US Banking System + Washington Mutual (WaMu)

[Tonuss]

Is WaMu in a "death spiral"? Once people get nervous and start pulling out cash and closing accounts, it can snowball and from that point it becomes near impossible to avoid bankruptcy/closure.

[Xzin]

Finding a list of banks that are not likely to go belly up is HARD right now because all of the big boys played by the same rules and most leveraged themselves to the hilt - and then some. If you take a deep look at the top 10 banks by deposits, you get a feeling that most all of them have loaded up their level 3 assets in a "mark to fantasy" type of deal. Without getting into bogus changes in account rules or off balance sheet items, it isn't pretty. In fact, many of them owe more than they have. As much as double, or more. Not only can the FDIC not be relied upon (they only have ~50 billion to backstop against trillions) but the backdrop of the economy is terrible right now. 6+ right now, 7% unemployment before too long does not make houses easier to pay off. This is the stuff that in history has brought down entire empires. So pay attention.

The entire economy is based around fractional lending and sustained growth. When that growth stops, the system fails. Miserably. This is not a crisis of liquidity, this is a crisis of solvency. Think Great Depression or worse. Will that happen? Not sure yet. But derivatives and the like are all systems of financial mass destruction. And once the boulder gets pushed off of a hill, it doesn't just stop right away. Buffett saw it YEARS ago. And he was right. All they are doing right now is buying time. But I don't expect earnings to come around anytime soon. It will be a long and slow recovery in my opinion. I fully expect many bank failures over the next few months, amid a backdrop of slowing economic growth. You think subprime was bad? Alt-A is still shaking out. Next up? Commercial lending and credit cards.

To get a feel for the larger and more solid banks, take a look at the FDIC site: http://www4.fdic.gov/idasp/index.asp
But just because an institution is large is no guarantee of anything. I tend to like larger banks than smaller ones as a general rule though.

Batten down the hatches - a storm is upon us.

Which is great if you are looking to start a new venture. There is always a silver lining.

[Xzin]

And yes, WaMu is in a ratched death spiral. It can't raise capitol.

http://seekingalpha.com/article/8646...iral-financing

"TPG invested in Washington Mutual to the tune of $7 billion at $8.75 per share, a substantial discount at the time to WaMu’s stock price of $13. Today WaMu’s stock is $6. Last month AIG raised $20 billion when their stock was trading at $37 per share. Today AIG stock is just above $30 per share. ...

We believe it is more accurate to call them “death spiral” securities. They work as follows. The investors in the equity raise would have their investment “protected” by a provision which states that should the bank afterwards raise money at a lower price than what they paid, these investors would be compensated retroactively by having their initial investment priced at this lower price, thereby being issued new shares for free. It doesn’t take a mathematician to see how these provisions can result in massive dilution should the bank subsequently raise even a paltry amount of capital. A new offering will trigger a lower price because of the dilution it would cause, which would trigger even more dilution because of the lower price, which would then trigger an even lower price because of the even higher dilution, etc. This is why we call such securities a death spiral."

[Zite83]

Lehman lists debts of $613 Billion In Chapter 11 Filing Monday!!! The company I work for is taking a good chunk of that...We will be filing majority of their phone services that will be placed under bankruptcy... I should of stayed in collections ;( but instead took a pay cut to do a less annoying job. Owell... data entry for the win!

[Xten]

Yeah, with Lehman Brothers, AIG and Merill Lynch's recent standings, I would love to be sitting on the Bank of Americas board of directors. The fact that they can afford to buy their 2nd rival in this market is quite peculiar.

They are still absorbing Countrywide no less. It was a shotgun marriage, at best. But who else? JPM just "bought" Bear Stearns. There is really nobody bigger.

Countrywide is going down also. My Friends dad here -was- the head department manager for the southwest region. They are in deep trouble as well and stocks/credit cards and Home loans going down with them as well. just my 2c

[Sanctume]

I suppose at this point none are 100% solid but from the current status what would everyone say they feel is the most stable / safest banks at the moment.

I think guild banks are pretty secure. But I prefer alt banks too for the not so common loot.

[Mac]

[quote='Xten',index.php?page=Thread&postID=121774#p ost121774]Countrywide is going down also. My Friends dad here -was- the head department manager for the southwest region. They are in deep trouble as well and stocks/credit cards and Home loans going down with them as well. just my 2c [/quote][b]B of A [url='http://newsroom.bankofamerica.com/index.php?s=press_releases&item=7956']wrote[/url] they bought them.[/b]

[Xzin]

BofA has a lot to lose if Countrywide went under though. The deal isn't officially done yet either.

[Binaryzero]

Yeah, with Lehman Brothers, AIG and Merill Lynch's recent standings, I would love to be sitting on the Bank of Americas board of directors. The fact that they can afford to buy their 2nd rival in this market is quite peculiar.

They are still absorbing Countrywide no less. It was a shotgun marriage, at best. But who else? JPM just "bought" Bear Stearns. There is really nobody bigger.

One thing to consider it Bank of America is still posting a profit this year (even with Countrywide) Also it was an all stock deal so there is not much real cash out of pocket. They are one of two bank to post profits first two quarters this year.

[Binaryzero]

BofA has a lot to lose if Countrywide went under though. The deal isn't officially done yet either.

Legal Day one was a weeks ago, Bank of America and Countrywide are running as one business...