Its only Thursday and Wamu just failed. This is easily the largest bank failure in US history.
FDIC Link
$310 Billion in deposits! Absolutely dwarfing Continental Illinois Corp.($40 Billion, estimated $83 Billion in today's dollars) and Indymac ($32 Billion)(the two previous largest failures).
So JP Morgan gains a significant West Coast presence. How many jobs will be lost out west?
I'm glad I haven't done my September real estate emotions yet... this could be sending the market into panic. I'm not sure if its there yet... In some areas, oh yea... But Nationally?
Calculatedrisk.blogspot.com is doing the best coverage.
4X the size of the previous largest bank failure! There is an electronic bank run going on right now. If people withdrawl their cash and buy gold (and 'bury it in the back yard') there is absolutely nothing the government can do from this being the worst recession of our lifetime. This is going to kill the velocity of money. How many airlines will fail? How many states will see middle class flight as they cut services to the people who actually earn money?
Oh... I'm already predicting that. (Unless you survived the Great Depression...)
Edit: Wamu *never* made the Fed's troubled bank list! (If it did, it was on the same day as its failure.) Statistically, it did such a fine job of cooking its books, it wasn't even on the 'troubled bank' list. Oh, most bloggers were wondering why it wasn't failing...
Edit2: Notice the ads are now stating 'times are tough' (Home Depot), 'Saving the planet from high gas prices' (Mitsubishi), and otherwise are selling to people trying to save money?
WSJ says drinking spending less
Top executives at Pernod Ricard SA said Thursday that Americans are cutting back on purchases of its liquor products in bars and some are seeking cheaper brands when buying alcohol at stores, in a sign of a worsening economy.
"There's no question there are some negative numbers" in the bar and restaurant segment, Paul Duffy, chief executive of the French drinks titan's U.S. arm, said at a New York news briefing.
Sales at grocery stores and other retail outlets continue to grow at healthy rates, but there has been "some tick up in trading down" to less-expensive brands, Mr. Duffy said. In an interview, he added, "We wouldn't characterize [the shifts] as a crisis."
Much more in the article worth reading.
As Scoobie says: Rho Rho
Edit #2: Link on 32 banks about to fail
Got Popcorn?
Neil
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7 comments:
"I'm glad I haven't done my September real estate emotions yet... this could be sending the market into panic. I'm not sure if its there yet... In some areas, oh yea... But Nationally?"
Lets just say this. If you think there needs to be some trigger -- some sort of shared public event to put the Nation into its next emotional stage, could there ever be anything more shared than the last 2 weeks?
Its your blog, and I understand the need to re-assess a few months from now to see if the housing data matches up, but if you think this last 2 weeks hasnt done somehting to the national psyche - you are nuts my man!!!
Bank runs are in vogue now...I wonder what main street's response will be if the bankers get our tax money...maybe a viral bank run will show them.
The anon:
The last two weeks have done something to the national psyche. But the next emotion call isn't minor. I think we're very close. But recall, I'm in California. Indymac and Wamu have huge presences here. Nuts? No. A desire to be precise? Yes. ;)
I'm seeing evidence of electronic bank runs. One no longer needs to show up in person. Thus... we probably are in panic. But I wish to be accurate.
Got Popcorn?
Neil
"I'm seeing evidence of electronic bank runs. One no longer needs to show up in person. Thus... we probably are in panic. But I wish to be accurate."
Fair enough. I guess what im saying is, if you are looking for a bank failure to put the whole US over into the next emotion, I dont know who that would be. BOA is heavy out here, but I dont recall their presence is heavy out west. Is there any bank that has a broad enough "visible" presence to put the rest of the country into the next stage?
I dont know, but if there isnt such a bank - the best you are going to get is the current convusions we are having and all the news they are generating.
The anon,
Its not just bank failures... It probably won't be one bank.
Actually, I see the incident happening shortly after the start of panic being the clearing of the 401k's. American's have *far* more money they care about in 401k's than CD's.
But my emotions are for real estate. Real estate is dependent upon the rest of the economy... something direly forgotten during the bubble.
And if I'm off by a few weeks? The important part, for me, is the quantify the 'buying window.' A window that opens in 2010 at the earliest. Credit markets will make that a pretty global window.
At this point, the European bank failures might play a greater role than the US banks. Fortis would require multiples of the Belgian GNP to save. Since its unlikely the EU would jump in... that will have... interesting effects.
Got Popcorn?
Neil
This is the hangover we are getting as a nation after a few years of indiscriminate drinking and partying. I think we are in for tough times but in the end that is what will make this country tougher and better in the end. For years we have been living beyond our means, a culture of borrowing that trickled down from the top. So logic indicates we should learn our lesson and take it as it comes.
I believe the $700 billion bailout will just prolong the recession. People who can't afford houses shouldn't be in them, by keeping these people paying mortgages they can barely afford (with bailout money) we are just prolonging the pain and penalizing those that were disciplined in waiting for common sense to come back to the markets.
Politicians tries to scare us with recession, etc. But the truth is that we need one. Maybe then people will stop buying crap they don't need with money they don't have. This mess was created by people who had no common sense in both the banks and the general population in general. Anyone who bought a house thinking it was going up 20% a year forever is stupid/uneducated and should not have been buying anything in the first place.
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