Something’s up with the FDIC. At this economic blog, a letter from a real estate developer:
I work in the construction business and something has been creeping to the forefront of my attention for the past few weeks and now it seems to be moving full steam ahead.
Banks are forcing developers/builders (especially smaller ones) to give up their properties (unsold homes and lots).
Banks say the reason is that the properties in question are no longer performing assets. I am sure there are some loans out there that are not performing and the owners are going under. I am equally sure that there are plenty of developers that are still selling homes – just not at the pace originally planned on the pro formas.
[...]
Down in the comments, we have this:
Your construction industry source raises an interesting issue. Since I work for a relative healthy bank, I don’t see that in my bank.
However, we have had federal auditors in the bank for the past couple weeks and I’ve noticed an interesting development. They are getting tougher on banks recognizing loans that they view as a problem and pushing for downgrades.
So, the very problem might be federal auditors are forcing banks to down grade loans to a doubtful status. In such cases as nonperforming real estate assets, this essentially forces the bank to do something more than wait and see if the developer can turn his investment and pay off the bank.
It forces banks to resolve the issue mostly by enforcing their rights on the collateral, which is why they are probably recommending the developer walk away, so they can their hands on the collateral sooner (maybe deeding it over to the bank) versus going through foreclosure and potential bankruptcy on behalf of the client, which can draw out the process for months.
[...]
So what does all of this mean? It means that the FDIC is turning the screws on the banks to get the non-performing loans off the books, even if it means trading something with a glimmer of hope of performing a ways down the road for collateral that has zip, zero, nada market.
Or does it? A large investor, with deep pockets (quite likely foreign) might be just waiting in the wings to snap up these distressed assets at fire-sale prices. Alternately, the banks with deep pockets may want to push the ones with less deep pockets over the edge (i.e. the ones choosing to receive TARP funds may want, with the connivance of the Feds, to push the ones who chose not to take TARP funds over).
In the long run, of course, a clearing of excess inventory is both a good and necessary thing. But pushing teetering banks over the edge, and taking marginally viable development businesses with them probably isn’t the best plan for the weak economy right now. But I can see no end of players, both inside and outside of the country, who would stand to gain from this.
Most transparent administration in history, my itching butt.
Update: Heh™:
Tags: FDIC
My guess is a fair amount of the foreign investors pray to the east.
Who could get a sweet deal on these ‘distressed” proerties?
Hmmm, Soros? Nah!
When the smoke clears, somebody’s going to be sitting on top of a lot of real estate, that (if we’re lucky) is going to be worth a lot of money in a few years. And there’s a fairly good chance the taxpayers will end up paying for it.
And that’s ignoring the little bank stock holders and the stock holders in these little development companies who are going to be wiped out.
Call it corporate euthanasia. Fits with the Obama philosophy perfectly. Survival of the strong (and connected).
@ RIX:
Actually I smell Buffet as much as Soros, but we’ll see.
It used to be that a robber baron could do this kind of stuff on his own. Nowadays, a robber baron needs the government on his team.
They know what’s coming and want to fatten up the prey by not leaving to much paper hanging out. letting the little guys eat the administrative recovery costs so the bigs won’t have to as they gorge on depreciated assests they can roll back into tranches for another round of selling back to the fed and selected sovreigns. A roundup of sorts to have hoof stock and fodder to back a new global banking structure.
Have y’all stockpiled necessities?
This is a little off topic , but I think relevant.
Obama made a big deal in his radio address this morning about meeting with those “evil” Insurance companies & not getting assurances,.
Isn’t it oddd that just before the Healthcare Summit & the Dems going nulear that WellPoint(Blue Cross of California) annonced a 39% rate increase?
How stupid! Maybe not, the Chairman of WellPoint is Leonard Shaffer,former official with the Carter Administration & big Obama supporter.
WellPoint has claims sites all over the country as Anthem.
If ObamaCare leads to a single payer, I wonder who might pay the claims?
CHARLOTTE, N.C. (AP) — Regulators on Friday shuttered banks in Florida, Illinois, Maryland and Utah, boosting to 26 the number of bank failures in the U.S. so far this year following the 140 brought down in 2009 by mounting loan defaults and the recession. http://finance.yahoo.com/news/Banks-shuttered-in-Fla-Ill-apf-2958911227.html?x=0&.v=5
@ MrPaulRevere:
I just found out yesterday that my bank went under, when I got a statement in the mail from Umpqua Bank, Roseburg, OR. Seriously. No announcement, no nothing, just my regular statement from Umpqua Bank.
snork wrote:
Yep – I don’t about where you are but the government has been using emminent domain to steal alot of properties around here and paying only about a third of what they’re worth.
