Run on Bank Helped Kill WaMu, But Your Money Is Safe

Posted Sep 26, 2008 10:44am EDT by Aaron Task in Investing, Recession, Banking

In the biggest bank failure in U.S. history, the Federal Deposit Insurance Co. seized Washington Mutual's assets Thursday. The FDIC then quickly sold most of WaMu (that's assets and liabilities) to JPMorgan.

Simply put, WaMu was victimized by a classic "run on the bank." Customers withdrew $16.7 billion in a 10-day period following the bankruptcy of Lehman Brothers, leaving WaMu "with insufficient liquidity to meet its obligations," its regulators determined.

A longer explanation is WaMu was victimized by mismanagement and misguided bets on exotic (and toxic) instruments such as option adjustable-rate mortgages.

The deal has major ramifications for JPMorgan and the banking industry as a whole, as Henry and I discuss in a forthcoming segment.

For the vast majority of people who bank at WaMu, which had 2200 branches and $188.3 billion of deposits as of June 30, the important thing to remember is your deposits are insured up to $100,000, and the Federal government will go to every extreme to make sure it's available.

"There will be no interruption in services and bank customers should expect business as usual come Friday morning," FDIC Chairman Sheila Bair told reporters last night.

The sobering truth, however, is that repeated declarations about the sanctity of FDIC insurance from Bair, President Bush, Treasury Secretary Paulson, Fed Chairman Bernanke and others failed to quell concerns among WaMu's customers. That suggests more "bank runs" could be in the offing unless the government moves quickly to restore confidence.

(SOURCE http://finance.yahoo.com)

Nomura offers bonuses to Lehman staff

By Peter Thal Larsen and Lina Saigol in London

Published: September 25 2008 21:30 | Last updated: September 25 2008 21:30

Lehman Brothers’ top investment bankers in London have been offered large guaranteed cash bonuses by Nomura, the Japanese lender that this week bought the European and Asian operations of the bankrupt Wall Street bank.

Nomura has offered to pay Lehman investment bankers the equivalent of last year’s bonus, in cash, if they stay until the autumn of 2009. It has also promised that the 2009 bonus pool will be the same size as last year, though a proportion will be in the form of restricted stock.

(ft.com)

2008 Federal Budget

Total receipts

Estimated receipts for fiscal year 2008 were $2.66 trillion.

• $1.25 trillion - Individual income tax
• $927.2 billion - Social Security and other payroll taxes
• $314.9 billion - Corporate income tax
• $68.1 billion - Excise taxes
• $29.2 billion - Customs duties
• $25.7 billion - Estate and gift taxes
• $50.7 billion - Other

Total spending

Further information: Government spending

A pie chart representing spending by category for the US budget for 2008

The President's budget for 2008 totals $2.9 trillion. Percentages in parentheses indicate percentage change compared to 2007. This budget request is broken down by the following expenditures:

• Mandatory spending: $1.788 trillion (+4.2%)
  • $608 billion (+4.5%) - Social Security
  • $386 billion (+5.2%) - Medicare
  • $209 billion (+5.6%) - Medicaid and the State Children's Health Insurance Program (SCHIP)
  • $324 billion (+1.8%) - Unemployment/Welfare/Other mandatory spending
  • $261 billion (+9.2%) - Interest on National Debt

• Discretionary spending: $1.114 trillion (+3.1%)
  • $481.4 billion (+12.1%) - United States Department of Defense
  • $145.2 billion (+45.8%) - Global War on Terror
  • $69.3 billion (+0.3%) - Health and Human Services
  • $56.0 billion (+0.0%) - United States Department of Education
  • $39.4 billion (+18.7%) - United States Department of Veterans Affairs
  • $35.2 billion (+1.4%) - US Department of Housing and Urban Development
  • $35.0 billion (+22.0%) - State and Other International Programs
  • $34.3 billion (+7.2%) - Department of Homeland Security
  • $24.3 billion (+6.6%) - Energy
  • $20.2 billion (+4.1%) - Department of Justice
  • $20.2 billion (+3.1%) - Department of Agriculture
  • $17.3 billion (+6.8%) - National Aeronautics and Space Administration
  • $12.1 billion (+13.1%) - Department of Transportation
  • $12.1 billion (+6.1%) - Department of Treasury
  • $10.6 billion (+2.9%) - United States Department of the Interior
  • $10.6 billion (-9.4%) - United States Department of Labor
  • $51.8 billion (+9.7%) - Other On-budget Discretionary Spending
  • $39.0 billion - Other Off-budget Discretionary Spending

The Iraq war and the Afghanistan war are not part of the defense budget; they are appropriations.

