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September 2008A blast from the pastI was cleaning out my writing room yesterday and came across this snippet that I had copied down longhand from an article that I had read. It had given me quite a jolt at the time and here it was, a year and a half later and still, it gave my stomach that plummeting feeling. A year and a half ago, I didn’t have this blog. I had no where to put this piece of information. Now I have you. I don’t remember who wrote this particular article from which I copied out these two quotes. However, here is what I had scribbled on a sheet of lined paper that I ripped out of a spiral notebook. It was probably Richard Russell, who, thank God, seems to be recovering nicely from a stroke. He said he wasn’t going to be writing every day anymore. Which I understand. He’s in his mid-eighties and was writing reams Monday through Friday. Not just about the markets, but life, WWII, memories of New York way back when, cactus, politics, chelation. Reading his daily remarks, you feel like you are sitting down in a comfy chair by the fire with a cup of tea and an old friend from whom your world is richer for having known. Anyway, this is what the paper said: The following allegations are copied and pasted from page 5 of Sean David Morton’s Delphi Associates Newsletter #115 dated March 10 2006 “Bank of America and Compass Bank managers (probably all other U.S. banks too) have been instructing their employees in the last few weeks on how to respond to customer demands in the event of a collapse of the U.S. economy - specifically telling the employees that only agents from the Department of Homeland Security are to decide what belongings customers may have from their safe deposit boxes - and that precious metals and other valuables will not be released to U.S. citizens. The bank employees have been strictly prohibited from revealing the banks new “guidelines” to anyone.“ I went on to write, but not in quotes, so I don’t know if I abbreviated what I read, or if whoever wrote this article did. (Again, probably R. Russell, but I’m not certain.) Similar allegations by Joel Skousen in the Jan. 27, 2006 issue of Joel Skousen’s World Affairs Brief. Pretty much the same info. with one specific detail that wasn’t in the above. “They were told that no weapons, cash, gold or silver will be allowed to leave the bank.—only various paperwork will be given to owners.“ I FOUND THIS SHOCKING! To not be allowed to take your own property out of a bank safe that you pay money to keep your things in for safekeeping in case of an emergency? Then this morning, I read this snippet from Postcards from Cape Town, that he lifted from the Wall Street Journal, and I don’t know, but it seemed like I should include it in this mornings blog. The Wall Street Journal: New credit hurdle looms for banks “At issue are so-called floating-rate notes - securities used heavily by banks in 2006 to borrow money. A big chunk of those notes, which typically mature in two years, will come due over the next year or so, at a time when banks are struggling to raise fresh funds. That’s forcing banks to sell assets, compete heavily for deposits and issue expensive new debt. “The crunch will begin next month, when some $95 billion in floating-rate notes mature. JPMorgan analyst Alex Roever estimates that financial institutions will have to pay off at least $787 billion in floating-rate notes and other medium-term obligations before the end of 2009. That’s about 43% more than they had to redeem in the previous 16 months. “The problem highlights how the pain of the credit crunch, now entering its second year, won’t end soon for banks or the broader economy. The Federal Deposit Insurance Corp. said on Tuesday that its list of ‘problem’ banks at risk of failure had grown to 117 at the end of June, up from 90 at the end of March. FDIC Chairman Sheila Bair said her agency might have to borrow money from the Treasury Department to see it through an expected wave of bank failures. She said the borrowing could be needed to handle short-term cash-flow pressure brought on by reimbursements to depositors after bank failures. “As banks scramble to pay the floating-rate notes, they could see profit margins shrink as wary investors demand higher interest rates for new borrowings. They’re also likely to become less willing to make new loans to consumers and companies, aggravating economic downturns in both the US and Europe.“ This is not the first article that I’ve read in the last week that has mentioned the 117 possible bank failures in coming months. It is a concern. Bennet Sedacca wrote a pretty informative one called “Dead Banks Walking” and John Mauldin’s Thoughts from the Frontline article called “Who’s holding the Old Maid” (or something to that effect) was interesting as well. I was scouring through my papers to try to find the name of the private firm that investigates banks and for $50 you can check the credit worthiness and balance sheets of any bank that files in the U.S. for a whole year, but I in my grand writing room clean-up, must have tossed it. But if any of you are interested in finding out your banks standing, it was in one of John Mauldin’s back investment newsletters in the last two weeks. Unfortunately, once I read them I hit the delete button. Anyway, I’m not sure why I felt the need to post this. I try not to inundate you with fiscal stuff, but every once in a while, I can’t help myself. Check out the credit rating of your bank. Make sure it isn’t one of the “Dead Banks Walking.“ If you have cash or gold etc, tucked away in a safe deposit box in a bank as insurance against scary times, you might want to check out the new bank policies and make sure that you will have access to it if needed. Otherwise, find somewhere else to store it. Also, gold has been taking it in the shorts lately, and why are the 10 year government T-bills selling when they only paying 3.8% with inflation is running at 5.6%? What do the bond people see that we don’t? Deflation anyone?
Posted by Meg Tilly on Tuesday, September 02, 2008 in Chewing the Fat |
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