[6.8SPC_DUMP]

Great thread and comments as usual. I don't consider myself an expert in anything, considering what QP's are to warring or Mr. Harsey is to knife making, but I hope this is helpful to some.

The major threat to local banks, as opposed to national banks, is their balance sheet risk is centralized to that one community. For instance, if a local bank depends on a Military base for the income on mortgage payments from those stationed there and that Military base closes, even a very sound balance sheet may collapse. Accordingly, local banks in MI, CA, NV and AZ were particularly hard hit in the mortgage meltdown.

National banks can better mitigate this risk because they have branches in many different communities. They also will be more likely to have branches in other countries if that is an issue.

Personally, I prefer the model of non-corporate Credit Unions.

Credit unions are not-for-profit institutions exempt from both federal and local taxes. Therefore, they can charge below-market rates on auto, home, and signature loans, while offering higher interest rates on savings and checking accounts.

You maybe thinking: "Well the below-market rates on home loans is what caused all these problems thanks to Fannie Mae and Freddie Mac using the Community Reinvestment Act - so why the hell would I put my money there?"

So what makes non-corporate credit unions any better? I'll put the long winded answer at the bottom of the post*, but, their lending doesn't remotely resemble this process and even in the morgage meltdown it was rare for a non-corporate credit union to go belly up, dispite loans being centralized to that one community. I personally think the morgage melt-down hasn't ended so it's a safer bet in my eyes.

They are member-owned cooperatives, which get their operating funds from shares purchased by individual owners, who are members. Members get paid dividends out of the earnings made on the interest of approved loans. Because they are member owned non-corporate credit unions are among the most conservatively run financial institutions in the U.S.

They also benefit from the same FDIC coverage as any other bank.

The National Credit Union Administration web site if interested, but talk to a professional, this is just my .00000002. Link

Temporary Changes to FDIC Deposit Insurance Coverage
The standard insurance amount of $250,000 per depositor is in effect through December 31, 2013. On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except IRAs and other certain retirement accounts, which will remain at $250,000 per depositor.

The FDIC’s temporary Transaction Account Guarantee Program provides depositors with unlimited coverage for noninterest-bearing transaction accounts at participating FDIC-insured institutions. Noninterest-bearing checking accounts include Demand Deposit Accounts (DDAs) and any transaction account that has unlimited withdrawals and that cannot earn interest. Also included are low-interest NOW accounts (NOW accounts that cannot earn more than 0.5% interest) and IOLTA accounts. This unlimited insurance coverage is temporary and will remain in effect through June 30, 2010. Link

However, all that is temporarily null and void in the event of a "bank holiday", which may occur at some point; particularly in the event of a major terrorist attack.

For this reason some financial advisors (generally to the wealthy) have encouraged their clients to get out of US based assets and property and conduct their banking and gold storage overseas.

If the US does devalue the dollar it may confiscate gold again, as they did in 1933 under EO 6102, to tie the dollar back to gold. The ban lasted 41 years and was not lifted until three years after the USD came off the gold standard. The "Smart Screening" technology will be effective in detecting in external bodily smuggling of gold as it does not set off typical medal detectors.

It should also be noted that since banks need our core deposits to leverage the amount of money they can have the Fed print for them (or "maintain within the confines" of their already stretched fractal reserve requirements); they fight hard for it and don't like credit unions. Here was the Federal Reserve's purposed idea in 1999 to keep your money (and the money they print from lending money) in banks: The Carry Tax that taxed the value of each privately held and individually marked dollar as long as it wasn't in a bank... Link

Originally Posted by HowardCohodas

The lack of profitability of the banks core business is why a recent analysis shows that many banks would lose money without the huge fees they charge for overdrafts and missed payments.

Great point. It also led to sweetheart leveraging deals like:

The repeal of Glass-Seagull: which enabled the same corporate pyramiding of debt as in the Great Depression, now with the ability to under-write insurance. and;

The Commodity Futures Modernization Act of 2000 (CFMA): In which major dealers of large over-the-counter derivatives transactions stopped being regulated as “futures” with SEC and “securities” under federal securities laws. “Safety and soundness” standards were replaced by “entity-based supervision". Commodity Exchange Act was dead just like the great depression.

What do we have to show for it?

Enron's electricity futures scam, the fraudulent oil futures jump to $140 a barrel early in 2008 and the mortgage melt down.

I wonder if handing control of our monetary policy to a banking cartel who makes interest on our national debt (400 billion a year now and closer to a trillion a year when interest rates raise) and banking lobbyists had anything to do with it?

Here's a rant by Dylan Ratigan I was sent on the "reform" by our "elected representatives". It's fast paced but sound bytes is what they do on these shows. Rep. Perlmutter (D CO.) says it well: "the best reform since the new deal". Well worth the 7 min. IMHO Link

Have a good weekend.
--------
*It's important to remember that for many institutions regulated under CRA: issuing home loans to people without checking if they had a job, if they had savings or if they were 10 million in debt, was literally standard practice for years.

Also when they issued sub-prime, Alt-A and Option Arms loans they made a higher fee.

The toxic assets were passed along to investors by means of the "securitization process" where these mortgages were pooled together to create a new security that's value was based off of the underlying home's value and mortgage cash flows.

These assets were sold or transferred to an issuer, or special purpose vehicle, which is used to manage the assets and legally protect the company from the assets' obligations. The SPV will then sell the securities, which are backed by the assets held in the SPV, to investors.

During this time Credit Rating Agencies became more focused on the volume of mortgage-backed-securities they approved rather than the fee that they made from each MBS. Also, (because an Act passed that is described below) the credit rating agencies' only requirement to approve a AAA/risk free rating was to make sure that the bank followed its own guidelines. If the bank made the amount of money the person who wanted the mortgage said they had, the sole basis of their decision on whether to approve the loan, the credit rating agencies just needed to check to see if that person actually said they had that much money. They are called "stated income loans" and no one verified the claim.