The Second Wave

The second wave of many bank failures is now here. Last year, 25 banks failed. 77 banks have already failed this year. On Friday another large bank, Colonial BancGroup, is now being gobbled up by one of its rivals BB&T. The troubled Colonial was closed earlier by state regulators and a federal judge froze its $25 billion in assets. BB&T is now purchasing $22 billion of Colonial's assets.

Colonial is the sixth largest bank in US history to fail, and by far the largest of 2009 failures. 4 more regional banks also failed on Friday, two in Arizona, one in LasVegas, and one in Pittsburgh.

What does this have to do with the economy or the public? Banks typically fail before violent economic upheavals. They are usually a strong warning of things to come. The FDIC was created to protect deposits in troubled banks. They have raised their protection to $250,000 per depositor. However, what happens if the FDIC runs out of money?

On July 18, 2008, I posted a blog titled "The FDIC" and went into detail about what it does. The FDIC has $49 billion in funds to protect troubled banks, but insures more than $3 trillion in deposits. Is that really enough? The fund took a $35.1 billion hit in 2008, and an additional $4.3 billion decline in the first quarter of this year, leaving it with assets of only $13 billion as of March 31. But most of last year's decline was due to $25 billion the agency set aside to cover future losses.

Last year, financial behemoths such Bear Stearns, Washington Mutual, and Indy Mac all failed. The trickle down effect are now hitting the medium and smaller banks. All of this leads to consolidation. The bigger banks are gobbling up the smaller banks. How much of the government's TARP funds are being used to buy up other assets, rather than loan it to consumers and businesses to get the economy moving again?

My last post on July 31, 2009 included an article from Dan Caplinger about the ultimate sucker's rally that was forming over the last 5 months. In it, he compared the current times to the Great Depression and what happened in early 1930 after the horrendous October market drops of 1929.

I also did a post on March 17, 2008 when Bear Stearns first failed. The next day I reported on how the Federal Reserve responded, and predicted that the stock market will fall in September 2009, six months before it happened! JP Morgan reported to stockholders in March of 1929 to get out of the stock market before the October crash. In early 1930, the market rallied as pointed out by Dan Caplinger. Sounds familiar, doesn't it?

Many times I've pointed out in this blog that history repeats itself. Why? Because the manipulators that have used scenarios already have a model to predict behavior and consequences. The action created in early 1930s was to ultimately acquire more than two thirds of the farms of America and make the farmers tenants on their own lands.

In this century's Great Depression, the aim is different, but similar. Their aim this time will be to grab as much residential and commercial real estate as possible. Once a majority of homeowners are renters again, their level of control will be greater and they will have another piece of their plan is place. That is how it is in most of Europe.

If this sounds too far fetched, go back to the week of August 4, 2008 in this blog where I shared John Loeffler's article "The Sad Road to Socialism". Isn't Obama getting criticized for being a socialist?

These bank failings again only act as a warning. Bloomberg reported yesterday that more than 150 publicly traded U.S. lenders own nonperforming loans that equal 5 percent or more of their holdings, a level that former regulators say can wipe out a bank’s equity and threaten its survival.

The biggest banks with nonperforming loans of at least 5 percent include Wisconsin’s Marshall & Ilsley Corp. and Georgia’s Synovus Financial Corp., according to Bloomberg data. Among those exceeding 10 percent, the biggest in the 50 U.S. states was Michigan’s Flagstar Bancorp. Are these the next victims in the near future?

On August 8, 2008, I shared excerpts of John Loeffler's article "What Will Stop It?" Here are a couple reminders.
Americans have enjoyed so much freedom for so long, they have forgotten that freedom is a fluke in the history of the world; not the norm. Our freedoms were hard-won over hundreds of years of human tears. The current view that freedoms are somehow self-sustaining and "obvious" ignores a primary rule of the political universe, well established in human history: governments and those in them always gravitate toward power, money and control; power for themselves, confiscating money and property from their people, who then have to be controlled lest they protest too much.

The founding fathers thoroughly understood this, having experienced a lack of protections first hand. They understood that government is a necessary evil, not a paternalistic good. In assembling the Constitution, they knew that only a clear statement of citizens' rights would prevent power money and control from having their way.

Every one of our rights was established to protect individual citizens, the minority against the majority and to block abuse of power. "Shall not be infringed" was designed to prevent government encroachment; not as a guide for a "delicate balance" between "liberty" and "security." Delicate balances always collapse uni-directionally toward power, money and control and away from individual freedom!

In a free society, rights protect the individual from the government. In a dictatorship, rights protect the government from the people. If enough legal precedents for end-runs of all the protections contained in the Bill of Rights are allowed to continue unchecked, where will those precedents be taken by future leaders when all protections have been dismantled? What will stop the tyranny that will invariably follow? Nothing.


In essence, when a government goes from being a protector of private property to a plunderer of it, it places itself on a course of chaos, economic ruin and its own ultimate self-destruction.

Are we concerned enough to take action?

As always the choice is yours.

Here is a lesson from Biblical times of Nehemiah.
When I heard their outcry and these charges, I was very angry. I pondered them in my mind and then accused the nobles and officials. I told them, "You are exacting usury from your own countrymen!" So I called together a large meeting to deal with them and said: "As far as possible, we have bought back our Jewish brothers who were sold to the Gentiles. Now you are selling your brothers, only for them to be sold back to us!" They kept quiet, because they could find nothing to say.

So I continued, "What you are doing is not right. Shouldn't you walk in the fear of our God to avoid the reproach of our Gentile enemies? I and my brothers and my men are also lending the people money and grain. But let the exacting of usury stop! Give back to them immediately their fields, vineyards, olive groves and houses, and also the usury you are charging them—the hundredth part of the money, grain, new wine and oil."

"We will give it back," they said. "And we will not demand anything more from them. We will do as you say."

Then I summoned the priests and made the nobles and officials take an oath to do what they had promised. I also shook out the folds of my robe and said, "In this way may God shake out of his house and possessions every man who does not keep this promise. So may such a man be shaken out and emptied!"

At this the whole assembly said, "Amen," and praised the LORD. And the people did as they had promised. Nehemiah 5:6-13 (NIV)

If you have comments or questions, please feel free to contact me at the address below.
Email: DeltaInspire@hushmail.com