The biggest bank failure of 2009 happened last week when the FDIC moved to shut down Colonial BancGroup of Alabama, along with four other banks, bringing the total thus far this year to more than 70. A quick deal with BB&T to purchase Colonial caused its shares to rise. FDIC will be shouldering much of the losses, of course, which adds billions to the bailout of the banking system while at the same time working to further bank consolidation for the wealthiest banks still standing.

Such situations are a ‘win-lose’ proposition. Win for BB&T and their stockholders, lose for We the Taxpayers. This scheme where the feds cap the buyer’s losses at taxpayer expense is just another outrage to the hard-pressed public at a time when all the glorious pronouncements of economic recovery have yet to even begin to touch the lives of the general public still losing jobs at a high rate while no new jobs seem to be forthcoming.

And on top of the still-dismal economic situation for average people in this country, now we have the extremely contentious health care reform debate ongoing that looks more and more like bad street theater every day. Between the noisy hoards of idle old folks bused around the country to shut down discussion of provisions during Town Hall meetings held by vacationing congresscritters, and the absurd lies being spewed by the usual suspects at FoxNews and right wing radio, it’s looking more and more like the final result will be a significant new tax on the working poor that will be earmarked directly to the health insurance industry by means of mandatory purchase of junk insurance.

The situation is really health insurance reform, though reform isn’t really a good title either considering how much the Death by Spreadsheet crowd will end up getting from the public directly and from the government as subsidies. Yes, they will have to stop excluding anyone with a pre-existing condition, retroactively canceling policies if the insured person gets sick, and simply not paying for covered health care after the fact. But they will more than make up for however much this costs them by the ~40 million new policies the uninsured will have to purchase, and with government subsidies for many of those as well as losses incurred by having to honor their contracts.

And I am sure readers know that “junk insurance” – insurance that has a high deductible and hefty co-pays – isn’t going to help a person living on a shoestring budget already. Whatever ‘extra’ money those people might have saved over months to pay for a doctor’s visit will be taken by the insurers for that junk insurance. Leaving the working poor even worse off than they were before.

Even the so-called “Public Option” Obama and other Democrats have been touting is just another insurance option. Basic buy-in Medicaid, for which the government plans to auto-deduct from people’s bank accounts to make sure their premiums get paid on time. No word yet on whether they’ll do that for bank accounts that don’t have enough money in them to cover the deduction (like mine, for instance), thus causing families to suffer huge bank overdraft charges and messing up their other payment plans, or if a too-slim bank account qualifies people for automatic subsidy to make those insurance payments. But if I were to guess, I’d guess it’s just going to shaft the barely getting by yet again by throwing their bare budgeting into chaos and costing them more than they can pay.

Isn’t it funny how the wealthy and well-off are somehow able to convince themselves that we at the low end of the spectrum somehow have lots and lots of ‘extra’ money they should be able to take at will?

At any rate, we will not know until Christmas at least what the health care bill looks like or what’s in it. None of us should be holding our breath hoping for real reform or actual access to health care. In the end it’s way more likely that the government will simply be able to claim that they’ve ‘fixed’ the access problem – those ~50 million uninsured and ~100 million underinsured – so the U.S. will no longer rank #37 on the list of 37 industrialized nations on all measures of health care. While We the People will simply be poorer than we were before. I’d like to be pleasantly surprised, but don’t expect to be so long as people like Sarah Palin and Glenn Beck are spouting lies about killing granny and the Medicare crowd is hollering for the government to keep their hands off their Medicare. Stupid and/or evil people always seem to win in this country.

If you haven’t called or written your representatives and senators yet, please do so. We don’t have much of a voice in what happens in this country, but they at least need to know we’re out here and want real access to health care instead of just another theft of what little we do have. Then when we lose we’ll have earned our own bitching rights!

As Congress meets today and tomorrow to grill the principals before Friday’s vote on the $700 billion “emergency” Wall Street bailout plan (which has been in the works for months but strategically dumped on us all as an “emergency”), oil companies have instituted “rolling shortages” all over the Southeast. Some areas have been out of gas for more than a week and a half, and the situation is not expected to ease until Monday at the latest. Some gas – a single tanker at a time – is being delivered to stations along the Interstates and is being strictly rationed unless it’s diesel, one station per county.

State police are managing the gas lines to prevent violence, which did break out last week in the Nashville, Tennessee area when people started cutting in line. Food prices are rising so fast the stock boys at the grocery stores can’t mark up the goods fast enough, and the specter of looming fuel shortages for winter heat – or price increases that will force people to do without – is beginning to look very scary.

