Tag: Economic Woes

Banks Are Failing

Federal regulators shut down two national banks late Friday in the latest chapter of the credit crisis, and the Federal Deposit Insurance Corp. successfully protected all depositors by selling the accounts to Mutual of Omaha Bank.

First National Bank of Nevada had $3.4 billion in assets and $3.0 billion of deposits, making it a relatively large failure by historical standards — but much smaller than the $32 billion of assets that IndyMac Bank of Pasadena, Calif., had when it failed earlier this month. First National Bank of Nevada had 25 branches, some of which came from its June 30 merger with the First National Bank of Arizona.

First National Bank of Nevada had spent months trying to dig out of trouble. James Claffee, who recently joined the company as president and chief executive officer, told the Arizona Republic less than two weeks ago that he was hopeful the bank would be able to raise capital.

The number of failed banks this year has already surpassed the total from 2004 through 2007, but it is nowhere near the pace set during the savings and loan crisis in the 1980s and early 1990s, when several thousand banks failed.

Regulators have been preparing for more bank failures by adding staff, bringing on contractors, and intensifying training. The FDIC, which was created in 1933, has made a concerted push in recent months to educate bank customers about the deposit insurance rules. The FDIC insures accounts up to $100,000 per depositor, or $250,000 for some qualified retirement accounts.

Does This Look like A Strong Economy?

The economy showed the depth of its twin problems on Tuesday, slow growth and rising inflation, as the nation wrestled with a teetering financial system, a slumping dollar and rising prices for food and fuel.

The Labor Department reported that soaring costs for gasoline and food pushed inflation at the wholesale level up by a bigger-than-expected 1.8 percent in June, leaving inflation rising over the past year at the fastest pace in more than a quarter-century.

Over the past 12 months, wholesale prices are up 9.2 percent, the largest year-over-year surge since June 1981, another period when soaring energy costs were giving the country inflation pains.

Core inflation, which excludes energy and food, was better behaved in June, rising by just 0.2 percent, slightly lower than expectations.

A separate report from the Commerce Department showed that all the economy’s problems were weighing on the consumer. Retail sales edged up by a tiny 0.1 percent in June, weaker than had been expected, as consumer spending was held back by a sharp plunge in sales at auto dealerships.

The weak retail sales performance was a bad sign for future growth, given that it came in a month when the government was pumping out another $28 billion in economic stimulus payments, bringing the total payments to $78 billion at the end of June. Analysts said even this massive infusion of government support was not enough to overcome all the problems weighing on consumers.

If you listened to the speech today by the Prez then you should be thoroughly confused.  Who to believe?  The stats or a person trying to play a political card?

The Fed Bails Out Wall Street

Federal Reserve Board Chairman Ben Bernanke and Treasury Secretary Henry Paulson outlined the ruthless class policy being carried out to place the burden for the financial and housing crisis on the backs of working people.

Bernanke indicated that the Fed would extend its policy of offering unlimited loans to major Wall Street investment banks. The provision of Fed funds to non-commercial banks and brokerage firms, a departure from the Fed’s legal mandate without precedent since the Great Depression, is part of a policy of bailing out the banking system to the tune of hundreds of billions of dollars. The Fed announced its loan program for investment banks last March when it dispensed $29 billion to JPMorgan Chase as part of a rescue operation to prevent the collapse of Bear Stearns.

In other words, low-income home owners who were lured into high-interest mortgages by predatory mortgage companies and banks are getting their just deserts! Of course, the Wall Street CEOs and big investors who made billions of dollars by speculating on these loans, creating a vast edifice of fictitious capital that was bound to collapse, are not to be held accountable for any “untenable financial decisions.” On the contrary, they are to be subsidized with hundreds of billions of dollars of credit, ultimately to be paid for by public funds.

Bernanke made clear that his call for an extension of loans to big investment banks is part of a more comprehensive proposal to systemize and regularize federal subsidies and bailouts for troubled banking giants. Particularly significant was the following remark: “Because the resolution of a failing securities firm might have fiscal implications, it would be appropriate for the Treasury to take a leading role in any such process, in consultation with the firm’s regulator and other authorities.” The implication is that the US Treasury should be ready to fund bank bail-outs with whatever taxpayer funds are necessary.

This is unacceptable…..my business when in financial trouble was not helped in any way for the bad judgment that I was making….my point is these corporations made terrible decisions and should not be rewarded for doing so.

GM’s Woes Continue

General Motors Corp. may turn to salaried job cuts, as well as more extreme measures such as shelving a brand or borrowing from the UAW, to stanch North American losses in this year’s sinking auto industry, according to reports. The company isn’t commenting.

After falling to a half-century low last week, GM shares jumped Monday morning on a Wall Street Journal report about the possibility of job cuts and brand sales. But the shares fell back to a modest gain when spokespeople declined to comment on the job cuts and denied that any brand other than Hummer was under strategic review.

GM Chairman and CEO Rick Wagoner announced June 3 that the company is considering “all options” for the brand.

But GM has many options.

The automaker may be able to raise $5 billion to $6 billion from banks and another $6 billion by persuading the UAW to let it borrow some money pledged to a retiree health care fund, Brian Johnson, a New York-based Lehman Brothers Inc. analyst, said Monday.

NOW, that last statement is the one I zeroed in on…the Corporation will go to the Union, it has spent so much time trying to destroy, and ask for money, a loan.  Here is the chance to get even.  But will they?