View Full Version : MidFirst sweeps up failed bank



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Easy180
08-14-2009, 08:25 PM
Nice to see....Great sign for the bank especially given the fact most of their income comes from mortgage servicing...Looks like they will have over 30 branches in the Phoenix area before too long

Community Bank of Arizona shut down | State News | eastvalleytribune.com (http://www.eastvalleytribune.com/story/143037)

Community Bank of Arizona in Phoenix was closed Friday by the Arizona Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. The FDIC then entered into an agreement with MidFirst Bank, based in Oklahoma City, Okla., to assume the deposits of Community Bank of Arizona.

The four branches of Community Bank of Arizona will reopen on Monday as branches of MidFirst Bank. Depositors of Community Bank of Arizona will automatically become depositors of MidFirst Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers should continue to use their existing branches until MidFirst Bank can fully integrate the deposit records of Community Bank of Arizona.

Over the weekend, depositors of Community Bank of Arizona can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

As of June 30, 2009, Community Bank of Arizona had total assets of $158.5 million and total deposits of approximately $143.8 million. In addition to assuming all of the deposits of the failed bank, MidFirst Bank agreed to purchase approximately $125.5 million of assets. The FDIC will retain the remaining assets for later disposition.

Customers who have questions about the closing can call the FDIC toll-free at (800) 913-3058 or visit the FDIC's Web site at FDIC: Failed Bank Information - Bank Closing Information for Community Bank of Arizona, Phoenix, AZ (http://www.fdic.gov/bank/individual/failed/community-az.html).

Community Bank of Arizona is the 76th FDIC-insured institution to fail in the nation this year, and the first in Arizona. The last FDIC-insured institution to be closed in the state was NextBank in Phoenix, on February 7, 2002.

Easy180
08-14-2009, 08:30 PM
I guess I should have said banks

PHOENIX – Jeff Lowe, Arizona market president of MidFirst Bank, announced today that MidFirst, the largest privately held bank in Arizona, has agreed to acquire the assets and deposits of Community Bank of Arizona and Union Bank from the FDIC receivers. The Community Bank of Arizona and Union Bank were declared insolvent and the FDIC was assigned as receiver for each failed institution. The transaction adds 5 banking centers to MidFirst Bank’s growing Valley network. By year end, MidFirst will have over 20 locations in Arizona including these sites.

blangtang
08-15-2009, 01:07 AM
MidFirst is the biggest privately held bank in Az...Interesting. Growth.

Union Bank-its gotta been run by thugs to have half of its loans be junk.
-----------------------

From the FDIC: MidFirst Bank, Oklahoma City, Oklahoma, Assumes All of the Deposits of Union Bank, National Association, Gilbert, Arizona

Union Bank, National Association, Gilbert, Arizona, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of June 12, 2009, Union Bank, N.A. had total assets of $124 million and total deposits of approximately $112 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $61 million. ... Union Bank, N.A. is the 75th FDIC-insured institution to fail in the nation this year, and the second in Arizona. The last FDIC-insured institution to be closed in the state was Community Bank of Arizona, Phoenix, also today.

From the FDIC: MidFirst Bank, Oklahoma City, Oklahoma, Assumes All of the Deposits of Community Bank of Arizona, Phoenix, Arizona

Community Bank of Arizona, Phoenix, Arizona, was closed today by the Arizona Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of June 30, 2009, Community Bank of Arizona had total assets of $158.5 million and total deposits of approximately $143.8 million. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $25.5 million. ... Community Bank of Arizona is the 76th FDIC-insured institution to fail in the nation this year, and the first in Arizona. The last FDIC-insured institution to be closed in the state was NextBank, Phoenix, on February 7, 2002.
---
from FDIC

jbrown84
08-15-2009, 03:18 PM
Good to see MidFirst growing. Hopefully they will need a new tower soon. :D

Luke
08-21-2009, 12:55 PM
Had the taxpayers not been burdened with these failing banks, the good banks (like MidFirst) would have bailed out the bad banks in the most efficient way for both parties all while keeping the taxpayers free and clear.

Easy180
08-22-2009, 07:15 AM
Shocked you could find a way to gripe even on this thread Luke

Most of these would probably not be acquired w/o the FDIC assuming a decent amount of the cost

Luke
08-22-2009, 07:17 AM
Shocked you could find a way to gripe even on this thread Luke

Most of these would probably not be acquired w/o the FDIC assuming a decent amount of the cost

Gripe?

Seems like common sense to me.

metro
08-24-2009, 08:00 AM
Yeah, I'm going to have to agree with Luke on this one. The Feds should have let the bad banks fail.

RedDirt717
08-24-2009, 08:07 AM
Had the taxpayers not been burdened with these failing banks, the good banks (like MidFirst) would have bailed out the bad banks in the most efficient way for both parties all while keeping the taxpayers free and clear.

Glad someone else gets it.

BDP
08-24-2009, 09:29 AM
The Feds should have let the bad banks fail.