I knew I should have done a cow fart thread…
ijn order to analyze this we need to know the answer ro this question: does the administration want to fix the economy or destroy and remake it?
then proceed…i think
snork wrote:
Hey – it’s a nice day out and people have cabin fever. Don’t take it personally!
.
Could be & it could be both of them.
Buffet has been a little critical of Obama lately & you have
to wonder if that is a smoke screeen.
coldwarrior wrote:
Pick B and go from there.
wrote:
I would say the latter. Otherwise you would have to conclude that Obama is stupid & how racist would that be?
@ vapig:
ok…banks asserting rights on collateral early does what to the market between developers and banks, between developers and buyers, and has what effect onthe real estate market as a whole?
Yeah, but if you did this on the drinking thread last night, we would all have been lost.
this makes no sense to me, my degree is in macroecon, not micro…this is a micro econ problem so i am thinking outloud and asking questions
@ snork:
Damn, that sucks. Of course, pointing out our perilous financial situation is nothing but extremist reich wing fear-mongering //
coldwarrior wrote:
it places excess product in the hands of the banks who are then forced to sell them at auction at a low price.
it reduces inventory that the developers have, but the above action lowers prices as a whole…
@ coldwarrior:
I’m not sure if intentions are as important as results…just sayin…
I wonder why we don’t hear the stock holders of the Insurance companies crying bloody murder???? How come the Federal Gov goes ballistic over bonuses to Exec of undeperforming companies but publically berates Insurance Companies that turn a profit? What kinda crap is that?
A Western proposal for fresh UN sanctions on Iran includes a call for restricting new Iranian banks abroad and urges “vigilance” against the Islamic Republic’s central bank, diplomats said on Friday.
Speaking on condition of anonymity, Western diplomats familiar with negotiations on the draft proposal – which Washington worked on with Britain, France and Germany and then shared with Russia and China – said they were no longer pushing for an official UN blacklisting of the central bank.
Hey it’s more important to demonize the execs of insurance companies- right?
@ Nevergiveup:
As I recall BHO first tried to demonize the doctors.
People didn’t like that so he switched to attacking Insurance Companies.
They operate on a cost plus basis, that is they predict their exposure , payment for medical services & add margin.
How does insurance reform effect medical charges?
It doesn’t, this is just to set up the segue for single payer.
coldwarrior wrote:
why would FDIC regulators force this action?
to either make up ground and get the banks balance sheets in order from the last bubble, or to protect the FDIC from massive claims on deposits if there is another real estate bubble that is going to burst and take out many banks with it…how many of these assets are commercial?
Beautiful day & the dog is demanding a walk.
He is a dog & I guess deserves one.
See ya later.
this article from wizbang came out at the same time
with a tad bit more info
Is the FDIC Preemtively Cracking Down on Potentially Problematic Loans and Could It Lead to Massive Bank Failures in the Near Term?
I do find it interesting, though, that the FDIC is cracking down on the loan practices of private lending institutions, which could lead to massive bank failures, when just two months ago the federal government removed completely Fannie Mae’s and Freddie Mac’s bailout ceiling for three years, which will allow them to issue loans to their hearts’ desire putting the American taxpayers on the hook for any bad loans.
So, guess where the American people will have to go to get a mortgage if they don’t meet the private banks’ increasingly tough loan qualification standards? The the US government, which is where they may have to go for student loans as well if the Senate passes the Student Aid and Fiscal Responsibility Act.
@ snork:
It’s Mussolini’s 3rd Way Corporate-Capitalism.
coldwarrior wrote:
Right. As I said, the market does need to clear the excess inventory. What I’m questioning here is the way they want to do it all at once. Bouncing the system like this all in one quarter isn’t a good idea, and will cause a lot more dislocation that if they had a rolling policy over the course of several years. I’m not questioning whether or not some pain will be necessary in the long run.
i am going to assume that the FDIC is culling the bad paper and getting banks ready ahead of another hit on the real estate side.
the weak banks, in this process, will be taken over by strong competitors or the FDIC if the weak arent take over targets.
i think someone in fedgov is looking into their crystal ball and seeing a double dip recession based on commercial real estate surplusses/bubble.
howd i do?
Believe me. No one in this administration has the slightest idea of what they are doing. Nada. So every agency is on their own. And if they justify some bizarre act by left wing rhetoric, the got Obama’s blessing.
