Servias Ministries Blog

Year to date:  The FDIC has closed 146 banks.

2007 to date:  311 banks.

Latest Details

August 6, 2010 to November 12, 2010:  38 Banks

Stated Assets:  $13.78 billion

Deposits:  $11.97 billion

FDIC’s estimated cost of closing all 38 banks:  $2.72 billion  (23% of deposits)

FDIC Year to date total estimated losses:   $21.6 billion.

Loss Share Agreements

Loss sharing is a feature that the Federal Deposit Insurance Corporation (FDIC) first introduced into selected purchase and assumption transactions in 1991. Under loss sharing, the FDIC absorbs a portion of the loss on a specified pool of assets which maximizes asset recoveries and minimizes FDIC losses through least-cost approaches. Loss sharing also reduces the FDIC’s immediate cash needs, is operationally simpler and more seamless to failed bank customers and moves assets quickly into the private sector.  Simply put, the FDIC may suffer more losses if the underlying assets degrade further.

In the most of closures (30 closings out of 38), the FDIC entering into loss share agreements covering a high percentage of the assets taken over by the successor banks. In connection with these 30 closings, the FDIC entered into new loss-share agreements covering an additional $8.2 billion in assets.

That brings the total face value of assets covered by FDIC loss share agreements up to about $189 billion. Loss share agreements typically guarantee at least 80% of the value of assets over a period of eight to ten years.

This is “quantitative easing” being practiced by the federal government. This defers the day of reckoning when banks are forced to reconcile the inflated condition of their balance sheets.

Some Simple Math

Declared assets: $13.78 billion

Deposits of $11.97 billion

FDIC estimated closings cost:  $2.72 billion

True value of Declared Assets: $9.25 billion

Overstated value of Assets:  $4.53 billion (49% of Declared value)

Neither you nor I could get away with overstating our assets in order to get a mortgage (unlike 3 to 7 years ago).  Any overstatement would be classified as fraud, especially doubling the value.

Specific examples:

Maritime Savings Bank of West Allis, Wisconsin: stated assets of $350.5 million and deposits of $248.1 million. The FDIC estimated its closing cost $83.6 million. Overvalued by 113%.

ShoreBank of Chicago, Illinois: stated assets of $2.16 billion and deposits of $1.54 billion. The FDIC estimated its closing cost about $370 million. Overvalued by 84%.

Pace of Bank Closings Artificially Slow

The FDIC’s closure of 38 banks over three months is by no means an insignificant number. However, in the context of the FDIC’s overhang of troubled banks, it suggests the pace of bank closings is being kept artificially low.

As of April 2010, there were about 425 banks operating under serious FDIC enforcement orders that called into question the banks’ solvency. Since then, upwards of 25 new banks have come under such orders each month.

Therefore, closing 13 banks a month has done nothing to reduce the backlog of troubled banks operating in the Country. That backlog could only have grown.

Most likely, the pace of bank closings had been held back artificially by the need to keep up appearances for the benefit of the mid-term elections. With those now behind us, I would expect the pace of bank closings to accelerate considerably.

The last five decades converted Ford from a manufacturing company who dabbled in credit to a bank who built cars.  The F.I.R.E. economy (Finance, Insurance, Real Estate) resulted from the move away from the gold standard.  Unrestricted money creation attracted the corporate treasurers to the profits of financial engineering.  GM made more money in it GMAC lending unit than it did building cars.

The housing bubble was a debt based bubble.  When the housing prices fell, the debt level did not and the banks do not want to book the loss.  They want the consumers to absorb the loss instead, equal to about $1 Trillion per year.  We need a banking system but the banks moved away from their original mandate and became aggressive investors.  Their aggressive behavior created huge losses and they don’t want to be held accountable.  High unemployment hinders the ability of borrowers to pay back the inflated loans and most are now considering default.  That is the dilemma.

