New reg lets banks ignore actual value of “underperforming” loans

It is only fitting that on Halloween the Federal government is increasing the number of zombies among us.

Federal bank regulators issued guidelines allowing banks to keep loans on their books as "performing" even if the value of the underlying properties have fallen below the loan amount.

The rationale?

While CRE (commercial real estate) borrowers may experience deterioration in their financial condition, many continue to be creditworthy customers who have the willingness and capacity to repay their debts. In such cases, financial institutions and borrowers may find it mutually beneficial to work constructively together.

Nothing inspires confience in me like the phrase “financial institutions and borrowers may find it mutually beneficial.” Especially since banks are not required to only apply this rule to “creditworthy customers who have the willingness and capacity to repay their debts.”

I really can’t top what Doug McIntyre wrote at DailyFinance.com:

The FDIC appears simply to be taking losses that would be incurred in the normal course of business and pushing the true accounting for them into the future. It is to the political benefit of Washington to make it appear that the banking sector is getting better. It also probably helps the FDIC, which is essentially insolvent, from having to come up with billions of dollars to insure deposits at failing banks.

Some can argue that this regulation just does for commercial real estate what had already been done for home mortgages. In April, the Financial Accounting Standards Board approved a new set of rules allowing financial firms to fiddle with how big their real-estate losses are. (New accounting rules let bankers set the value of their own toxic assets)

When I use a word," Humpty Dumpty said in rather a scornful tone, "it means just what I choose it to mean – neither more nor less.”

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Bank robber says bank bailouts justify abrupt withdrawal

San Francisco police investigators are seeking the public’s help in tracking down a suspect who walked into a downtown bank, explained that he was fed up with corporate bailouts and threatened to detonate a bomb.

The manager escorted the man to a private room, where the suspect explained that he was employed by an organization that is concerned about U.S. government bailouts of corporations. … The money, the suspect explained, "would go to people who deserve it."

Can you steal your own money? Can a legal defense be built around the idea that it wasn’t a bank robbery but actually as "taxpayer repossession"?

Chances are someone will try it soon – bank robberies are definitely on the rise. They jumped 19.5% during the fourth quarter of 2008 over the previous quarter.

New game is a wonderfully bitter version of the economic mess

“Crunch, The Game For Utter Bankers” is a card game for anyone with a distinctly gallows sense of humor:

[It] allows you to experience the upside of down. Placed in the role of a global banking CEO, you have to juggle the conflicting demands of your ailing bank and your flourishing bank account. … Each player starts the game with a number of Assets in their bank, a small workforce and a few Trust cards. Trust is essential to your bank’s survival. Not only will capitalism falter without it, but each Trust card hides on the reverse a potential Government Bailout.

This  is the latest product from the fine warped folks at TerrorBull Games and – judging by the website — it is as bitter and cynical as their last number: War On Terror: The Board Game. (Does anyone do bitter better than the Brits? They have a cultural gift for angry commentary that I have never seen equaled: Waugh, Ralph Steadman, Francis Bacon, Martin & Kingsley Amis, Thackeray, Joe Orton – the list just goes on and wonderfully on. While the US has some fine satirists only Mencken really ranks for among the great acidivists.)

An average game sees you bribing your way out of government investigations, fending off aggressive takeovers and forcing debt onto the unsuspecting public. Meanwhile, reward your hard work by taking inappropriate bonuses and – when no one’s looking – brazenly embezzling your bank’s own funds and hiding them about your person. Crunch is unique in that to win, players are coaxed into cheating.

Fittingly, the game will hit stores on April 1, but it is NOT a prank.

Full disclosure alert:

• I have not played the game yet.
• I am being given a free review copy.
• The company has wormed its way into my heart by sending a free copy of War On Terror to a friend who is currently deployed in Afghanistan.

That said, if the game is half as fun to play as the website is to read it will be great.

Although the problems inherent in, say, spending over a trillion dollars on a war, while your country’s exports diminish year-on-year, would be apparent to the average school child, somehow everyone seemed caught off guard by this. And, being simple people, we started looking around to find out who to blame. …

Unfortunately, you can’t bomb the economy into shape, so looking for culprits was largely a waste of time. Even when bank bosses finally came under fire, it all felt like a bit of a diversion. Like sitting in an upturned, burning car and taking that moment to try and work out where you went wrong, when the car itself has no breaks, no steering wheel, tyres made out of butter and wood instead of glass for windows. And it’s not even a car, it’s an angry lion on roller skates and you’ve been trying to drive it.

Not sure if this will be as much fun as some tar and feathers – but I have my hopes up.

Quick links

• McCain claims two years ago he warned of mortgage problem. Two years ago he said, “I’d like to tell you that I did anticipate it, but I have to give you straight talk, I did not.”
• NYTimes brilliant interactive graphic showing how much major financial institutions have lost in market cap. US Bancorp looks great — gain of 1.1% in last 11 months makes it only institution not to have posted at least a double-digit loss.

Finance goes retro: Bank runs are back!

This ran in an Australian paper yesterday:

IN A modern financial system nothing is more frightening than a run on the bank. The US has now suffered a series of them, and they are escalating in size and scope, posing a serious threat to an already reeling economy.

This happened today:

LOS ANGELES – Police ordered angry customers lined up outside an IndyMac Bank branch to remain calm or face arrest Tuesday as they tried to pull their money on the second day of the failed institution’s federal takeover. …

Worried customers with deposits in excess of insured limits flooded IndyMac Bank branches on Monday, demanding to withdraw as much money as they could or get answers about the fate of their funds.

When it was clear some wouldn’t get in before closing, FDIC employees apparently took down names and told them to return Tuesday.

Other customers began lining up at 1:30 a.m. Tuesday, and by dawn, tensions escalated because people on the list were getting priority.

Ah, the good old days. Selling pencils and apples on the corner. An impending Democratic landslide. Hobo stew. An environmental disaster — then it was the dust bowl now its … hey has anyone seen the north pole lately? The rise of extremist political movements. Personally I am updating a few old songs. How about “Brother Can You Spare A Gallon”? “Twenties From Heaven”? Fortunately, “Let’s Face The Music And Dance” works just as it is.

Fortunately there is some good news: Oil prices plummet $7 on spreading economic fears

Oil prices plunged Tuesday as worries about the nation’s economic health shot to the fore and OPEC warned that high pump prices are likely to erode global demand for crude.

HUZZAH!

Every time it rains, it rains twenties from heaven
Don’t you know each cloud contains twenties from heaven?
You’ll find your fortune’s fallin’ all over the town
Be sure that your umbrella is upside down