Good afternoon, y’all.
snork wrote:
actually, it is a good idea to do it all in one quarter if further turmoil is seen in the 3rd adn 4th qtr of 2010…
clean house ahead of the double dip recession…depression…
@ coldwarrior:
That’s a he big question.
blogmocracy gets a hat tip from weaselzippers Report: Pro-Global Warming Scientists Planning Attacks on Skeptics With “an Outlandishly Aggressively Partisan Approach”…
@ rain of lead:
someone/funds/investors/foreign countries still has to buy the paper on these loans wherever they come from.
micro-econ gives me a headache…or was it the booze last night…
coldwarrior wrote:
Crashes it. Goodbye recovery.
Someone here one said that ObaMao’s economic policy was akin to wrack-a-mole. Everytime he sees some sort of recovery in the economy he WHACKS it!
{goddessoftheclassroom}
@ Speranza:
That’s great!
pat wrote:
these fdic guys are mostly apolitical.
vapig wrote:
it doesnt crash it so much as it places more assets in the hands of fedgov thru FDIC takeover of weak banks that are stuck with non-performing properties…then these properties have to be liquidated by fedgov…mugabe did this with the white owned farms, just sayin
coldwarrior wrote:
That is another possibility. But I think you may be giving them a little too much credit for prescience.
i think someone in DC is looking into the crytal ball and sees another train wreck coming, this one in commercial real estate, so the FDIC is trying to batten down any bad paper
Rodan wrote:
In this particular case, we’re talking about developer loans. The loans are commercial, but the collateral is residential.
But getting back to your other point about worse storm clouds on the horizon, when these commercial real estate loans start resetting, well, just think Iron Fist’s avatar.
@ Rodan:
{Rodan}
@ snork:
Maybe you can fix this:
snork wrote:
the economists at fedgov know that the 4th quarter gdp jump was bullshit. these cats are pretty bright. it isnt hard to assume that since the commercial real estate market hasnt collapsed yet, and was driven by the same speculation as the private real estate market, and has the same surplus properties, that it is the next shoe to drop.
@ Speranza:
snork wrote:
real estate loans are sold in bond bundles that often include commercial and private, this is supposed to spread the risk. so if the commercial portion of this market goes south, the effects are economy wide because all of the paper is tainted again
Hi, coldwarrior,
ready for a fight ? Noooooo, not with me
Please, do me a favor and beat him to a pulp (metaphorically speaking)
Golly, I sure do hope that that nice man Mr. Obama can buy those properties so they don’t go to waste. He’s got the answers, yes sir. Yep, the government needs to prevent Soros and Buffet and any other domestic or foreign potential buyer from taking advantage of the situation. The Dems should demonize the FDIC and the banks for being cold and heartless, and not caring about the public good. Then, after the public chastising on the Senate floor, the only course of action for the Dems will be to use TARP/Stimulus/Jobs-Bill/’Fill-in-the-blank’ money for the purpose at hand, viz., seizing property without drawing too much attention, even though those funds were not at all intended for such a purpose. You see, the evil banks don’t care about developers going through hard times. But now the banks are stuck with property, so, it’s only right that the government use tax-dollars to buy up that property for whatever purpose they deem contributes to social justice, green jobs, Stalinism, etc. It sure would be a shame if Obama let this crisis go to waste.
Guggi wrote:
OH MY GOD!!!
i didnt think that there could be a worse option than rahm…there is.
coldwarrior wrote:
Again though, forcing all of this book value off the books is going to require another cash infusion from the feds. I don’t see how in practical terms this actually helps anything.
@ Mr. P:
yep…we agree, see my 42.
its not as fleshed out as yours, tho
snork wrote:
are we assuming obamam wants to help or hurt the economy?
@ Guggi:
This is satire, right?
snork wrote:
I hope so
but it isn’t very funny, mainly stupid.
snork wrote:
this is the satire:
Guggi wrote:
m moore pains me to no end, he is the worst characature of a progressive, i cringe whenever i see him
@ Mr. P:
You should audition for a White House job!
goddessoftheclassroom wrote:
Good afternoon beautiful…
@ doriangrey:
{doriangrey}
coldwarrior wrote:
Me too, me too. He had been unbelievable popular in Europe but his popularity has been dwindling fast during the last years.
cloward-piven of the economic system?
snork wrote:
Has to be. Moore himself can’t possibly do 100 jumping jacks.
Maybe it’s the “weasel WE,” y’no, We with a capital Y, as in YOU.
