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Bank Failures Surpass 50 For The Year

Bad week for bank failures, particularly here in the “Land of Lincoln.” From MarketWatch’s Alistair Barr and John Letzing last night:

Seven banks were closed by regulators on Thursday, including six in Illinois, bringing the total for 2009 to 52 as the U.S. banking system remains under pressure from rising unemployment and record foreclosures.

The John Warner Bank, in Clinton, Ill., was closed by the Illinois Department of Financial and Professional Regulation and the Federal Deposit Insurance Corp. was appointed receiver. The FDIC then sold the bank’s deposits and most of its assets to State Bank of Lincoln, in Lincoln, Ill.

The same Illinois regulator also shut the First State Bank of Winchester, in Winchester, Ill., and appointed the FDIC receiver. The federal agency said it then sold the bank’s deposits and most of its assets to the First National Bank of Beardstown, in Beardstown, Ill.

Rock River Bank, in Oregon, Ill., was also closed and the FDIC appointed receiver. The regulator sold the bank’s deposits and most of its assets to the Harvard State Bank, in Harvard, Ill.

Elizabeth, Ill.-based Elizabeth State Bank was also later closed, with Galena, Ill.-based Galena State Bank and Trust assuming the failed bank’s deposits, the FDIC said. Rounding out the list of Illinois bank failures on Thursday were Danville-based First National Bank, and Worth-based Founders Bank.

The lone bank failure for the day not located in Illinois was Dallas-based Millennium State Bank, the federal regulator said. Irving, Tex.-based State Bank of Texas has agreed to assume the failed bank’s deposits…

On Thursday, the FDIC estimated that the seven bank failures will cost its deposit-insurance fund a total of roughly $314.3 million.

Source:

“Seven banks bring 2009 U.S. failures total to 52”
Alistair Barr, John Letzing
MarketWatch, July 2, 2009

BankUnited FSB Is Largest Bank Failure This Year

Another bank bites the dust. And a big one at that. The Associated Press’ Marcy Gordon wrote this morning:

The federal seizure of struggling Florida thrift BankUnited FSB is expected to cost the Federal Deposit Insurance Corp. $4.9 billion, representing the second-largest hit to the FDIC’s insurance fund since the financial crisis began felling banks last year.

The costliest was last year’s seizure of California lender IndyMac Bank, on which the bank insurance fund is estimated to have lost $10.7 billion.

The Office of Thrift Supervision, a Treasury Department agency, said Thursday that BankUnited FSB reported $1.2 billion in losses last year as defaults on loans piled up. The thrift “was critically undercapitalized and in an unsafe condition to conduct business,” the agency said in a statement.

Coral Gables, Fla.-based BankUnited FSB is the 34th federally insured institution to be closed this year, and the biggest.

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Gordon discussed the problem of rising bank failures in more detail. She wrote:

The 34 bank failures this year in the U.S. compare with 25 in 2008 and just three in 2007. As the economy nationwide has soured, amid rising unemployment, tumbling home prices and soaring loan defaults, bank failures have cascaded and sapped billions out of the deposit insurance fund. According to the most recent data available, the fund now stands at its lowest level in nearly a quarter-century — $18.9 billion as of Dec. 31, compared with $52.4 billion at the end of 2007.

The FDIC expects that bank failures will cost the insurance fund around $65 billion through 2013.

The FDIC has planned to impose a new emergency fee on U.S. banks to replenish the fund. Legislation passed by Congress this week boosts the FDIC’s authority to borrow from the Treasury Department if needed from $30 billion to $100 billion, allowing the agency to reduce the amount of the insurance fees.

Source:

“Florida’s BankUnited fails, will cost FDIC $4.9B”
Marcy Gordon
Associated Press, May 22, 2009

Small And Midsize Banks Threatened By Bad Commercial Real Estate Loans

Sounds like there’s the potential for more rough sailing ahead for the U.S. banking industry. Especially when it comes to the smaller players. From the
Wall Street Journal’s David Enrich and Maurice Tamman yesterday:

Commercial real-estate loans could generate losses of $100 billion by the end of next year at more than 900 small and midsize U.S. banks if the economy’s woes deepen, according to an analysis by The Wall Street Journal.

Such loans, which fund the construction of shopping malls, office buildings, apartment complexes and hotels, could account for nearly half the losses at the banks analyzed by the Journal, consuming capital that is an essential cushion against bad loans.

