FDIC risks $80 Billion in Loss Share Agreements

Every Friday, in just about every bank failure press release, the FDIC mentions a loss share agreement with the acquiring bank. As an example, in the press release regarding Mutual Bank of Harvey, Illinois on July 31st:

As of July 16, 2009, Mutual Bank had total assets of $1.6 billion and total deposits of approximately $1.6 billion. In addition to assuming all of the deposits of the failed bank, United Central Bank agreed to purchase essentially all of the assets.
The FDIC and United Central Bank entered into a loss-share transaction on approximately $1.3 billion of Mutual Bank's assets.
emphasis added

For those interested in every detail, here are the Single Family Loss Share Agreement (page 54) and Commercial Loss Share Agreement {page 89) between the FDIC and United Central Bank (the acquirer).

Calculated Risk: FDIC risks $80 Billion in Loss Share Agreements

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Why Gmail Went Down Today (GOOG)

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Dan Frommer

Google has explained why its Gmail Web mail service went down today. In short, they took a few Gmail servers down for routine maintenance. But its "request routers" -- servers that direct traffic to Gmail servers -- couldn't handle the rest of the load. (Ironically, because of recent changes designed to make the systems more reliable.) And everything stacked up until it crashed.

Not great that Gmail was down, but good that Google is so open about the problem and parts of its solution. We doubt it lost much serious business today. (Especially because the email servers were up the whole time; just Gmail's Web interface wasn't. If actual mail were lost, that'd be a different story.)

Why Gmail Went Down Today (GOOG)

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Britain facing blackouts for first time since 1970’s

By Andrew Porter

Demand for power from homes and businesses will exceed supply from the national grid within eight years, according to official figures.

The shortage of supplies will hit the equivalent of many as 16 million families for at least one hour during the year, it is forecast.

Not since the early 1970s when the three-day week was introduced to preserve coal has Britain faced the prospect of reationing energy use.

The gap between Britain’s energy needs and demand throws fresh doubt on the Government’s assertion that renewable energy can make up for dwindling nuclear and coal capabilities.

Over the next 10 years, one third of Britain’s power-generating capacity needs to be replaced with cleaner fuels. But last night the Conservatives said that Labour had refused to face up to the problem.

Britain facing blackouts for first time since 1970s - Telegraph

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Audit of Fed Now Likely

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By Patrick A. Heller

In a town hall meeting last Thursday, Rep. Barney Frank, D-Mass., who is chair of the House Financial Services Committee, was asked what he was going to do about H.R. 1207, a bill in his committee sponsored by Rep. Ron Paul, R-Texas, and co-sponsored by 282 other representatives.

This bill calls for an audit of the Federal Reserve to be conducted by the Government Accountability Office. As part of such an audit, it is expected that there would be an audit of U.S. gold holdings and trading activities.

To just about everyone's surprise, Frank stated that he was working with Paul to slightly modify the bill to make it possible to gain congressional approval in October. The modifications he wants have to do with eliminating the concern that such an audit might interfere with the Fed's policy-setting abilities.

As this legislation has gained support, Frank had previously been non-responsive to inquiries on this bill. With enough votes in the House of Representatives pretty much assured, Frank's position as chair of the committee to which the bill was referred was the last practical obstacle to this legislation passing Congress.

Numismaster.com

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'The Cold War has ended, but we're still in that mode'

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David McNeill

With a sweeping victory for the DPJ now a fact, party leader Yukio Hatoyama is certain to replace Taro Aso as Japan's leader. The scion of a conservative dynasty and the grandson of a former prime minister, the 62-year-old former academic has raised conservative hackles by promising what he calls a "new deal" in economic, environmental and defence policies, switching government emphasis from big business to consumers and ending Japan's traditional subservience to the US military.

"The Cold War has ended, along with the direct threat from Russia, but we're still in Cold War mode," he told The Independent. "In my home constituency of Hokkaido [in the north of Japan] there are still lots of tanks prepared to counter a Russian invasion. We're being told to show the flag in Afghanistan and put boots on the ground in Iraq, but are we really making a genuine contribution if we just go along with what America says?"

