Important Notes On Friday’s Bank Failures Posted: May 03 2010 By: Jim Sinclair Post Edited: May 3, 2010 at 12:26 am
Filed under: General Editorial
My Dear Friends,
Please read this as you must understand the serious nature of what is taking place.
Regards, Jim

Dear Jim,
The following are some additional thoughts on the seven bank failures announced by the FDIC on Friday, April 30, 2010.
1. Perspective on Losses
This week’s losses were extremely serious, a fact belied by the virtual absence of press coverage. They were the largest in any single week since the failure of IndyMac Bank on July 11, 2008.
IndyMac had assets of about $32 billion and deposits of $19 billion. Its failure cost the FDIC an estimated $8 billion.
The seven banks that failed this week had combined assets of about $25.8 billion and deposits of $19.6 billion. These failures cost the FDIC an estimated $7.33 billion.
Prior to this week, the FDIC’s estimated losses from 57 bank failures in 2010 stood at about $8.6 billion. This week’s failures practically doubled that figure, to $15.93 billion.
This information cannot be reconciled with the MOPE that states the banking sector has recovered. To the contrary, these failures speak of deeply-rooted problems in the banking sector that appear to be getting worse over time.
2. Status of the Deposit Insurance Fund
According to an AP article posted Friday (cited below), the FDIC’s deposit insurance fund “fell into the red last year, hitting a $20.9 billion deficit as of [Dec. 31, 2009].” With this year’s losses, the fund’s deficit has grown to at least $36.8 billion. In addition, the FDIC has a huge exposure for worse-than-expected losses on some $165 billion of assets taken over by acquiring banks.
That pretty much wipes out the $45 billion the FDIC announced it was going to raise by requiring banks to pre-pay premiums for the period, 2010 through 2012. Obligations of the FDIC will soon become obligations of the U.S. taxpayer, adding billions of dollars each year to already out-of-control federal deficits.
3. More FASB-Blessed Fantasy Valuations
Each of the FDIC’s press releases provides vital information about the true market value of the failed banks’ assets versus the values assigned them by bank management. This gives some insight into the extent of over-valuations across the banking sector in the wake of the Financial Accounting Standards Board (“FASB”) having suspended fair value accounting rules last year.
The FASB’s capitulation has given bank management far too much leeway to value assets at levels far beyond what they could fetch in the open market, resulting in banks’ balance sheets becoming increasingly less reliable indicators of their true financial health.
Looking at the five largest failures this week:
Westernbank Puerto Rico of Mayaguez, Puerto Rico, had stated assets of $11.94 billion and deposits of $8.62 billion. On paper, it was an extremely healthy bank; yet the FDIC’s loss estimate for its closure is $3.31 billion. Based on that estimate, the real market value of its assets is only $5.31 billion. Bank management had over-valued these assets by 125%.
R-G Premier Bank of Puerto Rico of Hato Rey, Puerto Rico, had stated assets of $5.92 billion and deposits of $4.25 billion. The FDIC’s loss estimate for its closure is $1.23 billion. Based on that estimate, the real market value of its assets is $3.02 billion, and had been over-valued by 96%.
Frontier Bank of Everett, WA, had stated assets of $3.5 billion and deposits of $3.13 billion. Its loss estimate is $1.37 billion. Based on that estimate, its assets are really worth $1.76 billion, and had been over-valued by 99%.
Eurobank of San Juan, Puerto Rico had stated assets of $2.56 billion and deposits of $1.97 billion. Its loss estimate is $744 million. Based on that estimate, its assets are really worth $1.226 billion, and had been over-valued by 109%.
CF Bankcorp of Port Huron, MI, had stated assets of $1.65 billion and deposits of $1.43 billion. Its loss estimate is $615 million. Based on that estimate, its assets are really worth $815 million, and had been over-valued by 102%.
Here again, these bank failures are being reported free of any allegations of fraud or even negligence on the part of bank management. Absent any such allegations, it stands to reason that these over-valuations, ranging from 96% to 125%, are considered to be in line with reasonable accounting practices sanctioned by the FASB at the time it suspended fair value requirements.
4. AP Article Covering Failures
Linked below is an AP article that provided some better-than-average coverage of this week’s failures and the status of the FDIC’s finances. Interestingly, the article was originally published at about 8:15 pm EST on Friday, April 30, 2010, but had to be re-posted at 10:00 pm EST following the FDIC’s release of additional information late in the evening.
Focusing on the three banks that failed in Puerto Rico, the AP noted they “together held more than one-fifth of the total bank assets on the U.S. Caribbean territory.”
Here’s some food for thought. Puerto Rico’s GDP is about $76 billion, about 21% of the size of Greece’s ($356 billion). What is more relevant to the concerns of U.S. citizens, the fact that Greece is experiencing budget problems, or that FDIC-insured banks controlling one-fifth of the value of the assets on Puerto Rico failed in one week?
What possible explanation could there be for the fact that the Greek “crisis” has been dominating headlines in the U.S. press for months, while matters such as these horrendous bank failures and the impending failures of the majority of U.S. States barely get a mention?
Can you say, Manipulation of Perspective Economics?
Respectfully yours, CIGA Richard B.
Banks closed in Puerto Rico, Mich., Mo., Wash. Regulators shut down 7 banks in Puerto Rico, Mo., Mich., Wash., brings total to 64 this year Marcy Gordon, AP Business Writer, On Friday, April 30, 2010, 10:00 pm
WASHINGTON (AP) – Regulators on Friday shut down shut down three banks in Puerto Rico, two in Missouri, and one each in Michigan and Washington, bringing the number of U.S. bank failures this year to 64.
The Federal Deposit Insurance Corp. took over the banks: Westernbank Puerto Rico, based in Mayaguez, with about $11.9 billion in assets; R-G Premier Bank of Puerto Rico, based in Hato Rey, with around $5.9 billion in assets; and San Juan-based Eurobank, with $2.5 billion in assets.
The FDIC also seized CF Bancorp, based in Port Huron, Mich., with about $1.6 billion in assets; Champion Bank, of Creve Coeur, Mo., with $187.3 million in assets; BC National Banks, of Butler, Mo., with $67.2 million in assets; and Frontier Bank, based in Everett, Wash., with $3.5 billion in assets.
Banco Popular de Puerto Rico agreed to acquire Westernbank’s deposits and about $9.4 billion of its assets. The FDIC will keep the remainder for eventual sale. Scotiabank de Puerto Rico agreed to buy all the assets and deposits of R-G Premier Bank. And Oriental Bank and Trust is acquiring all the assets and deposits of Eurobank. The three healthier acquiring banks are based in San Juan, the Puerto Rican capital.
The three failed banks together held more than one-fifth of the total bank assets on the U.S. Caribbean territory. They had struggled to stay afloat during Puerto Rico’s grinding, four-year recession.
It was Puerto Rico’s largest bank consolidation in more than two decades as well as one of the FDIC’s biggest resolutions of failed banks in the financial crisis that struck in fall 2008.
More…
Now do you understand why I keep saying they will print money till we run out of trees?
They have no choice but to print, or the whole ponzi scheme falls apart...