Total losses at those banks could surpass $200 billion over that period, according to the Journal’s analysis, which utilized the same worst-case scenario the federal government used in its recent stress tests of 19 large banks. Under that scenario, more than 600 small and midsize banks could see their capital shrink to levels that usually are considered worrisome by federal regulators. The potential losses could exceed revenue over that period at nearly all the banks analyzed by the Journal.

The potential losses on commercial real estate are by far the largest problem facing the midsize and small banks, easily exceeding losses on home loans, which could total about $49 billion, according to the Journal’s analysis. Nearly one-third of the banks could see their capital slip to risky levels because of commercial real-estate losses, the Journal found.

The Journal, using data contained in banks’ filings with the Federal Reserve, examined the financial health of 940 small and midsize banks. It applied the loan-loss criteria that the Fed used in its stress tests of the largest banks.

The findings are a stark reminder that the U.S. banking industry’s problems stretch far beyond the 19 giants scrutinized in the government stress tests. Regulators and investors have focused on too-big-to-fail banks such as Bank of America Corp. and Citigroup Inc. But more than 8,000 other lenders throughout the country are being squeezed by the recession and real-estate crash.

19 institutions does not a banking system make…

Source:

“Local Banks Face Big Losses”
David Enrich, Maurice Tamman
Wall Street Journal, May 19, 2009

That Which Didn’t Kill Could’ve Made US Stronger

Earlier today, I was doing research for Boom2Bust.com’s sister blog, Investorazzi.com, when I noticed Jeremy Grantham, the chairman of global investment firm GMO and advisor to such notable individuals as former U.S. Vice President Dick Cheney and U.S. Senator John Kerry, had just released his latest quarterly letter. The British-born investor set aside the last part of his May publication to lay into those responsible for the financial mess we find ourselves in today, as well as those who have traded in America’s long-term economic health to preserve the cancerous financial status-quo. From the piece:

It is ironic, by the way, that the U.S. would be less hurt than most given that Pied Piper Greenspan led all of us global rats off the cliff. And, yes, in this case the Maestro (well named) had an orchestra pit filled with Treasury and Fed officials (especially the NY Fed), and such a large supporting cast of dancing CEOs of financial firms and their reckless board chums that even Cecil B. DeMille would have found them sufficient. So we in the U.S. developed almost single-handedly the tech bubble of the late 1990s, and then engineered a U.S. housing bubble and a flood of excess dollars that almost guaranteed that global assets would follow suit. Yet, unfairly or not, the U.S. has some considerable advantages in this mess we created. First, we have an unusually low percentage of our labor force in manufacturing and export-oriented companies that will be the most immediately affected by the global downturn, unlike Germany and China, to name two. Second, the dollar plays an important role that may cushion U.S. pain by allowing U.S. authorities the flexibility to make their own rules where other countries such as Spain and Ireland have most decisions heavily constrained. More profoundly, the U.S. is in a position where necessary sacrifices will simply be less painful. We in the U.S. will have to buy two fewer teddy bears for our already spoiled four-year-olds. The third television set will be postponed as will the second or third car. We will have to settle for a slimmed down financial industry and fewer deal-oriented lawyers. Woe is us…

It may indeed be a better long-term solution to accept a more punishing decline and let foolish overleveraged banks go under together with weak players in other industries. Surely assets would flow to stronger hands with beneficial long-term effects. Indeed, the quick 1922 recovery from the precipitous decline of 1919-21 was so profound that the “Roaring Twenties” suppressed the memory of that earlier depression…

Current stimulus seems to be more about timing. We are unwilling to take a very sharp economic downturn even if such a downturn makes a quick, healthy recovery more likely. Rather, we seem to be making a desperate attempt to make the setback shallower, perhaps at the expense of a longer recovery period. What is likely to happen in the near term always has far more political influence than what may happen in the longer term. So we have been more decisively selecting the Japanese route rather than the 1921 or the S&L approach of a more rapid liquidation. Month by month we are voting for desperate life support systems – at the tax payers’ expense – for zombie banks and industrial companies that have been technically bankrupted by years of excess and almost criminally bad management.

