5.01% Free Rewards Checking from CharterBank!

All People Who Like Making Money,

CharterBank has come out with a new checking account product that is absolutely unmatched in the indusstry. If you’re interested, hit me up, and it’s likely that I can get you signed up for the account.

Here are the amazing advantages of having this account:

1. You get to have me as your personal, free, go-to financial advisor. With that comes a lifetime supply of my gratitude and a lot of banking knowledge and service that you’re just flat out not going to get anywhere else.

2. You earn a whopping 5.01% on balances up to $25,000. On balances over that amount, you earn 1.01%. You still get the 5.01% on the first $25,000- don’t worry.

3. You get ATM fees refunded to you each month up to $20. That’s anywhere in the nation, any fee, up to 20 bucks per month.

4. You get to be a part of a growing, dynamic bank that is small enough to care about every customer, but sophisticated and energetic enough to lead the pack with innovative technology and products.

So your next question is probably- What’s the catch?

Of course, there’s not a catch, because I’m going to tell you all the details right here. In exchange for your making the bank more efficient and profitable, we’re going to pay you an outrageous amount of interest just for letting us hang out with your checking account.

How do you make us more efficient and profitable? Here you go:

1. Receive either one direct deposit or ensure that your account is electronically debited once every month. You can accomplish this by things like having your paycheck electronically deposited into your account, paying your cell phone bill online, paying your credit card, etc. Remember, it’s EITHER an electronic debit OR credit every month. You set it up once and it’s done forever.

2. Sign up for our online statements. They’re many times safer than having paper statements and they save you from having to never open them when you get them in the mail. Online statements cost us 10 cents. Paper ones cost us up to $2.50 a piece. We give that savings back to you.

3. Use your debit card. 10 times a month or more- to be exact. A lot of people have reservations about this and instead use a credit card. What they don’t realize is their debit card gets the same protections as your credit cards if you always choose to run a “credit” transaction rather than entering your pin number. Same protection, but we pay you lots of money to use us.

Random Tidbits:

You get the first month interest no matter what- don’t worry about timing this right.

We refund your ATM fees once a month when the statement drops. This will happen on the 19th of every month.

Let’s say you do none of the qualifying items above- you still have a free checking account. No penalties, no fees, no nothing. There is nothing but win-win here.

So now that you’ve realized how easy and amazing this product is, how do you sign up? You email me, hit me up on facebook, or call me directly.

Raymond.grote@gmail.com
678-423-5312 (Work)
678-416-3880 (Cell)

I’m still alive, I promise

For any of you who regularly check the site and have noticed my extended absence, I’m still alive.  I recently lost my laptop, don’t have easy access to another one quite yet, and am blocked from getting on my site while at work.  Don’t worry though, I have a lot of writing to do once I rectify this situation.  In the meantime, I enourage you to read the next post for an exciting new product with CharterBank!

Implications of Colonial Bank’s Failure

There’s big news out today, folks.  Colonial bank is very likely to fail today, August, 14th, 2009, and there are a lot of reasons you should care.

First, Colonial received a major investment from a now bankrupt business, Taylor, Bean, and Whitaker.  This company funded and facilitated a huge number of mortgages, particularly in the southeast region.  But that’s old news.

Second, Colonial’s failure was leaked prior to its actually being shut down and placed into receivorship.  This is a huge issue.  There are two schools of thought on this.  The first is the most simple: somebody leaked the information at BB&T, Colonial, or the FDIC out of pure stupidity.  There’s a good reason that the public isn’t notified when a bank is going to close.  It saves that bank, usually, from having a run and costing the FDIC even more money.  The second reason is a little more complex and underhanded.  Somebody might have purposely leaked the news that the extremely strong BB&T was going to buy the deposits of the very weak Colonial, because Colonial was already seeing a run on deposits.  The first instance is extremely problematic; the second, extremely smart.  We’ll have to wait and see what really happened.