The Federal Reserve is trying to resurrect the broken FIRE economy but should be focused on creating new jobs by building a new energy-efficient infrastructure.  The FIRE economy is history.  The Transportation, Energy, Communications, Infrastructure (TECI) economy should now be the focus.

$300 Fluctuations?

Gold lost $40 on Friday and silver lost $1.64, about 5%.  But silver is up 54% for the year.  This metals bull market will try to buck timid investors off its back.  Was anything solved at the G20 summit?  No.  QE2 (Quantitative Easing #2) will push the dollar lower but there will be rallies on the way.  The Fed will use foreign intervention to keep the dollar from tanking immediately.  They want the dollar to decline, but in an orderly fashion.  The dollar rally this week needed to happen as the President participated in talks at the G20 summit to project “confidence” in U.S. policy.

The Banking System Flush

For those unfamiliar with how regulators process insolvent banks, it would be helpful provide a little discussion.  Regulators audit banks on an annual basis.  They track performance ratios on a continual basis.  When banks become weak, the regulators start looking for suitors to take over the bank.  This may take many months to solve the problem.  The regulators closely monitor the bank and keep it afloat while attempting to find another bank or a qualified group of investor to acquire the bank.  This allows regulators to “manage” bank closures so that it does alert the public to the seriousness of the insolvency in the system.  Thus a systematic approach to bank closure that manages perception is used.  Three banks were closed this week and more will be closed in coming weeks.

Living Beyond Our Means

Cut spending for others, but not for me.  The U.S. is spending beyond its ability to pay back the money it borrows to satisfy the accustomed lifestyle.  Americans are unwilling to choose austerity as a solution to the problem.  The only other solution is to inflate our way out of debt.  That is Ben Bernanke’s job.  Obama knows it, the Chinese know it, the Fed knows it, and now you know it.  What can we do as individuals?  Shift some of our assets into precious metals, store food for future consumption, pay off debt, reduce our monthly bills, and simplify.

The manipulation of the silver market has long been a frustrating drama for those of us who watch the metals prices on a daily basis.  Over the last several years, there have been many interviews and articles about the observed manipulation but it fell on legislative deaf ears.  It would appear that the time has finally arrived for the perpetrators to be brought to justice.  See: http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8116143/Whistleblower-accuses-HSBC-and-JP-Morgan-of-silver-futures-scam.html

The problem is one of complexity and jurisdiction.  When traders are in the New York and London, it is not easy to follow the money trail.  The brightest financial engineers are not working for the regulatory agencies since they can make more money working in private industry.  Add a whistleblower to the mix, and you have some real potential.  The whistleblower can lead the regulators right to the detailed records that prove the crime.  Most likely the whistleblower was complicit in the crime but was shafted by the employer.

When gold & silver were used as currency, a 15 to 1 ratio was the standard valuation between the two metals.  Once we went off the gold standard, this ratio averaged 55:1.  That may change soon.  If we allow for a 30 to 1 ratio. silver should move to $50 per ounce soon.  However, if gold moves to $3,000 as many predict, $100 silver is not unrealistic.  Related silver stocks stand to gain rather nicely from this move.

The Day of Atonement was on the 260th day of this year and is the day Jesus was baptized and marked the trip to the wilderness.  On the 300th day of the year which marked the ending to the time of testing, the CFTC announced the investigation to the manipulation of silver (to the downside).  Silver represents redemption in Scripture.  The Ark was 300 cubits in length, another number of redemption of mankind.  Selah.

What a good looking chart below:

It seems that nobody has preached on this forty day cycle yet.  Jesus was in the wilderness during the Feast of Tabernacles takin’ care of business.  It wasn’t until His time of testing as a mature man (30 years old) could He celebrate that feast day.

The Chinese people are expected to buy 18 million new cars next year whereas the demand in the U.S. will be about 11.5 million.  Other developing countries are also on the upswing of energy consumption.  We are currently in the shoulder months for gasoline and natural gas but the oil prices have remained firm.  It appears that the market understands the increasing demand of the Far East and the inability to substantially increase global production of oil.

