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I looked--small, local banks--probably undercapped to start with and tried to take advantage of the real estate boom and went bust--Timthe Guy--do you know anything real about WHY those banks failed?
snippet from end of article:
"It's our view that regulators are expecting 100 to 200 banks to fail" over the next 12 to 24 months, says Jaret Seiberg, a research analyst for the Stanford Group. Seiberg expects those failures to occur predominantly in states like Ohio, Michigan, California, and Georgia—where the construction lending market, which includes residential real estate, is expected to weaken dramatically.
I looked--small, local banks--probably undercapped to start with and tried to take advantage of the real estate boom and went bust--Timthe Guy--do you know anything real about WHY those banks failed?
I would guess the major issues would have been real estate related (development and construction loans).
I guess Bear Stearns will be the first to file bankruptcy or close to it.
There could be more. Goldman Sachs has 1.1 trillion in mortgage backed securities on it's books with only $40 billion in corresponding equity. Merrill Lynch has 1 trillion with only $27 billion in equity. Some of these institutions are having to raise money through sovereign investors - trading stock in the company for cash - to keep ahead of what is turning out to be a very dangerous game while foreigners end up owning a greater percentage of our top financial institutions. And it's not just dangerous for them. The average Joe Sixpack American is in debt up to their eyeballs with the largest portion of that being their mortgage or other debt against their primary residence. For many of these people who are facing declining real estate prices, they may find they owe more than the home is worth. If they walk away from the mortgage, the result will be additional unsold inventory which will further depress prices and affect people at the next level - with only a little equity in their home. The big institutions can't sell their mortgage backed securities - causing enormous write downs, the average American may not be able to sell (provided they have to) for enough to cover the mortgage, and those who'd like to buy a new house will have a greater difficulty getting a mortgage due to all of this mess.
There could be more. Goldman Sachs has 1.1 trillion in mortgage backed securities on it's books with only $40 billion in corresponding equity. Merrill Lynch has 1 trillion with only $27 billion in equity. Some of these institutions are having to raise money through sovereign investors - trading stock in the company for cash - to keep ahead of what is turning out to be a very dangerous game while foreigners end up owning a greater percentage of our top financial institutions. And it's not just dangerous for them. The average Joe Sixpack American is in debt up to their eyeballs with the largest portion of that being their mortgage or other debt against their primary residence. For many of these people who are facing declining real estate prices, they may find they owe more than the home is worth. If they walk away from the mortgage, the result will be additional unsold inventory which will further depress prices and affect people at the next level - with only a little equity in their home. The big institutions can't sell their mortgage backed securities - causing enormous write downs, the average American may not be able to sell (provided they have to) for enough to cover the mortgage, and those who'd like to buy a new house will have a greater difficulty getting a mortgage due to all of this mess.
I agree. I think if we cannot fix this situation very soon we will go into a depression.
If the credit crisis continues, it is highly likely that an American regional or national bank will fail. Which bank do you suspect will be the first to fall?
Banks still do fail.
Northern Rock Looks Set To Be Nationalised - The MoneyOutlet.co.uk (http://www.moneyoutlet.co.uk/2008/01/northern-rock-looks-set-to-be-nationalised.html - broken link)
unless something crazy happens I don't think any of the banks will fail. I think American Govt will make us tax payers bail them out.
If the feds have cut rates a few times now why are the banks not passing it on to the subprime borrowers, so they can at least afford payments and stay in their homes ?
Or is that not how it all works !!!
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