Third, Colonial bank received TARP money after getting a similarly large amount of private investment.  It received $550 million tax payer dollars, to be exact.  Recently, the TARP inspector general (aka TARP czar) raided offices of the bank alleging fraud that probably would have kept the bank from receiving funds.  As an FYI, a number of bankers and investment professionals that I have spoken with agreed with me when I was astounded and angered that Colonial received funds in the first place.  They’ve been failing for quite some time.  There goes $550 million down the tubes that was only supposed to be invested in the strongest and/or most systemically important financial institutions.  There’s a scandal brewing here, just wait.

Finally, and this is the biggest future news of all, the FDIC is going to run out of its self-funded reserve for losses.  This means that it’s likely that it will tap its line of credit at the Treasury.  This isn’t the first time this has happened, and you shouldn’t panic, but it’s one more bit of shocking fall out from the financial disaster that we’re desperately trying to get behind us.  Let me repeat, the FDIC is about to run out of its own money and start relying on taxpayers.  Can the government handle it? Absolutely.  Does this highlight how bad our situation was and continues to be? Absolutely.  Most importantly- Are your deposits still safe? Absolutely.

The Best of Today’s Business: July 29, 2009

Microsoft’s Bing and Yahoo! Tie the Knot

CNNMoney’s David Goldman reports that f ollowing a year and a half courtship, which at times looked more like a messy divorce, Yahoo! and Microsoft announced that they have finally struck a deal on a search partnership.  Under the 10 year agreement, Microsoft’s Bing will power Yahoo! sites while Yahoo! will provide search technology and its global sales force to Microsoft. 

Full Story: http://money.cnn.com/2009/07/29/technology/microsoft_yahoo/index.htm?postversion=2009072908

Found: A Construction Company Attracting Investors

China’s economic climate shows increasing signs of life with the latest evidence being the IPO of China State Construction Engineering Corp.  Joe MacDonald of BusinessWeek reports that the builder of such Chinese icons as the “Water Cube” and Shanghai World Finance Center (China’s Tallest Building) ended its first day of trading up over 56.2% after surging 80% early on.  The company raised $7.3 billion making it the the largest IPO since Visa’s 19.7 billion offering. 

Full Story: http://www.businessweek.com/ap/financialnews/D99O243O0.htm

Rational Free Market or Siding with Evil?

Yesterday’s news that the CFTC will soon publish a report stating that speculators were to blame for oil’s fast rise (and subsequent crash) in 2008 certainly came as a breath of fresh air to many stung by those high prices.  This was not the case with Jon Birger of Fortune magazine.  In his article published late Tuesday, he defends the practice of speculation primarily relying on the fact that futures markets are not set up to take delivery and therefore prices must, in general, line up with overall supply and demand.  He goes on to say that removing speculators from the market would provide strong incentive for those who can buy and sell these contracts to hoarde the supply, thus driving up the price even higher, akin to when the silver market was cornered in the 1970’s.  Moral of the story: Be careful what you wish for; you just might get it.

Full Story: http://money.cnn.com/2009/07/28/news/economy/oil_prices_speculators.fortune/index.htm?postversion=2009072816

Proof of his argument: http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article5528333.ece

Noted:  Mortgage applications fell by 6.3% for the week ended July 24, 2009.

The Best of Today’s Business: July 28, 2009

SEC Requires Traders to “‘Cover Up”

Expanding on the temporary rule put in place during the height of the fall of 2008’s  financial crisis, last night the SEC made a rule banning “naked” short selling permanent.  Short sellers bet that stocks will fall in value.  Short selling occurs when traders borrow stock, sell the borrowed stock, buy real stock when the stock loses value, return the borrowed shares, and pocket the difference (and that’s the simple version).  While the SEC does not view short selling as a evil, it does believe that “naked” short selling, or selling shares when there are no shares even borrowed, to be highly manipulative.  The SEC finally realized that there was something inherently wrong with selling things you down own, don’t have a right to, and don’t even have access to.  Nice work.

