1, 2, 3, 5, 6, 9, 10, 11, 12, 14, 17, “18″, 20, 27, 28, 31, “35″, “40″, 51, 67, “155″, 247.  Again out of more than 7,600 banks.

I do understand that it is easier to identify the “bad” guys than it is the “good” guys; however, i am making progress along the “good” guy lines, too.

Oh well, it looks like a busy week ahead.  I have figured out my approach to analyzing Quanta Analytics List of 100 StockExchange Banks, and feel really pretty good about it.  I have figured out a way to evaluate every bank against a set of “normalized” industry statistics so that i can look at everyone of them on the same “par level”.  I’ve collected the data on about two-thirds of my banks, run some early tests, and the outcomes are positive.  It will take me about a day to get the rest of the data that i intend to use, then all it will come down to then is to run my analysis and rank the banks accordingly.

It’s kind of funny because i just received The Street’s list of the top ten “big banks with greater than $1 billion market value” that they think people should invest in–and here it is, in order from ten on down to the best.

MBFI, USB, HBAN, FITB, PNC, STSA, C, WFC, JPM, and BAC.  Just in case you don’t know your stock symbols, the last four are of course:  Citigroup, Wells Fargo, JP Morgan, and Bank of America.

I have a feeling my list of ten might look a little different, but probably for different reasons.

Then also this next week, i am expecting to see the President’s 2012 budget numbers.  I am all set to see how the President’s 2012 budget numbers compare to his 2011 budget numbers, so i can see “What a Difference a Year Makes”.  I not only intend to compare the 2012 numbers of this years versus last years, but also this years 2011′s, and 2010′s against last years 2011′s and 2010′s.  Those are the three key years.  2010 will show how the actual did against last years projected.  2011 will show how the current budget turned out against the 2011 President’s.   And of course, it will be interesting to see how 2012′s new budget compares to last year’s thoughts.

That will take a day or two, and take me away from Quanta’s banking analysis, but so what.  It’s not like people are beating down the door to see what i have to say.

Need i bring up fannie and freddie and the plans for them?  Sometimes i think i am living in some isolated, back country area like Littleton, North Carolina where nobody knows crap–especially when it comes to the ways of the world as viewed in Washington and New York City.

Oh well.  X sent me a good article from the Times on J.D. Salinger yesterday.  Needless to say, i think there are parallel’s.

For example, here is my website record yesterday?  One, for my Indy site (with a 100% bounce rate–meaning they left as soon as they got on).  Zero for my Quanta Analytics site.

And life goes on in the back roads.

Have a good one.

Jim, or should i say J.D., which in my case stands for James Dean

Census Data–average (mean) income per 78,874,000 families in 2008 was $79,634.  That is the average.

Assume $26 Trillion in Debt (high) but would include $15 T in national debt, $10 T in mortgage debt, and $1 T in individual debt.

Divide $26 Trillion by 78,874 families and this comes out to $329,640 of debt per family.

Amortize that $329,640 over 30 years at 5.00% and yearly payments per family = $21,443 .

Divide that $21,443 by the average 2008 income ($79,634) and you get 27%.  Which by the way is under general lending underwriting guidelines for long term lending.

Granted our debt is going in the wrong direction–that is upwards–however, we cannot forget that family incomes have also been rising as well as our GDP.  Although the ‘debt’ numbers might seem large, i am beginning to think that maybe things are not as bad as they might seem otherwise.

As you know, i never did believe in the Great Depression scenario as it was.  Now tell me what i am missing.

ps.  And just as an aside, during the past thirty years when we have accrued most of that Debt on the books, average family income in constant 2008 dollars rose from around $60,000 to the $80,000 level–enough in other words to cover those $20,000 annual debt payments.

Have a good one.

Dear cohort:

I guess everyone either (1) already knows what I am saying, (2) they think I am just another “blogger-type” blowing smoke; or (3) there is so much other noise out there counter to what I am saying that they just can’t accept it.

It reminds me of the day I was watching the Big Bank Executives getting grilled in front of the Senate Finance Committee a couple of years ago.  Of course, the executives were getting beaten up pretty good by the “extremely wise and insightful” Senators and generally the Executives were fairly meek in their responses to the grilling.  Most of the discussion was around the banks’ mortgage lending, but at one point Senator XXX puffed up his chest and said, “What are you going to do when the next shoe drops–bad credit card lending?”  The Senator said, “My Expert Economists are telling me that credit card lending is going to be the next multi-Trillion dollar problem that you banks are going to drop on us.”