Bailout or no bailout – and despite the launch of FBI investigations of Fannie Mae, Freddy Mac, Lehman Brothers and AIG – the United States may well be fully in the clutches of major economic depression before winter even hits. Whether or not that translates to global recession isn’t much of an issue to regular people, as we here in our own homes wonder how we will survive. This post and several following posts in a new series will take a look at the steps citizens should take as soon as possible to ensure their families will make it through the next 6 months. If depression goes on longer than that, additional strategies will be necessary, some already compiled as series in this blog and available under the “Our Most Popular” header on the left side of the page.

Here in Part 1 there are two broad categories of concern citizens will have to work around in order to do for themselves, particular to not freezing, not starving, and not getting indefinitely detained or killed. Considerations must start NOW.

Things to Plan Around:

1. Availability of home heating fuel/gasoline.

It is quite likely that there will be rolling gas shortages throughout the next year. We can also fairly assume there will be drastic fuel oil shortages in the northern tier of the country, and that many will unfortunately freeze to death in their homes or die of carbon monoxide poisoning from kerosene heaters, or fires from badly planned fireplace/wood stove installations.

If you live in an area with ample woods with standing or down dead or a brisk firewood market for purchase, or availability of wood stove pellets, get yourself a wood stove. These come in all sizes and thicknesses, some need more protection to floors and walls than others. You will also need stove piping and must plan a way to get the smoke outside your house (can be through a removed windowpane if necessary). Stoves are often available reasonably cheap and in good condition through Craig’s List or other re-sale sources. Do your homework, install it correctly. If the electricity goes out or fuel oil is unavailable, your family will still be warm. AND you can cook on it!

Resource: NASD: Proper Installation, Operation and Maintenance

2. Deployed Troops, Curfews, Travel Restrictions, Rationing.

Beginning on October 1st – next week – the US Army’s Third Infantry Division’s 1st Brigade Combat Team – all 6500 to 8000 troops – will be re-deployed within the borders of the United States for various police functions. Regular police forces are being deployed for crowd control and peacekeeping functions as well, in managing protests, gas lines and runs on banks, grocery stores, etc. Expect to be challenged every time you go out, be thankful when it doesn’t happen.

Important: In case of travel restrictions, try to gather your immediate family in one place, preferably the place among your extended network best situated according to all considerations. Schools may be shut down due to lack of fuel for transportation and/or heating, if you have college-bound offspring, consider taking a couple of semesters off unless things at the college look stable. Don’t be afraid to call the admin and ask pointed questions, either. You won’t want anyone near and dear to you to be stuck someplace where they have no resources.

What this means is you need to do what stocking up you can immediately, and plan for obtaining the rest of your needs in possibly creative ways. If you have money socked away, withdraw enough to get you through if the bank goes under, all of it if they’ll let you have it. Store ready cash in freezer bags in the freezer. Purchase as much staple supplies as you can possibly afford, NOW before there are serious shortages and before the prices double or triple.

What food supplies you will need to obtain, along with other tools and supplies, will be supplied in Part 2 of this series. Please stay tuned!

Links:
Southeast Gas Update
FBI investigating companies at heart of meltdown
Long Term Capitol
Craig’s List: Great Resource or Scary Place?
20 Ways to Live on Almost Nothing
It’s Better Than Cheap… It’s Free!

Posts to This Series:

Part 1: Roadblocks and Interference
Part 2: Food: Eating What You Can Get

Watching Treasury’s Paulson on Meet the Press Sunday made me sick. That pitiful, pleading look, the bizarre non-logic, the reversion to fear, fear, fear… the guy’s a cheap crook in an expensive suit and no, the whole world isn’t going to self-detonate if we let the greedheads take their lumps for being so damned greedy. Let ‘em fail.

Meanwhile, I’ve a fine plan to salvage the housing market as well as the business and jobs outlook. Instead of giving up to $3 trillion dollars (the price goes up hourly) to the crooks who got us into this mess, why not give every citizen $3,000 dollars? They’ll catch up on their mortgages, then FHA (the receiver for Fannie Mae and Freddie Mac) can refinance at lower rates and more realistic selling prices. Voila! the mortgage market is no longer “bad debt.” And if we’ve got an extra couple of trillion laying around to spend on these greedheads, why don’t we spend it on something useful – like universal health care?

That price tag is less than a third of the price tag the Fed, Treasury or Wall Street has come up with to bail themselves out of the hole they dug, and it would completely solve the asset valuation problem for regular Americans who don’t earn $5 million a year. And it lets the Wall Street failures fail. They earned it, they deserve it. Screw ‘em. The rest of us will be fine with our dividend.

