Comments on: WaMu Failure Could Trigger Extension of Deposit Guarantees http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of.html Mon, 23 Nov 2009 06:07:28 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Anonymous http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of.html#comment-15354 Anonymous Mon, 15 Sep 2008 16:54:00 +0000 http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of-deposit-guarantees/#comment-15354 Is the $300bil of assets a real number (i.e. what the assets would realistically fetch in today's market during a liquidation), or mark to make-believe numbers like level 3 valuation or what they'd be worth if housing prices were still at 2006 levels?<br/><br/>If it's the former, then the FDIC may not have to pay out much (at least for WM, no bets on other banks), and most depositors will be made whole. After all, the $100,000 is only what the govt will guarantee, not what a bankruptcy judge will force WM to pay out. To any bankruptcy experts out there: are depositors the first in line in a BK, or are there higher priority entities? Is the $300bil of assets a real number (i.e. what the assets would realistically fetch in today’s market during a liquidation), or mark to make-believe numbers like level 3 valuation or what they’d be worth if housing prices were still at 2006 levels?

If it’s the former, then the FDIC may not have to pay out much (at least for WM, no bets on other banks), and most depositors will be made whole. After all, the $100,000 is only what the govt will guarantee, not what a bankruptcy judge will force WM to pay out. To any bankruptcy experts out there: are depositors the first in line in a BK, or are there higher priority entities?

]]> By: Anonymous http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of.html#comment-15342 Anonymous Mon, 15 Sep 2008 15:37:00 +0000 http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of-deposit-guarantees/#comment-15342 The voucher idea will not work. Who would want their employer to decide where they ccan and cannot shop? This system existed in the 19th century where factory bosses controlled the factories where people work and the shops where they can buy their food.Gone is your economic freedom. The voucher idea will not work. Who would want their employer to decide where they ccan and cannot shop? This system existed in the 19th century where factory bosses controlled the factories where people work and the shops where they can buy their food.Gone is your economic freedom.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of.html#comment-15321 Anonymous Mon, 15 Sep 2008 13:13:00 +0000 http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of-deposit-guarantees/#comment-15321 "The failure of a bank its size would test the strength of the US deposit insurance system and its ability to maintain the confidence of the nation's savers."<br/><br/>Yeah, all 6 of them. “The failure of a bank its size would test the strength of the US deposit insurance system and its ability to maintain the confidence of the nation’s savers.”

Yeah, all 6 of them.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of.html#comment-15315 Anonymous Mon, 15 Sep 2008 12:34:00 +0000 http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of-deposit-guarantees/#comment-15315 Anon @ 7:37,<br/><br/>Your voucher idea won't<br/>happen; it's far too open to abuse.<br/><br/>Consider the lyrics of "16 tons". Anon @ 7:37,

Your voucher idea won’t
happen; it’s far too open to abuse.

Consider the lyrics of “16 tons”.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of.html#comment-15314 Anonymous Mon, 15 Sep 2008 12:26:00 +0000 http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of-deposit-guarantees/#comment-15314 One point that got glanced over.<br/><br/>Per FT article:<br/><br/>-FDIC has $45 billion.<br/>-FDIC has $70 billion in Treasury credit lines.<br/>-Washington Mutual had $143 billion in insured deposits.<br/>-Washington Mutual had $164 billion in uninsured deposits.<br/><br/>Steve in his post says just give out half of the money for uninsured depositors. Well, that's $82 billion...and that is after the insured deposits have to be taken care of. One point that got glanced over.

Per FT article:

-FDIC has $45 billion.
-FDIC has $70 billion in Treasury credit lines.
-Washington Mutual had $143 billion in insured deposits.
-Washington Mutual had $164 billion in uninsured deposits.

Steve in his post says just give out half of the money for uninsured depositors. Well, that’s $82 billion…and that is after the insured deposits have to be taken care of.

