Thursday, August 16, 2007

Bank Run?

From the LA Times (hat tip Peter Viles):

Anxious customers jammed the phone lines and website of Countrywide Bank and crowded its branch offices to pull out their savings because of concerns about the financial problems of the mortgage lender that owns the bank.
...
At Countrywide Bank offices, in a scene not common since the U.S. savings-and-loan crisis ended in the early '90s, so many people showed up to take out some or all of their money that in some cases they had to leave their names.
...
At a branch near Countrywide's corporate headquarters in Calabasas on Thursday, a flood of spooked customers seeking to withdraw their certificates of deposit and money-market accounts overwhelmed the small staff. The Countrywide employees were forced to resort to taking down names and asking people to wait it out or come back later.
...
Bill Ashmore drove his Porsche Cayenne to Countrywide's Laguna Niguel office and waited half an hour to cash out $500,000, which he then wired to an account at Bank of America. "It's because of the fear of the bankruptcy," said Ashmore, president of Irvine's Impac Mortgage Holdings, which escaped bankruptcy itself recently by shutting down virtually all its lending and laying off hundreds of employees. "It's got my wife totally freaked out," he said. "I just don't want to deal with it. I don't care about losing 90 days' interest, I don't care if it's FDIC-insured -- I just want it out."

15 comments:

Diggin Deeper said...

Looks like the Fed might have bailed out the banks with its discount cut...I kind of doubt it as this credit mess has a ways to go. Makes for an interesting one-day event.

Gwynster said...

Options expire today and the Fed is in dmamge control mode.

Sippn said...

BenB (Fed) doesn't have the ability to deal with the psycological effects - doesn't understand them.

Gwynster said...

I'll give you that one Sippin.

I stayed up late to watch the Asian markets close (and play a few game of minesweep **winks).
http://www.bloomberg.com/markets/stocks/movers_index_nky.html

A fed cut against those drops and the Yen hike means someone out there in the carry trades just lost some limbs. Having the fed cut on top - ouch.

But the juggernaut is already rolling. A .5% cut is just keep us afloat _for now.

I have to agree with Bill Fleckstein; either we are worried about inflation or not. http://tinyurl.com/29gt8m
So come on Fed, pick your poision and stick with it.

Sippn said...

The Fed can't control inflation like 20-30 years ago "we are not alone" in the consumer driven world.

Our inflation today is fuel driven.

Mortgage equity withdrawal driven spending is done for a long while.

Us industries are slowing down dramatically while Ben focuses on stuff he can't control.

Throw out the textbooks, get current.

serenity said...

The funny/scary thing is (depending on your perspective)I actually had my down payment for a home stashed in countrywide until today.. we are moving it back to emigrantdirect for the time being. but the 5.5% at countrywide was nice! who knows, if this thing shakes out and has some semblance of settling, we will probably go back to countrywide.

by the way sippin, thanks for the advise the last time i posed a question on this blog.

smf said...

"doesn't have the ability to deal with the psycological effects"

While the market can be easily swayed by psychological factors, witness what can drive the price of oil up or down, this housing market has real problems.

Nothing stops the simple fact that most houses are unaffordable to most people today. And there is NOTHING that the Fed can do to make the houses more affordable right now, unless they can make the prices go down.

At one point in the past, we held at least $350K in equity in our house, and we had an income of around $100K/year. (That put is in the top 10% of all income earners).

We could NOT find and still cannot find a move-up home that we could could afford with a 30 year fixed loan. But if we went for an exotic loan, we could have easily qualified for a million dollar home. Of course, making that payment later would have been impossible.

The only thing that will pull this market out of the hole it is in is much lower home prices. And even then, witness by some news trickling in, that still does not stop the fact that the US is grossly overbuilt right now, with more than a million homes sitting vacant.

Gwynster said...

Housing slump takes its toll on state, local jobs
Unemployment in July rises here and statewide
http://www.sacbee.com/749/story/331019.html

But not to worry, the economy and job market are strong so prices won't really decline by much.
/sarc off

Real said...

SMF: and we had an income of around $100K/year. (That put is in the top 10% of all income earners).

