Ole
Man Ozark's Musings on Money and Banking
It is hard to believe
that the older I get,
the more I realize how much out of touch with the mainstream I have
become. In the early '90s I would have bet my small net worth that Slick
Willie would have never gotten the nomination, much less become a
two-term Prez. But, he was around the Ozarks so much that we all got to
know him way too much. Guess that’s indicative of what I know ‘bout
fly fishin’ – while having thoughts of “that woman” on the Great
White River, huh? Shucks, nothin’s biting, anyway. Humm… might as
well wade over to the bank and have lunch, a beer, and write a few
musings with my financial calculator…. What a great day on the White!
The trout still in the water, and no flies in the trees! Nevertheless, I find
myself out of the mainstream in my own banking profession of more than
three decades. Used to be, the banking regulators would be knocking on
your back door if your loan-to-deposit ratio got to be more than 80%.
Hell, they worried that you wouldn't have the liquidity to meet possible
demand for deposits [they call it a bank run back in the 1930s and in All Loaned Up for
the Delta Dawn Cotillion Ball… the Date’s Late? Steel Magnolias to
the Rescue? It is simply amazing to
me that the entire collection of 9,079 FDIC insured institutions have
loaned out all of their deposits plus 5.99%. Yeah, Bubba, that is a
105.99% loan-to-deposit ratio! That’s for everybody, Folks! Take a
look for yourself: Nope, you don’t need bifocals, Y’all! This is
called the Loan to Deposit Ratio, which the FDIC politely does not
calculate for folks, since they depend on the BLS to provide the vital
signs to Jane and Joe Six-Pack and the rest of the banking industry. See: FDIC,
Federal Deposit Insurance Corporation, Statistics at a Glance, as of
June 30, 2004 New Math 101 Meets
Jack Daniels’… with a Budweiser Chaser & a HP12c Divide Total Loans $ of
5,783 [Trillion] by [Total] Domestic Deposits $ at $5,456 [Trillion] =
1.0599! Absolutely
incredible… Rechecking the math with a slug of Jack Daniel’s…. I
get the same answer on my HP12c Financial Calculator even in Reverse
Polish! Absolutely incredible with the ice… the big ice in the
financial markets! Thank you Hewlett Packard for teaching me Polish in
Reverse! Gee, I wish the fish would start bitin’! How in the hell can the
regulators let this happen? How can Congress let this happen? Or, do
they want this to happen? Talk ‘bout being asleep at the switch! I
can’t be asleep, I’m trout fishing on the Great White, having lunch,
a beer, and playing with my HP12c! Liquidity is as
Liquidity does… The answer, it seems,
is quite simple. All the financial institutions have to do is file a
liquidity plan!! An Examiner with the Office of the Comptroller [of the
Currency] told me that the essential elements of banks' liquidity plans
were the Federal Home Loan Bank Certificates and Brokered Deposits!! Now
let's do a little simple math! There are $5.7 trillion in loans and $5.4
trillion in deposits and the FHLB is ALREADY providing over $500 BILLION
in liquidity – gettin' “purty” [ehhh, pretty in Ozark Suthern
Drawl] close to 10%, ain't it? And the liquidity plan? -- is to get the
FHLB to sell securities in the event of a liquidity crisis? Who the hell
are they goin’ to sell ‘em to in a Liquidity Crisis? JPChase up to
their assets in Fannie Mae and Gold Derivatives? Bank of Let's see here now
– Stream of Streams or Stream of Consciousness? If we have a national
emergency or panic – yeah, that would make me feel a lot better to buy
me a gaggle of FHLB obligations!! – but not on my General Beauregard,
Nathan Bedford Forrest,
or General Lee!