I agree with this in theory, but I don't think we have the stomach for it... politically or economically. Even many solid banks would not have wanted the toxic assets and credit markets would be even worse than they still are. I think in the long run, we would have been much better off, but it would have taken years. Given that people freak when the feds raise rates to reflect actual risk, I don't think people would have the guts to weather the 5-10 years it would take for markets to open back up as even good banks struggled to find the capital to keep going.

Luke
08-24-2009, 09:43 AM
I think in the long run, we would have been much better off, but it would have taken years. Given that people freak when the feds raise rates to reflect actual risk, I don't think people would have the guts to weather the 5-10 years it would take for markets to open back up as even good banks struggled to find the capital to keep going.

If the banks would have been able to crash quickly, I think we would have turned it around quicker. "Rescuing" a failed system by going further into debt arguably extends the length of this downward slump.

BDP
08-24-2009, 10:13 AM
Yeah, we can do all the what ifs and what could have been, but we'll never know. Crashing quickly could very well have been the total undoing of the system. It's when they fail all at once that mitigation is warranted and that's what we were facing. I think all we can do now is try and put into place a better system geared towards prevention and that does not favor the "too big to fail" mantra. For much of the 2000s there was a total disconnect between cost of capital and risk of capital, and that led to recklessness and negligence. You either regulate it stronger to offset the risk of cheap cash, or you raise the cost of capital to reflect the greater risk of unregulated credit markets. Instead, we had no good regulation and cheap money that, as usual, found its way to bad assets.

When capital is not properly valued, you get a booms and busts and it adjusts up and down. We did it in the 90s with venture capital in the tech sector and we did it in the 2000s with the mortgage and housing markets. Yet, everyone's "solution" to slow or slowing economies is cheap unregulated capital. That's fine, but kiss constant growth goodbye and get used to periods of inflated wealth and easy capital, followed by long periods of unemployment and frozen credit markets. That's really what free markets look like under a microscope. The problem is that people don't seem to want better regulation or tighter credit markets. They want this "boom and bail out" system, if for nothing else, because they don't want to give up the boom. Then they get angry when they have to pay for the boom, either through a tax funded bail out, or through losing their house and job until the market "corrects".

mugofbeer
08-24-2009, 10:54 AM
Few people realize how close the system came to crashing last October. Had the government just stepped back and let it all happen, we WOULD have had a new depression on our hands - not just a steep recession. Instead of 10% unemployment, picture 30-40% or more. Picture economies worldwide crashing with worldwide depression. Think about a total lack of credit. Good can't be imported, goods can't be exported, oil and gas to run your car or heat homes in the NE can't be imported because there is no credit. Those who say we should ahve just let the banks fail have no idea the economic cataclysm that would have caused - not just here but across the world.

theparkman81
08-24-2009, 06:32 PM
Good to see MidFirst growing. Hopefully they will need a new tower soon. :D

I wish they would and it would be little bit taller then the Devon tower, that would be awesome.

Karried
08-24-2009, 07:17 PM
Out of curiosity, what happens to the customer's savings when banks fail and no other bank bails them out?

warreng88
08-24-2009, 08:01 PM
I wish they would and it would be little bit taller then the Devon tower, that would be awesome.

I have a good friend that is a higher up in Midfirst and I asked him about that and he said there are no plans to in the near future. They are not completely busting at the seams yet so there is no need for it.

Easy180
08-24-2009, 08:09 PM
I would think it could be a possibility within a decade...Will have a pretty solid presence in the Phoenix market...Should payoff handsomely when the economy starts cooking again...Couple that with a stabilized housing market for their massive mortgage servicing biz and they will be flush with cash and out of room

andy157
08-25-2009, 02:26 AM
Few people realize how close the system came to crashing last October. Had the government just stepped back and let it all happen, we WOULD have had a new depression on our hands - not just a steep recession. Instead of 10% unemployment, picture 30-40% or more. Picture economies worldwide crashing with worldwide depression. Think about a total lack of credit. Good can't be imported, goods can't be exported, oil and gas to run your car or heat homes in the NE can't be imported because there is no credit. Those who say we should ahve just let the banks fail have no idea the economic cataclysm that would have caused - not just here but across the world.I agree with you, and I'm glad to see our worthless Government finally do something right. Can you imagine how screwed-up this banking issue would have been if the USPS had got involved?

venture
08-25-2009, 09:12 AM
It is also funny how many seem to forget that a good chunk of that bank bail out money has already been repaid - I want to say over half.

mugofbeer
08-25-2009, 09:18 AM
Out of curiosity, what happens to the customer's savings when banks fail and no other bank bails them out?

The FDIC closes the bank and pays off anyone who had funds at or under $250,000 on deposit. There are ways you can have more but I would direct you to the FDIC for that. Its actually a pretty orderly system when they have to close a bank. Payoff is usually within a couple of weeks.

bretthexum
08-25-2009, 01:12 PM
It is also funny how many seem to forget that a good chunk of that bank bail out money has already been repaid - I want to say over half.

