When was the last time major bank went bankrupt in US?

[Bruce Wayne]

When was the last time major bank went bankrupt in US?

[CRFSaver]

Re: When was the last time major bank went bankrupt in US?

Technically banks do not go bankrupt, they become insolvent. In that case they are normally worked out by the FDIC. When you ask about major, do you mean a money center bank? In that case Continental in the early 80's would be it. The thing is that small regional banks have more assets then Continental had at its peak.

Superior bank in the Chicago area (owned partially by the Pritzker family of Hyatt Hotels fame) went insolvent a couple years ago.

[Bluezy]

Re: When was the last time major bank went bankrupt in US?

Source


Cooking the Books: U.S. Banks are Giant Casinos

by Michael Edward


While media financial reporters keep the current focus of the public eye on Martha Stewart, the insolvency of U.S. banks due to their derivative holdings is being swept under the carpet.

Because banks have not been making a profit from traditional lending, derivatives became a fantastic way for them to net huge gains by trying to guess (gamble on) future prices of commodities or stocks. They were able to take these gambling risks because the Fed is supposed to back them from losses that would make them insolvent (more liabilities than assets). The worst part is that derivative transactions stay off the books and away from the prying eyes of investors and analysts.

U.S. interest rates being kept low by the Federal Reserve System (which is neither Federal nor does it have any intrinsic reserves) is to simply hide the hundreds of $Billions ($100 Billion U.S. Dollars = $100,000,000,000) of derivative losses and the true insolvency of U.S. banks. The moment interest rates start to run up, U.S. banks will be left holding little paper value assets to offset their vast derivative gambling losses.

U.S. stock markets are being manipulated to show overall value gains and "profits" is to keep U.S. banks "paper solvent". In reality, the public is being conned into thinking that U.S. banks are still solvent because they show "gains" in their stock "paper" value. If the U.S. markets were not manipulated, U.S. banks would collapse overnight along with the entire U.S. economy.

U.S. banks are merging with each other to hide their derivative losses with "paper asset" bookeeping that incorrectly shows they are solvent with enough "assets" to overcome their losses. In reality, this is smoke and mirror accounting, a scam worth $Trillions.

U.S. banks - with the privately owned Federal Reserve System at the helm - have turned into giant casinos by running a Casino Economy that is splintering into vast piles of insolvent firewood. The kindling was lit in the early 1990's, but now a bonfire is raging with great plumes of red-ink smoke. Can the Fed and the Fed-controlled media keep the public from seeing that red smoke with their manipulative mirrors? If the public would just open their eyes and wake up, they would see what's really going on, so here's something to focus your eyes on:


The top 25 U.S. banks with the largest derivatives holdings (estimate based on OCC Q3-2003 report and updated from news releases since 10/03). Remember, $1 Billion U.S. Dollars = $1,000,000,000.

RANK - BANK NAME - DERIVATIVES (in $US BILLIONS)

1 - JPMORGAN CHASE BANK - 33,700 ($33 Trillion, 700 Billion)

2 - BANK OF AMERICA - 13,800

3 - CITIGROUP - 11,000

4 - WACHOVIA CORPORATION - 2,457

5 - BANK ONE CORPORATION - 1,133

6 - HSBC - 1,043

7 - WELLS FARGO BANK NA - 911 ($911 Billion)

8 - FLEET BOSTON - 494

9 - BANK OF NEW YORK - 496

10 - COUNTRY WIDE FINANCIAL - 410

11 - STATE STREET - 320

12 - TAUNUS - 307

13 - NATIONAL CITY - 203

14 - ABN AMRO - 188

15 - MELLON - 153

16 - KEYCORP - 98 ($98 Billion)

17 - SUNTRUST - 82

18 - FIRST TENNESSEE BANK NA - 58

19 - U S BAN CORP - 54

20 - PNC BANK NATIONAL ASSN - 45

21 - DORAL - 31

22 - NORTHERN TRUST - 25

23 - CIBC DELAWARE - 25

24 - METLIFE - 22

25 - UTRECHT-AMERICA - 20


If you want to get a hint at how much red ink your U.S. bank casino is swimming in, look at their latest financial report and keep an eye out for an entry such as, "adjustment of derivative financial instruments" or "adjustment of non-interest instruments". If they list such an "adjustment" (most do not), this means they have written off the losses incurred from their derivative gambling.

If you bank with one of the 25 banks listed above, you can expect worse than the 1986-1990 Savings & Loan bank collapses when people were unable to remove all or most of their money from their accounts until years later. This time, you can expect to loose whatever they claim to "hold" for you because the FDIC and the "Fed" have no means to replace the losses with any intrinsic value.

If you choose to keep accounts with these U.S. banks, you have just become a high-stakes gambler, and the odds are stacked against you.


