Anti-Bailout Petition

Karl at Tickerforum has set up a nifty petition that automatically sends an anti-bailout fax to your Senators and Representatives.

Why I'm Short Harley

“I need $3,000,” Tito Vazquez, 45, says as he looks at his gleaming Harley-Davidson motorcycle. “But the economy's a mess right now and my credit cards are all maxed out.”

Which brings him here, to Collateral Lender, a few blocks east of ultra-posh Rodeo Drive, in Beverly Hills. In short, it is a pawn shop. Like most pawn shops in Los Angeles - home to not one but two failed mortgage lenders, Countrywide Financial and IndyMac Bank - it is doing a roaring trade.

For Mr Vazquez, that is not good news: Collateral Lender has so many Harleys it does not have room for any more.

Matt Simmons on CNBC

Must watch video of Matt Simmons on CNBC.

You Know the Saying, "Celebrities Always Die in Threes"? Banks Always Fail in Hundreds.

A bank failure - particularly the failure of a large bank for reasons that are not idiosyncratic - should sound alarm bells in the brain of anyone who knows the statistical distribution of bank failures.



Prediction: the chart will soon have another spike of bank failures.

One other observation: the FDIC is going to use up a huge chunk of its capital paying IndyMac claims. Expect them to raise deposit insurance premiums for other banks. This means even lower profits for banks.

FDIC Comments Imply a Big Haircut for IndyMac's Loans

The following items are from this WSJ article about the IndyMac failure:

• IndyMac had roughly $19 billion of deposits. Nearly $1 billion of those deposits were uninsured, affecting about 10,000 people, the FDIC said.
• The Pasadena, Calif., thrift was one of the largest savings and loans in the country, with about $32 billion in assets.
• The collapse is expected to cost the Federal Deposit Insurance Corp. between $4 billion and $8 billion, potentially wiping out more than 10% of the FDIC's $53 billion deposit-insurance fund.

We know from a recent Reuters article how big IndyMac's Federal Home Loan Bank advances were: "The loans, or "advances" -- totaling more than $10 billion as of March 31 by the San Francisco FHLB -- are backed by mortgages pledged by IndyMac."

We also know that "the FHLBs have a 'super lien' when institutions fail. To protect their position they have a claim on any of the additional eligible collateral in the failed bank. In addition, the FDIC has a regulation that reaffirms the FHLBs priority and the FHLBs can demand prepayment of advances when institutions fail."

Using what we know, we can infer the percentage haircut that the FDIC is placing on Indymac's assets. It's not pretty:


Now we see that these assets are every bit as bad as bearish bloggers have been saying.

Now we see that there is not a "liquidity crisis" or a "subprime crisis", but a housing crash and a solvency crisis.