Yeah, with a nice profit also.

andy157
08-25-2009, 01:57 PM
It is also funny how many seem to forget that a good chunk of that bank bail out money has already been repaid - I want to say over half.Hogwash, that can't be right, our Government can't do anything right, so I don't believe you.

Luke
08-25-2009, 02:07 PM
I'd be curious to read about these bailouts being repaid. Any links?

soonerguru
08-25-2009, 02:14 PM
Had the taxpayers not been burdened with these failing banks, the good banks (like MidFirst) would have bailed out the bad banks in the most efficient way for both parties all while keeping the taxpayers free and clear.

Oversimplification.

Private banks did not have enough to overcome 30 trillion in toxic assets.

soonerguru
08-25-2009, 02:17 PM
Some of you people should actually talk to someone in banking or finance before extending your rear ends on message boards. Ask them what was happening last August and September.

Whoever the poster is that said many banks have already repaid bailout money is correct. With interest.

PokeyePierce
08-26-2009, 07:05 AM
At the time of the bailout I agreed with Luke that the banks should have been allowed to fail. At Coburn's townhall at the Chase tower, he was asked about this issue. He told the crowd that President Bush told him that if the bailout was not passed that the ATM's would not have worked the next morning, several large banks would have failed and that a dollar would be worth $.99. He further claimed that the consequences would have been worse than the Great Depression.

He also mentioned that even knowing today that the money was not handled perfectly, he would vote for it again.

Luke
08-26-2009, 08:10 AM
At the time of the bailout I agreed with Luke that the banks should have been allowed to fail. At Coburn's townhall at the Chase tower, he was asked about this issue. He told the crowd that President Bush told him that if the bailout was not passed that the ATM's would not have worked the next morning, several large banks would have failed and that a dollar would be worth $.99. He further claimed that the consequences would have been worse than the Great Depression.

He also mentioned that even knowing today that the money was not handled perfectly, he would vote for it again.

While that may or may not be true (no one knows what would have happened), there is absolutely no reason to visit the bad banking practices of private companies on the taxpayers.

It's simply not the government's role to shift the moral hazard from the ones responsible onto the taxpayers no matter what the alleged economic impact would be. As it is, these big banks didn't learn anything except that when push comes to shove, "the gubmit will bail us out."

mugofbeer
08-26-2009, 08:30 AM
While that may or may not be true (no one knows what would have happened), there is absolutely no reason to visit the bad banking practices of private companies on the taxpayers.

It's simply not the government's role to shift the moral hazard from the ones responsible onto the taxpayers no matter what the alleged economic impact would be. As it is, these big banks didn't learn anything except that when push comes to shove, "the gubmit will bail us out."

I disagree. The role of the Federal Reserve (AKA, the Gubmit) is to preserve a smooth running banking system. This recession has been a lesson on how interconnected ALL the banks, brokerage companies, investment banks and insurance companies of this country are and how interconnected they all are internationally.

Last October the entire system virtually melted down. Most all credit locked up (which is an integral and vital part of the banking system behind the scenes as well as to the public), and panic ensued in New York when Lehman Brothers, Bear Stearns and Merril Lynch all disappeared.

To have let the banks fail would have plunged this country, as well as most of the rest of the world, into a DEPRESSION. Like 10% unemployment? You would love 30-40% unemployment!

The bailouts weren't pretty, they weren't desireable, but they were absolutely necessary to the economic survival of this country and much of the world. Don't believe me? Watch the PBS Frontline episode discussing the action of the Federal Reserve last October. MSNBC is going to start a series of reports in Sept. reviewing the same.

soonerguru
08-26-2009, 08:48 AM
I agree that it's beyond maddening to seemingly reward these banks and investment houses for their possibly fraudulent bad decisions. It is infuriating.

But the bailout was kind of like administering CPR and wrapping tourniquets around bleeding accident victims. My thought at the time was we had no choice but to administer emergency aid -- not so much for the perpetrators of this massive fraud but to protect our own arses.

There was no guarantee it would work. There was no guarantee our credit markets would stabilize. There were many educated people who believed the bailout was actually too small to stench the bleeding from tens of trillions in toxic assets. It's still not entirely clear how we're going to make some of those toxic assets "go away."

And yet, our financial system did not melt down. We should all take a moment and say a prayer of gratitude that that nightmare did not come to pass. In some ways, it's a miracle. Thank God many of our leaders took quick action (some of them, of course, took the opportunity to politically grandstand the issue, though.)

We've had it pretty darn good in this country for so long. Those of us who roll our eyes when our elders talk about the Great Depression simply cannot understand how bad things can get when our systems fail us. We simply lack that perspective.

But there are occasions when problems are so bad the government is the last option. Last fall was one of those times.

Now, as far as the wrong doing, that should be addressed legally once the system has stabilized, and I think we are there.

Let's hope flimsy paper is not used as a leveraged financial asset ever again. It's a recipe for disaster and endangers our capitalist system. That can be addressed in Congress, and will.