But if you really want to try and understand what they’re all so boogedy-scared of right now, here are some links to excellent overviews that will tell you more than anybody wants to know about how we got to where we are today, and why.

Daily Kos front pager ‘Devilstower’ published a spectacular overview of how we got here in his Three Times is Enemy Action. It’s clear and concise, easy to understand, and will make you furious. His piece is so good that it was picked up by The Nation, which also offers an article by William Greider that’s worth reading, Paulson Bailout Plan a Historic Swindle.

Trading insider bonddad offers his usual excellent analysis of the bailout plan being pushed by BushCo (with further links) with Paulson to the US – Grab Your Ankles, beginning with the relevant observation…

“There’s a plan afoot to screw the US taxpayer.”

Yeah, well. Seems to me that instead of ‘trust’ in the very people who have screwed things up so thoroughly, we should see if trusting We the People might not work better.

If indeed we must in the wake of the failure of the only valuation we’ve had in recent years (real property) find some other means of valuation, giving the “bailout” money to those of us who DO consider our homes and businesses to be valuable would do more to dig us out of this mess than giving it to crooks.

Links:

Paulson to the US – Grab Your Ankles
Three Times is Enemy Action
Paulson Bailout Plan a Historic Swindle

Well, it was a tough weekend. After insurance giant AIG hinted that it might be heading for bankruptcy, investment bank Lehman Bros. went ahead and filed Chapter 11. Merrill Lynch grabbed at a $50 billion takeover from Bank of America, which is already regretting its takeover of the nation’s largest mortgage lender [Countrywide]. Stocks fell worldwide on Monday even after intervention from the Fed promising eased restrictions on emergency funds.

It’s not difficult to find gloom and doom on Wall Street today over how many jobs in the financial sector are going to be lost. Worse, that concern will in fact translate into a whole lot more jobs lost out in the real world where you and I live. Factories will be closed, inability to finance durable goods orders will exacerbate the problems, and GM is about to go under too. It ain’t even close to over yet, folks. If all you lose is your home, you’ll be among the lucky ones.

I’ll be posting more good information on stretching leftover dollars for those real people being harmed by all this, maybe even have something to say about the fact that there’s no gas in my region right now at all, leaving nothing to ration. Or tell you how I fare on my plan to sell my now-useless diesel ‘vintage’ Mercedes so I can buy a horse (have plenty of grass and kudzu). But in the meantime, best advice – if you’ve got gas – is to head directly to your regional farmer’s market and buy as much rice, other grains, fresh veggies and fruits as you can possibly afford. I’ll talk a bit about how to preserve it through the winter too, since it’s not really that hard.

I will also start posting information about growing some of your own food, even in the winter. There will be lots of links to great sources for information on these strategies too, so please stay tuned. The best advice I can give to people who end up here after searching something on Google because they’re just now joining our Shoestring Budget ranks, is…

Don’t Panic.

All you really have to do is survive. The future is the future, it’ll bring its own problems and opportunities. Right now you just need to “ride it out” in one piece (and all of a piece family-wise). Money’s just paper at this end of real life, you CAN learn to make do on much less of it. And who knows? Once you’re out the other end of the tunnel, you might even find that you can live a much happier, fulfilled and truly shared life without all that much of it. It’s a good lesson to learn. It puts things in perspective, something this modern world could use more of.

Links:

Lehman Brothers collapse stuns global markets
Lehman Files for Bankruptcy, Merrill Sold, AIG Seeks Cash
Wall St.’s Turmoil Sends Stocks Reeling
Credit Crunch: How to Survive the Recession
20 Ways to Live on Almost Nothing
Uninsured? More Ways to Survive

The Sunday New York Times offered an in-depth analysis on August 3 by Larry Rohter entitled, Shipping Costs Start to Crimp Globalization.

A decade ago oil was going for $10 a barrel and “outsourcing” manufacturing facilities and jobs to low-wage regions of the Third World began to hit American labor hard. We were all told we must simply adjust to a whole new, world-wide way of doing things, and damn the torpedoes that were decimating labor unions and sending millions of skilled Americans into the minimum wage ranks of burger-flippers and WalMart greeters just to (not quite) get by.

Oil is trading today [Aug. 4] for just over $121 a barrel, down quite a bit from just a month ago when speculators bid it up to $138. The drop is attributed to falling demand as conservation kicks in on the user front. $4 a gallon gasoline and $5 a gallon diesel has cut into fuel consumption big time this summer as regular people choose not to drive if they don’t have to, and transportation fleets pool schedules to ensure their trucks, trains and ships aren’t wasting a drop. According to Rohter the big ocean-going container fleets have slowed down 20% to save on fuel costs, which translates into substantially slower turnaround on the goods.