I was a bit surprised when the CEO of Bank of America responded almost immediately, “Now, Senator, I hardly think that will happen–the amount of all credit card lending for the entire industry is less than $1 Trillion.  Our analysts estimate industry losses for that part of the market will be around $10 Billion.

Now I don’t know about you, but even at that time I felt that there was a fairly big gap between the Great Senator with a “multi-Trillion dollar” perspective versus the Questionable Banker with a “$10 Billion dollar” perspective.

Having already made myself somewhat familiar with the FDIC Banking database, I knew that there was information available to determine which of the two perspectives was more correct, so I went into my den and got on my computer and onto the FDIC website.

And do you know what I discovered after about five minutes of looking?

The CEO of Bank of America knew more about what he was talking about than the Great Senator XXX who was backed by his so-called expert economists.

As you know, I have never liked economists in general nor anecdotes (although i have just told you one) in particular.  Personally, I prefer to use “composite” information based upon reliable information than the type of side-bar anecdotes that many of the experts use to extrapolate into nonsense.  The trouble is it takes more work to do the former than it does the latter–although in all truth–not much more work.

So now with that being said, I will stand behind QA’s findings and analysis showing that the “worst of the banking industry’s problem” is over.

———–

H–I just don’t see this doomsday scenario happening.

I have been looking at some figures on-line from the cia world factbook and have now ordered the 2011 version from Amazon.  I am sure just mentioning the cia might raise eyebrows, but for some reason i have this “sneaking suspicion” that their facts might actually be better than those that a lot of the “doomsayers” keep throwing out there.

There are many ways to measure a country’s value besides “gdp”, “banking”, “debt”–and even though the u.s. can still hold its own quite well in those arenas, the u.s. does quite well in a lot of other areas, too, including “water supply”, “agriculture”, “wealth per capita”, “infrastructure in airports, railways, roadways, etc.”, “housing”, “land per capita”, “education expenditures”, “military expenditures”, “life expectancy”, “electricity generation”, etc.

Yes, we need to fix some things (maybe even a lot of things), but if we are smart and start doing some of the things that this new government panel came up with, then i wouldn’t pay too much attention to the doomsayers.

What is happening today is that the rest of the world is improving themselves faster than we are, but that is a lot easier to do when you are starting up than it is when your business life cycle has somewhat matured.  For example, it is a lot harder for Microsoft to experience 100% growth today than it was when they were much, much smaller back in the 1980s.  And it a lot harder to raise your standard of living in the u.s. today than it is in China, India, Brazil and Russia.

The U.S. is still a great country (and a great place to live) and i really believe that we should do as much “brain draining” as we possibly can from the rest of the world.  I also think we need to get a little off our “high horse” and recognize that the rest of the world would kind of like to live with some of the high standards which we seem to take for granted.

Personally, i think we need to quit listening to all the “pundits” who really don’t know jack.  There are always two ways to look at things, and personally i don’t think the doomsayer approach is the best one.

Here is something i just wrote one of my cohorts, who said he thought he was beginning to understand.  It might help others, too.  Like i have said all along, none of this is “rocket science”, and that is coming from someone who at one point in his life was a “nuclear engineer”.

———

I am sure you understand it, P–.  It just comes down to the fact that bank loans are recorded as bank assets.  Loans that are not getting paid (i.e., delinquent loans–30-day, 90+ days, etc.) are Non-performing assets.  In other words, if you subtract NPA (nonperforming assets) from your assets on your balance sheet, you have to reduce Equity to keep your balance sheet balanced.

That is why you compare NPA to Equity.  If NPA is greater than Equity, the bank is theoretically in trouble.  Assuming that all NPA = 0 value (an extreme case, but fundamentally conservative) and that all Equity = 100% of its value (which is probably not necessarily true, considering that goodwill adds to equity, but just the same. . .).

Unlike the banks that the FDIC is shutting down, Equity for the banks “too big to fail” are in the 10-11% range and their NPA is in the 2-4% range.  And it always has been throughout this whole debacle.  In the past (pre -Great Recession) NPAs generally represented about 0.5% of Assets as a comparison.

It’s just a statistical fact that smaller banks tend to fall outside of the norm more than the big banks because of numbers–that is why most of the banks that the fdic shuts down are smaller banks (i.e., less than $1 billion in assets).

Overall, this recent recession, i estimate to be between 2-3 times worse than the S&L crisis (adjusting for inflation), but it is and has been a far cry from what the Great Depression was.  Once people finally figure that out, i think you will see the U.S. stock market moving upwards again.  In fact, i think it is already starting in that direction.