]]> By: digger http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of.html#comment-15312 digger Mon, 15 Sep 2008 11:42:00 +0000 http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of-deposit-guarantees/#comment-15312 Individuals can use "treasury direct." no that much trouble to open an account.<br/><br/>businesses can use "payroll cards." google: payroll cards comptroller of the currency june 2005 or www.occ.treas.gov/cdd/payrollcards.pdf Individuals can use “treasury direct.” no that much trouble to open an account.

businesses can use “payroll cards.” google: payroll cards comptroller of the currency june 2005 or http://www.occ.treas.gov/cdd/payrollcards.pdf

]]> By: Anonymous http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of.html#comment-15311 Anonymous Mon, 15 Sep 2008 11:37:00 +0000 http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of-deposit-guarantees/#comment-15311 "Many firms carry more than $100,000 in balances over the course of a month, particularly if they have a healthy payroll." The solution is to stop paying in currency and start paying "in kind". Businesses could negoitiate with local retailers for vouchers which could be used for payment to workers. Of course, the local retailers would have to be paid. Maybe the solution would be for businesses to open an account at the Fed. “Many firms carry more than $100,000 in balances over the course of a month, particularly if they have a healthy payroll.” The solution is to stop paying in currency and start paying “in kind”. Businesses could negoitiate with local retailers for vouchers which could be used for payment to workers. Of course, the local retailers would have to be paid. Maybe the solution would be for businesses to open an account at the Fed.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of.html#comment-15309 Anonymous Mon, 15 Sep 2008 09:49:00 +0000 http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of-deposit-guarantees/#comment-15309 Your mom is not the only person in denial of the economic calimity in progress. I have attempted to warn friends and family for years with little but hostility to show for my efforts (shoot the messenger). <br/><br/>I stopped trying to get the message out several years ago. If depositers/investors want their heads to remain in the sand, then so be it...I have had my fair share of scorn.<br/><br/>River Your mom is not the only person in denial of the economic calimity in progress. I have attempted to warn friends and family for years with little but hostility to show for my efforts (shoot the messenger).

I stopped trying to get the message out several years ago. If depositers/investors want their heads to remain in the sand, then so be it…I have had my fair share of scorn.

River

]]> By: a http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of.html#comment-15307 a Mon, 15 Sep 2008 09:18:00 +0000 http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of-deposit-guarantees/#comment-15307 My mother (80 years old) has too much at one bank. I've been suggesting (you don't tell her anything!) that she move some of it to other banks, but she doesn't *like* the other banks where she lives. Treasuries, Mom? Too much trouble. Agh. My mother (80 years old) has too much at one bank. I’ve been suggesting (you don’t tell her anything!) that she move some of it to other banks, but she doesn’t *like* the other banks where she lives. Treasuries, Mom? Too much trouble. Agh.

]]> By: Steve http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of.html#comment-15306 Steve Mon, 15 Sep 2008 08:59:00 +0000 http://www.nakedcapitalism.com/2008/09/wamu-failure-could-trigger-extension-of-deposit-guarantees/#comment-15306 The exposure of the FDIC fund to a WaMu failure is not as great as it seems, at least under the most likely scenario, which is a conservatorship a la IndyMac. If they follow the IndyMac playbook, they could pay out an advance dividend of 50% to the excess depositors, say $10B, and that would approximate total cash out of pocket, for the present. The fund balance is insufficient if FDIC attempted to transfer all or part of the deposits (say $100B - $130B) to another<br/>institution, unless that institution also purchases assets, which purchase would be an offset to the FDIC wire. If, big if, FDIC can find a purchaser willing to take > $100B of WaMu's assets, then the fund would be walloped but not emptied.<br/><br/>Whether FDIC has enough bodies and talent to handle a failure the size of WaMu is of course a different matter. The exposure of the FDIC fund to a WaMu failure is not as great as it seems, at least under the most likely scenario, which is a conservatorship a la IndyMac. If they follow the IndyMac playbook, they could pay out an advance dividend of 50% to the excess depositors, say $10B, and that would approximate total cash out of pocket, for the present. The fund balance is insufficient if FDIC attempted to transfer all or part of the deposits (say $100B – $130B) to another
institution, unless that institution also purchases assets, which purchase would be an offset to the FDIC wire. If, big if, FDIC can find a purchaser willing to take > $100B of WaMu's assets, then the fund would be walloped but not emptied.

Whether FDIC has enough bodies and talent to handle a failure the size of WaMu is of course a different matter.

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