We all recognize that greatly increased shipping costs as reflected in the upside-down cost of diesel fuel (remember when diesel was always a dollar LESS than gasoline?) must translate into an increase in the price of everything that moves by means of diesel fuel. This means inflation in every sector, at a time of stagnant wages, joblessness and increasing costs of basic transportation, heating and cooling for the average citizen.

A study in May by Canada’s CIBC World Markets investment bank showed that the recent increases in shipping costs amounts to a 9% tariff on all trade. All without governments having to do a thing. Their report concluded that…

The cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today. [This situation] has effectively offset all the trade liberalization efforts of the last three decades.

Many things contributed to the decline in demand, including Americans choosing to stay close to home this summer, and/or trading in their gas-guzzling SUVs for more fuel efficient vehicles. GM is in trouble for betting on the wrong market, and other American automakers who could have beat the Japanese at the MPG game but didn’t bother to do so are also taking a hit. Union busting plays a role as well, as corporate job losses rose 33% over last year.

Some corporate jobs, however, are doing just fine. Seems that corporate number-crunchers have figured out a way to convert the pension plans of their workers into retirement benefits and ‘golden parachutes’ for executives. The Wall Street Journal offers Companies Tap Pension Plans to Fund Executive Benefits. If you’re still counting on that pension, you’d better start doing something about this before you find yourself at age 65 having to try and live on $1,000 a month in raw Social Security.

Also in the news, the FDIC took over yet another bank on Friday, as Florida’s First Priority becomes 8th bank failure this year. Once again, the good and the not-so good advice of financial pundits should be taken seriously by all who can put away some cash just in case their bank shuts its doors.

Links:

Shipping Costs Start to Crimp Globalization
The End of Globalization?
Globalization begins the great unwind
Companies Tap Pension Plans to Fund Executive Benefits
Florida’s First Priority becomes 8th bank failure this year

Photo from LA Times

That minor recession that John McCain’s erstwhile economic advisor informed us just last week is “all in our heads” got worse as FDIC moved on Friday to take over Pasadena’s IndyMac Bank. Their audit showed that a surprising number of deposits exceed insurance coverage limits, and when the bank goes down that money is gone… poof, disappeared, “liquidated” by economic reality. According to the Wall Street Journal, this works out to about 10,000 people whose money was in IndyMac – 5% of their total deposit base – who will now have to “learn a lesson” about not putting all their golden eggs in one basket.

The FDIC Quarterly Banking Profile doesn’t look very promising either, so it’s important for people to realize that they are only guaranteed return of $100,000 in regular deposits, or $250,000 in retirement accounts (including accrued interest). Given what has happened in the past as corporations decide unilaterally to loot their portions of retirement accounts in order to try and stay afloat, if things get bad enough the retirement savings of Baby Boomers may well be in jeopardy.

Since 2007 there have been 8 bank/thrift failures, nowhere near the level of failures during either the Great Depression or the notorious S&L ‘crisis’ of the 1980s. But that can change rather quickly, so if you’ve some real money in the bank – particularly in the kind of retirement account we’ve been told for years we’ll need in order to live well in our old age – you may want to divvy it up into more than one institution so the full amount is covered.

Now, unless you’re rich enough to not be living on a shoestring budget, this one’s probably not going to affect many regular people in whose minds Phil Gramm tells us the recession originates. Yet as municipalities and local businesses that often have hundreds of thousands of dollars in a single local bank shift their deposits to larger institutions or split them off in insurable chunks, many local banks and thrifts will find themselves insolvent.

The FDIC will have pay for losses to the insured limit, but that can take time. Particularly if the house of cards comes down pretty much all at once, and there are no ready buyers. Sure, it’s all just paper or electronic bits (so it doesn’t really matter who’s got your ‘money’ so long as it’s less than the limits), a lot of us can’t easily go a week with no access to our direct-deposit paychecks or some ready cash when our debit card doesn’t work in any ATM or grocery store anymore because the bank’s out of business. It takes even more time if there’s a buyer for the bank, as all the piddly detail stuff has to be done over – new debit cards, new checks, etc., and switching your direct income and payments can be a big hassle.