 Summary of the ruling: 

http://www.cnbc.com/id/32174786

Full Release: 

http://www.sec.gov/news/press/2009/2009-172.htm

Bank of America Goes on a Diet

Dan Fitzpatrick reports that BofA chief, Ken Lewis, announced plans to scale back it’s American branch network by 10%.  Mr. Lewis cites consumer demand shifting away from traditional branch banking to more convenient online and mobile outlets.  BofA’s chief rivals, Wells Fargo and J.PMorgan Chase, have no plans to follow suit saying that they will continue to continue to branch as aggressively as they have done in recent years.  Bof A’s trimming down comes as it attempts to appease Uncle Sam while swallowing Merrill Lynch and Countrywide and seeing continued pressure on earnings from souring loans. 

Full Article:  http://moneywatch.bnet.com/economic-news/video/bofa-to-shed-10-of-branches/325535/

CFTC Reverses Itself on Oil Speculators

Jeanne Dugan and Alistair MacDonald report in today’s Wall Street Journal that the U.S. Commodity Futures Trading Commision plans to issue a report stating that oil speculators played a large role in the extreme surge in oil prices in 2008.  In a clear departure from Bush-era free market idealism, the agency states that previous studies and conclusions were based on incomplete and possibly erroneous information.  The reversal stands in clear opposition to the U.K’s Financial Services Authority who says it has found no evidence that speculators caused the bubble. 

Full Story: http://www.cnbc.com/id/32183731

Silverman Strikes Out (On His Own)

Sam Schechner and Shira Ovide report that Ben Silverman, co-chairman of NBC Entertainiment and Universal Media Studios, will leave the company  to begin a new media venture withIAC/InterActiveCorp. NBC’s chief executive, Jeff Zucker, stated that the departure and NBC’s reorgainzation come as part of a “confluence of events.”  Silverman leaves with a mixed track record.  The network lost 155 of its prime-time viewership under his watch while producing hit shows such as “The Office” and “Ugly Betty.” 

Full Article:

http://online.wsj.com/article/SB124870053062783671.html

Noted: Home prices fell 17.1% in May 2009 over May 2008.  This is a slight improvement from April 2009’s yearly decline and further indication of the bottoming of the housing bust.

Best of Today’s Business: July 27, 2009

As many of you are well aware, I read pretty much anything and everything that has to do with business and banking for at least a couple of hours a day.  I usually start off with going through major sites like CNBC, CNN(money), FoxNews Business, Yahoo!Finance, Google Business, FDIC, and Federal Reserve of Atlanta.  Then I move on to catching up on anything I haven’t already read on one of those sites by going through the Wall Street Journal. 

I say all this to set up the new daily blog I’m going to attempt to create.  I’ll house it here on FrontlineFinancials while maintaining the less regular, much more in depth posts that I try to put out on at least a weekly basis.  This new series will be modeled after the Yahoo!Finance’s former “Best of Today’s Business.”  If I run into any copyright issues, I’ll change it up.  I’m not sure why Yahoo! decided to cancel the column, but I and many others used to begin each day with it to get a quick run down of important, influential, or downright hilarious business articles and blog posts.  To that end, here’s the difference between mine and Yahoo!’s old one: I encourage you make comments and post your own favorite articles/blogs each day.  I’ll update the blog throughout the day based on your comments and suggestions.  So, here’s the innaugural version of the “Best of Today’s Business” (the reincarnation).

July 27,2009

A Durable Competitive What?

The “Huffington Post“ and “Business Wire” (among many other business publications) report today that billionaire Warren Buffet is teaming up with a new media group, A Squared Entertainment, LLC and AOL.  They’re producing  a series of financial education cartoon shorts.  “The Secret Millionaires Club”  debuts in Buffet’s interview on CNBC.com (click here to see the clip).  It details a “proper” investment decision-making process regarding a local candy company (See’s Candy, anyone?).  While the theme song isn’t exactly catchy, the short lesson provided should be on the agenda at everyone’s first day of Business School. 