Now you try to get the so-called regulators to talk about the liquidity
crisis immediately after "9/11". There was NO press about it
whatsoever. It "sort of " got the FHLB to “reel in” some
of their participants with 212% loan-to-deposit ratios – like they
were playing for the big ones in the Great White River of Arkansas. Humm,
next thing we will all know is that these high fallutin’ regulators
will be makin’ the Mississippi River flow upstream – the only thing
is – last time that happened there was a massive earthquake in the New
Madrid Fault in the early 1800s. Who are they kiddin’? Mebbe
regulators are buying up
It is interesting that
the Federal Reserve Bank, principle regulator of bank holding companies
came out with a new rating in 1992 that is used in place of the CAMEL
rating. This is the BOPEC rating.[2]
After all, banks are getting into other affiliate businesses, so
it is interesting to see the elements of the old traditional rating that
is currently missing and below the waterline with all the rest of the
icebergs floating around. Throwing the baby out with the bathwater, all
must be well on the Well, three decades ago
there were over 20,000 banks and savings institutions. Today there are
9,079. [5]
But we still have the same number or even more regulators: the FDIC, OCC,
State Bank Departments in all 50 states, FFIEC, and Federal Reserve
System just to mention a few. The fact is, our regulators have become
our buddies and essentially cheerleaders, because they are dependent
upon the remaining 9,079 institutions for their very existence. Who
wants to bite the hand of [“piss off” down here in the Ozarks] their
Boss or a Potential Employer as a pup or guru mortgage banker over some
esoteric, silly liquidity issue? Hell, all they have to do is file a
liquidity plan! – Let’s just hope they all work like all those
Fannie Mae and other assorted GSE derivatives! – and that Messieurs
Munger and Buffett up there in Omaha, Nebraska don’t know much about
sewage, the American accounting of derivatives, and insults! [6] From DEEP in them thar
Hills in Ole Man Ozark [edited by Gale
Bullock, Other Essays by Ole
Man Ozark on the Loan to Deposit Ratio:
Footnotes
and Reference Links
[1]
[2]
BOPEC Rating for Bank
Holding Companies: Bank affiliates, Other affiliates, Parent
Company, Earnings, Capital Adequacy. This is a result of the
de-regulation of interstate and intrastate banking. [3] This is Larry Becraft, Jr.’s observation in his position paper, Memorandum of Law: The Money Issue found under Part IV, Fiat Law Equals Fiat Currency, 1968 to Present, cited below. Mr. Becraft calls this a “war of the "Fed" against its own kind, private commercial banks:” The
The silver dollar, the "dollar of our daddies," was killed prior to this period. It was replaced by "bastard" sons and daughters such as the Eisenhower dollar and "Susan B. Agony," which were utterly repugnant to the coins intended by the framers of our Constitution. President Nixon closed the "gold window" in 1971 to prevent foreign redemption of our paper currency with gold. But this did not result in damage to those international holders of currency because the federal government provided compensation via a vast foreign aid program. Since
1968, federal budget deficits have vastly increased; the difference
between federal revenues and federal expenditures has been provided,
in the majority, by new credit created by the "Fed." This
apparently alarming development has spawned state efforts to amend
the Constitution to provide for a balanced budget. The proponents of
a balanced budget apparently lack understanding of the precise
social role played by budget deficits; if these advocates are
successful in their endeavor, the end of life as we know it here in
the The scientific art
of creating booms or depressions for our economy has been fully
developed by the "Fed." This organization can now totally
control the U.S.
economy, and this ability allows it to totally control any
particular industry. The past few years have clearly shown the
ability of the "Fed" to attack any industry, be it the
automotive, oil, or transportation, and bring that industry into its
control. The current industry under concerted attack by the creditor
creators is agriculture. Of
particular significance presently is the war of the "Fed"
against its own kind, private commercial banks. The Fed desires to
bring all banks directly under its control and to create out of some
14,000 independent banks a few large industry giants. The fewer the
number of banks, the greater the control by the "Fed." A
deposit made into a bank in heartland There are many other detrimental effects to be noted as a result of the banishment of specie as the only component of our monetary system and its replacement by fiat currency, but such would serve no purpose here. It only needs to be noted that specie coin is "free man's" money; it is unpolitical and a circulating currency of specie coin cannot result in any governmentally imposed favoritism or benefit to debtors at the expense of creditors. Fiat currency, however, is political money and can be used to favor one group against another or to destroy any group, including an independent sovereign state. [4] Gale Bullock, MAI, SRPA, SRA calls this “secret war” against its own kind by the Federal Reserve, the prime directive or the prime directive of the Federal Reserve toward total banking consolidation in the United States of America. Mr. Becraft is fully aware of Mr. Bullock’s additional terminology and definition of this “secret war” within his position paper, and has allowed Mr. Bullock the continued use of the term in conjunction with his position paper. Mr. Bullock has written extensively on the subject of the prime directive by the Federal Reserve System for a controlled consolidation of the banking and mortgage loan industry to Wall Street. One of the most obvious mechanisms to accomplish this is through a controlled micro and macro market burn of real estate markets, producing insolvent lenders which can be “bailed out” by larger Wall Street Monied Interests. See Also: What is the Prime Directive? [5] Three decades is not a long time, yet the banking industry has consolidated to Wall Street by approximately 55% from the over 20,000 to the 9,079 currently existing. What will happen in the next 5, 10, 20 or 30 years? Another 45% contraction giving us only 4,993? [6]
Charlie Munger, Berkshire's 78-year-old vice chairman, added:
"To say derivative accounting in See: http://www.siliconinvestor.com/readmsg.aspx?msgid=17426927 © 2004 Realty Reality |
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