Best advice I’ve seen is to go ahead and pay down your credit cards significantly right now as much as you can, then keep your balance low so they’ll still be available if you need to float for a month or two. You should also take out enough cash to cover your family’s costs for a full week, two is better, and keep it in a cookie jar (or freezer bag). Any bills you pay on line (electric bills, phone bills, mortgage, credit cards) may be adversely affected for the same period of time. You may want to cancel direct deposits and withdrawals now, write regular old checks and send them out snail-mail so you don’t end up phone-less or without electricity and don’t get slammed with late charges should your bank fail.

FDIC predicts that IndyMac may cost the fund between $4 and $8 billion dollars, making it the most expensive bank failure EVER. If more banks fail, other financial institutions will have to pay more into the fund and that will affect THEIR bottom lines. At some point the actual taxpayers will have to start footing the bill (as we are now doing for the bulk of Bear-Stearns’ losses), the Fed will have to print up some more funny money, and our foreign creditors – the ones who have been financing the BushCo spending spree (primarily China) may panic and start dumping paper.

…at which point our “mental recession” turns into a worldwide mess of epic proportions.

I admit that I’ve never spent much time or brain cells on trying to understand much about the magic of capitalism, since I’ve never had enough money to play such games or care about those who do. But I do know that those at the lower end of the economic scale are the ones who will suffer most from what Wall Street likes to call “corrections” in the national economy. I’ve put two weeks’ worth of cash into a freezer bag. It’s not earning any interest, but we had enough to cover that and won’t spend it unless we have to. Just knowing it’s there makes me feel better, though I’m hoping Bank of America manages to weather the coming storm. …mostly because if it goes down, nobody’s money in any institution is safe.

Links:

Wall Street Journal
FDIC Quarterly Banking Profile

Pittsburgh: Forty people wearing red tee shirts and carrying signs marched right into a National City Bank last Friday morning. They chanted “Criminal Offenders, Predatory Lenders!” and blew whistles. They demanded an immediate halt to home foreclosures.

The group dispersed after police were called and nobody got arrested, but no one got any relief from foreclosure either. The demonstration was part of a national effort by the group ACORN, the Association of Community Organizations for Reform Now, which provides free counseling to low and moderate income home buyers. As more and more families lose their homes, ACORN hopes protest actions will become more and more visible.

From shelters and coalitions for the homeless all over the country, reports are coming in of overwhelmed facilities and no end in sight as new faces join the ranks of the homeless. The ‘lucky’ ones, about 76% of renters and homeowners displaced by the continuing mortgage crisis, are moving in with relatives and friends. The rest are on the streets, living in their cars, or filling emergency shelters. It’s going to get worse.

Meanwhile, the Federal Deposit Insurance Corporation, a.k.a. FDIC, reported in March the highest number of “problem institutions” it’s seen since the savings and loan crisis of the late 1980s. These tend to be smaller banks finding themselves short on required capital and facing failure due to construction loans secured by the value of those new homes, which are now worth just a fraction of the original estimated value.

So. What if you live in the suburbs in a neighborhood with more ‘For Sale’ signs than political placards in the yards, and your bank’s tellers are becoming less cheerful and helpful lately? What if the bank closed early on Saturday and suddenly a fleet of identical, nondescript rental cars show up in the parking lot, full of nondescript guys and gals in dark business suits carrying briefcases march in, and don’t leave?

The Charleston SC Post and Courier offers a blow-by-blow description by Damian Paletta of the Wall Street Journal, Anatomy of a bank failure: When the liquidators come calling that might help ease the jitters of those who wonder about just how ‘safe’ their money really is in these times of non-recession Depression…

First Integrity, which had two branches and $55 million in assets, was the fourth FDIC-insured bank to fail this year. That’s one more than during the entire three-year stretch leading up to 2008. Some analysts predict that as many as 150 banks, mostly small and medium-size, could fail over the next three years.

Those concerned about growing financial crisis that shows all signs of being far worse than anyone in the government, financial sector or mainstream press wants to admit should read Paletta’s article. So long as your deposits at the bank are $100,000 or less, it won’t disappear even if the bank fails. If you’ve got more than $100,000 in deposits, securities and other investments held by any single bank, it’s time to diversify – divvy them up and into unaffiliated institutions, each advertising that FDIC logo on the window.

Forewarned is forearmed. Just as the government won’t admit to recession, and routinely underreports all the important indicators – unemployment, home and business foreclosures, etc. – you can be sure they’re underreporting current and expected future bank failures too. Don’t get ‘liquidated’ if you can help it.

Links:

Family Storms Pittsburgh Bank, Protests Mortgage Crisis
New recession worry: Bank failures
Anatomy of a bank failure: When the liquidators come calling
New Faces Join Homeless Ranks