Then, let's put some folks away for a while for being complicit in this nightmare.

mugofbeer
08-26-2009, 09:31 AM
There were a number of people out there who were doing wrong, no doubt. The Bernie Madoff's of the world have really put a bad taste in people's mouths. But he and his type were not the culprits.

The culprits were 1) politicians - both left and right - who created laws and directed the markets to suit their political needs.
On the right, you had the Republican's who wanted government out of business. They also supported a system of corporate executive greed where excessive bonuses, salaries and stock options paid them ridiculous amounts of money. I was one of those who believed, and still do to a great extent, that government should be minimized and should keep thier noses out of our business most of the time. However, I was wrong in the respect that government HAS to regulate the business of money. There are too many greedy people out there who will stretch the law to its limits and break it when they think they can get away with it.
On the left, you can put blame on politicians who pander to special interest groups and do everything they can to buy votes. In this recession, they can be blamed for pushing through legislation over the Bush administration objections, that relaxed mortgage qualification requirements. They did this by pushing the "everyone deserves to have the American dream of owning a home" and "its not right that only the rich can afford a home" lines. They directed that Fannie Mae and Freddie Mac (quasi governmental entities that set the ground rules for mortgage lending) start buying sub-prime mortgage paper to enhance the mortgage lending process. Other banks and investment banks also were buying sub-prime mortgages and even creating more risky loan packages. When the bottom bricks were pulled from the system, the entire wall came crumbling down.
2) The financial services industry - this industry was allowed to run amok due to lax regulation and oversight and the smell of money. They bought and sold securities made up of thousands of mortgage loans rated AAA when, in fact, the securities had numerous sub-prime loans inside. They created synthetic securities and options that supposedly were backed by mortgage paper but were actually just worthless air. Many of the mortgage packages were essentially fraudulently represented and fraudulently rated in conjunction with the rating agencies.
3) The mortgage lenders - again, a mostly unregulated or under-regulated industry. Loans were made because the loan officers got a commission and received fees when they processed a mortgage loan. The most clear example of where the business of money went unregulated and took advantage of so many borrowers who couldn't really afford a home.
4) The borrowers - people who simply wanted to own a home but really couldn't afford one. They were often talked into buying homes with $0 down, one-year of 0% interest and to hell with what happened in a year. Illegals were given mortgage loans using fake SSN's. When things went bad, they just walked away from the loan and moved elsewhere or left the country. Finally, borrowers who bought multiple properties in CA, FL, Las Vegas, Phoenix, etc, thinking they would appreciate up and up and up - but then the bubble burst.

We all need to ensure that this type of thing never happens again. The mortgage industry and the entire financial services industry needs to be regulated and it needs to be closely monitored. The SEC failed to find Bernard Madoff even though they were tipped off to him 10 years ago. They failed to convince the politicians that the entire financial system was being turned into a huge ponzi scheme with the way the mortgage loan industry was being run.

This is why the entire health care insurance issue is ridiculous to even consider at this time. We need to fix our economy first and figure out how to regulate it properly before the health care collossus is even considered.

bretthexum
08-26-2009, 09:35 AM
Great post Mug. Explains the situation very well. It's not quite as easy as "let the markets take care of themself"

hoya
08-26-2009, 10:00 AM
I saw a warning sign of what was to come a few years ago. I was dating some girl, and went to a party at the house of somebody she knew. As I walked around their massive mansion, I asked what they did for a living. I don't remember the answer, but it was something unremarkable. I asked the girl how they could afford a house that size on not very much money. Her answer was that they had financed it over like a 60 year loan with a huge balloon payment at the end, didn't ever plan to pay it off, and they'd just sell it in 10 years once real estate prices had risen. The plan was they'd be living there virtually for free, paying off the house at the higher value and getting back everything they'd paid so far.

I thought it sounded like a disaster in the making. I wonder how those people are doing now.

Free markets only work while there is rationality involved. When people start ignoring the downside, blinded by easy money, they make stupid decisions. Unfortunately, this was a pretty big round of stupidity, and it fell to the rest of us to fix the problem. I'm glad we bailed them out, but now we get to put rules in place so the inmates don't run the asylum again.

As far as MidFirst goes, I'm glad to see that most banks in Oklahoma have learned their lesson, and didn't get lured in by the easy money that so many other banks chased. Like a cute girl at a club wearing a "Seniors 2010" shirt, it's a trap!

Luke
08-26-2009, 11:25 AM
I saw a warning sign of what was to come a few years ago. I was dating some girl, and went to a party at the house of somebody she knew. As I walked around their massive mansion, I asked what they did for a living. I don't remember the answer, but it was something unremarkable. I asked the girl how they could afford a house that size on not very much money. Her answer was that they had financed it over like a 60 year loan with a huge balloon payment at the end, didn't ever plan to pay it off, and they'd just sell it in 10 years once real estate prices had risen. The plan was they'd be living there virtually for free, paying off the house at the higher value and getting back everything they'd paid so far.