Non-commercial reproduction allowed, otherwise copyright 2004 by WorldVisionPortal.Org

[PrincessPerky]

Re: When was the last time major bank went bankrupt in US?

So if your bank should be on that list is your bank really gonna fold? (Mine is BOA)

[CRFSaver]

Re: When was the last time major bank went bankrupt in US?

So I hate seeing commentary on derivatives by people who have never used derivatives and really know nothing about them. Derivatives have this big scary connotation when in actuality they have made our financial institutions safer for the most part. Like any instrument they get abused.

First, derivatives are a way of transfering risk and that is what most banks use derivatives for. Banks use swaps (and sometimes options, futures, swaptions, etc) as a way of adjusting their liabilities and assets to match closer to each other. This is what protects the financial system from an 80's style insolvency when you are funding 5% mortgages with 15% deposits.

Second, the numbers they give you are notional amounts. What does that mean? There is never an exchange of principal on these swap transactions. Notional is just what the rate calculations are based off of. To give you an example, if i was to enter into a 100 Million notional swap where I pay a 5 percent fixed rate and receive, Libor flat, I dont pay or receive 100 million dollars. But depending on the terms I will exchange cash flows on a periodic basis based on the rate.

In a case like this my risk comes from the counterparty defaulting and in that case I am not out 100 Million, I am just out any hedging gains (or in some case losses) I would have encured in the transaction. To protect against that the Credit Suport Annex in the ISDA agreement you sign lays out collateralization as the mark to market becomes out of wack. So even if my counterparty defaulted, I hae the bonds (or cash) he has given to me as collateral to make up for that difference.

Are their risks from derivatives? You bet! But most of those are concentrated in the hedge funds that actually use them for betting purposes. For example Long Term Capital Management is a typical example and only because of the huge exposure they had.

So yes JP Morgan had 33.7 Trillion (notional) of derivative holdings. Know what that number doesnt tell you? What percentage of those notional offset each other. JPM is a huge derivatives dealer meaning that most of their derivatives book is a match book and the remaining is hedged out on a daily basis. Is it perfect? No. But I will telly ou right now 33.7 trillion dollars is not at risk. Bank of America is also a huge derivatives dealer. Same comments as above. Citi, Wachovia, HSBC, Ditto.

You can see what a banks derivative exposure is as they are required to disclose the amount they have in their financial statement footnote. They are also required to mark to market (current value) their portfolio on a quarterly basis. If the derivative is used as a hedge any gain or loss goes to comprehensive income. If it is not considered a hedge it goes directly to earnings (sorry I am being pretty vanilla with my explanations). There are tests that have to be passed to be considered a hedge.

Other derivatives will include those options your company gave you (work for a tech company?) They also include mortgage backed and asset backed securities. These derivatives are what have allowed so many housing loans, car loans, home equity loans, etc to be so abundant in the last 15 years. Ask your parents how hard it was to get a house loan 30 years ago. They also allow companies to hedge their exposure to the Euro, Yen, Pound, Ruble, etc.

Banks are restricted in what derivatives they can participate in and I the Federal Reserve does not look kindly on speculative use of derivatives by banks. How do I know all of this? I have participated in the derivatives market since I got out of college and in fact up till about 4 months ago I was the person doing the valuation of my companies derivatives portfolio as well as collateral management and cash flow movement on allt he instruments. I can assure you we are not using them to speculate. Before that I was selling derivative products to many of these very same banks, insurance companies and hedge funds.

The bigger risk from derivatives comes from two groups. First being the GSE's (Fannie Mae and Freddie Mac). These two entities represent over 25% of the "derivatives" market. The second are unregulated entities such as hedge funds. They normally have naked positions that could affectively collapse the swap market. But to compare our financial system to a casino is a terrible comparison (especially for the banks that use the products). Maybe for individuals but for institutions that is a terrible representation.

Our banking system is quite robust and in the best health it has been in a long time if not ever. Most bank collapses now a days comes from fraud (such as Superior Bank I mentioned). Enron committed fraud. How it was marking its derivatives was not legal. Barings bank collapsed due to fraud. Nick Leesen hid his position from the company. LTCM was close to fraud but was more slight of hand then anything. If anythign we need to push for more compliance and risk management, not trying to scare people into thinking they wont be able to get their money out at the local Bank of America. It just wont happen.

[PrincessPerky]

Re: When was the last time major bank went bankrupt in US?

Thanks

[Bluezy]

Re: When was the last time major bank went bankrupt in US?

Saver:

You might consider writing a rebuttal to Mr Edward directly. I am sure that everyone would appreciate your experience as well as the challenge of Mr Edward on his findings.

[CRFSaver]

Re: When was the last time major bank went bankrupt in US?

Don't tell me I would have to register for another website