Who Killed 21 Georgia Banks?

Whiskey & Gunpowder By Samantha Buker August 21, 2009 Baltimore, Maryland, U.S.A. Who Killed 21 Georgia Banks? “It does gall you. Just because we’re a little bitty county doesn’t mean we don’t need a bank. It wasn’t our fault.” — Hazel Bedingfield, 79, who now travels 24 miles for her Social Security payment at her new bank You deposit your paycheck on Friday and can’t get money out on Saturday. But don’t worry, the FDIC will cut you a check on Monday morning. Your county commissioner tells the evening news: “The bank failure opens up an opportunity for another bank to set up here. Until then, customers will have to find another bank in a surrounding county.” ~~~~~~~~~~~~~~Special~~~~~~~~~~~~~~ “On Monday the 24th at Noon I’ll reveal the next major Bank Stock set to CRASH.” I’ve caught another major bank lying about being able to pay their massive $1.5 billion dividend scheduled for 2009. You could triple your money by December if you take my advice. Click here to read more. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Your bank might have been built in 1905. It may have survived two world wars and a Great Depression. It was sold in 2000 and rebranded when the new owners moved headquarters to Atlanta…you can guess the rest. This happened to citizens in Gibson, Ga. And it could happen to you tomorrow. The Feds raid your bank on Friday…They escort the CEO out. Then they empty the vault. Right now, aren’t you wondering how much longer will this go on? The short answer: about $13 billion worth of FDIC intervention. I’m wondering if that’ll be enough. Gargantuan, unfounded suburban growth ringing ‘round the Peach State’s metropolis Hotlanta takes the brunt of the blame for bank collapses left and right. Especially those construction loans. A typical example of why these failed, according to FDIC investigation: Over 75% of the loan money was handed out before a single day of on-site construction began. But here’s a big reason: Banks invest in other banks. Some banks never see nice depositors walk up to their ATMs or get lollipops at the counter. The wholesale bank’s only clients are other banks. If some of those big-ticket clients fold, well, there goes the bank. Silverton was just such a bank, with about 1,500 client banks in 44 of the 50 states. This earned Silverton the nickname “the Mini-Federal Reserve.” The trouble came from the chunks of real estate loans Silverton sold to other banks in “low-growth” areas: deposit-rich regions that are “loan poor.” Guess that means places that aren’t Nevada, California or Georgia. It didn’t stop Florida Community Bank from adding a stake in the now-defunct Silverton bank to its $978 million dollar asset base. And the FCB ranks among the weakest financial institutions in Florida. We are not surprised. Even Atlanta’s Federal Home Loan Bank, as 2009 dawned, was straddling the mere 3% capital ratio that would set a regulator’s teeth on edge. (The culprit there was the unwinding private-label mortgage-backed securities.) Now get this. The Georgia banks facing FDIC conservatorship often depend on loan advances from the Federal Home Loan Bank of Atlanta to stay afloat, and the FHLB gets paid first, before depositors — costing the FDIC even more millions — even if the collateral isn’t there to do it. Georgia regulators OK’d any fly-by-night bank startup. After all, who didn’t want a cut from making loans to real estate developers? At the start of the housing collapse, Georgia had 334 banks. That’s more than in California, which has four times Georgia’s population. Dan Amoss, the editor of Strategic Short Report, points a finger at this failed bank and offers some advice: “A perfect example is Integrity Bank in Georgia, which should have been shut down long before it was allowed to attract new deposits with high CD rates.   “Also, note to Whiskey readers: If your CD rates seem too good to be true, your bank may not be healthy, and you may have to deal with the hassle of not accessing your money while the bank is resolved.” ~~~~~~~~~~~~~~Special~~~~~~~~~~~~~~ What Does the Next Big Bank Shakedown Mean for You? Profits, if you act before Monday, Aug. 24. Dan has quite a knack for spotting bad banks. His Strategic Short Report readers bagged gains of 162% betting against Allied Capital, and the whopping 462% winner shorting Lehman Brothers. On Monday, we’ll release his latest short-financial play…available to bar patrons for just $1. