bank run blog

A Minnesota bank was taken over by regulators on Friday, becoming the fourth bank to fail this year. According to the Associated Press :

“Federal regulators on Friday shut down a small Minnesota bank called First Integrity, saying unsafe practices had weakened its financial condition.

The Federal Deposit Insurance Corp. was appointed as receiver of First Integrity National Association of Staples, Minn., which had $54.7 million in assets and $50.3 million in deposits as of March 31.”

This week the FDIC issued a warning that US banks remained at risk, despite a mad rush to hoard reserves since last August. The New York Times reports :

“The Federal Deposit Insurance Corporation warned Thursday that the nation’s ailing banking industry was likely to weaken further.

The F.D.I.C. said the combined profit of the financial institutions it regulates plunged 46 percent, to $19.3 billion, during the first three months of the year.

During that time, banks and savings institutions set aside more money to cover future losses than in any quarter in the last 20 years, the regulator said. Reserves totaled $37.1 billion — four times their level a year earlier.

Even so, the percentage of troubled loans covered by such reserves, a measure of the industry’s strength known as the coverage ratio, sank to its lowest level since 1993. The number of borrowers who fell behind on loan payments increased sharply during the quarter.”

Associated Press : Bank regulators shutter First Integrity bank

New York Times : Agency Sounds an Alarm on Banks’ Shaky Outlooks

Performed professionally and to code, automatic and obligatory, almost perfunctorily…and fast as lightning-back to the beneficiary goes 2281 Casey…

The disorderly unwinding that economists have feared is upon us, and one result is that uncertain investors have been driving up commodities, which are suddenly seen as the only safe haven for large positions. The Associated Press ran an analysis today titled Institutional money drives up commodities :

“Institutional investors such as pension funds, university endowments and sovereign wealth funds have ramped up investing in commodities as a hedge against inflation and to seek out higher returns versus stocks and bonds.”

The institutional dollars have to go somewhere. For the last decade they have flowed into various securitized debt instruments, but now that party is over. The AP piece continues :

“In recent weeks, however, more attention has been drawn to the big money these investors are putting into commodity-index funds. They don’t actually own any of the commodities. Instead, they trade futures contracts, which are agreements that oblige the investor to buy or sell an asset at a predetermined price. Futures are considered a benchmark for prices in the market.

Critics allege that the continual inflow of institutional money is hijacking the market because the indices are permitted to bypass traditional speculative position limits imposed by the Commodity Futures Trading Commission.”

full story

One bubble begets another in an economy where the only product is debt. USA Today looked at market behavior last week, wondering Commodities bubble brews? :

“Commodities are the first growth industry of the 21st century. The prices of energy, basic metals and foodstuffs have soared, and so, some say, has speculation. This year alone, cocoa is up 40%, copper has soared 24%, and corn has risen 33%. And the price charts for some commodities are beginning to look suspiciously like the Nasdaq fever line in 1999, just before the tech-laden stock index crashed in March 2000. And, as the economy continues to work through the more recent crash in home prices, the question inevitably arises: Is there a commodities bubble brewing?”

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The rebate checks that have been sent out to US taxpayers in an effort to revive consumer spending are having little effect, with the weak dollar pushing prices higher on a wide range of goods and services. The Associated Press ran a feature today about the dissipation of the checks amid every day expenditures :

“But reality has interfered, in the form of ever-climbing food bills and $4-a-gallon gasoline. Day-to-day living costs have sopped up the checks for many other early recipients and spoiled their rebate fantasies. Government figures released Friday showed consumer spending inched up just 0.2 percent in April, despite widespread anticipation of the stimulus payments sent out starting late in the month.”

Consumer Affairs reported last week that retailers knew what was in store :

“A survey conducted for the National Retail Federation finds that the biggest leap in rebate spending will come at the gas pump, as 17.2 million people plan to use at least some of their tax rebate check to pay for gas, up from 12.1 million people who planned to do so in February.

The rising cost of everyday items like milk, bread and rice — and even chicken — means that consumers will wind up spending a bigger chunk of the checks on groceries, with 21.2 million people saying they will use a portion of the check for food, up from 20.4 million people in February.”

Associated Press : Many consumers spend rebates on cost of living

Consumer Affairs : Tax Rebate Checks Going Towards Necessities

Local TV station WKCRA in Contra Costa County, CA, reports on an incident of foreclosure arson. Redstateupdate.net reported earlier this year on the trend toward “foreclosure flameouts”;

“Occurances of homeowners turning to arson hoping to collect insurance money have cropped up across the nation. Insurance authorities in California have reported that suspicious fires that destroy foreclosed properties have doubled in the past year. The Deputy Fire Marshal of Fresno California told KFSN TV News that his department has seen personal residences, commercial properties and even vehicles set ablaze by frustrated owners who are faced with imminent foreclosure or repossession.”

see stories-

redstateupdate.net : Consumer Burnout Spawns Trashouts, Flameouts
WKCR TV : Three More Arrests In Lincoln Arson Attempt