Denninger: FDIC admits bank blance sheets fraudulent.

[dixiegrrrrl]

( When asked about overblown prices of bailed out bank assets, the FDIC replied:)


" That’s the value the bank had them on their books on their year-end financials, but the true value is much less. It is similar to someone in Las Vegas saying that their house is worth $300,000 because that’s what they paid for it three years ago, but the reality is, if they had to sell it in today’s market, they’d only get $250,000 for it. The FDIC has to sell assets in today’s market. "

A raw admission that the banks are carrying these loans at dramatically above their actual value.

Yes, this means that essentially all balance sheets must now be considered fraudulent, and thus the valuations assigned by the market to them are also fraudulent.

Extending this to the stock market as a whole you now have a market that is intentionally overvalued as a direct and proximate consequence of fraud, permitted and endorsed by the government, of somewhere between 25-40%.

Link to the whole piece on Denninger's site:
http://market-ticker.denninger.net/

[Joanne98]

1. Whoa!

[dixiegrrrrl]

2. Yeah.....

I am sure that was an unintentional admission, perhaps by a low ranking functionary, but still, it certainly validates everything Denninger has been saying for a long long time.
and explains why FDIC is so loathe to close the banks.

[Joanne98]

7. That makes sense. Good catch.

[dixiegrrrrl]

3. Assuming Deninger's figures,

an honest evaluation of prices would equal:

40% of 10,555 .... DOW = 6333
(40%) 0f 1,138 .... S&P = 628

which is the same as saying in order to get rid of the debt, that is level we have to get to.

[Pharaoh]

4. Ruh Ro..........

:hide: :shrug:

[CoffeeCat]

5. Anyone remember this article?

I knew we were in for something terrible, when I saw this article, "New Rule Would Allow
Banks To Choose Value of Their Assets" --which was published nearly one year ago.

From the article:
"The Financial Accounting Standards Board quietly buckled to banking-industry pressure last week and proposed new accounting practices that would allow banks to value assets at a higher price than they could currently be sold for"
(more at link)

http://www.huffingtonpost.com/2009/03/26/new-rule-would-allow-bank_n_179489.html

So, all of those "toxic assets" that were on the books of the banks--are not valued as
the shineola that they are. According to the new rules--BANKS DETERMINE THEIR WORTH.

I was astounded when the Financial Accounting Standard Boards allowed this to happen. How
in the world can we know if ANY bank is healthy--if they are assigning premium values to
toxic, worthless assets?

The article discusses that many of the bailout banks were hammering Congress and the FASB
to allow the banks to do this. The FASB caved to the banks.

Everything may all ready have collapsed. How do we know that it hasn't? How do we know
for sure that many banks (possible some very large banks) aren't hiding alarming problems
within their balance sheets?

[dixiegrrrrl]

6. We don't know....which is as bad as knowing.

Elizabeth Warren said last week, on the Charlie Rose show, that THIS year will be the beginning of almost 3,000 banks getting hit with failed commercial real estate loans.
( There are about 8.000 community banks in total)

And at least 50% of those banks are now underwater. And that the commercial loans are due to be coming up for renewal over the next three years.
THREE more years of this. She looked practically tearful.

Meanwhile, today it was announced the newly developed Regulatory agency would be housed
in the Fed, at least for 23 of the "biggest banks".

It seems the banks are now grabbing and/or holding onto every dollar ( thus not loaning) in an
effort to "extend and pretend" as Denninger calls it. Hoping against hope if they can wait long enough the dead loans they are hiding will come alive and have some value.

this site has a nifty tool showing a bank's rating AND line by line of its over due and non-performing loans.

http://banktracker.investigativereportingworkshop.org/banks/

[BR_Parkway]

8. If that answer isn't directly related to why the year end value and today's

value are so different - then yeah, it's a stark admission by then; though not exactly newsworthy to those of us paying attention.

25% of home loans underwater. Billions in Alt-A and Interest Only loans scheduled to reset 2nd quarter 2010 through 3rd quarter 2011.

Expectations that 40-45% of CRE will default - in spite of the recent move by the regulators allowing banks to extend credit for CRE holders up to 125% of current value if they were current on payments and just came up on a due date for renewal combined with a LTV that was negative

[CoffeeCat]

9. So really...the banks could be insolvent...

I don't get what they're doing.

If the bank balance sheets are full of worthless junk (which they have valued as valuable), how is this
going to play out?

Are they waiting for the big recovery, and do they think they can hide this from us until the economy bounces back?
Are they assuming that if we knew the truth about their balance sheets that there would be bank runs that would
lead to a collapse of the financial system?

Or...are they hiding a collapse that will be revealed later? I ask this question because I don't see how this is
recoverable. Unless there is some major intervention, how can the banks clean this up without another bailout.

What are they doing?

[dixiegrrrrl]

10. Well, if they admit they are broke, then the government is broke,

then we cannot sell our debt unless we pay huge interest on it, thus a FAST death spiral.

If we pretend we are just sorta broke, but not too badly broke, then we can keep pretending and hoping for a miracle...which really is a thin thin hope. Thus a SLOW death spiral.

remember that our DEBT is US Treasuries, "backed by the full faith and strength of the US Government".

What happens when people stop believing that?

The books that come out in 2-3 years will be interesting, when the full story of all the hidden crap is revealed.
Meanwhile, when you go to the store to buy that bread, better hope the store pretends your money is good.

[BR_Parkway]

13. The term is "Extend & Pretend" - if they can make the banks look solvent

while the Wall St based economy recovers, and off load these crappy 'investment vehicles' onto things like pension funds - then the banks would be solvent again

If they made them actually recognize the true market value of this junk, they'd be shuttered under FDIC regulations

[Mira]

11. Thank you Dixiegrrrrl - your vigilance is enviable and impressive

You helped me see that what little I have needed to come out of the banks.
Recommended

[lonestarnot]

12. Something like election theft. No one had to tell me it was true.