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ All last week, Dan and I fired e-mails back and forth about the next U.S. bank to fail: The Great Southern behemoth: Colonial BancGroup. Then, on Friday Aug. 14, it finally happened… BB&T to Swallow Colonial Whole: What Bones Will It Spit Out? Colonial tapped the FDIC’s matchmaking skills to shack up with BB&T. Expect this marriage to look like the 20-something who marries the wealthy old man because she can’t wait to max out his credit cards. Dan bet me last Friday that dilutive stock offerings were on the way. Sure enough, come Monday, BB&T offered 26.6 million brand-new shares to some willing dupes. Like the other Southern banks we’ve been talking about, Alabama-based Colonial’s arms stretched into bad places like Georgia and Florida. And here’s what helped shake Colonial’s foundation. They call it warehouse lending. That’s short-term financing that independent mortgage bankers relied on to do business. Fannie, Freddie or Ginnie did not guarantee these loans. Back in the 2007’s warehouse-lending heyday, the market was a $200 billion business. Lately, of course, the rich well dried up, to just $25 billion in lending. Colonial held the big 25% chunk of it. So now that it has dropped out of the race, who’s left? The other warehouse-lending trendsetters already lie in the grave. The biggest tombstones: Countrywide and WaMu. And there’s a fresh hole dug for a new occupant: Guaranty Bank of Texas, which issued the FDIC red alert last month. Finally, we have National City (acquired by PNC). ~~~~~~~~~~~~~~Special~~~~~~~~~~~~~~ This ill-fated move by PNC led to 220% gains for readers who took Dan Amoss’ advice. He told them exactly how to place one simple downside bet. You could join them for the next round. His next “troubled bank” play comes out on Aug. 24. Be the first to read his report here. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ What does this tell us? If all the big enablers for these loans are shutting up shop under duress, it makes you think there could be something wrong with the product. Instead of letting the free market eat the gross error of overexuberance, the industry is lobbying Washington to give government-backed Fannie Mae, Freddie Mac and Ginnie Mae a bigger role in warehouse lending. Don’t Let the GSEs Take Over Let’s flash back to a nice piece of advice that still holds true for Fannie, Freddie and fast-growing Ginnie. Back in March 2002, the prescient Chris Mayer (before he joined the Agora family) wrote a missive for Mises.org called “Mortgage Market Socialization.” Take a look at this bit of prophecy: “Forgotten is the truism that periods of prosperity necessarily precede periods of crisis. Thus, caution becomes heresy and optimism becomes the new religion. “The only way to correct this problem is the same way all socialistic practices are corrected — the government’s involvement must be severed completely. Just because the GSEs have led a charmed life so far is no reason to infer that their future will always be so bright. Socialism is not dead; it is alive in institutions like the GSEs. “The longer the GSEs are able to expand as they have, the more certain it becomes that someday taxpayers will have to bear the cost of such excess. Like Russian roulette, the longer you play, the more certain it becomes that you will bear the risk for playing.” I don’t know about Congress, but I think you Shooters would be eager to put down this particular gun. We’ve already paid about $86 billion in bailouts and what’s it gotten us? But since Fannie and Freddie backs or owns more than half of the single-family mortgages — probably yours — how about we just don’t load any more bullets? Here’s the directionless drivel from Tim Geithner, recently before the Senate Banking Committee, as reported by Bloomberg: “Fannie Mae and Freddie Mac will remain in limbo, as the U.S. Treasury secretary said the government doesn’t have time now to deal with the future of the two mortgage-finance companies it seized in September. “We did not believe that we could at this time — in this time frame — lay out a sensible set of reforms to guide, to determine what their future role should be. We’re going to begin a process of looking at broader options for what their future should be… “We just didn’t think it’s an essential thing to do just now, but it is an essential thing to do.” Doesn’t this fill you with confidence? You see, Shooters, this whole mess began at an exclusive resort island off the coast of Georgia…The ol’ Jekyll Island Club set the foundation for sopping up and propping up incompetence in 1913. Regards, Samantha Buker P.S.: So what’s the next big bank to fail? Dan Amoss has the goods in a report he and I are putting out on Monday, Aug. 24. He expects the bank to