I expect an oil shock of some point within the next 48 months.  Suddenly the market will wake up to the fact that demand continues to outstrip supply.  As the price of oil rises, other energy prices will rise as well.  Energy supports growth, lack of energy resource restricts it.  The price of oil relative to other commodities has shown a strong correlation to U.S. economic cycles as being a primary reason for the rise and fall of the economy.

It took 24 months for the electorate to determine if Obama could turn this economy around.  All indications are that the time is up and tonight will tell the story.  Economies do not “turn on a dime” but sustained unemployment and fear of recession cause society to demand change.  The problem is that neither Democrats nor Republicans have the answer.  The mindset of the American people must change.

The Far East wants a standard of living similar to the rest of the world.  The problem is that the rest of the world attained the current standard with cheap energy and cheap food.  These commodities are no longer cheap.  The current infrastructure will no longer support the ways of the past.  Mankind must change.  Our Heavenly Father has all the answers and His Love will release those answers for the good off men whether they are His friends or enemies.  Our focus and direction should be toward His Heart.  His elect will have the answers as they mature into their calling.

$100 Oil/Currency War

We may soon see $100 oil based on the decline of the Dollar.  Global commodities are pushing up prices in terms of U.S. Dollars.  Bernanke and his cohorts want to see inflation but the rest of us have been experiencing inflation in our everyday lives.  See: http://www.bloomberg.com/news/2010-10-15/opec-members-seek-100-a-barrel-oil-as-sliding-dollar-cuts-real-revenue.html  The US desperately needs a cheaper currency, but so do other countries.  There is a race to the bottom and gold & silver will reap the benefits.  The average person will be the loser due to the depreciation of savings.

No increase for Social Security Recipients

Once again, the “cooked” statistics have slapped our seniors in the face.  The measurement of inflation has been diluted by non-essential products and services that it has indicated to us there was no inflation over the last 12 months.  I wonder what country they live in?  We received notice of an increase in our health insurance premium, just like clockwork.  SGS places September’s consumer inflation level at 8.5% which is certainly a more realistic number.  See http://www.shadowstats.com  If the government used these numbers, the increase in Social Security would cause the agency to run out of money sooner than currently projected.    How can our seniors survive on the same check as last year?  What little savings they have, they receive virtually no interest.  There came a famine in the land!

Looming Energy Crisis

Within 48 months, I project the energy crisis revelation will go mainstream.  At that point, the gas guzzlers will become worthless.  We are hoping to have a Prius in the garage by the end of the month.  Once the mainstream media figures out the global production has peaked and in decline, fuel efficient cars will be in short supply and the discounts will evaporate.  Am I willing to give up roominess for geographic flexibility?  Yes.  I expect higher prices or a deeper recession.  Either way, we are reducing our relative energy expense and exposure.

Banks’ Impact

To add insult to injury, the banks are pleading for mercy in their mortgage-backed security crisis.  The problem is that someone is going to lose wealth at the end of the day.  Will it be the banks, the pension funds and other investors, and/or the US taxpayers?  The music has stopped and the party is over.  I expect we will be hearing cries to Heaven before long.  We’re in a multi-front crisis.

At 9:06 AM October 13th, I was sitting at my home office desk on the phone with an associate.  Suddenly, the entire house (including the floor) shook!  An earthquake!  The United States Geological Survey was quick to post the epicenter located near Norman, Oklahoma, home to the OU Sooner football team:

The International Headquarters of Servias Ministries had just experienced a major earthquake, 5.1 on the Richter Scale.  Was this the end?  This isn’t California, ya know.  Should I run outside before aftershocks arrive?  Do I have enough food and water stored for such an event?  Now where did I place that emergency plan?

My assistant who works about 4 miles northwest of me immediately called to check the damage.  Her dogs were pacing and whining.  Uh oh!  Suddenly, I couldn’t focus on the business at hand.  Was I in shock?  My wife (conveniently out of town… did she know what was coming and failed to alert me) called to check on me.  I wonder why she asked about the status of my life insurance policy?

