Saturday, February 14, 2009

The bleeding continues

Four more banks have gone kaput on Friday.

Pinnacle Bank of Oregon, Beaverton, OR February 13, 2009 February 13, 2009
Corn Belt Bank and Trust Company, Pittsfield, IL February 13, 2009 February 13, 2009
Riverside Bank of the Gulf Coast, Cape Coral, FL February 13, 2009 February 13, 2009
Sherman County Bank, Loup City, NE February 13, 2009 February 13, 2009

That's 13 banks in the last month and a half. I heard that before this is all over some 1000 banks will either be bought or simply vanish. I hate to sound like Dr. Gloom (there's already a blogger named Dr. Doom) but this is reality. There's too many bad loans not getting paid and not enough capital or income to cover the losses.

But here's a solution that might help everyone. To get a real value of a house at present go back about ten years. Take the value of the house then and add the rate of inflation which would be a 20 to 30 % increase from that point. That would be fairly close to the real value. Take the new valuation and subtract that from the current mortgage amount. The government gets to hold a note on 1/2 of the difference. The bank gets to write off the other half on an accelerated schedule. The mortgage gets refinanced at new lower rates and new valuation. After ten years the government can sell the note when the home value increases to an acceptable level. The note gets paid back when the home is sold or added to the mortgage when the refinanced mortgage is paid off. Don't laugh it just might work.
Or we could just go with the alternative. Let the foreclosures continue and bulldoze the empty houses thereby decreasing the supply of homes. Lower supply equals higher prices along with bread lines.

I hear they're upping the unemployment by $45. Hey I have an idea. Keep the $45 and get me back to work.
There was a job down in Tacoma, Wa. for meter reader. Something like 6000 people showed up to apply for the job (one opening). And they say we're not in a depression.

Well it's off to a recert class tomorrow. Got to keep you people safe from them tehrrrorists .


BBC said...

Thankfully my place is free and clear and I don't care what it's worth because it's likely I will keep it for the rest of my days.

After that, I guess I still won't care.

Jobs are nice, but at least be thankful for the unemployment. Where is it going exactly? I don't know, but we're on our way.

The Blog Fodder said...

As a Canadian I am always amazed at these funny little banks. We have five big banks, nation wide that have been there forever. The country will go TU before these banks. We also have Credit Unions galore which operate under very tight rules and so don't get into trouble.

Things have hit the fan in Ukraine and I will blog on that one of these days.

MRMacrum said...

Interesting idea for an alternative. What I thought about was not so elaborate. Nor did it cut the losses some like your idea does.

I thought why not just have the government say, "Give us your bad loans. We will work with the homeowners and you guys can cut your losses and move on with what capital you have left." I only say this because at this point, giving them money seems to be rewarding them for bad behaviour. And so far, all that money has not seemed to have any positive effect. They are sitting on it.

I like your idea much better.

BBC said...

Blog Fodder, doesn't matter how strong your banks are, you are dependent on America and it's going to take you down with us.

I love Canadians, but they are as stupid as we are.