announce a surprise on Tuesday, Aug. 25 that sends shareholders running for the exits. I suggest you act on his advice. The last time Dan found a weak link in the banking chain, his readers raked in 462% profits…before the Federal Reserve and the Treasury stepped in. As promised, today we return to the hollering. Prepare yourself… I hate telling you this, but as a Canadian, Nationalized Healthcare is great, and certainly could save your life!! From my experience, just two years ago I needed an emergency four-way Bypass, which took 6.5 hours and kept me in Hospital 11 weeks, and I am here to talk about it!! The best thing, it cost not one cent!!! The best thing that could happen to Americans is Obama Nationalizing your whole System!! Hospitals should NOT make a profit, ever!!! Hoo boy. Ok. I’m glad you’re alive. Really. But that bypass cost plenty. It just didn’t cost YOU anything. I’m glad you can live with that. Fortunately I have not had to use our system personally but as a 74—year-old I have seen MANY examples of young and old who have received outstanding care in hospitals in the Toronto area.   My wife slipped and broke her wrist in December of 2008 and the caring and devoted service she received was outstanding. While I was in the waiting room a gentleman sitting beside me was complaining bitterly about the cost of car parking at the hospital. When I reminded him that his wife was about to receive hundreds if not thousands of dollars of FREE medical attention he shut up. Point is that there are always exceptions to everything, but generally speaking our Health Care system works. I have 7 fellow seniors who are alive to-day because of the system and the care they get in it. They get care they need when they need it.   For the so called “ Special Reports “ on the negatives of Doctors and nurses leaving Canada, they don’t report how many have returned in the last 5 years because they realize they jumped the gun. Re negatives about Canadian Health care, it reminds me of the old saying, “don’t eat that Elmer, that’s Horse Sh...t ! Same deal. I’m not arguing that some people — maybe even a great deal of people — don’t get perfect care under a nationalized system. This is why I don’t like squirming around with numbers; statistics can be used to make a point (lie) by either side of a debarte. No, what concerns me is natural law and morality. You can’t get something for nothing. You can think you are for a little while…but the costs are there and they’re piling up…and eventually the whole delusion gets exposed for what it is. Dear Mr. DiLorenzo, All the bad things you write about the Canadian and other national heath systems may be true.  But what solution do you have for the 47 milions American that have no heath insurance at all, and the great many more that are underinsured? Tough noogies. Seriously…who says you get medical treatment? At what point did medical care become a basic right? And how does medical care come before food care and housing? Seems to me that eating is the very first requirement of health, yet no one is calling for universal food care. It seems sufficient to most of the bleeding hearts in the U.S. that only the descendants of slaves get to eat for free and live in apartments they don’t pay for. But absolutely everybody should have access to every bit of medical technology available. (For the record, I don’t have any medical insurance because I refused the stuff. There’s an interesting story behind why, too, and I’ll share it with you in an upcoming article.) Oh, do get a grip, Gary. Universal Healthcare is not socialism. Nor is it lethal, or even a state monopoly. I live in Ireland, where we have universal care we all pay for it out of general taxation. We also have the option of paying for private insurance, from a variety of firms, and more than half of us do. One provider, the largest, is Voluntary Health Insurance, is a not-for-profit, and more than half of us have it, too. I have lived in several EU countries and experienced their public healthcare; The best is the French, followed by the UK’s NHS. I was also expertly looked after in Tuscany. Our medics are well paid, too. My GP earned north of €250k from public practice last year. Not bad when you bear in mind that her expensive medical education was paid for by the taxpayer. Our public salaries for Consultants, which is what we call  specialists, are more than most US medics dream of. There is nothing to beat not having to worry about what happens if you fall ill; having experienced what passes for competence in yours, where hugely expensive and unnecessary procedures were carried