Deficit

With projected receipts significantly less than projected outlays, the budget proposed by President Bush predicts a net deficit of approximately 240 billion dollars, adding to a United States governmental debt of about $9 trillion.

SOURCE http://en.wikipedia.org/wiki/United_States_federal_budget,_2008

General Election: McCain vs. Obama

General Election: McCain vs. Obama

RCP Electoral Map | Changes in Electoral Count | Map With No Toss Ups | No Toss Up Changes

Polling Data

Poll	Date	Sample	Obama (D)	McCain (R)	Spread
RCP Average	09/09 - 09/21	--	48.1	45.4	Obama +2.7
CNN/Opinion Research	09/19 - 09/21	697 LV	51	47	Obama +4
Gallup Tracking	09/19 - 09/21	2740 RV	48	44	Obama +4
Rasmussen Tracking	09/19 - 09/21	3000 LV	48	47	Obama +1
Hotline/FD Tracking	09/19 - 09/21	922 RV	47	42	Obama +5
Battleground Tracking	09/14 - 09/21	800 LV	47	48	McCain +1
CBS News/NY Times	09/12 - 09/16	LV	49	44	Obama +5
Quinnipiac	09/11 - 09/16	987 LV	49	45	Obama +4
Pew Research	09/09 - 09/14	2307 LV	46	46	Tie

See All General Election: McCain vs. Obama Polling Data

Intrade Market Prices for General Election: McCain vs. Obama

	Obama	McCain
Intrade Real Time Quotes			(See More Data)

US banks turn to Tokyo for help

By Francesco Guerrera, Henny Sender and Michael MacKenzie in New York and Krishna Guha in Washington

Published: September 22 2008 20:05 | Last updated: September 22 2008 20:05

The US financial system was shaken by fears that a $700bn government rescue plan might not be enough to end the financial crisis on Monday as the dollar sank, stock markets tumbled and once mighty Wall Street names turned to Japan to safeguard their future.

Morgan Stanley announced it was to sell a stake of 10-20 per cent to the Mitsubishi UFJ Financial Group (MUFG) in a $9bn deal. The news came just hours after Nomura, Japan’s largest broker, confirmed it was buying Lehman Brothers’ operations in Asia and was in exclusive talks to secure parts of its business in Europe.

(ft.com)

All the Candidates’ Cars

When you have seven homes, that's a lot of garages to fill. After the fuss over the number of residences owned by the two presidential nominees, NEWSWEEK looked into the candidates' cars. And based on public vehicle-registration records, here's the score. John and Cindy McCain: 13. Barack and Michelle Obama: one.

One vehicle in the McCain fleet has caused a small flap. United Auto Workers president Ron Gettelfinger, an Obama backer, accused McCain this month of "flip-flopping" on who bought daughter Meghan's foreign-made Toyota Prius. McCain said last year that he bought it, but then told a Detroit TV station on Sept. 7 that Meghan "bought it, I believe, herself." (The McCain campaign did not respond to multiple requests for comment.)

Obama's lone vehicle also is a green machine, a 2008 Ford Escape hybrid. He bought it last year to replace the family's Chrysler 300C, a Hemi-powered sedan. Obama ditched the 300C, once 50 Cent's preferred ride, after taking heat for driving a guzzler while haranguing Detroit about building more fuel-efficient cars.

McCain's personal ride, a 2004 Cadillac CTS, is no gas sipper, but it should make Detroit happy because it's made by General Motors. "I've bought American literally all my life and I'm proud," McCain said in the interview with Detroit's WXYZ-TV. But the rest of his fleet is not all-American. There's a 2005 Volkswagen convertible in the garage along with a 2001 Honda sedan. Otherwise, there's a 2007 half-ton Ford pickup truck, which might come in handy on the Sedona ranch; a vintage 1960 Willys Jeep; a 2008 Jeep Wrangler; a 2000 Lincoln; and a 2001 GMC SUV. The McCains also own three 2000 NEV Gem electric vehicles, which are bubble-shaped cars popular in retirement communities.

Only the Cadillac is registered in the candidate's name. Cindy McCain's name is on 11 vehicles, though not the one she actually drives. That car, a Lexus, is registered to her family's beer-distributor business and is outfitted with personalized plates that read MS BUD.

© 2008

http://www.newsweek.com/id/160091