All Western states, be that New York State or Greece, will be bailed out.
QE to infinity is omnipresent in the West.


Eurozone OKs $145 billion bailout for Greece
Loans, with aid of International Monetary Fund, spread across three years By Elena Becatoros and Raf Casert
BRUSSELS – Finance ministers from the 16 countries that use the euro agreed Sunday to rescue Greece with €110 billion in loans over three years to keep it from defaulting on its debts.
The loan package with the International Monetary Fund is also aimed at keeping Greece’s debt crisis from spreading to other financially weak countries such as Spain and Portugal — just as Europe is struggling out of a painful recession.
In return, Greece had to agree to an austerity program that will impose painful spending cuts and tax increases on its people for years to come.
The plan will still need approval by some countries’ parliaments. But the head of the eurogroup, Luxembourg’s Jean-Claude Juncker, said Greece will get the first funds by May 19, when Athens has €8.5 billion worth of a 10-year bond maturing.
Fears that the money might be held up by objections in powerful eurozone member Germany — where the Greek bailout is not popular — sent shudders through bond and stock markets last week.
Jim Sinclair
More…





OK FOLKS, READ THIS IT"S VERY IMPORTANT. IF YOU THINK EVERYTHING IS GETTING BETTER THINK AGAIN... Do not listen to the lies and propaganda from the mainstream media...
Next you will learn how the Ponzi scheme works.