And bailing out situations like this is a great use of taxpayer dollars?

These are the people that need to learn what responsibility is.

And the banks that were in on this should have failed with them.


Unfortunately, this was a pretty big round of stupidity, and it fell to the rest of us to fix the problem.

It didn't have to, politicians forced that upon us.


I'm glad we bailed them out, but now we get to put rules in place so the inmates don't run the asylum again.

It was regulations that got us to that point. More will simply make it worse in the future.

Remember, the government can't even run it's own books. Forget about them coming up with rules for everyone else's.

soonerguru
08-26-2009, 11:50 AM
It was regulations that got us to that point. More will simply make it worse in the future.


You really need to read up on Steagall-Glass and other deregulations. Your point is so wrong it's embarassing to read.

If you think it's Kosher for investment banks to bundle and leverage poor loans as investment-grade assets, you're possibly insane.

I know you're not insane, I just think you believe yourself to be an economic free-market purist.

We do not have a free market and never had.

I'm not a fan of onerous regulations, but smart regulations protect investors, taxpayers and our entire free enterprise system.

bretthexum
08-26-2009, 11:58 AM
And bailing out situations like this is a great use of taxpayer dollars?

.

In this case yes. We already got half of the bailout money back with interest.

king183
08-26-2009, 12:52 PM
You really need to read up on Steagall-Glass and other deregulations. Your point is so wrong it's embarassing to read.


Likewise, you need to read up on the Community Reinvestment Act that helped cause much of the crisis by using Government-Sponsored Entities to make ridiculous loans to those who couldn't afford them, all at the behest of do-gooders in DC.

king183
08-26-2009, 12:58 PM
On the right, you had the Republican's who wanted government out of business. They also supported a system of corporate executive greed where excessive bonuses, salaries and stock options paid them ridiculous amounts of money.

This has nothing to do with the situation we're in. It's just a populist talking point that allows people to find an easy villain. Those executives could have been making $1 a year with $1 bonuses and the situation would be EXACTLY the same, holding all else equal. Similarly, they could have been making $200 million a year and getting enormous bonuses, and we wouldn't be in this mess had everyone involved (politicians, gov't, dumb borrowers, credit raters) not authorized ursurious loans everyone knew couldn't be repaid.

bretthexum
08-26-2009, 01:06 PM
Likewise, you need to read up on the Community Reinvestment Act that helped cause much of the crisis by using Government-Sponsored Entities to make ridiculous loans to those who couldn't afford them, all at the behest of do-gooders in DC.

Yes, that was part of the problem but not the main catalyst.

Luke
08-26-2009, 01:17 PM
There are more perspectives on this issue than the "world-would-have-melted-down" perspective.


Under interventionism the government intervenes in private economic activity with rules, regulations, subsidies, or tax benefits. That’s what the SEC is all about, along with the Federal Reserve, the departments of Agriculture, Labor, and Commerce, and multitudes of regulatory agencies. Interventionism leaves the means of production in private hands but controls, manipulates, and regulates economic activity.

It would be difficult to find a better example of both socialist central planning and interventionism than the U.S. housing market, that sector of the economy that ignited the financial firestorm that has engulfed the world.

Here is what federal central planners and interventionists did. Primarily through the U.S. Department of Housing and Urban Development (HUD), they came up with a plan that would ensure home ownership for almost every American. Home ownership is the American dream, or so they said. The problem with a free market, the planners thought, is that banks and financial institutions are ordinarily resistant to lending money to high-risk customers. The inability of many poor and middle-class people to borrow money to purchase a home is a flaw in the free market, the planners felt, so they came up with a plan that would solve the problem.

In 1977, Congress enacted the Community Reinvestment Act, which prohibited banks from discriminating against poorer-risk customers, including those who lived in poorer parts of town. However, the banks didn’t actually have to assume the risk of the loans. That’s where Fannie Mae and Freddie Mac came into the picture. They are quasi-government agencies that would purchase the mortgage loans from the banks, thereby relieving the banks of the risk of default.

Fannie Mae and Freddie Mac would then package the mortgages into collateral for debt instruments issued by them. The reason that investors all over the world purchased those debt instruments as investments is that the U.S. government was serving as an implicit guarantor of mortgage-backed securities. The idea was that if borrowers defaulted in payments on their loans, investors wouldn’t lose their money because the federal government would cover the losses.

Ultimately, the entire house of cards came crashing down, as socialist central plans are apt to do. Large numbers of people began defaulting on their home-mortgage payments and investors were facing massive losses on their investments. As expected, the federal government entered the picture and began covering the enormous losses that institutions were suffering as a result of the home-loan scheme.

Regulation upon regulation and then regulation to try to offset the side-effect of previous regulation, then more regulation because THAT one caused unforseen problems...

It's like a patient that takes a medication for a headache, but then his neck pops. So, he takes a med for his neck popping which causes his toenails to fall out. So, then he takes meds to prevent his toenails... on and on...