I do think I know one thing, however. If a government invests directly, drawing employment from a large pool of the unemployed, and only invests in projects with a high societal return on investment such as hiring workers with well-stocked tool belts to install insulation, or repair bridges and transmission lines, or lay track to accommodate a respectably fast train from Boston to Washington (Yes!), it seems nearly certain that such a government will never have to regret it. Keeping banks, bankers, or even extra auto workers in business seems, in comparison, far more questionable. So questionable in fact that it must be justified by politics, not economics. We should particularly not allow ourselves to be intimidated by the financial mafia into believing that all of the failing financial companies – or very nearly all – had to be defended at all costs. To take the equivalent dough that was spent on propping up, say, Goldman or related entities like AIG (that were necessary to Goldman’s well being), as well as the many other incompetent banks and spending it instead on really useful, high return infrastructure and energy conservation and oil and coal replacement projects would seem like a real bargain for society. Yes, we would certainly have had a very painful temporary economic hit from financial and other bankruptcies if we had decided to let them go, but given the proven resilience of economies, it would still have seemed a better long-term bet. But, as I said, this is all just speculative theory and I don’t have to deal with Congress.

Let me end this section by emphasizing once again the difference between real wealth and the real economy on one hand, and illusionary wealth and debt on the other. If we had let all the reckless bankers go out of business, we would not have blown up our houses or our factories, or carted off our machine tools to Russia, nor would we have machine gunned any of our educated workforce, even our bankers! When the smoke had cleared, those with money would have bought up the bankrupt assets at cents on the dollar and we would have had a sharp recovery in the economy. Moral hazard would have been crushed, lessons learned for a generation or two, and assets would be in stronger, more efficient hands. Debt is accounting, not reality. Real economies are much more resilient than they are given credit for. We allow ourselves to be terrified by the “financial-industrial complex” as Eisenhower might have said, much to their advantage.

You can read the entire quarterly letter (in .pdf format) here.

Source:

“The Last Hurrah and Seven Lean Years”
Jeremy Grantham
Quarterly Letter
GMO, May 2009

Wall Street Paychecks Making A Comeback?

Sounds like they might be partying on “The Street” again soon. From the New York Times’ Louise Story this weekend:

The rest of the nation may be getting back to basics, but on Wall Street, paychecks still come with a golden promise.

Workers at the largest financial institutions are on track to earn as much money this year as they did before the financial crisis began, because of the strong start of the year for bank profits.

Even as the industry’s compensation has been put in the spotlight for being so high at a time when many banks have received taxpayer help, six of the biggest banks set aside over $36 billion in the first quarter to pay their employees, according to a review of financial statements.

If that pace continues all year, the money set aside for compensation suggests that workers at many banks will see their pay — much of it in bonuses — recover from the lows of last year.

“I just haven’t seen huge changes in the way people are talking about compensation,” said Sandy Gross, managing partner of Pinetum Partners, a financial recruiting firm. “Wall Street is being realistic. You have to retain your human capital.”

Brad Hintz, an analyst at Sanford C. Bernstein, was more critical. “Like everything on Wall Street, they’re starting to sin again,” he said. “As you see a recovery, you’ll see everybody’s compensation beginning to rise.”

In total, the banks are not necessarily spending more on compensation, because their work forces have shrunk sharply in the last 18 months. Still, the average pay for those who remain — rank-and-file workers whose earnings are not affected by government-imposed limits — appears to be rebounding.

Of the large banks receiving federal help, Goldman Sachs stands out for setting aside the most per person for compensation. The bank, which nearly halved its compensation last year, set aside $4.7 billion for worker pay in the quarter. If that level continues all year, it would add up to average pay of $569,220 per worker — almost as much as the pay in 2007, a record year.

What was it that musician and former Talking Heads frontman David Byrne used to say?

“Same as it ever was.”

The BPA (ft. David Byrne, Dizzee Rascal), “Toe Jam” (2008)
YouTube Video Link

Source:

“After Off Year, Wall Street Pay Is Bouncing Back”
Louise Story
New York Times, April 26, 2009

Trends Expert Says The “Greatest Depression” Is Upon Us

We’ve already experienced one blast from the past in David M. Walker today. How about one more, for good measure? Does anyone remember me talking about Gerald Celente some time ago? Like Walker, he’s in the headlines these days too. This is what I wrote about Celente on November 26, 2007:

Not surprisingly, the following story wasn’t picked up by the mainstream financial media. Back on November 19, UPI reported that Gerald Celente, trends researcher and director of the Trends Research Institute, told the Hudson Valley Business Journal (NY) that the United States is headed towards “The Panic of 2008,” where a financial crisis will send the U.S. dollar tumbling as much as 90% and the price of an ounce of gold soaring to $2,000. Celente told the paper:

We are going to see economic times the likes of which no living person has seen… The bigger they are, the harder they’ll fall.

