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WAMU


Hugh Conway

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Um this seems rather ominous.

 

Federal Bank Insurance Fund Dwindling

 

By MARCY GORDON, AP Business Writer Tue Sep 16, 7:49 PM ET

 

WASHINGTON - Banks are not the only ones struggling in the growing financial crisis. The fund established to insure their deposits is also feeling the pinch, and the taxpayer may be the lender of last resort.

 

The Federal Deposit Insurance Corp., whose insurance fund has slipped below the minimum target level set by Congress, could be forced to tap tax dollars through a Treasury Department loan if Washington Mutual Inc., the nation's largest thrift, or another struggling rival fails, economists and industry analysts said Tuesday.

 

Treasury has already come to the rescue of several corporate victims of the housing and credit crunches. The government took over mortgage finance companies Fannie Mae and Freddie Mac, and helped finance the sale of investment bank Bear Stearns to J.P. Morgan Chase & Co.

 

Eleven federally insured banks and thrifts have failed this year, including Pasadena, Calif.-based IndyMac Bank, by far the largest shut down by regulators.

 

Additional failures of large banks or savings and loans companies seem likely, and that could overwhelm the FDIC's insurance fund, said Brian Bethune, U.S. economist at consulting firm Global Insight.

 

"We've got a ... retail bank run forming in this country," said Christopher Whalen, senior vice president and managing director of Institutional Risk Analytics.

 

Treasury Secretary Henry Paulson said Monday that the country's commercial banking system "is safe and sound" and that "the American people can be very, very confident about their accounts in our banking system." FDIC officials also have said 98 percent of U.S. banks still meet regulators' standards for adequate capital.

 

But fear is growing on Main Street as well as Wall Street about the likelihood of multiple bank failures and the strain that would put on the FDIC.

 

The fund, which is marking its 75th anniversary this year with a "Face Your Finances" campaign, is at $45.2 billion — the lowest level since 2003. At the same time, the number of troubled banks is at a five-year high.

 

That would be like the shit hitting the fan, right?

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The devil is in the details, people. What makes you think Wamu is anything like AIG, Lehmann, or Fannie / Freddie? What do any of you know about Wamu's balance sheet? Is Wamu on the hook for tons of mortgage backed securities, highly levered instruments? Oh wait, no, actually. Just a lot of mortgages, some of them risky. Are they posting big losses? Yes. Are they in a position where they could fail at any moment? No. THey're simply not exposed to the same kinds of financial instruments that could bring such an event about.

 

It's not your fault - the media is stupid as well. The exposures that AIG, Lehmann, and Fannie / Freddie had that brought them to the brink with a quickness are not the same exposures Wamu has. Period. Even after downgrading Wamu bonds to junk status, S&P and Moody's both acknowledged that Wamu is in good liquidity shape and well above the required capitalization levels. S&P went as far as to say that Wamu has enough cash on hand to pay all of its expenses through at least 2010.

 

Wamu is heavily exposed to the housing market, but not through shit tons of highly levered instruments that the investment banks and mortage insurers are. If the housing market tanks worse, it's gonna hurt Wamu even more. Is it gonna drive them outta business? Maybe, possibly, in the future. But to think Wamu is gonna tank in the next few months just demonstrates illiteracy about the financial industry.

 

But, alas, most people are dumbshits. Including many traders on Wall Street. Right now all investment analysts are coalescing around a negative view of Wamu. Why? If anyone says "hey, this isn't as bad as the rest of you think", then they're on the hook for explaining why. There's a lot of groupthink out there. It is also handy for analysts who happening to be shorting the fuck out of financials. Most of the negative outlook articles on Wamu are quoting one analyst - Dick Bove. He happens to take a particularly harsh view of the financials. He's also got a great PR agent who gets him interviews with tons of papers. It is far preferable for everyone on the street to coalesce around the same view to avoid being asked to defend their ideas. The analyst reports aren't even reporting model results - they're looking more and more like ad hoc speculation. How do I know? I read those reports (it is part of my job).

 

I'm not saying that Wamu isn't having a hard time. They're having a really hard time. Just not enough to justify junk bond ratings and $2/share stock.

 

So go ahead and assume that all women can't drive, all black men want to rob you, all hispanics will stab you, all asians are hard working and good at math, and that all financial isntitutions are the same and are gonna tank. Stereotyping sure helps us avoid all that critical thinking and understanding of facts.

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So go ahead and assume that all women can't drive, all black men want to rob you, all hispanics will stab you, all asians are hard working and good at math, and that all financial isntitutions are the same and are gonna tank. Stereotyping sure helps us avoid all that critical thinking and understanding of facts.

 

How much money do you have deposited in WAMU accounts? While the risk of WAMU failing may be insigificant, avoiding such risk is pretty simple. The transition had no direct economic downside for me, but a significant potential upside.

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Fair enough; it isn't terribly costly to transfer ones' accounts these days.

 

I believe everyone should make careful, measured, thoughtful decisions regarding their money. Just seems to me that proclaiming the end is nigh and celebrating all the accompanying schaudenfreude (sp?) is pretty capricious in light of, you know, facts and numbers and stuff.

 

And, no, I am not sucking up Wamu stock right now. I'm not saying everyone should get into the company. I'm just saying it is oversimplifying to compare their situation with the others.

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How much money do you have deposited in WAMU accounts? While the risk of WAMU failing may be insigificant, avoiding such risk is pretty simple. The transition had no direct economic downside for me, but a significant potential upside.

 

Exactly.

 

People said Lehmann brothers was next when BSC failed. Guess what? They were. People said AIG had problems. Guess what? They did.

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