.
Too bad more Americans did not read or comprehend ....
The Quiet Coup
http://bit.ly/9QobY
The Big Takeover
http://bit.ly/rpHLw
we're officially, royally fucked so 98% of Americans had better get a new dream and fast !
The Triumph of the Banking Oligarchs continues with two faced 'change agent' Obama
The Credit rating agencies need to downgrade faster!
Ahoy Capt Ned -- thx alot for the great but freaky info. When I puruse the 5300 docs of a CU to determine exposure to the corporates, I notice member deposits at corporates and investments in corporates. Are these #s relative to total assets a useful gauge, or is there another metric that better describes exposure? Any other items in these docs that are useful to determine CU health?? Thx again for posting and happy sailing.
Cap'n Ned,
Thanks much, extremely informative. I had just moved about 20% of our holdings to a local FCU as I was getting unnerved about the FDIC now being the backstop for the PPIP.
If I'm reading your post correctly, the NCUSIF is totally unfunded right now. So if my FCU goes belly up on Monday, who is going to cover the insured deposits?
I realize the plan is to recapitalize the fund over the next 5 years, but that won't do any of us a whole lot of good if things blow up before there is money in the fund to cover us. And if the losses at Central or West are worse than anticipated, might they also redirect some of the new contributions into NCUSIF to help make good those "new" losses at the Corporate level?
I'm seriously beginning to think that the FDIC and NCUA coverages are nothing more than a sham to give us a false sense of security. I may go 50% cash in the mattress (deflation scenario) and 50% gold in the safe (inflation scenario).
It's truly getting that silly.
Just Say "No" to the Credit Rating Agencies
http://www.truthout.org/011709Y
The credit rating agencies have got us, coming and going. First they help cause the biggest economic calamity since the 1930's. And now they tell us we can't take the fiscal measures needed to get us out of this mess. Meanwhile, they are laughing all the way to the bank (that is, if they can find one that is still solvent).
Why are we still listening to them?
So please tell me genius where where you are your fellow travelers with your keen insights 3 years ago?
Getting ignored by a horse's ass.
Here's my new credit union's (BECU) report:
http://reports.ncua.gov/data/cureports/index.cfm
I think Line 9 shows ~$9 million while it has $1028 million in total investments...at the end of December 2008. That doesn't seem too bad...if I'm reading it right.
I also looked at the CU's webiste and found the, standard I guess, reference about the failed corporate CUs in March. A link frim this page shows that their payments to NCUA (?) went from $30 to $48 million.
Well, I just joined BECU yesterday to take my money out of the "too big to fail" banks. I noticed the CD rates were not very good.
Before I joined, I did check out ratings for BECU at bankrate.com and bauerfinancial.com. I don't know how credible these rating agencies are though.
*sigh*
The siezed CU was planning to report a smaller loss! Link
"Getting ignored by a horse's ass. "
Thanks, BR. That was perfect!
There is no safe place for savings, I guess.
Prolly there never was.
Byzantine_Ruins...is that Turkish 
Well, I have a little cash in the metaphorical Sealey, and a little gold. I think I will hound the hub for buying a little bit more gold, and putting aside a little more cash.
He's just appeasing me tho.
Yes, dear. . .
Why is it Istanbul, not Constantinople.
Dah, dah, dah, da-da-da, dah dah dadadadada. . .
That's nobody's business but the Turks.!
It was Byzantium long before. . .
Byzantine_Ruins = Mustafa Kemal Atatürk 2.0
Slow newsdays. Why aren't army units seizing Washington? Where are the airstrikes on bankster HQ in NJ, NY and CT?
More bad news for homeowners in recently-built credit traps: Bad Drywall!
http://news.yahoo.com/s/ap/20090411/ap_on_bi_ge/chinese_drywall
My site: http://ic4mg.com
Well, that was informative, Captain Ned. I looked at the last five years of reports for my little CU ($85 million assets & 6,000+ members):
Total Delinquent Loans
Dec 2004: 52,607
Dec 2005: 88,644
Dec 2006: 103,378
Dec 2007: 175,161
Dec 2008: 746,802
This is in a coastal So Cal city where real estate prices are still pretty sticky and the recession is creeping in slowly. Can't imagine what the numbers are for CUs in the Inland Empire and High Desert.
