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Banking Collapse? What Banking Collapse?
The solvency scare scam

Vernon Hill ( about me )
Posted 09/26/2008
bankstocks.com
vhill@bankstocks.com

In Washington all week, politicians have been running around waving their arms, warning that the banking system is about to collapse, credit is freezing up, and that Mom-and-Pop businesses across the country are at risk.

What banking system are they talking about, exactly? The 8,000 U.S. commercial banks that take in federally insured deposits and provide dependable financing to businesses and individuals in their local communities—or shadow banking system, typified by the Goldman Sachs’ and Morgan Stanleys and uninsured money market funds?

Yes, we know Goldman and its friends are suffering a massive run on their wholesale funding, after having run up massive leverage.

Yes, we know Washington Mutual’s thrift-plus-leverage models are imploding.

Yes, we know that money market funds didn’t turn out to be as safe as advertised, and have had to be unceremoniously bailed out by the government.

But despite all this tumult, America's banks continue to play their role of supporting their communities every day with credit and payment services, without resorting to wild pleas for government bailouts.

America's core banking system appears solid. It’s the shadow banking system, largely unregulated, that’s whining for a bailout.

What do you think? Let me know!

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Comment:

itserich Posted On 9/26/2008 3:14:06 PM

I think we can all breathe a sigh of relief the shadow banking system bailed out the FDIC.

patientmerit Posted On 9/26/2008 8:50:21 PM

Agreed, but how do we stop the bailout train? We hear that politicians are getting 50:1 calls and emails against, but it seems to make no difference. Bernard

pgibbns Posted On 9/27/2008 7:46:56 PM

Accounts with over 100K are being moved into treasuries througout the country. GS, MS and JPM are now relatively safe - they have either sold their troubled assets or marked them down considerably. Many of the small commerical banks still have lots of mortgages marked at hold-to-maturity prices and cannot survive significant deposit loss. The current "bailout" package is not for Wall St - its for the thrifts. If the package is not passed by Sunday - expect to see several go under next week. This may help the public understand what the package is all about.

pgibbns Posted On 9/27/2008 7:55:52 PM

Accounts with over 100K are being moved into treasuries througout the country. GS, MS and JPM are now relatively safe - they have either sold their troubled assets or marked them down considerably. Many of the small commerical banks still have lots of mortgages marked at hold-to-maturity prices and cannot survive significant deposit loss. The current "bailout" package is not for Wall St - its for the thrifts. If the package is not passed by Sunday - expect to see several go under next week. This may help the public understand what the package is all about.

bigmike Posted On 9/27/2008 8:21:36 PM

Were you watching NCC and WB Friday? This crisis of confidence - every community bank is at risk - if nothing is done. JPM, BAC, WFC, USB and PNC will be the only banks left standing if this nonsense continues - lower marks by these strong players beget more forced failures which give them more undervalued assets which will written up later as this situation settles down. That is what Mr. market is telling you and this daisy chain must be broken.

Renochang Posted On 9/29/2008 12:16:40 PM

After letting go of all my FannieMae shares at $77.50, I 've sat on the sidelines and am now, for the first time ever, itching to purchase some bank shares. A bare-minimum nibble into National City seems as good as any. Any idears?

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