Full Story: http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=20090724005103&newsLang=en

The “Town Hall” Approach Works for Uncle Ben, Too.

As part of his efforts to ensure that the Federal Reserve becomes more transparent and accountable, Chairman Bernanke reaches out to the general public with an “Obama-esque” town hall Q&A on Jim Lehrer’s “News Hour”.  In it he details how he thinks the Fed and economy are doing,  his belief that the Fed is best suited to manage both Consumer protection and systemic risk regulation, and how sickening the bailout of the financial industry has been.  This is a three part series airing Monday , Tuesday, and Wednesday evenings at 6pm on PBS.

Full Article with clips: http://www.pbs.org/newshour/updates/business/july-dec09/bernanke_07-26.html

Not a Complete Disaster = The New “Good News”

Everyone knows the housing market is in shambles, but AP’s Alan Zibel reports that the market appears to be showing new signs of life.  New home sales are up 11% from May levels.  Additionally, resales of existing homes were up 4%.  This good news comes against the backdrop of continued downward pressure on pricing.  The median home price fell 6% to $206,200 from May’s level of $219,000.  Many are calling this the final bottom of the market, but with government tax subsidies running out at the end of the year, we’ll need the economy to pick up some steam in order to keep the momentum going.

Full Article: http://www.newsvine.com/_news/2009/07/27/3076052-june-new-home-sales-rise-11-percent

Blue Light Special:  The United States

Reuters‘ Chris Reese writes about the impending week of Treasury debt auctions.  The sheer size is shocking: over $200 Billion for this week alone.  Just like everyone else in America, buyers of bonds are becoming more and more skeptical of the ability of America to meet its future payment obligations.  Bond yields are moving upward while prices are (naturally) moving downward.  This could create major issues for future generations if this fiscal trend is not stopped.

Full Article: http://www.reuters.com/article/companyNewsAndPR/idUSN2737787420090727

Noted:  Jack Welch surprises America by *gasp* saying that you have to work a lot to get ahead. Click here for the shocking details!

Thoughts on Current CD Rates

Right now I’m dealing with a lot of irrational behavior in the CD market.  More and more people are closing out their accounts here because they are being lured away by higher rates at other institutions.  This is not unusual, but at least one group of these rate shoppers are going to end up missing out on a lot of interest that they could have had if they had taken a lower rate for a little while. 

Let me explain myself.

There are two groups of bankers paying high rates right now.  One camp pays them because they have to do it.  They’re on the verge of going out of business and have to pay high rates in order for you to leave your money there.  As long as you’re FDIC insured, you should take advantage of these poor souls. 

The group that I want to deal with in this post is the banker who pays high rates because he wants to do so, not because he is desperate to keep your money. 

This group is exceedingly smart, forward thinking, and low-risk taking.  He’s paying rates on short term CD’s at current market rates.  That is, for CD’s with around 30-days to 2 year maturities, he’s paying somewhere between .5% to a little less than 2%, respectively.  That’s not how he’s being smart though. 

What the smart banker is doing is locking in long term CD money now in anticipation of substantially higher rates coming in the future.  He’s paying around 4% (which by the way isn’t really all that high of a rate compared to rates over the last 20+ years) on 5 year CD’s.  Right now, that CD is losing him money, but over time, he’ll make a killing on it. 

Here’s why:

With the Federal Reserve and the Federal Government already having promised, guaranteed, or directly put 11 trillion dollars into the economy, there is going to be inflation.  You cannot put that amount of money into our economy without devaluing our currency, i.e. causing substantial inflation. 

(Read Fed. Charman Bernanke’s latest comments on inflation here)

If words like inflation, devaluation, the mirage of the Federal Reserve, etc., don’t mean much to you, let’s put it in terms of something everybody understands: gas.

Everyone needs it, everyone wants it, and you have to use it almost every day.  Now, let’s say everyone had to drive as much as they do now with the car that they have right now, BUT there was only enough gas on earth for everyone to have three gallons per month.  The price of gas would be unbelievably high, right?  Gas would be VERY valuable. 

