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Failed Banks May Get Pension-Fund Backing as FDIC Seeks Cash

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March 09, 2010 – Comments (12)

Beautiful. Lets further concentrate systemic risk. In fact why don't we just list all public and private assets on the Fed's balance sheet so they can paper over everything all at once when it blows up.

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Failed Banks May Get Pension-Fund Backing as FDIC Seeks Cash
March 08, 2010
By Dakin Campbell


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[excerpt]

 March 8 (Bloomberg) -- The Federal Deposit Insurance Corp. is trying to encourage public retirement funds that control more than $2 trillion to buy all or part of failed lenders, taking a more direct role in propping up the banking system, said people briefed on the matter.

Direct investments may allow funds such as those in Oregon, New Jersey and California to cut fees for private-equity managers, and the agency to get better prices for distressed assets, the people said. They declined to be identified because talks with regulators are confidential.

Oregon’s retirement fund may contribute $100 million as regulators seek “the support of state pension funds to solve the crisis surrounding ongoing bank failures,” Jay Fewel, a senior investment officer at the Oregon State Treasury, said in a presentation at the fund’s Feb. 24 meeting. New Jersey’s fund may also participate, said Orin Kramer, chairman of New Jersey’s State Investment Council.

The FDIC shuttered 140 lenders last year and expects the tally may be higher in 2010. Regulators have avoided signing up private-equity firms as rescuers on concern that they might take too much risk. Pension funds, whose 100 largest members manage $2.4 trillion, could provide capital to acquire deposits and outstanding loans from collapsed banks, according to the people.

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12 Comments – Post Your Own

#1) On March 09, 2010 at 12:17 PM, ElCid16 (95.69) wrote:

Ha, this clip from the article sounds strikingly familiar:

“Financially sophisticated people do not assume that banks have recognized all of their real estate losses,” Kramer said, adding that it can still be a bad deal if a buyer overpays for a deposit franchise or if loans perform worse than expected. “We are in the early innings for commercial real estate.”

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#2) On March 09, 2010 at 12:29 PM, Option1307 (29.69) wrote:

as regulators seek “the support of state pension funds to solve the crisis surrounding ongoing bank failures,”

Hu, well maybe we should not be trying to save every freaking bank in the world and let them fail for once. I'm just saying...

 

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#3) On March 09, 2010 at 12:48 PM, outoffocus (22.84) wrote:

Hu, well maybe we should not be trying to save every freaking bank in the world and let them fail for once. I'm just saying...

We've already headed down that path.  So far we already decided that we are going to take preference on big banks vs. small banks.  We'll let the big banks stay around while the small banks fail. In the meantime the big banks get to eliminate all their competition while continuing to take unreasonable risks with people's money. How do we reverse this course? Who knows. All I know is I do not like what I see.

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#4) On March 09, 2010 at 1:25 PM, Option1307 (29.69) wrote:

outoffocus

Agreed.

My statement was in regards to all banks, and fyi, you shouldn't put too much thought into it.

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#5) On March 09, 2010 at 3:15 PM, binve (< 20) wrote:

dkilgour16,

Exactly. But its 6 months later and a new bull market! Those problems don't matter anymore! *Very* short institutional memory.

Option1307 ,

Hu, well maybe we should not be trying to save every freaking bank in the world and let them fail for once. I'm just saying

I'm with you man

outoffocus,

How do we reverse this course? Who knows. All I know is I do not like what I see

Me neither :(..

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#6) On March 09, 2010 at 4:42 PM, ralphmachio (24.85) wrote:

Being new at this, I was wondering how sure we should be that we are entering a new bull market, and not at the cusp of the next move down. IF Citi breaks through resistance, then I will have to start believing, but GS seems to have stopped just at the peak of it's trading range, and JPM is almost there. The volume on today's Citi move almost has me convinced.

This course will be reversed, and my guess is it will happen when we least expect it, and just after a convincing rally shakes the last of the small speculators loose from their bear positions. I feel a similar disturbance in the force as when Citi went from under 1.00 to 2.+, and it's getting in the way of my sleeping patterns. I feel we are ready for a big move, and I cannot see a large move up, unless there is just a senseless stampede to the cliff.

I'd love to know what some more experienced traders think. 

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#7) On March 09, 2010 at 5:51 PM, binve (< 20) wrote:

ralphmachio,

I was wondering how sure we should be that we are entering a new bull market, and not at the cusp of the next move down.

Well you know me :) I am not at all convinced this is a bull market continuation and that we are avoiding a major decline here. That is not a given, not by a long shot. I also have another option that I am exploring here: http://marketthoughtsandanalysis.blogspot.com/2010/03/some-more-p2-thoughts.html .