@Feckless Ness, that sub-1% delinquency rate looks pretty good normalized to the total capital, but that's not the right metric. You have to either subtract off the portion of the asset base lent to the corporate CU (to get a sort of "retained" capital base against which to assess performance), or else you have to account for the bad lending at the corporate level. Either way you want to know how much they passed upstream to the corporate CU.
At our CU the portion that went corporate is a significant fraction but not dominant (20% ish IIRC).
My site: http://ic4mg.com
Thanks, Wis. I'll go back and look at the corporate line.
km4 wrote on Sat, 04/11/2009 - 7:15pm.
Byzantine_Ruins = Mustafa Kemal Atatürk 2.0
Please don't say that sort of thing about me. That kind of talk can get you killed in times like these
Thanks to Cpt. Ned for the info, btw.
That's dollars, right, not number of loans.
Or, what is it?
Chainsaw (member) wrote on Sat, 04/11/2009 - 3:38pm.
...I'm seriously beginning to think that the FDIC and NCUA coverages are nothing more than a sham to give us a false sense of security. I may go 50% cash in the mattress (deflation scenario) and 50% gold in the safe (inflation scenario).
It's truly getting that silly...
~~~~~~~~~~~~~~~~~~~
After having driven their financial system into desaster , it's nice to see some growth in desperation .
Now we get the mad scramble for safety. But in the end there is no ! Hahaha !
I guess Americans are just starting to learn the hard way that irresponsibility actually does have consequences ? Hahaha !
Why didn't you do the prudent thing a few years ago and so avoided this mess ? Now you will pay the piper ! Bon voyage on your way to hell !
P.S. : Oh, printing money like crazy does not have bad consequences later ! No ?
Captain Ned,
Thanks very much for your clear explanation on the corporate/natural person credit unions. Also, for the link and pointer to the line items to look for, very much appreciated here!
Oh Dear GOD! Mezzanines on Atl-As in 06 and 07. That sounds suspiciously like doubling down to try to recoup bets already going bad. Half their dead locker 'portfolio for equity' holds bundles of rotting fish heads in a freezer without a compressor. Suicide babes knocking back shots. ---And they went to _business school_ to learn how to do this? Manalive, you could hire a 'bo from under an underpass and get comparable performance at least, and for a whole lot less . . . .
A quick note. Investments in corporates other than the membership deposit are fully insured by the NCUA under temporary authority. They did this to avoid NPCUs running out their corporate deposits, thus causing a 2nd-level run on US Central.
The only amounts a NPCU has at risk in a corporate CU are those titled "Membership Capital at Corporate Credit Unions" on the 5300 Call Report. The line "All Other Investments in Corporate Credit Unions" represents normal deposits (not subject to the 3 year waiting period) and these are fully backed by the full faith & credit clause until NCUA says otherwise.
The post by Captain Ned was terrific. And this may be just the beginning of uncovered big losses by Corporates & in turn to the CUs. The toxic assets in the MBS will increase as the joblessness increase & many prime mortgage loans go bad! So more capitaiization may be needed down the road!
Incidentally, there are only 3 members on the NCUA board- 2 Democrat appointees & 1 Republican. As the number of CUs & banks decreases, soon they may be merged under only one regulator. With the Gov't hardup for taxes, CUs may one day lose its tax exempt status & must become like banks- high fee people to death!!!
robot post 6572x
robot post 6572 from ht link
«Will credit agencies get away with such an obvious disregard to their duties during the credit boom?"»
They performed their duties very well indeed, if you look at it from the point of view of an original property owners/speculator, a mortgage broker or an investment banker.
The ratings they gave have created massive wealth for their customers, the WINNERS like Cayne, Fuld, Mozillo, ONeal, Prince, ... who are going to ride out this depression in fully deserved STUNNING LUXURY.
Real Americans salute those WINNERS and celebrate the STUNNING LUXURY they are enjoying for finding ways to sell B stuff at AAA prices. Isn't this what every Real American would have done in their place?
wow.
oh YEAH
1 st !
p.s.
a) Will credit agencies get away with such an obvious disregard to their duties during the credit boom?
b) Did the loan portfolio of an average money center (Bank) follow the same triple A to Junk path?
FAZ here I go.