The Winds of Change

WaMu and Wachovia have both been gobbled up by other banks, in both cases ultra fast deals were slapped together in order to prevent a bankruptcy that would collapse the FDIC balance sheets. I don’t know if these were good deals for the buying banks but I do know they were seen as necessary for political reasons, if only to keep the lid on an every growing problem until the U.S. gets through this election cycle.

Despite these backroom deals and the attempted $700 billion bail out the contagion continues to spread as Iceland nationalizes a major bank
As does the U.K. with Bradford and Bingley

There will certainly be many more of these deals to come and as time progresses they are becoming more convoluted as the government, or agencies like the FDIC end up taking equity positions in either the failed companies or the purchasers of these companies as a method to fund the takeover and/or backstop losses that could well end up being more than these rushed purchasers bargained for.

It’s amazing how fast things are moving, WaMu failed on a Thursday which is unprecedented to date. After all the other failures have been Friday after closing so the FDIC ninjas could swoop in without spooking the market and allowing the details to be finalized and publicised while the markets were closed. This one was so desperate that they could not wait a single day longer to do the deed, harsh times indeed.

It’s good to see people are walking finally up with protests on wall street, people calling their leaders, tearing up talk radio and the blog sphere but this is far too late to save the system and perhaps too late to save themselves. When the bubble was inflating few said WTF are you guys doing? Few asked if they could really afford that house, fewer even questioned the soundness of banks that gave mortgages without asking for a work record. Now they are all up in arms and outraged that their stupidity and apathy on all things financial is going to give them a $700 Billion bite in the ass.

People get the government (and apparently banks) that they deserve. Lazy, ignorant people are destined to get corrupt or incompetent leaders. Democracy only works with a well educated and vigilant population, considering more people know who Dr Phil is than Ben Bernanke, and only 60% vote there is not much else to say!

The shit is finally hitting the fan and people only have a very short time prepare. Had the bailout proposed passed, (it just failed in the house minutes ago) they might have held things together at least until the end of the election cycle, now however all bets are off. The market could freefall; and we could see runs on banks and civil insurrections as the next topics of presidential debates.

Either way however the U.S. is in dire straits had this bailout passed or the soon to be seen Son of Bailout passes, the U.S. will be monetizing corporate debt and heading for a insane inflationary spiral.

If this stays as is with no bailout then the banking system freezes up and a different but just a destructive set of events will unwind. Either way the U.S. is in for a world of pain and Canada and the world by contagion will get roughed up too.

On the Canadian side I know people on the mortgage floor of some big banks and there is real panic in the air. No one knows what to do and they fluctuate between panicked actions to total inaction. Of course once you hear things like the Chinese Government has told its banks not to make any more bank to bank loans to American institutions you can see why there the mood is turning from sour to putrid. I’m also noticing very high hits on both my site and the ads despite my limited posts of late. (very busy with Canadian election)

What really strikes home is how many people who ignored my rants have suddenly started asking questions.
“What’s this about failing banks?”
“Tell me about this silver thing?”
“You said a depression is coming and some guy agreed with you on the news last night, what does it mean?”

It means prepare for the worst because no one can tell for sure what is going to happen, especially in the U.S. Stock up on food, have a little extra cash on hand, some gold and silver and stay away from protests and riots.

I would also say to Canadians that one party in our election still claims the financial crisis is contained and won’t affect Canada. This party is either lying or too damn stupid to remain in power. Beware!