Soon you have regulations wrapped in regulations wrapped in regulations and a crash... and somehow it's the free market's fault?

mugofbeer
08-26-2009, 01:22 PM
This has nothing to do with the situation we're in. It's just a populist talking point that allows people to find an easy villain. Those executives could have been making $1 a year with $1 bonuses and the situation would be EXACTLY the same, holding all else equal. Similarly, they could have been making $200 million a year and getting enormous bonuses, and we wouldn't be in this mess had everyone involved (politicians, gov't, dumb borrowers, credit raters) not authorized ursurious loans everyone knew couldn't be repaid.

It's the SYSTEM of greed that was supported. The salaries, bonuses and golden parachutes were just a sympton of the sick system. The system of greed is what created the situation you list above. Had an unregulated system of greed not pervaded our financial services industry, most of the subprime loans would not have been made. But, the Republicans saw the situation as one of laissez faire economics while the Democrats saw it as an opportunity to buy votes by "buying" every disenfranchised voter a house.

mugofbeer
08-26-2009, 01:26 PM
And to get back onto track, MidFirst is an institution that did not participate in the greed of subprime lending. They kept the high road, had realistic financial requirements and have prospered through the crisis. Good luck to them!

Luke
08-26-2009, 01:35 PM
And to get back onto track, MidFirst is an institution that did not participate in the greed of subprime lending. They kept the high road, had realistic financial requirements and have prospered through the crisis. Good luck to them!

Yet they could get no share of the bailout.

Logic would dictate that rewards would come to those practicing good banking, not bad.

Ah, America...

king183
08-26-2009, 01:38 PM
Had an unregulated system of greed not pervaded our financial services industry, most of the subprime loans would not have been made. But, the Republicans saw the situation as one of laissez faire economics while the Democrats saw it as an opportunity to buy votes by "buying" every disenfranchised voter a house.

This is utterly false. There was NO unregulated, laissez faire system in the housing and financial markets. The housing/mortgage market was and is among the most heavily regulated. Had the government not been involved as a de facto guarantor of idiotic, risky loans (and their subsidiary debt instruments) no executive in his right mind would have allowed his company to loan to those high risk populations and no investors would have purchased the debt instruments because they know they couldn't be repaid or honored, thus being a losing proposition.

But that was exactly the point behind the government intervention. Those politicians you mention (that part you have correct) knew the companies wouldn't loan to high risk populations, most often minorities, so they intervened in the market and, voila, you have ARMs going to those who can't afford them and investors buying up the debt because they believed the government would cover the risk. I'm not a "purist" or blindly anti-regulation person, but in this case, it was precisely the type of government regulation you seem to think was absent that got us into this mess.

king183
08-26-2009, 01:40 PM
Anyway, I hope Midfirst builds a 100 story tower downtown powered by Mercruiser engines.

mugofbeer
08-26-2009, 01:46 PM
My understanding is they did not get, nor ASK for bailout money. Did I miss something?

mugofbeer
08-26-2009, 01:52 PM
This is utterly false. There was NO unregulated, laissez faire system in the housing and financial markets. The housing/mortgage market was and is among the most heavily regulated. Had the government not been involved as a de facto guarantor of idiotic, risky loans (and their subsidiary debt instruments) no executive in his right mind would have allowed his company to loan to those high risk populations and no investors would have purchased the debt instruments because they know they couldn't be repaid or honored, thus being a losing proposition.

But that was exactly the point behind the government intervention. Those politicians you mention (that part you have correct) knew the companies wouldn't loan to high risk populations, most often minorities, so they intervened in the market and, voila, you have ARMs going to those who can't afford them and investors buying up the debt because they believed the government would cover the risk. I'm not a "purist" or blindly anti-regulation person, but in this case, it was precisely the type of government regulation you seem to think was absent that got us into this mess.

KING - I spent 25 years in the financial services industry. I have seen it with my own eyes, including SEC, NASD and internal audits. I have seen the greed of the owners and top executives with my own eyes. The regulation that was there was not effectively enforced and it was not regulating the right things.

My wife was in the mortgage business for 15 years. She was heavily involved in the purchasing of mortgage loan paper for a large investment banking firm that failed because of the garbage the department she managed was forced to buy. She had a conscience more than 3 year ago and could see the company was buying "trash" loans at the rate of $500 million worth a week so she left. Her company doesn't exist anymore.

Your arguements are, in fact, supporting my point but you apparently don't realize it.

king183
08-26-2009, 01:59 PM
Your arguements are, in fact, supporting my point but you apparently don't realize it.

No, Mug, I realize we're 95% in agreement, but I won't agree with the statement that there was a laissez faire or unregulated system at play when it was, in fact, quite the opposite. You're correct there was greed at the heart of this matter, as there is in every part of society, but to say it was unregulated is incorrect. The government interventions and regulations fostered the greed in these cases (which is what you allude to when you talk about Democrats wanting to help everyone buy a house).

bretthexum
08-26-2009, 02:08 PM
which is what you allude to when you talk about Democrats wanting to help everyone buy a house).

