All US Banks and their Texas Ratio
Chris Brunner at the Lew Rockwell Blog posted this interesting article about how to get a clue as to what banks might be the shakiest at the moment, and more likely to fail.
Brunner:
A few days ago, a friend of mine called me to ask if I had any idea how to figure out which banks would be the next to fail. Some extensive googling revealed that while lists of troubled banks obviously exist, none of them seem to be readily available to the public. Why? Because the bankers do not want you to have this. Just watch the president of the American Bankers Association in this interview talk about how important it is to keep this private.
This is a list of all of the banks in the United States and the corresponding Texas Ratio for each one. Developed by Gerard Cassidy, the Texas ratio is a measure of a bank’s credit troubles. Basically, the higher the ratio, the worse the situation is for that particular bank. Banks with a ratio of 100 and higher are in very serious danger of collapse, and banks with a ratio of 50 or higher are vulnerable.
This is the formula I used:
100 * ((Non-performing Assets – U.S guaranteed loans) + Other REO) / (Equity + Loss Reserves)
… I recommend Chris’s post – read it!
I have put the list together as a word .doc file and as an excel spreadsheet sorted (ascending) by state and city and then (descending – worst to best) by Texas Ratio.
View: doc spreadsheet
-dcm
By Andrew
McCoy
I have read all I can (Yeesh my head hurts) on the current financial crisis. Especially interesting to me is all the partisans blaming everyone else for it. Here’s my thought’s.
The roots of the issue lie all the way back after the first S&L Crisis in the late 80’s. Fannie Mae and Freddie Mac hired a bunch of people and gave out lots of money to both parties to ensure they had the best possible regulations (for them to make money). They had the best of both worlds, they could loan whatever they wanted, and have very little cash reserves.
Then came the wild 90’s. The Clinton administration decided home ownership was especially important and encouraged banks to make loans to marginal candidates and they would get tax breaks for doing so.
Things were going swimmingly in the late 90’s for the homes market. Inevitably though, a slow down was happening. There is a market saturation point after all.
Then something else was thrown into the mix. Phil Gramm ,as a senator in Dec 2000, put an addendum on a spending bill that allowed companies to package up mortgages and sell them as securities (CDS’s), the best part of this bill (for wallstreet) was that it was a totally unregulated market. This allowed a lot… no, massive amounts of capitol to be injected into the mortgage market.
and not a lot of demand. So interest rates were lowered and people started taking out 2nd mortgages, buying up houses they could barely afford, etc. These were packaged into CDS’s, and since it was an unregulated item, sold as AAA investments. Wall street made billions selling these, banks were rolling in value (not cash, it was lent out).
Sometime, in the 2002 timeframe, state attorney generals started noticing these loans were becoming more and more predatory, so started asking for regulations on these loans. In response US Government (Bush administration) did this
“In 2003, during the height of the predatory lending crisis, the OCC (Office of the Comptroller of the Currency) invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks”. Which by the way all 50 state AG’s and banking superintendents were totally against.
Ensuring that predatory lenders were completely protected from the states.
In 2004, Republicans on the banking committee wanted to look into Fannie and Freddie and the Democrats threatened a filibuster to the discussion so it was tabled. But, the same year, the SEC (bowing to pressure from the republicans) allowed investment companies to have greater than a 12 to 1 debt to cash ration. This means that prior to 2004 if Lehman Bros. had 120 billion in debt, they would have to have 10 billion in cash to cover any shortfalls. After 2004 they could have a 30 to 1 or even 40 to 1 debt to cash ration. So that same 10 billion would allow them to have 300 billion (or 400 billion) in debt. This ensured their competitiveness, really.
So we fast forward a few years and the AAA rated debts (remember, they’re AAA because we said so, no regulation involved) started faltering. Normally the banks and investments houses would have a lot of cash on hand to cover these issues, but now don’t thanks to the SEC, so start taking major losses. They don’t have the cash and when these items hit 50-60% of their previous values they have to revalue them/ sell them for a value much lower than what they said it’s worth (that value set arbitrarily, remember).
My solution is as follows:
The government nationalized fannie and freddie a few months ago. So if we (they) bought all the housing loans under 500k made since 2003, chopped 25% off the amount owed, then made the people pay back the rest at say 4% interest. That would take the “bad debt” out of the CDS’s that were sold and help the banks. It would also help people due to them being able to afford their houses and not defaulting on them. We, the tax payers, would still take a bath financially, but we would do it at least helping people, not just big corporations.
If the treasury secretary and the financial houses don’t like this it’s because they are hiding something other than mortgages on their balance sheets and shouldn’t be bailed out.