Maybe only Obama does the 100 jumping jacks …. while Moore eats 100 flapjacks.
want to know how bad things really are?
http://www.talkleft.com/story/2009/4/7/111939/1728
Guggi wrote:
i suppose one can be very popular and make lots of cash if just 30% of the people pay for the product…
@ goddessoftheclassroom:
GOTC, I haven’t caught you here since the musical went on. How did it go?
wolfie wrote:
heart attack, right now.
wolfie wrote:
If Moore tried to do 100 jumping jacks he’d have a massive heart attack, hell somebody for gods sake take him up on that offer…
@ wolfie:
{wolfie}
Thee kids were AWESOME last night! Tonight is our final performance. I’m very proud o them.
http://www.talkleft.com/story/2009/4/7/111939/1728
The FDIC itself may not be long for this world. It is insuring mortgage bonds. One of the poorest decisions ever made and contrary to its purpose of insuring household savings. Move your money to a Credit Union.
@ coldwarrior:
@ doriangrey:
GMTA!
bbl…ma jolie fille is waking up from her nap…
AND!!! for the first time in MONTHS, there are clear skies tonight and only a little light pollution from the moon…i get to break out the telescopes tonight!!!!!11TY!!!!!
wolfie wrote:
indeed, well diagnosed dr dorian!
bbl
wolfie wrote:
Can I just eat my waffle?
snork wrote:
Not if Micheal Moore gets to it first…
@ goddessoftheclassroom:
Fantastic! Wish I could see the show myself!
We attend 3 or 4 high school productions a year, BTW. This is a great way for families to see live theater, no matter how small the town you live in and no matter how tight your budget.
snork wrote:
Yeah. A faaaaaaaar more likely scenario than the 100 Obama jumping jacks, I must admit!
coldwarrior wrote:
It still crashes it because no one will have trust in the system any longer, effectively closing it down.
@ goddessoftheclassroom:
{goddessoftheclassroom}
Good Afternoon, Teacher!
@ Mr. P:
What’s up homie!
@ Mr. P:
Sounds like what Hugo Chavez did in Venezuela.
Snork, have you seen this site? It’s a fascinating resource about the ‘green’ movement: http://www.undueinfluence.com/
@ wolfie:
We got something majorly cool coming up in a couple weeks. The local island choir is joining several others and the Seattle Symphony to put on Mozart’s Requiem. I kinda wish I didn’t have this high-frequency hearing loss.
@ wolfie:
You are wonderful! No Broadway star could appreciate an enthusiastic audience more than a cast of junior or senior high kids!
@ Iron Fist:
{Iron Fist}
vapig wrote:
When that happens, we start trading other currencies. The Euro seems to be having it’s troubles. Renminbi, maybe?
Ammo also makes a good currency. Reasonably compact, worth more as things go to hell…
@ snork:
That reminds me, I could use some more 5.56 ammo…
@ MrPaulRevere:
Can’t say that I have. Looks good.
……or……..the banks seize the properties, the Fed’s nationalize the banks (the will of Soros) and the Fed’s own the country……
just because I’m paranoid does not make the Government innocent……
@ IslandLibertarian:
With this bunch in charge who can blame you!
@ lobo91:
You would probably like (well, want to read) this. Canadian gun laws are screwed. Even their courts admit that, but they’ll still send you to jail for violating them. I am really hoping McDonald comes down good. It looks like P&I is out, but they could still have a strong incorperation with intermediate or strict scrutiny (either one will throw out most gun laws).
One good thing about the wife leaving: More storage space for ammo.
Have a great evening, y’all!
Large investor groups/funds have been put together all over the country just for this deal herein disscussed.
The banks now will be able to use the remaining “bail out money”,
for shopping centers/land dev. deals/strip centers/D.R. Hortons
left behind lots he let go leaving the option money behind/hotels/and other large deal like truck warehouse’s ect.
Your tax money will be used as the “new equity” aka the difference from the sale price and the loan amount,,, you mr and ms taxpayer are putting your skin in the game…..
The banks and many investors have been waiting on this, two buds of mine who made lots of money off the RTC deals have been sitting on the cash from then to now and have started up one with others, they
have $500,000,000.00 ready to use to buy deals when the banks write them down at least to 60% and in some areas like Las Vegas they will have to be 40% or lower.
There will be lots of money made, and granddads banks and money will be in the deals buying. And no the trust says no distribution of the profits it will all have to be put back in the buss. and make it bigger and make more jobs. He did know how to piss of sorry ass lazy decendants and loon commie’s like these f’n no good Obama Demoncraps.
Tough old bird, but very, very smart and is still ruling from the grave.
I’m going to hazard out a guess that the FDIC might be trying to insulate the banks because of the impending ARM/Option-A resets that are incoming hard and fast, and there’s no way they can delay the resets again. If that’s the case then march/april are going to be a very bumpy months with the worst to follow after. Easily looking at 30-50b/per month if not more in mortgages up for resets to creeping rates, which people won’t be able to pay.
This doesn’t help that there continues to be sector bleed, and the unemployment continues to rise.