Maybe that would be true if you lived in Helena, Montana, but here in the Sacramento region, >26% of families have an average income of $100K+ according to http://factfinder.census.gov, and that was back in 2005. $100K might sound like a lot of money to some people, but it really is not when taken with the higher incomes of California. As to houses being affordable, about 60% of homes in the region were purchased in 2002 or earlier before any big run ups. So, you must mean they are not affordable for people buying today with little to no downpayment and an income of <$100K - in that case, I would agree with you.

Diggin Deeper said...

"Our inflation today is fuel driven".

I disagree Sippn...I believe it is dollar driven due to wide open and hot running printing presses. I've commented before, when we've got twice as many dollars chasing the same barrel of oil (which is in shorter supply this year than last), the price of oil only reflects 1/2 the purchasing power of the dollar.


"The Fed can't control inflation like 20-30 years ago "we are not alone" in the consumer driven world"

Sure it can... but it won't. Benny Boy is a student of the Great Depression. He'll inflate rather than allow deflation to grab hold. The only way to do that is to continue to allow the dollar to devalue by printing more of them.

While we are finding ways to keep our financial system afloat, central banks throughout the world have been raising rates to cool inflation and stave off the dollars affect on their economy. A rate cut, which now appears imminent, will add more fuel to inflation's fire as we continue to reflate in order to protect our asses financially. If you don't think the Fed is trying to manipulate the psychological effects of world's financial system, think again. The whole world's financial integrity is based on the dollar.

RE prices have oustripped the dollar's depreciation while oil, gold, and other commodities have not. RE prices have to go down if we are to sidestep a recession or worse.

smf said...

"So, you must mean they are not affordable for people buying today with little to no downpayment and an income of <$100K - in that case, I would agree with you."

Our downpayment would be about $200K, but even then we would not be getting a house that is much better than what we currently have. And this would be with making a $3000/month house payment.

smf said...

">26% of families have an average income of $100K+ according to http://factfinder.census.gov"

That is correct, though these families only represent about 15% of all households in the county.

And you need to also remember that when you have a family, your discretionary income drops down dramatically, with all the expenses that kids bring.

So, even though we have an net income of $7500/month, a typical GR home with no down payment would run about $5000/month, and we are not about to do that.

Especially since our current custom home, a 4/2, 2300 sq.ft. with a .25 ac yard costs us $2000/month.

Real said...

Our downpayment would be about $200K, but even then we would not be getting a house that is much better than what we currently have. And this would be with making a $3000/month house payment.

Unless you are a mormon or running a brothel, I don't see how people would need more than a 4/2.5 house at ~2500ft^2. Anything more than that and you are buying for style points. A $2,500ft^2 home with 2500ft^2 will set you back $400 - $600K in Sac depending on where you are buying. You can get into nice neighborhoods at $550K, making your payment $2,400 on a 7% fixed 30 year full amortizing loan. Assuming you make $100K as you stated, that means your house payment is 28% of your gross income, with 3.5% of that being 'savings' as it is a reduction in the loan and another 7% coming back as tax savings. You should be able to comfortably afford a $550K home nearly anywhere in Sacramento so I can't really see your affordability issue. Now, if you want a $1M stucco $hitbox up in EDH with all new stainless appliance, custom cabinets and granite, you need to get a better job and blame yourself for your career choice and $100K income vs. the housing market.

smf said...

"I don't see how people would need more than a 4/2.5 house at ~2500ft^2"

To each their own. But have you seen how many houses larger than 2500 are in the market right now?

"Anything more than that and you are buying for style points"

Depends on what you need. We want a 4/3 with a bonus room and an office. Usually that gets us up to 3000 ft^2.

"You can get into nice neighborhoods at $550K"

Yes, but it would not be nicer than what we already have.

"You should be able to comfortably afford a $550K home nearly anywhere in Sacramento so I can't really see your affordability issue"

Commute time. Plus a $550K house is not really much in this market.

"Now, if you want a $1M stucco $hitbox up in EDH"

There is plenty of stucco boxes in GR right now. Frankly, GR homes will never win architectural prices. And some areas of GR have that dreaded all garage/roof look.

smf said...

Plus you can see plenty of granite and H/W floors, plus the S/S appliances as well in GR.