Then, the long term fixes. Stop letting corporations pay elected officials, and by that I mean donate to their campaigns, for really good helpful legislation. Second, if you want fannie mae/ Freddie mac to exist, either completely nationalize it, or make it completely private, no in between. Third, don’t let wall street trade in un-regulated items. And fourth, go back to the 12-1 debt to cash ration for Wall Street companies.
Documentary GOP Insiders Failed to Block Now Online
A compelling video about the Bush – Cheney Administration’s path to their torture policies is now available online.
(Update 1) (Update 2 – above)
Glenn Greenwald at Salon:
Last month, I interviewed Harper’s Scott Horton regarding a piece he had written on the efforts of several PBS officials, including Jay Rockefeller’s wife (the CEO of Washington’s PBS affiliate) to block broadcast of the documentary Torturing Democracy, 
which compellingly documents how virtually all of the torture and other illegalities and abuses of America’s interrogation programs were authorized and ordered at the highest levels of the Bush administration (of which waterboarding is but one small example).
That documentary is now available to be viewed in its entirety online — here — and I can’t recommend it highly enough.
(Note – Jay Rockefeller is the ranking GOP member and Co-Chair of the Senate Intelligence Oversight Committee.)
Ditto for me. Here’s a link to each of the 3 parts:
And here is an excerpt:
Also, There’s a pretty good timeline at the Torturing Democracy site, as well as all the key documents in the Bush administration’s decisions to stray beyond the boundaries of the Law.
Downloadable Collection at Civiblog.org
Here’s a collection of related documents 
I made shortly after the NY Times broke the story in December 2005 about blanket Warrantless NSA (National Security Agency) domestic (within the US borders) surveillance.
I think the NY Times is reprehensible for sitting on this story since before the 2004 election, waiting 13 months to publish, and then only because the reporters involved had the same story in a book coming out.
This is a comment I left on LawGeek in 2006.
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I have been working on translating some of the publicly available PDF’s on this issue into html. They are here – http://thewall.civiblog.org/rsf/house_nsabrief_docs_012006.html Here are the legal briefs and stuff:
Here is the EFF’s Class Action Complaint against AT&T. http://thewall.civiblog.org/rsf/att-complaint.html AMERICAN CIVIL LIBERTIES UNION Here is the ACLU’s Complaint for Declatory and Injunctive Relief against the NSA. FOIA
ISSUES BRIEFINGS
http://thewall.civiblog.org/rsf/aclu_matrix_report.html I put a lot of work into these…the ACLU Complaint has lots of internal navigation. You can go directly to any page from any page (60 pages), or directly to any of the 195 paragraphs of the complaint from the table of contents, a click away from any page. I hope these, and the other documents on this site are of use to You. Cheers,
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Reaffirms America’s Penchant for Change
Ladies and Gentlemen, The President-Elect of the United States …
Well, who could possibly follow that?
Possible Signs of Internal Financial Irregularities
After taking an $85 billion emergency loan from the Fed, and then another $38 billion, A.I.G isn’t being very 
specific on how it has already spent most of the money, according to Mary William Walsh’s article in the New York Times:
(emphasis added)
A.I.G. has declined to provide a detailed account of how it has used the Fed’s money. The company said it could not provide more information ahead of its quarterly report, expected next week, the first under new management. The Fed releases a weekly figure, most recently showing that $90 billion of the $123 billion available has been drawn down.
A.I.G. has outlined only broad categories: some is being used to shore up its securities-lending program, some to make good on its guaranteed investment contracts, some to pay for day-to-day operations and — of perhaps greatest interest to watchdogs — tens of billions of dollars to post collateral with other financial institutions, as required by A.I.G.’s many derivatives contracts.
No information has been supplied yet about who these counterparties are, how much collateral they have received or what additional tripwires may require even more collateral if the housing market continues to slide.
Some industry observers say there must be undisclosed irregular accounting leading up to the bailout for so much of the $123 Billion lifeline to have been used up so fast.
“You don’t just suddenly lose $120 billion overnight,” said Donn Vickrey of Gradient Analytics, an independent securities research firm in Scottsdale, Ariz.
Mr. Vickrey says he believes A.I.G. must have already accumulated tens of billions of dollars worth of losses by mid-September, when it came close to collapse.
The article details indications of a sustained effort on the part of AIG top management to bury any details of an internal debate on how to value it’s derivatives contracts over the past few years. When a former SEC accountant was brought in due to previous irregularities,
He began to focus on the company’s accounting for its credit-default swaps and collided with Joseph Cassano, the head of the company’s financial products division … When the expert tried to revise A.I.G.’s method for measuring its swaps, he said that Mr. Cassano told him, “I have deliberately excluded you from the valuation because I was concerned that you would pollute the process.”