Celente, who correctly forecast the subprime mortgage crisis, the dollar’s decline, and gold’s rise, said that the subprime fiasco was just the first “small, high-risk segment of the market” to collapse. He predicts that derivative dealers, hedge funds, buyout firms and other market players will also unravel. Massive corporate losses will also be an integral part of the “Panic,” which will result in a lower U.S. standard of living.

Okay, so Celente was wrong about a dollar crash and gold skyrocketing (at least in 2008), but he’s off to a good start with the remainder of his forecast.

So what’s the trends researcher saying these days? Plenty. He wrote on HoweStreet.com Monday:

The “Greatest Depression” that the Trends Research Institute forecast, well before Wall Street or Washington would acknowledge recession, is upon us.

The global financial markets are collapsing. All the pundit’s cautious predictions and business media’s hopeful expectations at the New Year for an economic turn around and imminent market bottom were dead wrong. There will be no turn around in the second quarter of 2009 or 2010 or 2011 … America and much of the world has entered the “Greatest Depression.”

The global financial system, built on endless supplies of cheap money, rampant speculation, fraud, greed, and delusion is terminally ill and will not be coaxed into remission by stimulus packages nor restored to health by government buyouts and bailouts.

There is no stock market bottom in sight. The only figure that can be forecast with confidence is that the Dow won’t reach zero!

As the crisis worsens, governments will take draconian measures to prevent total economic collapse and public panic. We have cautioned the likelihood of such measures before. But the rapidity and severity of the economic unraveling now demands immediate attention.

Expect massive bank failures, runs on banks, and bank holidays. Even if deposits are FDIC insured, quick access to money is by no means assured. At minimum, have reserves on hand for emergencies.

Trendpost: When the ship is sinking there are very few options: Life boats, life rafts, life preservers … and for the late to act, possibly a few pieces of floating debris to cling to.

We are trend forecasters, not certified financial advisors legally empowered to provide such advice. Although gold prices declined today some $15 to $925 per ounce, we forecast that gold will be one of the few life saving investments that will continue to increase in value, reaching $2,000 per ounce and beyond.

Buy gold online – quickly, safely and at low prices

Source:

“The ‘Greatest Depression’ Under Way”
Gerald Celente
HoweStreet.com, March 2, 2009

FDIC Sets Aside Billions For Additional Bank Failures

Here’s a topic that really hits home. Bank failures. And according to Reuters today, the FDIC is trying to keep one step ahead of the banking crisis. From the piece:

The worsening U.S. economy prompted the Federal Deposit Insurance Corp. Friday to double its projected U.S. bank failure costs to more than $80 billion over a five-year period ending in 2013.

The 25 U.S. bank failures in 2008 cost the agency $18 billion, the FDIC said. Another $65 billion in bank failure costs is expected from 2009 to 2013, it said.

On Thursday, the FDIC announced that the number of problem U.S. banks jumped by nearly 50% to 252 in the fourth quarter of 2008.

FDIC staff recommended the agency assess U.S. banks a special one-time fee to raise as much as $15 billion to restore the fund being depleted by bank failures. The assessment of 20 basis points, which equates to $200,000 per $100 million in domestic deposits, in the third quarter would represent the first such move since 1996, when regulators took a similar action in the aftermath of the savings and loans crisis.

Back on February 10, I noted that an analyst for Royal Bank of Canada-affiliated RBC Capital Markets was predicting more than 1,000 bank failures during the next three to five years.

Source:

“Bank failures may cost FDIC $80 billion”
Reuters, February 27, 2009

Why Aren’t There More U.S. Bank Failures?

It’s not like I want to see any more banks fail, but I often wonder why only a handful of financial institutions have gone under as the result of the present financial crisis. CNBC senior features editor Albert Bozzo shed some light on the subject this morning:

With all the doom and gloom surrounding the banking industry from the toxic assets to the nasty recession, you’d think banks would be failing at a furious pace.

Think again. Since the recession began in January 2008, the FDIC has closed just 39 banks—25 in 2008 and 14 thus far in 2009.

By contrast, more than 1000 institutions were closed during 1988 and 1989 when the savings and loan crisis was at its peak. Another 850-plus failed in the ensuing three years when the S&L crisis intersected with the fairly mild recession of 1990-1991.

In 1933, the government closed all 17,000 of the nation’s banks for a long, bank holiday weekend and some 5,000 never reopened.

If all this doesn’t hold up to logic, then try politics.

“It’s worse than the statistics indicate,” says veteran bank analyst Bert Ely. “One of the problems is how slowly regulators move in dealing with this problem.”