 Alright, now take that same scenario and let the oil countries produce so much for everyone to have one thousand gallons a month.  The price would be extremely low right?  It wouldn’t be nearly as valuable.   That second scenario is what is going to happen to the value of our dollar over time because there are just so many dollars available right now. 

When inflation hits, and it will, interest rates will naturally go up in line with how bad that inflation gets.  This means that bankers will have to pay you higher rates on your CD’s.  So right now, the smart banker is using his forsight and knowledge to pretend to be paying people a “high” interest rate on 5 year CD’s, all the while knowing that you’re being a fool for falling for his little trap. 

My point is: Before you just go after the highest rate, look at the longer term implications.  If something seems too good to be true, it probably is.  Bankers paying high rates on short term money are probably going out of business soon.  Those paying “higher” rates on long term money that locks you into a very long holding period are probably taking advantage of your ignorance about inflation. 

Remember, inflation runs somewhere between 2% and 3% per year in good years.  We’re about to enter a period of high inflation (think something similar to the late 1970’s and the Nixon/Carter years).  Do you really think that 4% on a 5 year CD is a great rate in light of the fact that just 12 months ago you were getting 5.35% on 1 and 2 year CD’s?  Do you really think that if prices at the grocery store are rising at 5-10% per year that you’ll be happy about basically losing money on your CD?  If you’re fine with all that, then by all means, get that 4% CD.  If that scenario scares you, put your money in something much shorter term and settle for the lower rates in anticipation of being able to get a much higher, inflation-adjusted rate in the fairly near future. 

If you don’t believe me when I say 4% is a historically very low interest rate, check out what rates on 6-month CD’s have done over time here.  Keep in mind these CD’s have terms 4.5 years shorter than what you’re locking in if you take that 4%, 5 year CD.

(For all you who care about political correctness, insert “she” in the smart banker references wherever you deem appropriate.)

The Fall of Georgia Banking … (Past performance does not necessarily indicate future performance)

The first three issues we dove into were all related to basic supply and demand.  The major point of my argument surrounding the number of bank presidents, huge numbers of new banks, and “flipping” banks was this:  When the supply of banks exceeds the demand for banks, banks will tend to go out of business or consolidate. 

 You see this all the time with all kinds of products and businesses.  You even see this specifically with banks during the best of times as areas grow and mature.  Branches close or are consolidated pretty regularly. 

 The next set of issues I’d like to deal with are a bit more complex, but truly set the stage for one of the biggest “bubbles” in the history of the world, and more specifically, Georgia.  They are:

1.  Explosive population growth and projections of continued growth

2.  Unsustainable growth in debt, and

3.  Sub-prime mortgages

 The latter two were (and continue to be) national issues.  The population growth was more specifically in Georgia, but we also saw it in places like Las Vegas, Phoenix, Florida coastal areas, and some other pockets around the country.

 Growth in population is generally a wonderful economic driver.  At one point Georgia was home to some of the fastest growing populations in the country.  For years, counties like Coweta, Henry, Cobb, and Fulton experienced unprecedented and what seemed like endless growth.  This shift was happening as the business environment got much better and more sophisticated in the Metro-Atlanta region.  Georgia is also one of the best states for entrepreneurs and most  businesses because of pro-business labor laws and a helpful tax code.  When coupled with a generally good climate, lots of relatively cheap land and homes, and some good ole’ southern charm, Georgia and specifically Metro-Atlanta looked like a wonderful new place to call home.

 All of this sounds great so far, doesn’t it?  Why on earth would population growth be a “cause” of a banking melt-down?  The answer is simple- people thought that it would continue, without interruption, forever. 

