Bank Closing Information – August 20, 2010
These links contain useful information for the customers and vendors of these closed banks.
ShoreBank, Chicago, IL
Imperial Savings & Loan Association, Martinsville , VA
Independent National Bank, Ocala, FL
Community National Bank at Bartow, Bartow, FL
You will note that the one bank that bit the dust was Shore Bank in Chicago which has been propped up by Obama and all the bigwigs
in Washington. Please read this account on the demiseof Shorebank from Zero Hedge.
Failure Of Obama's Pet ShoreBank Costs Taxpayers $368 Million, Which Immediately Goes To Goldman Sachs Among Others
After a lengthy attempt to bail out his pet bank, ShoreBank Chicago, Illinois, which included several alleged armtwisting episodes by the administration, the president has finally let the bank die (with its assets valued at about 50% of face). Yet instead of going to hell, it was immediately resurrected with a bevy of new owners, among them Goldman, Morgan Stanley, and BofA, all of whom received nearly $400 million in taxpayer money for their "generosity" to keep the bank zombified even in teh afterlife.
Some details on the bank from the FDIC press release: "As of June 30, 2010, ShoreBank had approximately $2.16 billion in total assets and $1.54 billion in total deposits." In other words, the value of ShoreBank's assets was well below 70% of face, if the bank was undercapitalized at its current deposit level. Continuing: "The FDIC and Urban Partnership Bank entered into a loss-share transaction on $1.41 billion of ShoreBank's assets. Urban Partnership Bank will share in the losses on the asset pools covered under the loss-share agreement. The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector. The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $367.7 million." Netting the incremental cost of taxpayer DIF subsidies, means that the real value of assets was ($1.54 billion - $367.7 million)/$2.16 billion or 54% of face. And this is a bank that Obama wanted to keep alive at all costs? And just who is this "Urban Partnership Bank" that is receiving a taxpayer subsidy of $368 million? Why all the usual suspects of course: "The significant investors in Urban Partnership Bank are American Express Company, Bank of America, Citigroup, Ford Foundation, GE Capital Equity Investments, Inc., Harris Bank, the John D. and Catherine T. MacArthur Foundation, JPMorgan Chase & Co., Key Community Development Corp., Morgan Stanley, Northern Trust Corporation, PNC Investment Corp., State Farm Mutual Automobile, The Goldman Sachs Group, Inc., and Wells Fargo & Company." And so the old "out-of-one-taxpayer-pocket-and-into-another-Wall-Street-pocket" game continues, only this time it includes administration darling banks that should have been liquidated long ago.
By keeping ShoreBank artificially alive for far longer than it deserved, the assets amortized far more than they would have had it been taken into receivership by a non-conflicted bank, and thus the final cost to taxpayers would have been far less.
As it stands, Goldman and 11 other banks are receiving a multimillion dollar gift to conduct a portfolio liquidation run-off of ShoreBank's assets, while merely making sure existing deposits are serviced. At least we now know just how truly angry at Wall Street Obama is.
The funniest bit: this is how efficient the auction process was (from the press release):
FDIC received only one bid, which included an asset discount of $146 million and a 0.5 percent deposit premium. This saved the FDIC's insurance fund $250 million to $334 million over liquidation.
This also padded the top line of the abovementioned banks by $368 million off the bat, over and above whatever they make as they collect the proceeds from the portfolio run off.
In other words, Wall Street's core banks could have come up with any bid they wanted, and the FDIC would have had no choice but to fund the difference, because the alternative would be, gasp, so much scarier. Hm, where have we heard this before.
Full press release (link) and supplemental information (link) to this latest taxpayer gift to Wall Street's kleptocrats.
