Saturday, July 19, 2008

Insiders Claim Bank Runs Imminent

People have occasionally tagged me as being a "Doom-and-gloomer". Actually, it's more that I feel that this corrupt system is in need of a major re-boot. More than thirty years of supply-side Reaganomics has been the greatest upward transfer of wealth in the history of the country. This money doesn't just vanish into thin air, one guy profit's off another's loss. You would think people would have learned from the Savings and Loan crash under Reagan-Bush in the eighties. When Ronald Reagan signed the bill deregulating the Savings and Loan industry, he said "All in all, I think we've hit the jackpot".
Now, decades later, the whole house of cards is about to tumble down, and banking insiders are scared: I found this on "The Daily Reckoning":

I had a very interesting conversation today with a friend who used to be a mortgage broker (until the company he started imploded) and now works at a bank selling REO property. Now, this is a guy who made millions flipping, and when I told him two years ago that the whole house of cards was going to collapse shortly, he laughed at me.
He ain't laughing anymore.
I get on the phone with him, and he immediately tells me that his wife just got laid off from Indy Mac, so life is kind of sucking for them right now. Then he proceeds to tell me that both he and his wife (who have very close contacts at banks) have heard from reliable sources that the industry FULLY expect a massive run on savings and loans in the very near future. We're talking weeks, if not days. We are now officially on Banking System Deathwatch, ladies and gentlemen, because the next big bank that falls will be the domino that unleashes the runs on the other banks.
He said WaMu is certifiably D.O.A and will almost certainly be the next victim. He said the industry would be surprised if WaMu makes it another 30 days. Downey Savings and First Federal are the next dogs to die, according to him.
If it hadn't been so sad and scary, I would have actually enjoyed my I-told-you-so moment. But this guy is genuinely frightened now. You can hear the panic in his voice. He told me, point-blank: "It's all coming down. The whole system is crashing." He is quickly turning into an urban survivalist -- outfitting his home with solar, buying biodiesel, stocking up on food. It's truly fascinating to watch the variations in human behavior as this unfolds. This guy needed some prompting, but after the Fannie/Freddie news broke last week, he immediately got the clue. On the other hand, I work with a lawyer, and he's married to another lawyer. She banks at WaMu. I've been telling him for months, "Man, you've got to tell your wife to get her money out of that bank." Even after Indy failed, she was resisting because it was a "pain" to decouple her billpay and set up new auto debits and other crap. It's just pure laziness. So here you have someone who has SEEN the lines snaking around the corner, has clearly heard that people are having trouble getting their money, and she thinks, "Nah, I'll just wait and see what happens with WaMu." Finally, he put his foot down and basically demanded that she yank her money out. So she's beginning the "transition" this week.
There is going to be a LOT of roadkill before this thing is over. Be prepared to step over the bodies, my friends. They will be littering the streets.


Martial Development said...

The people at the top have the most to lose, and I doubt they will allow a descent into complete chaos.

It's a fool's game to buy high and sell low, and rich men build fortunes on top of fools. Let's not encourage any additional foolishness.

Hand2Hand said...

Hey MD,

I wish I could be as optimistic as you are.

The people at the top are just a greedy, careless, stupid and ignorant of history and economics as those as the bottom.

Just because they have the most to lose it doesn't mean they can't be careless or stupid with what they got.

Toldain said...

Well, the guy quoted in this piece, who formerly scoffed at the idea of trouble, now thinks we're about to collapse.

He was wrong then, and he's likely wrong now. He's just a wronger, but he seems to find ways to profit from it.

I'm not a "don't worry, be happy" guy, I'm the one who was saying in good times, "don't put all your eggs in one basket". And I'm saying that now.

The likelyhood is that the amount of money in WAMU that the woman mentioned has is covered by FDIC. So it won't go away. WAMU won't go away from her perspective. It's the stockholders in WAMU that have been crushed, and may get crushed even more. So it goes, that was money you could afford to lose, right? Right!!!??

Dojo Rat said...

It's go-to-jail time for some white-collar thieves...

Years a go, a guy I went to school with went to prison for making loans and selling cars to people who weren't qualified to get the loans. He went to Jail.
Now let's take a look at the investment banking industry...

Dojo Rat said...

I would also suggest that a lawyer could very likely have well over the $100,000 quaranteed by the FDIC in their WAMU account.

Hand2Hand said...

I'm always amazed that you can do hard time in our country for stealing something worth only a few bucks, yet these white collar criminals, like Enron, can cause people to lose millions and they get slapped on the wrist.

The worst that ever seems to happen to them is that they wind up in some country club minimum security prison that's better than most places where I've lived.