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[Spitfire]

by Jeff Davis

An Associated Press article reports “Wachovia Corp. reported a surprisingly large second-quarter loss Tuesday deflating Wall Street’s hopes that the nation’s big banks are weathering the credit crisis well. The bank said it lost $8.86 billion, is slashing its dividend and eliminating 10,750 positions after losses tied to mortgages soared. Even excluding one-time items, the results substantially missed analysts’ estimates. But by the afternoon its stock joined a modest Wall Street rally and rose as much as 13 percent — after its shares sank to mid-1991 levels in premarket trading, and after Wachovia’s new CEO said he plans to cut $2 billion of expenses by the end of next year and sell parts of the fourth-biggest U.S. bank.”

This is hardly surprising considering Wachovia has been circling the drain for months and it’s never been any secret on the Street. Shareholders are probably praying for a bail out deal, which should put a bottom to their stock’s decline. A number of US banks have been bought up by Arabs lately.

The article notes “‘Three rating agencies — Moody’s Investors Service, Standard & Poor’s and Fitch Ratings — downgraded their ratings on Wachovia’s debt, citing increased expectations of losses in the bank’s mortgage portfolio and its reduced flexibility to raise new capital…Earlier this month, the Charlotte-based bank had projected a $2.6 billion to $2.8 billion quarterly loss, equal to $1.23 to $1.33 per share, excluding goodwill items… Wachovia’s new management has pulled its head of out the sand and is fully acknowledging the problems not challenges,’ said Bart Narter, senior analyst at Celent, a Boston-based financial research and consulting firm. ‘While the company’s wealth management, corporate and investment banks, and capital management groups all had more encouraging results than the general bank, the general bank is the bulk of Wachovia and it isn’t performing well.’”

Do we need to guess that they’re angling for a bail out or some friendly takeover? If Wachovia fails, the Federal Reserve will need to print up more billions of dollars in unbacked paper currency just to bail out account holders, just like at Indymac Bank. This endless printing of money is the sort of smoke and mirrors show that belongs in a circus, not handling our economic crisis.

The AP article continues “…the company is moving to sell selected non-core assets and reduce the number of business customers who only use the bank for loans rather than other services. Wachovia expects to cut expenses during the second half of this year by $490 million and then reduce 2009 spending by $1.5 billion. As part of that plan, Wachovia said it would lay off 6,350 workers, affecting more than 5 percent to fit roughly 120,000 employees. A majority of those jobs will come from the mortgage area, Steel said.”

OK, the relatively high-paying white-collar jobs are starting to go, now, and not just through outsourcing but through outright layoffs and job loss. Those laid off Wachovia workers are 6,350 more people who probably won’t be able to pay their mortgages.

Why are American banks failing again 79 years after the First Great Depression?

In the wonderful world of finance capitalism, all money is borrowed from sharks higher up the food chain, and therefore it has to be collateralized with something, at least in theory. Most American banks are now “collateralized” and their “assets” consist of huge theoretical sums in the form of money owed on mortgages, sub-prime and otherwise.

But nobody in America has any good-paying jobs any more because America doesn’t manufacture or produce anything any longer, and so those huge $700,000 suburban tract houses are now increasingly inhabited by hysterical yuppie couples who have just lost their jobs. If they’re lucky, the wife may get work as an insurance cubicle worker as a no-benefit temp, and the husband may get a job delivering pizzas. Unfortunately you can’t make $2,500 per month mortgage payments with ersatz service industry jobs.

In the subprime market, fewer and fewer people are paying back their mortgages. Either their subsistence-level jobs have been taken away by illegal aliens, or they’re black and never had any jobs (with the real estate agent fabricating a job on the loan application form) or they’re illegal aliens and can’t keep up the payments as the teaser rate expires. The end result is few people are still paying their mortgages any more and the banks’ collateral and assets are simply documents not worth the paper they’re printed on.

Money used to be backed or collateralized with gold and silver or land or something of value; now it’s based on worthless paper. Wachovia was relying on home-owners to pay off their loans. Too bad they made all those loans to non-White subprime lenders; otherwise they might not be swirling around the bowl right now.
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“Wenn ein Volk seit 3000 Jahren verfolgt und geächtet wird, dann muss dass wohl irgend einen Grund haben”.
Henry Kissinger