 Builders and banks especially believed this enormous myth.  The faster the populations grew, the faster banks lent money to builders who built increasingly larger numbers of homes.  They failed to realize that just like the much larger economy, population growth is generally cyclical unless you’re in a third world country. It might always be growing, but sometimes it grows faster than others, and there will almost always be some upper limit.  When the growth in number of homes that banks were financing the construction of began to rapidly exceed the number of families moving into the area, there became a huge oversupply.

 Banks were eventually forced to foreclose on a huge number of the new constructions.  These were houses that had never been lived in and in many cases weren’t even finished.  Because of the huge oversupply, banks were forced to write down values at a rapid rate.

 Everyone also knows that homes have to sit on a piece of land.  Banks were increasingly financing more and more land to be developed into subdivisions to support this huge, “infinite” population growth.  It’s the land, especially, that has and will continue to bring down the community banks.  This is where the largest write downs have been.  Land, if it sells at all, is only selling for thirty to fifty cents on-the-dollar.  That means for every dollar a bank had loaned on a piece of foreclosed land, it can only sell it if they’re willing to lose seventy cents on it. 

 What ultimately caused the housing boom and bust in Georgia, as with everywhere else, were subprime mortgages.  There’s a twist to this story for community banks in Georgia however, and it’s very important.  Most community banks don’t actually provide the funds for the mortgages that they make.   The banks that have failed so far in Georgia actually held almost no “Sub-Prime Mortgages.” 

 The problem was the home ownership and building boom that those mortgages created.  Community banks were the ones that generally financed the builder’s land purchase and construction costs.  That builder would then sell the house to whoever could get the financing, and then pay off the community bank with the proceeds from the sale.  The community bank didn’t care who bought the house, but they should have.

 A large and growing number of the sales would never have happened under more “traditional” environments.  Everyone is well aware of all the asinine practices that were going on in the mortgage market like stated income loans, Alt-A mortgages, 105% loans, etc.  Had community bankers and regulators been more aware of these buyers, they might have been able to better slow down this clearly overheated market. 

 Finally, there was an unbelievable explosion in the level of debt for average households across the nation.  Because everyone and their mother and sometimes even their dead grandmother could get a mortgage, there was a huge expansion of mortgage debt.  Also, because home values were rising at an unprecedented rate and people were spending far more than they actually made, there was also an extremely big boom in home equity lines of credit.  It is now well known that this level of debt creation could not be sustained.  When home prices plummeted, home equity lines became worthless and the huge amount of debt outstanding relative to the new values of homes created a recipe for disaster for many banks.  To summarize Warren Buffett:  Debt is like gasoline in a car.  It can make the car go 100mph in a heartbeat.  But, when the car crashes, it’s also the gasoline that blows it up.

 Through all this, a very important lesson was re-learned by many bankers: past performance does not necessarily indicate future performance.  Populations will not grow endlessly, home values will not rise endlessly, people will not be able to sustain high levels of debt endlessly. 

 In the next couple of posts, I’ll be moving on from these more general issues that contributed to the Georgia debacle and diving headfirst into more complicated, but critical problems that brought down our banks.

You Can’t Handle the Truth!

Whether or not you’ve kept up with the Bank of America/Merril Lynch saga, there’s a somewhat funny, somewhat eerie, and mostly frighteningly true parallel between Jack Nicholson’s famous “You want me on that wall” speech in A Few Good Men and Hank Paulsen’s recent testimony to congress.  He was questione specifically about the government’s role in Bank of America’s purchase of Merrill Lynch at the height of the financial panic.  For your thought and enjoyment, below are the movie quotation and a few excerpts from Paulson’s recent testimony. 

 Let’s be honest, Hank Paulson may have screwed over BofA shareholders in the very short term and put the taxpayer on the hook for a pretty big loan, but it’s my belief, as I’ve said here before, that without this massive intervention we’d be in a financial nuclear winter.  Not only would Merrill have gone out of business, but BofA and consequently the entire system would have failed.