out, For a twisted ankle. Where the first question was ‘what insurance ya got?’, and they’d never heard of Lloyds, thinking our Travel Insurance was with Travelers. Don’t forget you already have socialised medicine, called Medicare and the Veterans system. One of the mot amazing things I’ve seen recently is the town hall meeting with lots of Seniors opposed to Obamacare and the State being involved in healthcare who also put their hands up in support of Medicare. Do not be afraid. Health is a human right. See what I mean? A human right?? Not being tortured, raped, killed or stolen from is a human right. Insisting other people pay for anything you use — even stuff you really, really need, like food, housing or doctor visits — is not. The most irritating aspect of the “health care debate” is the notion that health care is as important and possesses as great a value as oxygen, food, clothing, shelter, and don’t forget... freedom!  Though it has importance it is nowhere near as important as the aforementioned.  That is how any boondoggle is sold to the sheeple taxpaying entity.  “You need this and I will get it for you” or better phrased after political interpretation “I need you to need this and you will get this (the transfer of tax payer monies to bureaucracies and select individuals/groups of interest) for me”.  The american public is running out of money and oh yes... petroleum jelly. That was from a Texan. Of course. Thank you, Shooter. Oh lawdy! This faith in politics and the nation-state nanny! I thought it was over. A huge chunk of humanity tried to have the state take care of all their needs. They managed to fake it for seventy years. Hell, it looked great on paper! But it was born in tyranny and ended in collapse. I don’t pretend for a minute that the U.S. has been a bastion of free market liberty and self-determination for the last century…maybe it was only so for a few minutes after the signing of the Declaration of Independence… …But it still makes my insides boil a bit when people here clamor for “just a lil’ bit o’ socialism.” Just a little universal healthcare…to go with the food and housing for unwed mothers…and the inflation of the currency to bail out big banks…I’m sorry, but I can’t talk about this anymore. But I rant for nothing. You’ll get your universal coverage. Quality will go down while costs go up. It won’t happen immediately. We liberty-lovin’, free market types won’t get to say we told you so as soon as Obama signs a piece of paper. But like all delusions, it will be entered into with exuberance….but it will end in misery. In the meantime I get to collect a paycheck to lament about it publicly. Lucky for me there’s a market value on indignation and ire. Your conclusion that socialized medicine will ‘kill’ some of us and result in inferior care for the rest is, to put it kindly, totally unsupported by the facts. In every healthcare study America ranks at the very bottom of all developed countries for overall health care in every single parameter (infant mortality, life expectancy, treatable diseases etc.). Yet, we spend over twice as much per capita as the top rated country (France) and we still have 50 million uninsured !  What do these other countries have that we don’t ?   - universal health care (socialized medicine).  Linda Brady Traynham reminds us: “A typical Statist canard is that our health care systems ranks 19th in the world; this is true only because the stats were massaged in the case of the USA to include automobile accidents and homicides, most of which are the result of the leisured welfare class. When the U.S. is judged on equal terms our health care is the best in the world. The argument is over who is going to pay for it.” Right. Who indeed. The liars in the nice suits get the votes by promising you the moon on a platter. But you can’t vote prosperity and health into existence; you have to work for them. There’s a lot more mail in my inbox concerning this and it’s still pouring in as I type. We’ll discuss this more on Monday. Enjoy your weekend. Regards, Gary Gibson Managing Editor, Whiskey & Gunpowder gary@whiskeyandgunpowder.com One Famous Expert Warns, "There Will Be Panic" The 10 Shocking Reasons for China's Pollution Problem Geothermal Energy: Investment in the Future Here's One Coal Stock That's Set to Skyrocket Investing in Exchange Traded Funds The Real Story Behind the True Gold Bull Market Follow the Whiskey & Gunpowder on Twitter, here. Whiskey & Gunpowder, a free e-letter, is the independednt investor's daily guide to gold, commodities, profits and freedom. 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