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Archive for August, 2008

U.S. Says Banks on `Problem List' Rose 30% in Quarter

August 27th, 2008 at 04:43 pm

Aug. 26 (Bloomberg) -- The U.S. Federal Deposit Insurance Corp. said its ``problem list'' of banks increased 30 percent in the second quarter to the highest total in five years as more commercial real-estate loans were overdue.

The list had 117 banks as of June 30, up from 90 in the first quarter and the highest since mid-2003, the agency said today in its quarterly report without naming any institutions. FDIC-insured lenders reported net income of $4.96 billion, down 87 percent from $36.8 billion in the same quarter a year ago.

``More banks will come on the list as credit problems worsen,'' FDIC Chairman Sheila Bair said at a news conference in Washington.

Regulators are adding to the list as bank assets, liquidity and other fiscal measures weaken. Nine banks have failed this year, including California-based mortgage lender IndyMac Bancorp Inc., which the FDIC is running as a successor institution, IndyMac Federal Bank FSB.

IndyMac's failure will cost the U.S. deposit insurance fund about $8.9 billion, exceeding a $4 billion to $8 billion estimate, said Diane Ellis, the associate director of financial- risk management. The FDIC discovered additional insured deposits and had time to value the assets, Ellis said.

Second-Lowest Earnings

Second-quarter earnings fell from $19.3 billion in the previous quarter, driven by higher provisions for loan losses, the FDIC said. It was the second-lowest net income reported since the fourth quarter of 1991 behind the $600 million reported in the fourth quarter of 2007, the agency said.

``The results were pretty dismal, and we don't see a return to the high earnings levels of previous years any time soon,'' Bair said.

Funds set aside by banks to cover loan losses more than quadrupled to $50.2 billion from $11.4 billion in the year- earlier quarter.

Loans 90 days or more overdue, deemed troubled by the FDIC, jumped 20 percent to $162 billion from $136 billion in the first quarter, the FDIC said. Real-estate loans accounted for almost 90 percent of the rise in the past three quarters, the agency said.

The deposit insurance fund fell 14 percent to $45.2 billion and the reserve ratio, or balance divided by insured deposits, was 1.01 percent. The FDIC is required to shore up the fund when the ratio falls below 1.15 percent.

Higher Premiums

The agency in October will consider a plan to replenish the account that will likely include an increase in the premiums charged banks, Bair said.

A greater share of the increase will be shifted to ``riskier institutions so that safer institutions won't be unduly burdened,'' she said.

Lenders on the ``problem list'' had assets of $78.3 billion at the end of the second quarter, triple the $26.3 billion in the first quarter, the agency said. The FDIC said IndyMac's assets represented $32 billion of the increase.

Many banks on the list have high levels of commercial real- estate loans, especially in construction and development loans, said John Corston, the FDIC's associate director of large bank supervision. The number of problem institutions will continue to rise, he said.

``Problem institutions continue to be scattered across the country,'' Corston said. ``However, we expect to see some migration to areas experiencing the greatest stress.''

Regulators rate banks based on their asset quality, earnings, liquidity and other fiscal measures. Banks are ranked on a numerical scale, with 1 being the highest and 5 the lowest. A rating of 4 or 5 places a bank on the ``problem'' list.

The FDIC is a Washington-based bank regulator that insures deposits at 8,451 institutions with $13.3 trillion in assets.

To contact the reporter on this story: Alison Vekshin in Washington at


Highest level since 2003. I don't remeber worring to much about bank's solvency in 2003. I did in 1991 though.

Inflation Could Be Worse

August 20th, 2008 at 04:59 pm

Zimbabwe "inflation rocketed to a staggering 11 million percent in June, the highest in the world, from 2.2 million in May, and chronic food, fuel and foreign currency shortages are worsening.

But many economists believe the figure is higher still and it has little meaning for Zimbabweans, who find that a loaf of bread costs almost five times more than it did a month ago -- if it can be found for sale."


Mid August Update

August 19th, 2008 at 01:07 pm

We are half way through the third quarter. So far this has been a tough quarter. I paid of $4,500 in wife medical, paid life insurance policy of $920, paid for my wife's birthday party of $1,500, and need to save $500 for a vacation in September. The vacation house is paid for the week in Chatham down on the Cape. All I need to do is my some groceries (read beer and wine), probably a dinner out, and entertainment (read mini golf and ice cream). So, $500 should be enough maybe I should save $750, now that I am thinking out load.

Anyway, before that last tangent, that's over $7,400 in expenses that I paid out that didn't go to reducing debt. At first glance, I look at my debt and *sigh* thinking of how much more I could have paid down. But you know, I don't feel that bad. At the end of day, I am talking about probably $2,000 I could have put towards the debt.

Needless to say, I am back on track. I am looking at paying of my wife's braces this month and then attacking my son's medical. Also, looking at getting over the $3,000 mark for debt payment in September.

So, this quarter was all about rolling with the punches and being flexible in the budget. The most important thing – NO NEW DEBT!!!!

I also started posting my 2009 goals on the left and added a new page with retired debt. Just trying to declutter the webpage a little.

Exxon Mobil and Obscene Profits

August 7th, 2008 at 08:21 pm

The profits Exxon Mobil made fro Q2 are obscene. No firms should make that much. Right? But should we stick to one sector? Are there other companies making obscene profits?

How would be compare? I say we use the Net Profit Margin come up with a number and then take 100% of profits over that number. So Net Profit Margin for Exxon is profit divided by revenues. So that’s, $11.6 billion obscene dollars divided by $138 billion in revenue or 8.4%. So if a company makes 8.4 cents of profit on every dollar of revenues they sell, it's considered obscene.

Ok Google has a net profit margin of 25%. Talk about obscene. That' s 297% more obscene then Exxon.

In fact, the average net profit margin of the S&P is over 9%. Healthcare industry is at 12.28%, tech at 9.31%, Internet firms at 20.8%, and Personal products at 11%.

Over half the companies in the S&P 500 are gouging us. From banks to computers, to household companies. I say stop the gouging and cap the net profit margin at 5%. Anything above should be taxed at 100%.

It's time that companies stop gouging the American public. These companies would be forced to either increase their costs (like hiring people) or reduce their prices. Every company would be on a level playing field.


I almost forgot those evil railroads at 13.5%.