Posted by
Old Bill on Tuesday, July 15, 2008 9:29:08 PM
When a bank makes a bad loan, it loses money. When it makes a lot of bad loans, it loses a lot of money. But that doesn't necessarily mean it fails--becomes insolvent; closes its doors; goes out of business forever, with its depositors losing money, its shareholders losing all their money, and its employees losing their jobs.
Lots of banks have lost a lot of money recently in the real estate loan business due to the decline in real estate values, and the sub-prime (read: stupid) loans they made over the last few years when idiots and young 'loan facilitators' getting paid on commission wanted to make every loan work, even if the borrower couldn't document his/her income, even if they couldn't document that he had a job, or that the property in question was worth the amount of the loan; after all, wasn't everything going to go up, fast, a lot, forever?
But that doesn't mean all those banks are going to go broke--they'll just have to 'work out' their problems, renegotiating those loans where borrowers can reasonably keep current if the loan amount is reduced to reflect the property's real current value (always better than foreclosing and reselling a vacant house or building), or foreclosing if the flake just can't/won't make payments, period.
But not all those banks are going to get the chance to work out their problems; apparently, some are being 'busted out' by somebody in a position to do so, and that leads us to ask why they are doing so--and offer a little speculation as to possible reasons, and implications--for us... What do I mean by 'busted out'? Well, when the mob--or some other gangster--gets their hooks into a legit business, they often don't just settle for embezzling the cash and stealing the merchandise out of the warehouse, they often go for broke, using the company's name and credit to rob suppliers and lenders and thus enrich themselves to the max, leaving the legal owners on the hook when the doors are shut for good. This is 'busting out' a business.
But there are even more sophisticated ways of busting out a business; for example, by massive stock fraud or other financial manipulation that can take a profitable business and reduce it to a seemingly worthless shell, ripe for takeover at pennies on the dollar of its real value. This is another form of busting out a business. Has this been happening to American banks? Is it going to happen to more of them?
I recently read a fascinating article relating to the recent destruction of Bear Stearns, a financial company once thought an icon of American investment savvy, and a gold-plated blue-chip stock worth, only a year ago, $156 per share. Financial analysts valued it at an actual book value of $55 Billion, making its stock worth theoretically $220 per share. Yet, when it was closed and ordered sold to its rival, J.P. Morgan, its shareholders were offerred only $2 per share--and were only able to force that up to $10 per share by threat of lawsuit! How did this happen? There are those who believe it was the result of elaborate stock manipulation and fraud, and they marshall considerable evidence to make their case--see, e.g., Ellen Brown at globalresearch.ca/PrintArticle.php?articleId=8974 for an extensive presentation of this case.
PRESIDENT BUSH: APPOINT A SPECIAL PROSECUTOR NOW TO INVESTIGATE THE POSSIBLE BUST-OUT OF AMERICA'S BANKS!