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| Silver COT Report - Futures | ||||||
| Large Speculators | Commercial | Total | ||||
| Long | Short | Spreading | Long | Short | Long | Short |
| 43,251 | 7,679 | 24,423 | 33,949 | 87,693 | 101,623 | 119,795 |
| 654 | 816 | 1,883 | 2,273 | 3,264 | 4,810 | 5,963 |
| Traders | ||||||
| 90 | 27 | 38 | 30 | 36 | 135 | 90 |
| | Small Speculators | | | | ||
| | Long | Short | Open Interest | | | |
| | 27,225 | 9,053 | 128,848 | | | |
| | 668 | -485 | 5,478 | |||
| Silver | |
| Withdrawals from Dealers Inventory | zero |
| Withdrawals from customer Inventory | n/a |
| Deposits to the dealer Inventory | n/a |
| Deposits to the customer Inventory | 356,584* |
| No of oz served (contracts= ) | 0 |
| No of oz to be served zero contracts) | xxxxx |
| Gold | |
| Withdrawals from Dealers Inventory | 62,691 |
| Withdrawals from customer Inventory | zerooz |
| Deposits to the dealer Inventory | n/a |
| Deposits to the customer Inventory | zero |
| No of oz served (contracts =175 | 17500 |
| No of oz to be served (contracts=842. | 87,700 0z |
COMEX Warehouse Stocks Aug 20, 2010
Thebulliondesk.com reports the Russian Central bank has revealed that it added 15.6 tonnes (500,000 ozs) to its reserves in July, compared to 200,000ozs in June. So far this year it has acquired 87.5 tonnes – the total in 2009 was 134 tonnes.
CEF closed at a premium to NAV of 7.8% and PHYS of 9.709% (Wednesday 9.2% and 9.898%).
U.S. Sounds Alarm at China's Military Buildup
By ADAM ENTOUS
WASHINGTON—The Pentagon voiced alarm over China's military buildup, saying it was expanding its advantage over Taiwan and investing heavily in ballistic and cruise missile capabilities that could one day pose a challenge to U.S. dominance in the western Pacific.
In its annual report to Congress on Chinese military capabilities, the Pentagon also cited China's advances in electronic warfare. The U.S. government has been the target of cyber intrusions the report says appear to have originated in China and aimed to steal military secrets. "These intrusions focused on exfiltrating information, some of which could be of strategic or military utility," the report said.
Though their two countries are increasingly interlinked economically, ties between the U.S. military and the People's Liberation Army of China have deteriorated since January, when the Obama administration notified Congress of a plan to sell Taiwan up to $6.4 billion in arms.
Defense Secretary Robert Gates has appealed to the Chinese to re-engage to reduce the risk of military miscommunications. But U.S. officials say they have seen few signs of a thaw.
Washington has long voiced alarm over China's military buildup opposite Taiwan. In this year's report, which was delivered months behind schedule, the Pentagon said China's military edge over Taiwan was continuing to "shift in the mainland's favor," the main argument used by the Obama administration in approving the arms deal.
It Looks Like U.S. Government Bonds Aren't Supported By China Anymore
Vincent Fernando, CFA | Aug. 20, 2010, 3:45 AM
Earlier this week we highlighted how cut its holdings of U.S. government bonds by the largest ever monthly amount in June. Expanding this thread, it should be noted that China's U.S. debt ownership has fallen to $843.7 billion in June from $938.3 billion in September 200,9 according to U.S. Treasury Department released Monday. This equates to nearly an 11% reduction by China.
Yet interestingly, the 10-year U.S. treasury yield has fallen over the same period, despite the meme that China's voracious U.S. debt buying supports keeps America's bond yields low. (Note that China's U.S. debt holdings encompasses more than just ten-year U.S. bonds, however. )
Jim Sinclair's Commentary
QE to Infinity
There is no other politically expedient solution as the can gets kicked down the road many more times.
Huh? No Inflation?
The mass of men lead lives of quiet desperation - Henry David Thoreau
This article from Bloomberg News this morning grabbed my eyeballs: "Dollar Dinners From ConAgra Threatened By Costs." Heck, I didn't even know there was such an item. It looks to be the food-stamp- family-equivalent of Ramen Noodles for college students (I did a baked potato with melted cheese and hot sauce for variety when I was at the U of Chicago grad school). At any rate, if you read through the article, it would appear that ConAgra can no longer keep the price point at a buck by cutting costs and will have to either raise the price somewhere between 20% and 50% or reduce the size and quality of the portion. Here's the article link: No Inflation?