Sure, there are more banks now than in the 1930s and 20 years ago — roughly 8,400 today — but analysts say that still doesn’t explain the huge difference.

“The regulators are behind the curve,” adds Gerald O’Driscoll, a former Federal Reserve official and Citigroup VP, now with the Cato Institute. “The regulators are kind of where they were in the late 1980s. Regulators procrastinated, then acted. Regulators become tough when the politicians decide to bite the bullet.”

Banking experts say there are striking similarities between the current period and that of the late 1980s and early 1990s when the federal government went from insufficient stopgap solutions to the savings and loan crisis to a radical overhaul.

“It took a new administration to say we’re not responsible, to say we have a bunch of insolvent savings and loans,” says Lawrence White, a saving and loan regulator and former White House economist. “It made it easy for the regulators.”

White points out that it also took a new law, called Firrea, which created sweeping regulatory reform as well as a government entity — a bad bank, the Resolution Trust Corporation — to assume control of the institution’s assets and then sell them back into the private sector.

“In those days we weren’t as lenient,” says George Kaufman, a professor of banking and banking regulation at Loyola University, who consults for the Federal Reserve Bank of Chicago, “I think banks have been well under-capitalized.”

And the longer the government waits to close down troubled banks, the longer it will take to restructure the system, goes the thinking. That could also wind up costing taxpayers more money.

Great. Put in on my bill…

Source:

“Why More US Banks Aren’t Being Allowed to Fail”
Albert Bozzo
CNBC, February 26, 2009

Analyst: Over 1,000 Bank Failures On Tap

An analyst for Royal Bank of Canada-affiliated RBC Capital Markets is predicting a large number of bank failures over the next couple of years. From MarketWatch’s Alistair Barr yesterday:

More than 1,000 banks may fail during the next three to five years as the recession intensifies and loan losses climb, an analyst at RBC Capital Markets estimated on Monday.

In 2008, analyst Gerard Cassidy forecast 200 to 300 bank failures, but now he says the environment has deteriorated since then.

“Residential mortgage delinquencies remain at record levels, home-equity loan defaults are steadily rising and residential construction and land loan non-performing assets are skyrocketing for lenders with excess exposure to the weakest housing markets in the U.S.,” Cassidy wrote in a note to clients.

“In conjunction with the slowdown in the economy, credit deterioration has accelerated in the commercial and industrial and commercial real estate loan areas,” he said.

Since the mortgage-fueled credit crunch erupted in 2007, 34 banks have failed in the U.S. While Washington Mutual became the biggest bank failure in history last year, Cassidy expects most of the banks that collapse will be relatively small, with less than $2 billion in assets.

Source:

“More than 1,000 banks may fail, analyst estimates”
Alistair Barr
MarketWatch, February 9, 2009

FDIC Projects Higher Losses For Insurance Fund

Bad news from the FDIC. From Marcy Gordon of the Associated Press yesterday:

Federal regulators now believe U.S. bank failures will cost the deposit insurance fund more than $40 billion over the next four years as the economy weakens, a government official said Tuesday.

Federal Deposit Insurance Corp. Chief Operating Officer John Bovenzi said the agency’s estimate last fall of $40 billion in losses through 2013 probably will be surpassed. He also said in testimony for a House hearing that Congress should more than triple the agency’s line of credit with the Treasury Department to $100 billion from the current $30 billion.

The FDIC has never drawn on that credit line, but such an increase would ensure “that the public has no confusion or doubt about the government’s commitment to insured depositors,” Bovenzi said…

The FDIC’s original estimate of around $40 billion in losses to the insurance fund includes an $8.9 billion loss from last July’s failure of IndyMac Bank, a major thrift.

“That estimate is low,” Bovenzi said at the hearing by the House Financial Services Committee. “Our losses over an extended period will be higher.”

Source:

“FDIC: estimate for cost of bank failures over $40B”
Marcy Gordon
Associated Press, February 3, 2009

FDIC Friday, With A Twist

Tonight the Federal Deposit Insurance Corp. shut down three banks. But there’s a twist. MarketWatch’s John Letzing:

Federal regulators closed three banks in a single day Friday, as the ongoing credit crisis showed no signs of abating.

Utah’s MagnetBank became the fourth bank failure of the year, and the Federal Deposit Insurance Corp. was forced to directly refund depositors after being unable to find another institution willing to take over its operations.