Yeah it's pretty obvious you want to point fingers at the Democrats which is half right - but what loans lost more money? The poor people buying 150K homes in OKC they counldn't afford, or the speculators picking up millions upon millions of real estate/condos/houses in Florida, Nevada, and Cali?

I read a great article about this last year I'll try to find it. It broke down the foreclosures by region/demographic/etc.

king183
08-26-2009, 02:12 PM
Yeah it's pretty obvious you want to point fingers at the Democrats which is half right - but what loans lost more money? The poor people buying 150K homes in OKC they counldn't afford, or the speculators picking up millions upon millions of real estate/condos/houses in Florida, Nevada, and Cali?

I read a great article about this last year I'll try to find it. It broke down the foreclosures by region/demographic/etc.

No, Brett, I'm not blaming Democrats solely (I was just quoting a portion Mug's post). I think everyone knows both parties played a substantial role in this crisis by using government as their vote-buying machine.

bretthexum
08-26-2009, 02:14 PM
No, Brett, I'm not blaming Democrats solely (I was just quoting a portion Mug's post). I think everyone knows both parties played a substantial role in this crisis by using government as their vote-buying machine.

Gotcha, sorry

Luke
08-26-2009, 02:38 PM
My understanding is they did not get, nor ASK for bailout money. Did I miss something?

I'm sure they didn't.

I'm simply pointing out irony...

Most often, rewards come to those who work hard, establish themselves, invest well and then reap the benefits.

Failed banks did just the opposite and yet get rewarded with hundreds of millions of (our) dollars.

My point is not that we should have given money to good banks like MidFirst, but that if we're gonna dole money out to banks, why reward the bad ones?

Luke
08-26-2009, 03:13 PM
I have seen it with my own eyes, including SEC, NASD and internal audits...The regulation that was there was not effectively enforced and it was not regulating the right things.

This statement alone should cause any rational thinking person to rethink the necessity for government regulation.

If CURRENT inept government regulation is not working, by your own admission, then why in the world would even more regulation work?



Your arguements are, in fact, supporting my point but you apparently don't realize it.

Um, likewise.

soonerguru
08-26-2009, 08:26 PM
Those politicians you mention (that part you have correct) knew the companies wouldn't loan to high risk populations, most often minorities, so they intervened in the market and, voila, you have ARMs going to those who can't afford them and investors buying up the debt because they believed the government would cover the risk. I'm not a "purist" or blindly anti-regulation person, but in this case, it was precisely the type of government regulation you seem to think was absent that got us into this mess.

This is not what sent us into the abyss. It was the deregulation that allowed investment banks to leverage the said loans -- sometimes up to 30 times their "value" -- as investment grade assets.

It sounds so crazy no ordinary American would believe it.

They actually would take a risky loan, then trade it up to 30 times its value (at already inflated prices) on the market, bundling it in with more legitimate loans to get AAA ratings. It was beyond insane.

The mass of foreclosures alone would not have precipitated the disaster. It was the spiraling devaluation of the "assets" that caused the absolute destruction of literally trillions of dollars of wealth.

No person on this message board, regardless of their political leanings, would have thought this approach made a modicum of business sense. We would have not suggested it or done it because it was insane, and if not criminal, probably should have been.

A lot of people on the left and right were sounding alarms about:

1. The Fed's insistence on keeping the prime borrowing rate at less than a percent for like two straight years.

2. The devaluation of the currency due to the low interest rates.

3. The explosion (and lack of regulation) of new and exotic mortgage instruments, such as the ARMs you reference.

4. The huge and artificially inflated run-up in housing costs.

Don't kid yourselves, free-market adherents, this problem was caused by policy, such as that by the Fed.

Look, Greenspan is a smart guy and is certainly not the devil, but he was quoted as saying ARMs were great and he was the one who set Fed policy, and it has proven to be a disaster.

The GOP in Congress in the 90s and Bill Clinton dispensed with Steagall Glass. They deserve a lot of the blame for this mess. And Greenspan, possibly working with the Bush II admin to keep the economy humming along, shares blame as well for his irresponsible low-interest-rate and currency devaluation monetary policy.

It is fair and correct to say both parties played a hand in the mess. Perhaps they can both play a hand in ensuring we never endure this nightmare again by proposing sane solutions.

soonerguru
08-26-2009, 08:48 PM
And another thing: subprime lending is not new. It is not in itself a bad thing. If you have a broad loan portfolio, you may have some riskier loans with higher interest payments on the margin. That is not necessarily bad business.

The problem was 1. we had all of these fly by night companies issuing mortgages, completely unregulated, with no apparent concern whether or not they would be repaid; 2. These loans being repackaged and sold as investment assets, and 3. The repackaged assets being resold -- up to 30 times their initial value -- on the market.

There are many problems with this:

1. This is like a massive Ponzi scheme, requiring that the value of housing continue to go up to sustain the investments.

2. The lack of transparency to the investor, many of them institutional, such as your pension or 401k, thinking they are making commercial-grad investments, when they are literally buying worthless paper, resold well beyond the value of any collateral.

