Banks Today

The last three weeks have made it difficult to get current information to write anything that will be accurate by the time you read it. The stock markets and the bond markets change daily and sometimes even faster that daily.

Just yesterday, the Dow was up nearly 1000 points, and will not doubt change in foreign markets during the night. Even Iceland seems to be somehow important and the Icelandic government has apparently taken over the banks there , I suppose because of the economic crisis which has spread over the free world, and maybe some of the rest of it, although I don’t read much about Russia or North Korea, or even China.

Obviously, things aren’t too tough in the oil rich countries in the Middle East, but I can assure you that the US banks are up to their necks in problems, and the only banks receiving any help in this mess are the mega banks, such as Chase, BOA, Wells Fargo, and a dozen or so others that have been deemed “Too big to fail.” Two weeks ago, I would have included Wachovia, but they were saved by Wells Fargo, with a large helping hand from Uncle Sam.

Why are they too big to fail? There are many valid reasons, but politics payed too heavily in the decisions. Some of these financial institutions should not have been bailed out by the taxpayers.

It started with the failure of IndyBank, which was never a bank, but the news broadcastes kept calling them banks, and the public does not understand the difference. Washington Mutual was not a bank, A.I.G. was not a bank, and then came some of the large brokerage houses, who our always kindly government rescued, merged with others, or sold them and their assets at bargain prices.

Here in our part of the world, a large regional bank was taken over by Mutual of Omaha, who is somehow in the banking business in a BIG way. Everyone in the local financial world, including builders and their suppliers knew these blunder head bankers were going down. They had no idea what they were doing, had originated so many bad loans, and had even tried to pass them on to some smaller banks, who wanted in on the action, but didn’t have the staff or expertise to get in on their own.

Once again our government is trying to solve banking and credit problems, by either approving the sale of marginal banks to just about anyone, or having the Federal Government buy them out. Either way, they are managed by the same people who took them down, or by management who may or may not have any experience in taking care of other people’s money. None of this has much to do with sub prime housing loans. We’ll get to that later.

My frustration with this knows no bounds!