So I decided to update some prices of select everyday commodities - the kinds of goods that the Government conveniently overlooks when calculating its PPI/CPI metrics. This should be eye-opening: measured over the last 12 months, prices of all these items have increased by: copper 37%, corn 35%, pork bellies (bacon anyone?) 350%, cotton 74% and heating oil 33%. The last one bummed me out because I hate a chilly home and winter is coming. Here's the data link if you want to check my numbers: LINK
Let's be clear about one thing. The true definition of inflation is not higher prices of assets, goods and services. Prices in the system that we observe and experience are nothing more than the manifestation of the underlying cause, which is currency devaluation from an increase in the money supply in excess of a country's real economic output. You can't look at this over a short period of time. Take a look at this long term graph of the basic money supply measure, MZM, which is now one of the popular money supply metrics now that the Fed has hidden M3, the real money supply metric used by every other Central Bank:
So ya, over the past few months, the money supply appears to have contracted - slightly (although, it can be argued that MZM under-reports the true money supply, see this LINK and this True Money Supply if you care to be enlightened). Just think about the cost of a cadillac or a college education in 1970 vs. now. An even better measure of the money devaluation that has occurred is that since roughly the mid-1980's, it takes a 2-income household to maintain the same standard of living that a 1-income household could maintain back in 1970. In fact, stripping away the benefits of technology, a lot of analysts would argue that the overall standard of living today with 2-income households is lower than with 1 in 1970. THAT's inflation/dollar devaluation at work. That miniscule drop in MZM that has deflationists chasing their own tail in what can be termed "intellectual sloppiness" is not going to undo the damage of over 50 years of money supply expansion.
One other point to which I would like to draw your attention. You can see from the above chart the increase in money supply has accelerated since 1995. In theory, that increase in money supply should have been backed by a concomitant increase in the GDP. Of course, this was not even close to being the case. What resulted was the series of paper asset bubbles, each one ultimately inflicting more damage on our system. (emerging market debt, internet/tech stocks, housing - housing is a "paper" bubble because it was fueled by the mortgage bubble - and now the Treasury bond bubble, which some would call ultimately the dollar bubble).
Another way to look at the devaluation of the dollar is to measure it against the price of gold. After all, up until FDR did his magic in 1933, anyone could exchange their dollar bills for gold or silver at the Fed "window." In 1971, when Nixon completely shuttered the gold window, thereby completely unleashing the dollar from its tether to to gold, the price of gold was $35. This chart shows what has happened since then:
As you can see, the price of gold has increased 3500%, or the dollar has lost 97% of its value since 1971. Again, try to think about the long term affects of this insidious, long term devaluation of the dollar. My parents bought the home I grew up in 1969 for about $45k. The last sale I heard about around the peak of Denver real estate was $450,000. Given the devaluation of the dollar vs. gold, they would have been much better off taking that $45,000 and buying gold and renting.
Let's tie this back to the opening comments about the surprisingly large 12 month price increases in basic commodities. I would argue that a significant portion of the money that the Fed/Treasury has printed and injected into the system since the credit crisis of 2008 has flowed into commodities. This would be a natural place, besides gold and silver (up 31% and 37% respectively over the last 12 months), for printed money to flow into, as they represent consumable, depletable goods which have value to everyone and could ulitmately be used in a barter system if/when the dollar is ultimately rejected as a medium of exchange. Are you better off holding gold, silver and select commodities or holding paper dollars backed by a Government that would be insolvent if it weren't for its ability to use the printing press? What about the folks who depend on those $1 meals from ConAgra? If I were one of them, I would rush out and buy as much of what is left for a $1 as would fit in my freezer before the price goes up or the content of the package is reduced.
Of course, then again, this is how the hyperinflationary price escalation got started in Weimar Germany and, recently, in Zimbabwe. No inflation? Better check your premises because the facts do not contradict reality. And the reality is that the deflationists are wrong. To conclude, gold is going to go MUCH higher as this drama unfolds.
Late edition. I just read this piece by Egon von Greyerz LINK - Good read I thought this chart was a perfect addition to what I presented above:
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