There was a lot of propaganda coming from Wall Street trying to pin this on "risky loans to minorities." Unfortunately, that swill worked on a lot of people.

But the "risky loans" were only the tip of the iceberg. It was the repackaging and leveraging the loans, in an opaque manner, on the market that is what has basically screwed us for a generation. The loans only represented about 10 percent.

mugofbeer
08-26-2009, 11:05 PM
This statement alone should cause any rational thinking person to rethink the necessity for government regulation.

If CURRENT inept government regulation is not working, by your own admission, then why in the world would even more regulation work?



It IS a quandry, isn't it? I typically think as a Republican and want government interference out of business. In a perfect world where everyone plays by the rules and no one tries to break them, I would feel that way about all government regulation and interference. However, the last few years have opened my eyes a bit to the excesses and greed of so many people when government allows them to run amok.

I see excess and greed when corporations pay executives in excess of $50 million in compensation when the executive has essentially run the company into the ground. I see excess and greed when I see a securities trader MUST be paid a bonus of $100 million because the company signed a contract binding them to that bonus prior to TARP. I see excess and greed when mortgage loan officers prey on the poor and ignorant and take advantage of a politicized mortgage loan process letting "everyone have the American dream", nevermind they can't afford a house and have never demonstrated any fiscal responsibility.

The business of MONEY MUST BE REGULATED or else the greedy bastards like Bernard Madoff and the investment bankers will always find a way to pervert the system.

Yes, if you are going to regulate an industry, the regulators must do their jobs. However, like the police, we must have them around. We nearly lost our entire way of life last October. I, for one, don't care to see that happen again. The only way to prevent it from happening again is through regulation and oversight. You certainly aren't going to keep the greedy in line by making them take a couple of ethics classes.

OKCTalker
08-27-2009, 10:26 AM
There are too many commercial banks in the US today - around 8,500 I believe. Regulators allow for a minimal amount of capitalization that is far below what most industries permit. In fact, far below what non-regulated business owners would allow.

If regulators should phase in higher capital requirements and higher depositor insurance premiums, the weaker banks will be thinned out, and the remainder will be less of a burden on taxpayers and the economy.

soonerguru
08-27-2009, 11:06 AM
There are too many commercial banks in the US today

I have heard that as well. Add to that that most banks today make most all of their income from fees and overdrafts.

Luke
08-28-2009, 06:21 AM
So, about the TARP money being paid back...

Where Bailout Money Goes to Die - Rick Newman (usnews.com) (http://www.usnews.com/blogs/flowchart/2009/07/28/where-bailout-money-goes-to-die.html)


When CIT Group, a medium-sized lender, faced the threat of bankruptcy recently, it raised an uncomfortable prospect for the officials in Washington managing the bailout of the financial system. CIT got $2.3 billion in bailout funds last year--yet it was still failing. And the government decided not to offer any more help. So if CIT declared bankruptcy, taxpayers would be out their $2.3 billion.

CIT averted bankruptcy, for now, but the brush with insolvency highlighted one of the biggest risks of the entire bailout scheme: that taxpayers won't get their money back.


So far, 34 companies have returned about $72 billion in TARP funds to the government, according to a bailout tracker maintained by journalism site ProPublica.

Luke's Note: 72 Billion...of 1.1 TRILLION in TARP funds.


But nearly 700 firms have received bailout money, and many of them are still in rough shape.


Ethisphere publishes a TARP index, updated weekly, that measures the financial performance of all TARP recipients and calculates the "return" to taxpayers if the bailout funds are treated as an investment in the companies that got them. By that measure, the government has been a poor investor, losing about $148 billion so far--$1,233 per U.S. household.


Bailout architects like Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke have argued that the government is likely to get most of the bailout money back, which would make it more like an interest-bearing loan than a giveaway. But since the bailouts began last fall, a number of developments have made it clear that the feds--and the taxpayers--can kiss some of that money goodbye.

Again, this may be how some taxpayers wanted their money to be used. But, gaging the interest that taxpayers had regarding this issue and legislator phone lines burning in DC, the vast majority of taxpayers did NOT want their money to be used for this.

Why? We know how the government "invests" money. At a loss. Most often a big loss (e.g.: post office, amtrak, social security, medicare...) And instead of bailing out the American taxpaying family, our taxpayers go to large corporate entities who may or may not pay back their TARP gift.

metro
08-28-2009, 07:30 AM
Mods can we move this to current events, it's so far from the original topic, it's become more of a national discussion now.

bretthexum
08-28-2009, 09:10 AM
So, about the TARP money being paid back...


Luke's Note: 72 Billion...of 1.1 TRILLION in TARP funds.




Where did you get 1.1 trillion? The original TARP allocated 700 billion and all of that hasn't been used yet.

Good site to look at TARP

Tracking the $700 Billion Bailout - The New York Times (http://projects.nytimes.com/creditcrisis/recipients/table)