'The Cold War has ended, but we're still in that mode' - Asia, World - The Independent

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The Fed: Secrecy and Moral Hazard

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By James Kwak
According to Reuters, the Federal Reserve recently got a stay of a federal district court’s order that the Fed must reveal details about which banks accessed its emergency loan programs during the financial crisis. The arguments on each side are pretty straightforward. Bloomberg, the plaintiff, is arguing that the public has a right to know where their taxpayer money,* via the Federal Reserve, is going. The Fed is arguing that if it reveals the names, that could trigger a run on those banks, because customers will worry about their solvency; it is also arguing that revealing names now will make banks less willing to access emergency lending programs in the future, taking away an important tool in a financial crisis.
I find both of the Fed’s arguments weak.
I agree that immediate revelation of who is borrowing at the discount window (the Fed’s facility for lending to banks directly) could make creditors worry about a bank, triggering the modern version of a bank run. (Traditional bank runs shouldn’t happen because of FDIC insurance.) But we’re talking about things that happened last year, and the government has done everything it can to convince the public that the banking system is sound again. Even if Citigroup borrowed at the discount window last September, the ample bailouts it has received since then should convince any jittery investors that Citigroup isn’t going anywhere.
That is also something that apparently Barney Frank and Ron Paul agree on – any Fed disclosure should be delayed by several months.
Secrecy and Moral Hazard « The Baseline Scenario

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South Africa: Private Healthcare 'Likely to Implode'

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Chantelle Benjamin
DEPUTY Health Minister Molefi Sefularo extended a reconciliatory hand to the private healthcare sector yesterday, saying that the government would welcome its assistance in implementing the National Health Insurance (NHI) scheme, but warned it would go ahead regardless.
Sefularo told the annual conference of the Board of Healthcare Funders (BHF) at Sun City that the NHI was integral to the African National Congress's health policy and was consequently one of the department' s priorities along with overhauling the health system and improving its management and revitalisation of infrastructure .
"We have made it clear that we are determined to implement our 10- point plan and this health plan of action with speed," he said, adding that the NHI was a big part of that plan. He acknowledged the medical aid schemes' knowledge of the private healthcare sector, saying their expertise and experience would be needed for the implementation of NHI.
He warned, however, that private healthcare and the South African medical aid industry in their present form were "likely to implode because they are not sustainable".
allAfrica.com: South Africa: Private Healthcare 'Likely to Implode' (Page 1 of 1)

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South Africa: Row Looms Over Closed Briefing On Dodgy Arms Sales

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Wyndham Hartley

A confrontation is on the cards tomorrow if Parliament's defence committee proceeds with a "closed" meeting to discuss alleged "dodgy" arms deals approved by the National Conventional Arms Control Committee (NCACC).

This follows the publication in parliamentary papers of a notice announcing that committee chairman Jeff Radebe , who is also justice minister, would brief the committee on arms sales behind closed doors. His attendance at the committee follows the publication last month by the Democratic Alliance (DA) of details of arms sales to repressive regimes.

The weekend press quoted African National Congress chairman of the defence committee Nyamezeli Booi as saying the decision to make the meeting closed was taken after consultation with committee members.

DA defence spokesman David Maynier denied this, saying he was never canvassed on the issue.

allAfrica.com: South Africa: Row Looms Over Closed Briefing On Dodgy Arms Sales (Page 1 of 1)

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11 useful Windows apps that tie in to your GMail account

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by Lee Mathews

Love your GMail account but want to do more with it? If you're a Windows user, there are plenty of great (and free) apps that take advantage of your massive inbox in the cloud!

11 useful Windows apps that tie in to your GMail account

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Why U.S. Politicians Are Ignoring the Budget Deficit

By Robert J. Samuelson

The problem of the burgeoning government debt is mainly political, but the adverse consequences may be economic. The trouble is that we don't know what those consequences may be, when they may occur or even whether they will occur. Without some impending calamity, politicians of both parties recoil from doing anything unpopular that might bring the budget into balance over, say, the next six or seven years. The idea of anticipating and preempting future problems is not on their agenda.

Although the recent surge of budget deficits—the annual gaps between outlays and revenue, resulting in more federal debt—reflects the savage recession, the true cause is political. Deficits allow liberals and conservatives to maintain self-serving public positions. Liberals claim we can have more government (more health care, more education, more transportation) without taxing anyone but "the rich." Conservatives promise that taxes can be cut without depriving anyone (retirees, veterans, cities and states) of existing government benefits.

Neither claim is remotely believable under the assumption that, over the long run, government benefits and programs ought to be paid for with taxes. The truth is that government, again under both parties, has promised far more in benefits than can be covered by existing taxes. Only borrowing could reconcile the rhetorical claims with underlying economic realities. There have been 43 deficits in the past 48 years.

Why U.S. Politicians Are Ignoring the Budget Deficit | Newsweek Newsweek - Robert J. Samuelson | Newsweek.com

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