March 2009

Andy Anderson, sings The Real Estate Blues.

Andy Anderson is the broker of record for EXIT Realty Metro Dallas.  Broker by day, blues singer and song writer with passion.  Listen to how Andy helps people every day.

Andy Anderson, The Real Estate Blues

Andy has been a beloved fixture in the Dallas Real Estate business for many years.

He loves people, he loves music, he loves to help, those are the characteristics that

define Andy best.

Clay’s Commentary 3-28-2009 #2 Loan to Deposit Ratio

3-28-2009

Recently, an Active Rain blog article by Matt Heaton caught my attention, along with some insightful observations from Craig Frazer. As I recall, Matt correctly noted that many, if not the vast majority of the larger banks, very probably had exceeded their loan-to-deposit ratios. By definition, that should trigger FDIC takeovers of those banks to protect depositors and tax payers. Instead, Treasury elected to pump huge amounts of money into them and made accounting & regulatory changes so they don’t have to properly account for losses.  Why?

“While, FDIC receivership is a very effective and well tested for dealing with these sorts of banking crisis’, it also has a high political cost.  The incompetent bank executives that have been lining the politicians’ pockets for years would almost certainly find themselves out of a job, and many on Wall Street would eat substantial losses on stock and bond holdings in these banks.  There is also the fact that people don’t want to admit some of the banks that have been mainstays of the US banking system for decades may in fact be failures. I guess it just comes down to the fact there isn’t the political will in Washington to actually solve the crisis.”

Craig Frazer responded: “My limited understanding from reading the financial theory behind all of this is that there aren’t sufficient assets globally to address the 35:1 up to 50:1 leverage positions many of these financial behemoths managed to create.  Thus, at some point, if we want to allow institutions to fail (a popular outcry currently) the issue could be a two or three decade rebuilding of the world economies as government after government go bankrupt (see Iceland for an example of what could happen globally).”

“What the current administration is trying to accomplish (only time will tell if it is effective) is keeping the ship moving forward while the crew and passengers bail water as fast as possible.  This ship may still sink, before reaching shore but to allow all of these global financial institutions to fail would be the equivalent of cutting the ship’s engines and hoping just the water bailing process will work. Personally, I would like to keep heading toward landfall while bailing water…….”

By September, we will have a pretty good idea if we are going to avoid the other shoe dropping.
The international political instability that could be exacerbated by a failure of Obama/world initiatives is not something any thinking person wants to really experience. The scope of the emotional component in the current marketplace adds unfortunate complexity to properly adjusting conventional economic theories to effectively deal with today’s emerging challenges.

Everyone, including the President Obama, has to make distasteful compromises now that we are saddled with a philosophical direction. To make a major change in policy now is to court disaster. For selfish reasons, I say bankrupt the whole lot, claim the catastrophe as “a clear & present danger to the United States”, strip the stock brokers & bankers involved of all their earthly possessions, and ship the worst culprits to Guantanamo Bay before locking up and leaving Dick Cheney behind as Commandant.

Fortunately, I do not have to be realistic. What is “real”? The rules have changed. We must craft stability in new ways if we are to emerge fairly quickly from this economic calamity. Once done, maybe We The People will finally demand accountability. It’s long past due.  What do you think?

Mission Statement: Truth and Service