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Jim’s Mailbox Posted: May 03 2010 By: Jim Sinclair Post Edited: May 3, 2010 at 12:21 pm
Filed under: Jim's Mailbox
Dear Jim,
The following two articles provide a beautiful illustration of quantitative easing in action. They also reveal the shaky, deceptive foundation of our present, so-called economic recovery.
To begin with, the Bloomberg article, “Banks Buying Treasuries Help Keep Borrowing Rates Low," demonstrates how the U.S. government is able to create billions of dollars out of whole cloth.

The Federal Reserve creates as many billions of dollars as it wants with the stroke of a key. Next, it loans those billions of dollars to U.S. Banks at a rate of close to zero percent interest. U.S. Banks then take the billions of dollars they have borrowed from the Federal Reserve and purchase U.S. Treasuries, earning a margin of three percent or more interest.
Banks understandably prefer earning money this way to making actual loans to U.S. businesses and individuals. As noted in the Bloomberg article, “The risk of owning Treasures is lower than creating loans.”
This is an out-and-out monetization of U.S. debt. The government could literally do this to infinity. The only thing holding it back would be coming up with the interest payments; however, those, too, could be monetized to infinity.
It also amounts to an enormous subsidy of the banking industry that was never authorized by the legislature. In exchange for nothing more than executing a couple of keystrokes, U.S. banks earn a margin of three percent or more interest on however much money the U.S. Treasury and the Federal Reserve see fit to create.
Next, as explained in the Wall Street Journal article, “U.S. Role in Mortgage Market Grows Even Larger,” we see that the U.S. government has been forced to take over the lending operations that U.S. banks now find undesirable. As a result, we learn that the U.S. government’s “share” of the U.S. mortgage market has grown to 96.5%.
With apologies to the Wall Street Journal’s headline, if a single player has 96.5% of the home loan market, it does not have a “role” in the home mortgage market, it is the home mortgage market. This ridiculous shell game is the single factor propping up home prices in this country.
To summarize: the U.S. government creates money out of thin air, pays banks to hold onto that money and takes over the risk-based lending functions the banks were set up to perform in the first place. It’s a scheme only a bureaucrat could conceive of, and only a deaf, dumb and blind public could allow.

Banks Buying Treasuries Help Keep Borrowing Rates Low (Update 1) By Cordell Eddings
May 3 (Bloomberg) — Bank are increasing purchases of U.S. government securities to pump up profits while lending to businesses languishes near the lowest levels since credit markets started to freeze almost three years ago.
Holdings of Treasuries rose each of the past five weeks, an increase of $63.2 billion to $1.5 trillion, according to Federal Reserve data. At the same time, commercial and industrial loans climbed less than 1 percent to $1.27 trillion and are down 23 percent from the record high level in October 2008.
Banks, facing increased regulation after posting $1.78 trillion of write-downs and losses since the start of 2007, are taking advantage of the record gap between their borrowing costs and yields on U.S. debt instead of lending, according to data compiled by Bloomberg. Bank demand for Treasuries is helping cap yields as President Barack Obama sells record amounts of bonds to finance a budget deficit that exceeds $1 trillion.
“The risk of owning Treasures is lower than creating loans,” said Anthony Crescenzi, market strategist and money manager at Newport Beach, California-based Pacific Investment Management Co., the world’s largest bond-fund manager. “There is no clarity on what the capital climates will be domestically or on a global scale with regulation coming down the pipes, which means banks will be banking their money in safer assets.”
More…

U.S. Role in Mortgage Market Grows Even Larger By Nick Timiraos, The Wall Street Journal, April 30, 2010, 7:46 P.M. ET
The U.S. government’s massive share of the nation’s mortgage market grew even larger during the first quarter.
Government-related entities backed 96.5% of all home loans during the first quarter, up from 90% in 2009, according to Inside Mortgage Finance. The increase was driven by a jump in the share of loans backed by Fannie Mae and Freddie Mac, the government-owned housing-finance giants.
By providing a steady source of liquidity to the mortgage market, the government has helped housing markets to stabilize. However, "Fannie and Freddie have to get smaller and less relevant in order to revamp them, and instead, every day they’re getting bigger and bigger and bigger," said Paul Bossidy, chief executive of Clayton Holdings LLC, a mortgage analytics firm.
More…

If after reading this, you think everything is getting better... then forget about reading this website...because you are your own worst nightmare...