That marked the first time the FDIC has been unable to find an acquirer for a failed bank in nearly five years, according to FDIC spokesman David Barr. “This bank did not have an attractive franchise value, and not many retail deposits or core deposits,” Barr said. The FDIC had conducted an extensive marketing process for the bank’s assets, he said…

The FDIC later said it has also closed Maryland-based Suburban Federal Savings Bank, and Florida’s Ocala National Bank…

The closures mark the fourth, fifth and sixth bank failures of 2009, bringing the total to 31 since the start of the credit crisis.

Source:

“Utah’s MagnetBank closed without an acquirer”
John Letzing
MarketWatch, January 30, 2009

FDIC Friday Report: 1st Centennial Bank

FDIC Friday claimed another bank today. From Reuters’ Diane Bartz tonight:

California banking officials closed the 1st Centennial Bank on Friday, the Federal Deposit Insurance Corporation said in announcing the third bank failure this year.

The bank, which has just six branches, will be purchased by First California Bank of Westlake Village, California, the FDIC said.

As of Jan. 9, 2009, 1st Centennial had total assets of $803.3 million and total deposits of $676.9 million. Approximately $12.8 million of that exceeded the insurance limits, the FDIC said.

Bartz noted the growing number of bank failures since 2007. She wrote:

Three U.S. banks failed in 2007 while 25 were seized by officials in 2008 as a struggling economy and falling home prices took their toll on financial institutions.

“They were closed because they were in financial difficulty. They had some construction loans and that didn’t work out,” said FDIC spokesman David Barr.

Source:

“UPDATE 1-Govt closes California’s 1st Centennial Bank”
Diane Bartz
Reuters, January 23, 2009

Play ‘The Bailout Game’

From the Wall Street Journal’s David Gaffen yesterday:

Most people out there aren’t part of the loop — the people that can influence the decisions of those who are tasked with figuring out how and when to dole out vast sums to the various struggling banking companies.

But now you can have a say with The Bailout Game, created by Blue Earth Interactive. It’s a Monopoly-style game that requires you to decide whether to bail out various institutions or not while keeping a recession off your back and helping stocks advance. (Hat tip to Felix Salmon of Portfolio.com, who linked this first.)

Enjoy…

Source:

“Playing the Bailout Game”
David Gaffen
Wall Street Journal (MarketBeat blog), January 15, 2009

Dick Cheney’s Revisionism Of The Financial Crisis

In an apparent attempt to deflect blame from the Bush Administration’s handling of the economy, Vice President Dick Cheney erroneously claimed today that no one anticipated the ongoing U.S. financial crisis approaching. Deb Riechmann of the Associated Press wrote today:

Vice President Dick Cheney says that his boss, President George W. Bush, has no need to apologize to the American people for not doing more to head off the financial calamity, saying no one saw the crisis coming.

During an interview Thursday with The Associated Press in his West Wing office, Cheney defended the administration’s performance on an economy that is growing weaker daily and which recently collapsed in spectacular fashion. Cheney said that “nobody anywhere was smart enough to figure it out.”

Wow. I haven’t heard a whopper like that in a while. In fact, there’s so much evidence to the contrary I wouldn’t even know where to start. Perhaps Mr. Cheney might indulge us and pour over some of the archived material in this blog. Upon completing this task, it should become quite clear to him that a number of individuals, in fact, saw the economic crisis coming.

Furthermore, what makes the Vice President’s claim even more disturbing is that it’s been reported that he is a client of one Jeremy Grantham, chairman of Boston-based investment firm Grantham Mayo Van Otterloo. Grantham, in case you didn’t know, has been a well-known “bear” for quite some time now. In fact, back in April 2007, the British-born money manager even wrote in a letter to shareholders:

From Indian antiquities to modern Chinese art, from land in Panama to Mayfair; from forestry, infrastructure and the junkiest bonds to mundane blue chips; it’s bubble time!

Subsequently, he predicted that the bursting of these bubbles would take place “across all countries and all assets.” He also foretold the credit crunch, comparing it to watching a “slow-motion train wreck.” And he predicted that at least one major bank would fall within five years.

Such was Grantham’s “talent,” that the Wall Street Journal on January 2 even credited him, along with other individuals, for having correctly predicted the current financial crisis.

Vice President Cheney can keep on telling himself, and others, that no one predicted this financial mess. But, as far as I’m concerned, the evidence speaks for itself.

Sources:

“Cheney says no one saw financial crisis coming”
Deb Riechmann
Associated Press, January 8, 2009

“The Doomsayers Who Got It Right”
Wall Street Journal, January 2, 2009