"The Old Bloke" <grates@microsft.com> wrote in
news:qKhfk.20134$IK1.7659@news-server.bigpond.net.au:
>
> Hi MM, and others,
>
> My wife and I are retired and our sole income is from our savings.
> With the turmoil in banking around the world and the plunging shares
> (I think you call them stocks), I am getting a little wobbly. The
> Aus Gov has just passed a law guaranteeing "up" to $20,000 per
> depositor should a bank default. Whooppie. That would put a hole
> in my retirement!
>
> So we have started spreading our cash holdings through a few
> different banks till the world's financial crisis runs its course.
>
> I have been watching the Fannie Mae debacle. (Fannie is a very rude
> word in Aus, being a name of female genitals lol We piss ourselves
> with laughter when we hear people talking about their fanny bags!).
> If I understand correctly, the housing assets are now worth $300B
> less than the outstanding loans.(for the *two* banks involved). In
> Aus, banks are not required to release such financial detail. The
> scale will be smaller, but I am sure the same thing is happening
> here. Our 5 biggest banks have seen their share value halve in
> recent months. One has gone from $35 to $6 (Babcock)
>
> Ominously, the bulk of the money that Aussie banks lend, is in fact
> sourced from the USA, who source it from the Arabs (our petrol
> money!), the Japanese, Chinese, etc. If these latter countries turn
> off the money tap ....
The US govt got involved in home mortgages starting in 1932. The
programs have changed over the years, but currently there is a
regulator, the Office of Thrift supervison, a govt agency which
guarantees home loans on behalf of certain people such as
veterans (Ginnie Mae) and two private companies designed to compete
for mortgages against each other (Fannie Mae and Freddie Mac).
Their business model is to buy mortgages from banks who
originate them. The loans must meet certain standards (termed
"conforming"). The companies then package these loans into
something like bonds which are sold back to the originating lenders
or on the market. There have been some losses in this
business, but apparently the real problem is that the companies also
bought bundled mortgage bonds for their own account, and in
this case the underlying loans weren't conforming, but rather of
the "sub-prime" variety. Regardless of the actual performance of
these subprime mortgages, the market value of the bonds has
plummeted, and the companies are required to adjust the value
of them on their books to the market value. This results in a
reduction of the companies' capital below the requirements they
are required to maintain by their charters.
With respect to deposits, in the US there are some very harsh
money laundering laws which banks must follow. That can make it
a bit of a bother to deposit large sums (any thing over $10,000
must be reported, but there are additional requirements that
can affect lesser amounts).
scott s.
.
Vernon Balbert
Dallas