—–

And P–, another cohort asked me about the “banks yet to be shutdown”.  I have gone through my Quanta List, and put a table together that shuts down 47 banks a quarter (about the average for the FDIC for the last 5-6 quarters after they got their staffing in place).  At that rate all the rest of the banks will be shutdown over the next 8 quarters.  In my own analysis, i shutdown the banks with the worst NPA-Equity first.  During the first quarter of my next eight quarters, the loss rate is in the 18.6% rate, but by the time i shutdown the banks in my last quarter, i am in the less than 1% loss rate.  And if i total all the losses of those banks, i only come up with an overall loss of about $11 billion for $200 billion of assets.

Pretty interesting, huh?  In other words, Plotting out the next eight quarters of banks shutdowns?  Who else is doing that?

——-

Here’s the answer to your question, S–, which by the way is a good one.   First of all, i went to my own list (of troubled banks) to see how Everbank looked from my list.  When i did this, i could not find Everbank on my list of “troubled banks”.

But don’t think that i just stopped there, but then i went into the fdic database to see what i could find out on Everbank there.   And here is what i found.  In the last year, Everbank has raised their asset base from $7.5 billion to $11.2 Billion–that is generally a good sign, and not something that you would have necessarily expected considering the times, which is a “positive”.  Then I also noticed that Everbank’s Equity had increased to $1.0 billion from $0.6 billion.  That is also good, equity is flowing in at a higher rate, than before–this somewhat goes along with an improving firm.

The rub, however, is in the NPA (or non-performing asset) category.  When you look at the NPA/Asset ratio, you see that Evergreen’s ratio is currently just “very slightly” below their Equity/Asset Ratio.  The positive view is that Everbank is trying to pull themselves out of a sticky situation, and so far the numbers show that they are moving in the right direction.  However, the future is the future, and it is important for Everbank to keep up their current strategy.  They are not out of the woods yet, and that is why i think the rating people show entirely different perspectives, both feeling right in their own views.

I will tell you this, if Everbank’s NPA/Asset level was just slightly higher than it is currently, they would have been on my own “troubled bank” list.  So, essentially what i am saying is that two different opinions can be viewed from the same numbers.  Sometimes, it only comes to one’s own perspective.  Personally, i am kind of one of the “middle roaders” on Everbank, and that is this, “Yes, we like what you are doing, but don’t fall into bad habits because we are watching.”

Hope this explanation works for you, S–.  It was a good question.

Another problem with writing for Business Insider is the fact that i have laid out the foundation for many of my arguments in previous articles, and if one is not familiar with those, then it is hard to understand from where i am coming (including such things as the history of inflation, mortgage rates, refinancing, TARP, the banks too big to fail, etc.).  And you can’t simply continue repeating yourself in every article.

BTW, I did read the two articles that you sent me the other day.  To tell you the truth, i kind of got lost in the details.  I am not sure whether that is out of my own ignorance, but i just couldn’t readily buy into the arguments.

Some critics think that i am looking at things too “simplistically”, and i understand that criticism; however, i think there is a good argument to be made that if our enlightened “Economists” had used “simplistic” fundamentals that are taught in their 101 classes, rather than their much more confusing “econometrics”, we wouldn’t be in the mess that we are in today.

I intend to finish the analysis that i started yesterday and getting the numbers for the banks the fdic shutdown in 2009, 2008, and 2007.  When i get all of those, i intend to compile them by quarter and do some additional summary analysis.  When i get the entire list, i will print the list out, and send you a hard copy.

ps.  I am not an “accountant” but consider myself a pretty good “business financial analyst”.  And let me tell you that i fully understand that “Book accounting” has its negatives; however, believe me there is quite a lot of information readily available in the book accounts the fdic has on the banks–and they have twenty-years of experience (i.e., since the S&L crisis) collecting it–and all that twenty-years of information is available.  And if i have to depend on a source for my information, i think the comprehensive data in the fdic database, is about as good as it gets.

And that is speaking as someone who is trying to be a true independent.  Have a good one.

Hello fellows:

This morning i cranked out a little analysis on the 129 banks that the fdic has shutdown this year (2010), not counting yesterday’s three, and i thought you might find the attached spreadsheet worth your interest.

What I did was look up the non-performing asset to asset (NPA/Asset) ratio and the equity to asset (Equity/Asset) on the last financial quarterly report that each of the 129 banks submitted to the FDIC.

Of the 129, only 1 had an Eq/asset ratio greater than the NPA/Asset ratio.  This is exactly what my point was in writing yesterday’s article.

