The Credit Bomb Detonates in Florida

[robertpaulsen]

The Credit Bomb Detonates in Florida

By ALAN FARAGO

Yesterday, Bloomberg reported, "Florida: just first to face National Run on the Bank." And it is big news, indeed, that might be subtitled, "Hoist by their own petard".

How fitting that the detonation of the credit crisis would occur in Florida. The political influences that carried Jeb Bush to the governor's mansion in 1998 and W. in 2000 were fueled by Miami campaign contributors who pushed the housing boom in Florida, and everywhere.

Al Hoffman, former finance chair for both Jeb! and W, and former CEO of Florida WCI Communities, crowed to the Washington Post in 2003 that suburban sprawl was "an unstoppable force." (see eyeonmiami.blogspot.com archive feature: housing crash)

We now know that in addition to being unstoppable, sprawl is an engine of unparalleled financial destruction. WCI, itself, is in tatters.

more...

http://www.counterpunch.org/farago12052007.html

[cliss]

1. Ok Mr. Jebbie

are you reading this? Because if you're not, you're in for a rude awakening.

[fasttense]

2. But the stock Market is up so everything is just fine. n/t

:P :sarcasm:

[flashl]

3. Florida may be the proverbial canary in the mine. The housing crisis was there first?

And, how did Florida receive the distinction of the "first" with 'Run on the Bank'? Countryslide had customers in lines around corners to withdraw their money from its bank back in September.

[robertpaulsen]

5. I believe Farago is referring to this article.

Florida Just First to Face National Run on the Bank: Joe Mysak

Dec. 4 (Bloomberg) -- Florida officials are going to meet today to talk about the crisis in the state's Local Government Investment Pool. I don't know what they are going to talk about, but I know what they had better decide.

The State Board of Administration runs the pool, and its three trustees, Governor Charlie Crist, Chief Financial Officer Alex Sink and Attorney General Bill McCollum, had better decide that it's in the best interest of the state to ensure that all of the pool participants get their money back.

The investment pool, which contained $27 billion this summer, now has $14 billion, the result of withdrawals by municipalities with keenly developed senses of self- preservation. On Nov. 29 the board told the remaining participants they couldn't withdraw any more money from the pool.

The pool, which is where most of the state's municipalities put their money when they are not using it, owns $1.5 billion in securities that have been downgraded or defaulted as a result of the subprime market collapse.

http://www.bloomberg.com/apps/news?pid=20601039&sid=a6Ne4_lh1TS4&refer=home

But living in Los Angeles, I think what you're saying about CountrySlide (did you come up with that? Great name!) is correct. They've been bleeding like a stuffed pig and I don't think the government has put much of a tourniquet on it.

[flashl]

6. Thanks.

No. CountrySlide is not mine. Pick it up months ago, thought its author was on to something.

This is the August 17, 2007 bank run story:

Run on banks in LA amid crisis

In Los Angeles, economic concerns hit close to home.

Anxious customers of Countrywide Bank jammed its phone lines, branches and website after the nation's largest mortgage lender -- which owns the bank -- announced it was facing problems from a credit meltdown.

"Countrywide Financial Corp., the biggest home-loan company in the nation, sought Thursday to assure depositors and the financial industry that both it and its bank were fiscally stable," wrote the LA Times Friday. "And federal regulators said they weren't alarmed by the volume of withdrawals from the bank."

"The rush to withdraw money -- by depositors that included a former Los Angeles Kings star hockey player and an executive of a rival home-loan company -- came a day after fears arose that Countrywide Financial could file for bankruptcy protection because of a worsening credit crunch stemming from the sub-prime mortgage meltdown," the paper continued.

"At Countrywide Bank offices, in a scene rare 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," the Times added. "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."

[robertpaulsen]

7. I remember that. Here's a recent update on CountrySlide.

Dangerously Close to a Money Panic by Martin D. Weiss Ph.D. 12/3/2007

No one can predict the future. But right now, the panic is already spreading from big brokers and banks to local governments and a few money market funds. Just last week, for example:

* Florida's Local Government Investment Pool, a fund for local Florida governments, was frozen to stop a rush of withdrawals by panicked investors. Until recently, the fund had $27 billion. Last month, it fell to $15 billion due to mortgage-related losses and mass withdrawals. And on Thursday morning alone, before Florida slapped the freeze on withdrawals, the fund lost $3.5 billion!

* Montana's school districts, cities and counties withdrew $247 million from the state's $2.4 billion investment fund after officials said the rating on one of the pool's holdings was lowered to "default" level.

* Countrywide Financial caused more shock waves. One week ago, I explained why I believe the company is on a collision course with bankruptcy. (Click here for the details. http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=1216) Now, we learn that state funds like Florida's may have substantial investments in the company's banking subsidiary, downgraded in August and likely to be downgraded again.

http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=1238

This whole article is very informative, and very sobering.

[flashl]

8. Amazing. I can't think of another word.

"we will see a similar surge in other ARMs that reset to higher rates — to over $50 billion per month. :jawdrop:

Countrywide Financial gets $50 billion bailout: Countrywide borrowed from the Federal Home Loan Bank system (specifically the Federal Home Loan Bank of Atlanta).

"Despite All This, Wall Street's Leading Rating Agencies Have Not Yet Downgraded Countrywide Financial"

[cliss]

10. This is where it's going to hit.

Interesting. I've been waiting for the weakest link in the chain. I always assumed it would be some smaller bank in a VERY weak area, like maybe Ohio, San Diego or maybe Florida.
There would be some kind of panic, a run on the bank which would start the Domino Effect. This would then create a massive panic which would work its way up the food chain.

But Pension Funds?
Well, it makes sense because they are now the ones holding the bag.
And they're probably going to try and save what they can before it's too late.

[izquierdista]

4. Time to buy!

Don't believe that! They are just trying to shake out the suckers. I'd buy about 20 miles inland, about 20' above mean sea level and wait a few years. When half the state is under water from Global Warming and there isn't so much Florida real estate to go around, then we'll see who has the last laugh!

B-) B-)

[Joe Chi Minh]

9. Well, as I understand it, "sprawl" means an ungainly, undignified collapse, or

near collapse.... and an "unstoppable force", I would think, speaks for itself. For Big Al to see it coming, and be powerless to prevent it! Ah... the agony...