But I think the next move is a pullback of some type and size. And how this first wave unfolds will be the key to help us know what possibilities we should keep and which we should throw out. Thanks!.

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#8) On March 09, 2010 at 6:55 PM, ralphmachio (24.85) wrote:

So we are sort of on the same page, What do you feel about the banks breaking resistance? If they succeed, is it pretty much on, or is that just what the market is waiting for to correct? 

You believe we are on the first wave of a impulse? I still really don't know what I'm doing with Elliot wave theory, and I find myself looking at every wave that accelerates compared to the last, and I want to call it a 3.

 

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#9) On March 09, 2010 at 9:19 PM, amassafortune (29.45) wrote:

binve

Nice find. Another wall raised for the house of cards. The formula is clear - find all pockets of unleveraged dollars and use them to back impaired assets. We "encourage" your support in this national effort. Friends, bears, countrymen, lend us your money market funds, your pension assets, your roth...

This approach has been used successfully for years. The USDA allows some hair, droppings, and insects in food and grains. Arsenic, at 10/PPB, is allowed in drinking water. If a certain level of risk can be tolerated in the food and water supply, why not financial instruments? As long as the Red Cross doesn't start to get similarly creative, we should be OK. We'll be OK, right?

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#10) On March 10, 2010 at 12:35 AM, binve (< 20) wrote:

ralphmachio ,

Yes, if financials start making new highs then there is no way (in my mind) that we could be in P3. We would either still be in P2 or a Cycle Degree X.

I find myself looking at every wave that accelerates compared to the last, and I want to call it a 3.

LOL! I know the temptation is great :) But there have been so many ABC fakeouts in this rally. I have learned to be very picky in counting an impulse, and sometimes I don't even follow my own advice :(

amassafortune ,

Hey amass, thanks!

The formula is clear - find all pockets of unleveraged dollars and use them to back impaired assets. We "encourage" your support in this national effort. Friends, bears, countrymen, lend us your money market funds, your pension assets, your roth...

Man, no kidding. You are invited to prop assets and chase yield courtesy of Uncle Sam. There are no risks! But because that is a lie, we got your back with the printing press so no worries! Except now all the entities are interconnect so now when anybody fails, they all fail like dominos (and not just the shadow banks anymore, but pensions, and money markets, retail bank customers, ....) Doh!!

This approach has been used successfully for years. The USDA allows some hair, droppings, and insects in food and grains. Arsenic, at 10/PPB, is allowed in drinking water. If a certain level of risk can be tolerated in the food and water supply, why not financial instruments? As long as the Red Cross doesn't start to get similarly creative, we should be OK. We'll be OK, right?

That is a beautiful analogy! Perchlorate is a volatile fuel. And its bad, bad, bad!!!! Oh wait, you found some in the water supply? And it costs how many millions to clean up?!!? Oh well, in that case I think (pull a number from my ass) PPM is probably okay.

.... (and breathe) ... :) Thanks man!..

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#11) On March 10, 2010 at 1:21 AM, Tastylunch (29.24) wrote:

I'm concerned Binve

When is the Fed going to make Goldman and wal-mart merge? I'm upset they rejected my proposal for a Mogan Stanley-Monsanto merger as well. Why yesterday I gave my dog  and my Ford Pinto to Citigroup becasue I knew he'd be in better hands there. Got to keep all my assets in one place you know. We all know we need to concetrate wealth as much as possible  for US stability ;)

I'm at gallows humor at this point. It's out of our hands now.They've only been doing this nonstop since the 1980's S&L crisis I doubt they will suddenly see the light until the flash of the implosion.

>-The Federal Deposit Insurance Corp. is trying to encourage public retirement funds

Now that's omnious. Lats I looked Public retirement funds were the absolute last big money stop in the chain of greater fools. they excel at buying stuff at the top.

ruh roh spaghetti oh.

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#12) On March 10, 2010 at 8:56 AM, binve (< 20) wrote:

Tastylunch,

Exactly man, I too am very concerned. You have a poorly regulated industry (but of pete's sake you wouldn't even need the regulations if you put put glass-steagal back and said "no bailouts"), with toxic assets locked in bailout money with no hope of ever been properly valued (i.e. by the market), only able to survive because of the highly liquid and artifically low rate environment (the Dollar Swap issue I discussed a few weeks ago), and because we haven't had any failures in ohh I don't know a couple of months its time to start concentrating everything because risk is retired. .... yeah.

Now that's omnious. Lats I looked Public retirement funds were the absolute last big money stop in the chain of greater fools. they excel at buying stuff at the top.

... yep, this is gonna go great..

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