What about the headquarters infrastructure damage?  Was my electricity still on? Check.  Was my server farm still operational?  Check.  Telecommunications? Check.

What will be the economic impact of this quake with such a fragile economy?  Only time will tell.  Damage assessments are already being reported by various state and local agencies.

Whew!  It looks like we dodged a bullet!   Below is a picture of the devastation near the epicenter of the “Quake of 2010”:

By the way, even though the local Oklahoma Geological Survey originally measured the quake at 5.1, the USGS subsequently downgraded it to a 4.3 but we still made “the list”.  See http://earthquake.usgs.gov/earthquakes/recenteqsus/Quakes/quakes_big.php

Wall Street and the various policing agencies are becoming increasingly exposed to the chopping block.  As the media continues to focus and dissect the underlying issues in the mortgage-backed securities bailout, I suspect there are many banksters having sleepless nights:

This article posted late today confirms my point about all mortgage loans, current or delinquent: http://finance.yahoo.com/news/Foreclosure-Fraud-Its-Worse-cnbc-130283304.html?x=0&sec=topStories&pos=4&asset=&ccode= 

Unbelievable!

We are in a serious mess.  Greed has cornered itself in a box canyon and I expect a shootout soon.  The banks sold trillions of dollars of mortgage-backed securities and failed to “perfect” the title transfers as well as shoddy handling of paperwork.  This is not a new revelation but has been brewing for two years.  In the meantime, banks tried to get HB 3808 passed through Congress knowing that the chickens would come home to roost.  President Obama would not sign this bill into law, especially before the November 2nd elections.  He is the only one who would be on record, as noted below.

American Families versus The Big Banks

You have three direct parties in the MBS issue: the borrower (average American family), the lender (Big Investment Banks), the investor (pension funds, other banks, Federal Reserve[after disclosure of the toxic debt]).  Why do pension funds exist?  For the American family.  Who pays for the Fed’s actions?  The American taxpayer (or family).  Ultimately, this issue is between the Big Banks and the American family.  The problem is that the American family does not seem to be well represented in this issue.  The banks know this.  Congress is charged with the fiduciary duty to represent the welfare of the American family.  The banking industry is the largest contributor to Congressmen re-lection campaigns.  Hmmm.

U.S. Congress versus the American Families

House Bill 3808 was an attempt to make it easier for lenders to bypass the notarization process by allowing “electronic” notarization.  I don’t know about you but when I executed a mortgage on my house, I had a mountain of paperwork to review and had to sign my name more than 10 times on various documents to insure that there where no loopholes for me to get out of my mortgage debt in court.  The mortgage company attorneys made sure of that.  However, when it came time to sell that mortgage paper upstream the banks often bypassed the same pain of paperwork they forced on the borrower.  Since they knew they had cut corners, they wanted Congress to “fix” the problem with a new law- HB 3808.  It is interesting to look at the apparent deception surrounding this law.  When I attempted to find out if my Congressmen voted for the law, this is what I found:

Apr 27, 2010: This bill passed in the House of Representativesby voice vote. A record of each representative’s position was not kept.

Sep 27, 2010: This bill passed in the Senate by Unanimous Consent. A record of each senator’s position was not kept.

Source: http://www.govtrack.us/congress/bill.xpd?bill=h111-3808  See for yourself!  I sent an email to each of my Senators asking their position on this bill.  I suspect I will not receive an answer until after November 2nd.

The Law of Unequal Weights and Measures demands restitution.  Though I don’t condone those who borrowed above their means, the banks were the experts in the mortgage transaction and deceived the borrowers into thinking they could qualify for the loan.  Now that the mainstream media is finally reporting on this travesty, those in power will be forced to do something about it.  Will the American public finally wake up to the exploitation that has been occurring for decades? 

The following interview provides exposure and clarity to the issue at hand: