bank run blog

Tensions have been heightened as the Federal Reserve and the Treasury wrap up their bank stress tests. Today, executives of the 19 institutions evaluated will be confidentially told how their banks fared, and presumably what kind of capital they will need to raise to cover at least some of their inevitable writedowns. The results are currently scheduled to be made public on May 4th, but the Obama economic team has badly bungled the public relations aspect of the whole stress testing episode, so they may leak before then.

The feds did release a skinny, vague summary of the criteria being used by regulators. According to the New York Times :

“Federal regulators released the criteria they used to assess the financial health of the nation’s 19 biggest banks on Friday, but provided little new information for investors to distinguish the industry’s weak players from the strong.

In a 21-page report, the Federal Reserve regulators broadly laid out the tools they used to project bank losses if the economy worsens, and officials established an unspecified baseline to measure how much additional capital the banks should add as a buffer against higher losses. But they provided no concrete metrics to assess the depths of the troubles facing the industry or specific banks.

Still, the Federal Reserve report suggested that regulators are focusing on the amount of capital that they want banks to hold in common stock, which makes it easier for them to absorb future losses as the recession wears on. That could force at least a handful of the 19 banks to raise significant amounts of new capital and could lead to greater government ownership stakes in the banks.”

An article by Reuters also emphasizes that the government seems focused on capital reserve levels :

“The top 19 U.S. banks need to hold a ‘substantial’ amount of capital above regulatory requirements to weather a potential worsening of the economic recession, the U.S. Federal Reserve said on Friday.

Supervisors said ‘stress tests’ regulators conducted at major banks were aimed at ensuring the institutions have enough capital in reserve to continue to lend in potentially bleaker conditions, and are not to be considered a measure of banks’ current solvency.”

As if to confirm what skeptics have been saying for weeks about the charade of the stress tests, the Fed also let it be known that none of the big banks would fail the tests anyway. The Associated Press is reporting :

“The Federal Reserve says the government is prepared to rescue any of the banks that underwent ‘stress tests’ and were deemed vulnerable if the recession worsened sharply.

The Fed says the 19 companies that hold one-half of the loans in the U.S. banking system won’t be allowed to fail — even if they fared poorly on the stress tests.”

New York Times : Regulators Disclose Criteria for Bank ‘Stress Tests’

Reuters : Fed looking for substantial capital buffers

Associated Press : Fed says gov’t ready to save stress-tested banks

Sadly, the 20th of April has become known in the United States as the anniversary of the mass shootings at Columbine High School in Littleton, Colorado in 1999. Moreover, sociologists have noticed that the whole calendar for April is crowded with similar unhappy “anniversaries,” such as the Virginia Tech shootings two years ago and the bombing of the Murrah Federal Building in Oklahoma City in 1995. (So-called terrorism expert Steven Emerson appeared on network television shortly after the blast to proclaim that the attack had numerous “Middle Eastern traits”.)

It is perhaps not surprising that what has become a peculiarly, if not exclusively, American pastime would wind up having its own special day, and for many April 20th is that day.

But there are a few welcome signs of a backlash against the fetishistic, violent tantrums that threaten to define our culture in its decline. The New York Times reports :

“Long stigmatized as political poison, the marijuana movement has found new allies in prominent politicians, including Representatives Barney Frank, Democrat of Massachusetts, and Ron Paul, Republican of Texas, who co-wrote a bill last year to decrease federal penalties for possession and to give medical users new protections.

The bill failed, but with the recession prompting bulging budget deficits, some legislators in California and Massachusetts have gone further, suggesting that the drug could be legalized and taxed, a concept that has intrigued even such ideologically opposed pundits as Glenn Beck of Fox News and Jack Cafferty of CNN.”

Last week, the venerable progressive journal In These Times ran a feature on the gathering momentum for reform :

“As a medley of border violence, recessionary pressure, international criticism and popular acceptance steadily undermines America’s decades-long effort to eliminate drugs and drug use, the U.S. movement to legalize marijuana is gaining unprecedented momentum.

Once derided and dismissed by lawmakers, law enforcers and the law-abiding alike, marijuana reform is sweeping the nation, although the federal government appears committed—at least for the time being—to largely maintaining the status quo.”

Advocates for legalization are marking the occasion by launching a national public awareness campaign, to include television spots. According to news agency PR Web :

“The Foundation for the National Organization for the Reform of Marijuana Laws (NORML FOUNDATION) a Washington, D.C.-based advocacy organization established in 1997, is purchasing advertising time on selective cable outlets to underscore the urgency of decriminalizing marijuana also known as cannabis.

The NORML Foundation launched this Marijuana Law Reform Advertising Campaign on 4/20, a day marked as a holiday celebrated worldwide by the cannabis culture to create further political pressure on the federal government to both recognize 1) the ever-increasing support of Americans who favor cannabis legalization and 2) the clear sea change of cannabis laws that’s been happening at the state level since Californians voted in favor of medicinal access to cannabis in 1996.”

New York Times : Marijuana Advocates Point to Signs of Change

In these Times : An End to the War on Weed? Marijuana advocates believe legalization is on the horizon.

PR Web : Marijuana Advocacy Group Launches Cable TV Ad Campaign on ‘4/20′

Examiner.com : National Weed Day fuels marijuana legalization debate

Since early November, the Justice Department has announced that it has agreed to settlements in more than twenty business-related cases, many of which have been pending for years. The Washington Post recently reported details of several high-profile corporate settlements finalized over the Christmas holidays. Public interest groups have charged that the spate of settlement activity is being driven by a perception that the outgoing Bush administration is likely to offer more favorable deals than the Obama team led by Attorney General designee Eric Holder.

Among the influential corporations agreeing to settlements since the presidential election are AT&T, Siemens, Exxon Mobil, the Aibel Group, and Spartan Motors. The Justice Department announced three separate settlements totaling more than $15 million on December 23. Taxpayers Against Fraud spokesman Patrick Burns told the Post, “This is traditionally the time to ram a settlement through because no one notices. Putting it out between Christmas and New Year’s is brilliant.”

Law professor Ellen S. Podgor, who blogs on corporate fraud and white-collar crime, cited the Siemens settlement with the outgoing administration by giving it a “best timing in 2008&” award. The DoJ has continued to announce new settlements this month, as a number of senior government attorneys prepare to leave their posts.

cross posted at

redstateupdate.net

The FDIC has announced the failure of 1st Centennial Bank, of Redlands, California. The federal agency has arranged a sale of the failed bank’s assets and deposits to First California Bank, Westlake Village, California.

1st Centennial Bank is the third bank to fail in the nation this year. The most recent bank failure in California was Downey Savings and Loan, F.A., Newport Beach, on November 21, 2008. From the official press release :

“1st Centennial Bank, Redlands, California, was closed today by the California Department of Financial Institutions, which then appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with First California Bank, Westlake Village, California, to assume the insured deposits of 1st Centennial.

The six branches of 1st Centennial will reopen on Monday as branches of First California Bank. Depositors of the failed bank will automatically become depositors of First California. 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.”

see resources–

FDIC failed bank information page : First California Bank, Westlake Village, CA, Acquires the Insured Deposits of 1st Centennial Bank, Redlands, CA

Los Angeles Times : 1st Centennial Bank in Redlands is shut by state regulator

A report released this month by the Inspector General for the US Department of the Interior provides new details of pervasive politicization at the federal agency by Bush administration appointees, particularly within the Fish and Wildlife Service during the stormy tenure of the already notorious deputy assistant director Julie MacDonald. The report is the second by Inspector General Earl Devaney to investigate sensational charges against MacDonald, an administrative manager with no expertise in biology or natural sciences who is alleged to have displayed an improper bias toward business interests in routinely overruling scientific findings and recommendations. The Inspector general concludes that in 15 of 20 cases investigated, “the integrity of the process was potentially jeopardized” by MacDonald and her close colleagues.

In a cover letter submitted to Congress with his report, Devaney wrote that “MacDonald’s zeal to advance her agenda has caused considerable harm to the Endangered Species Act program and to the morale and reputation” of the Fish and Wildlife Service. Apart from the specific cases studied by the Inspector General, MacDonald’s influence may have affected other agency decisions, according to the report, which says, “Her heavy-handedness has cast doubt on nearly every ESA decision issued during her tenure.” MacDonald, who resigned in 2007 following Devaney’s first report on her improper activities, refused to comment on the new document.

Investigators found that the culture of brazen political interference was so pervasive in the agency that veteran scientific staff referred to persistent politicization of agency decisions and findings as “getting MacDonalded,” using the controversial deputy assistant director’s name as a verb. In addition to MacDonald, the report names former Assistant Secretary of the Interior Craig Manson one of his top aides, Randal Bowman, and department attorney Thomas Graf as being especially culpable for the department’s current morale and credibility issues.

Democratic Representative Nick Rahall of West Virginia said, “The results of this investigation paint a picture of something akin to a secret society residing within the Interior Department that was colluding to undermine the protection of endangered wildlife and covering for one another’s misdeeds.”

cross posted at

redstateupdate.net