As you will see from the spreadsheet, the total asset base for the 129 banks shutdown through Oct 1 this year is $83.8 billion.  The weighted average (using the asset base as the weight) NPA/Asset ratio for these banks was a quite high 17.05%.  The weighted average Eq/Asset ratio for these banks was a quite low 1.74%.  In total then, the weighted average difference between the two (nonperforming assets and equity) thus is a whopping “negative” 15.31%.

If all the Equity = 100% of its value, and all NPA = 0% of its value, losses associated with the $83.8 billion would be $12.8 billion.  If you double that amount for all the legal, accounting, professional fees, etc, the FDIC pays out and you probably have a pretty good ball park number for the cost to the FDIC.  Remember, the figures i am showing you above are only for the 2010 shutdowns.  When this financial crisis first began, the FDIC had about a $50 billion surplus, which from what i understand now is a $15 billion deficit.

Anyway, i think the attached spreadsheet is worth a glance.  I might add that of the 129 bank shutdowns, the fdic helped merge 124 of them into currently active banks (who probably bought the good assets at what i would hope to be a fair market value (there are probably some additional fdic losses associated with the sale).

The other five banks the fdic shutdown permanently and paid off the depositors.  All of that is also shown on the spreadsheet.

I also added the same current relative figures for the Big Four banks at the bottom, which provides you a fairly decent picture of the difference between those guys and the guys the fdic shuts down.   And all of this information was and has been available to the Government and the public throughout this financial crisis.  And it really makes you wonder what the Big Three (Paulsen, Bernanke, and Geithner) were thinking back in 2008 when they put TARP together.

I might also add that my own list of “Banks in Trouble” builds from the above analysis and i show another 380 or so banks with a total asset base of $200 billion.  This is slightly less than half of what the fdic puts on their troubled bank list (which i just assume is more conservative than mine).  I estimate the losses associated with those banks to be in the $12 billion range (which again you might double).

Oh well, just thought you might find this of some interest.  It took all of about two hours to do this morning at no cost to anyone.  Compare that to what we pay all the esteemed economists we have working in the Government and it might help you understand why we are in the kind of trouble that we are in.

ps.  I intend to take look back further at all the fdic bank shutdowns since 2007, but that will take me a little longer.  I just thought i would give you a preliminary look at things.

Anyway, i wanted you to know that i no longer feel like the “loan ranger” anymore.

And now if you are interested, what follows now is a copy of the email i just sent to Wessel regarding his article.

—-

Mr. Wessel–I read with great interest your article about the economy yesterday.  I especially found your comments from Zandi and Meyer about pushing for a massive government-sponsored refinancing effort particularly enlightening…considering the fact that is something i have been pushing myself for nearly “two years” now.  It’s always been the best way to renew consumer spending without Government spending and reducing taxes and it is justifiable from a long term inflationary (globalization) perspective, and it is consistent with financial theory (Fama).

One of the problems that we have been having in the United States, however, is that the only people that are getting heard are the Economists.  Having an M.B.A. from The Wharton School and more than twenty years of unique experience monitoring the risk of housing and mortgage-backed securities just does not mean anything compared to the unproven economic academics.

Along those lines, you may be interested in my recent Business Insider article that offers ten solutions for the Economy (including the 4.0% refinancing solution).  I believe it is line with your thinking, which i believe recommended more action and fewer dogfights.  The link to that article follows:

http://www.businessinsider.com/10-ways-we-can-fix-the-economy-right-now-2010-9

Respectfully,

Jim

http://www.businessinsider.com/tarp-great-depression-2010-10

For some reason unbeknownst to be (wink), it seemed to ruffle the feathers of a few “economists”, which is good.  The comments regarding my work are fairly negative from that bunch, but at least most of them got the message just the same–and that is not everyone believes their dribble.

My favorite line from Paulson’s book, On the Brink, is this one, which he quoted himself in a conversation with his wife at the time of the Lehman demise.  Now here it is: “What if the system collapses?  Everybody is looking at me and I don’t have the answers.  I am really scared?”  I think that says it all about those times, and i think that is why we got TARP.

Fear!

And all we have to Fear is Fear itself.  And our “economic leaders” almost drove us “over the brink” with Fear and their TARP concept.  If it wasn’t so sad, it would really be kind of funny.  Defending TARP now is like Bush defending the Iraq War with “Freedom” after finding out there were no “weapons of mass destruction”.

Oh well, i guess life marches on regardless.

Have a good one.