Kaffee: *Colonel Jessep, did you order the Code Red?*
Judge Randolph: You *don’t* have to answer that question!
Col. Jessep: I’ll answer the question!
[to Kaffee]
Col. Jessep: You want answers?
Kaffee: I think I’m entitled.
Col. Jessep: *You want answers?*
Kaffee: *I want the truth!*
Col. Jessep: *You can’t handle the truth!*
[pauses]
Col. Jessep: Son, we live in a world that has walls, and those walls have to be guarded by men with guns. Whose gonna do it? You? You, Lt. Weinburg? I have a greater responsibility than you could possibly fathom. You weep for Santiago, and you curse the marines. You have that luxury. You have the luxury of not knowing what I know. That Santiago’s death, while tragic, probably saved lives. And my existence, while grotesque and incomprehensible to you, saves lives. You don’t want the truth because deep down in places you don’t talk about at parties, you want me on that wall, you need me on that wall. We use words like honor, code, loyalty. We use these words as the backbone of a life spent defending something. You use them as a punchline. I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of the very freedom that I provide, and then questions the manner in which I provide it. I would rather you just said thank you, and went on your way, Otherwise, I suggest you pick up a weapon, and stand a post. Either way, I don’t give a damn what you think you are entitled to.
Kaffee: Did you order the Code Red?
Col. Jessep: I did the job I…
Kaffee: *Did you order the Code Red?*
Col. Jessep: *You’re Goddamned right I did!*

Tom Cruise = Chairman Towns?  I don’t think it’s much of a stretch. 

And from Mr. Paulson

“During my tenure, the world experienced a financial crisis unprecedented in our lifetimes. The crisis presented a relentless series of novel challenges that required swift, innovative, and dramatic responses. I am proud to have been among the many public servants—in the Congress and at Treasury, the Federal Reserve, the FDIC, the OCC, and other agencies of the government—who came together to confront these challenges and to prevent a far more damaging meltdown of our financial system.”

…”Our financial system underpins our modern economy; commerce today requires a string of payments, whether that string of payments is for delivering a gallon of milk from farm to consumer or for delivering a new product from idea to production. And that string of payments depends on trust. Our financial system works because consumers and investors have confidence in the strength of financial institutions. Last fall, that confidence was largely gone…”

…”Fortunately, the most dire of consequences were averted. I am proud that, along with many others, I brought what experience, talent, and efforts I could to right our nation’s course.”

…”having had the benefit of some time to reflect, and to consider views expressed by others, I am confident that our responses were substantially correct and that they saved this nation from great peril.”

…”Moreover, all public officials involved, including Mr. Bernanke and me, believed that the failure to consummate the merger would likely create immediate financial market instability, would threaten the viability of both firms, and would call into serious question the judgment of Bank of America’s leadership.”

And finally, “I explained to [Bank of America's CEO, Ken Lewis] that the government was supportive of Bank of America, but that it felt very strongly that if Bank of America exercised the MAC clause, such an action would show a colossal lack of judgment and would jeopardize Bank of America, Merrill Lynch, and the financial system. I further explained to him that, under such circumstances, the Federal Reserve could exercise its authority to remove management and the board of Bank of America. By referring to the Federal Reserve’s supervisory powers, I intended to deliver a strong message reinforcing the view that had been consistently expressed by the Federal Reserve, as Bank of America’s regulator, and shared by the Treasury, that it would be unthinkable for Bank of America to take this destructive action for which there was no reasonable legal basis and which would show a lack of judgment.”

Summed up in two sentences:  “Mr. Paulson, did you order the code red?!”  “You’re Goddamn right I did!”

(Find Mr. Paulson’s full testimony here)

The Actual Death of a Bank

I’m both relieved and a little sad to say that on Friday, June 26 at 6pm, Neighborhood Community Bank finally was seized by regulators. 

For the FDIC’s story on the closing, check out this link: http://www.fdic.gov/news/news/press/2009/pr09102.html

I’m taking notes and talking to a lot of people in an effort to give everyone an inside play-by-play of what happens from the perspective of an employee. 

Stay tuned!