(emphasis added)
Astounding Burn Rate
In the roughly 6 weeks since AIG got the massive government loans they have already used up 90 of an available $123 billion at last reports.
A spokesman for the insurer, Nicholas J. Ashooh, said A.I.G. did not anticipate having to use the entire $38 billion facility. At midyear, A.I.G. had a shortfall of $15.6 billion in that program, which it says has grown to $18 billion. Another spokesman, Joe Norton, said the company was getting out of this business. Of the government’s original $85 billion line of credit, the company has drawn down about $72 billion. It must pay 8.5 percent interest on those funds.
…
For $59 billion of the $72 billion A.I.G. has used, the company has provided no breakdown. A block of it has been used for day-to-day operations, a broad category that raises eyebrows since the company has been tarnished by reports of expensive trips and bonuses for executives.
(emphasis, links added)
US Federal Deficit 1989 - 2004
Possible Legal Violations
Rep. Barney Frank, House Financial Service Committee chairman said on Friday in remarks directed at Banks who had received a separate $125 Billion government buy-in, that financial institutions were “distorting” the government’s $700 billion economic bailout plan by using the money for bonuses, dividends and acquisitions. Frank said any uses of that money other than lending were “violation of the terms of the act.”
On 7 October Rep. Henry Waxman’s Committee on Oversight and Government Reform held hearings on the causes of AIG’s need for a bailout. (Full Hearing Video). At the hearing it came out that the week after AIG got an $85 Billion initial govenrment bailout, executives went on a retreat at a luxury resort, spending $443,343.71. Rep. Elijah Cummings (D-MD) said:
Have you heard of anything more outrageous – a week after taxpayers commit $85 billion dollars to rescue AIG, the company’s leading insurance executives spend hundreds of thousands of dollars at one of the most exclusive reports in the nation…Let me describe for some of you the charges that the shareholders, taxpayers, had to pay. AIG spent $200,000 dollars for hotel rooms. Almost $150,000 for catered banquets. AIG spent $23,000 at the hotel spa and another $1,400 at the salon. They were getting manicures, facials, pedicures and massages while American people were footing the bill. And they spent another $10,000 dollars for I don’t know what this is, leisure dining. Bars?
(emphasis added)
AIG Gets Another $25 Billion – Total: $144 Billion (so far…)
On Thursday 30 October, AIG said “it would be able to borrow up to $20.9 billion under the new program, raising its maximum available credit from the Fed to $144 billion under three different programs,” the New York Times reports. And there’s no sign yet that will be enough.
Edward M. Liddy, the insurance executive brought in by the government to restructure A.I.G., has already said that although he does not want to seek more money from the Fed, he may have to do so.
AIG’s unwillingness or inability to place a determinative valuation on their deriviative contracts has poisoned the credit market. As Tavakoli Structured Finance President Janet Tavakoli observes, “When investors don’t have full and honest information, they tend to sell everything, both the good and bad assets. … “It’s really bad for the markets. Things don’t heal until you take care of that.”
The NYT reports “Ms. Tavakoli said she thought that instead of pouring in more and more money, the Fed should bring A.I.G. together with all its derivatives counterparties and put a moratorium on the collateral calls.”
Tavakoli is an expert in derivative and similar financial products, and recently debated “mark to market” options on Bloomberg.
Morningstar Analyst – May be better to let losses be realised
Bill Bergman, Senior Equity Analyst at Morningstar observed, “We may be better off in the long run letting the losses be realized and letting the people who took the risk bear the loss.”
– assembled from various reports by dcm
Today’s global collapse more closely resembles Panic of 1873 than 1929
By Scott Reynolds Nelson
[Occasionally I will invite a Guest to publish at Scribal Thrum - and I'm proud to welcome Scott Nelson, Professor of History at William and Mary College. Thanks for Contributing, Scott.)
As a historian who works on the 19th century, I have been reading my newspaper with a considerable sense of dread. While many commentators on the recent mortgage and banking crisis have drawn parallels to the Great Depression of 1929, that comparison is not particularly apt. Two years ago, I began research on the Panic of 1873, an event of some interest to my colleagues in American business and labor history but probably unknown to everyone else. But as I turn the crank on the microfilm reader, I have been hearing weird echoes of recent events.
When commentators invoke 1929, I am dubious. According to most historians and economists, that depression had more to do with overlarge factory inventories, a stock-market crash, and Germany's inability to pay back war debts, which then led to continuing strain on British gold reserves. None of those factors is really an issue now. Contemporary industries have very sensitive controls for trimming production as consumption declines; our current stock-market dip followed bank problems that emerged more than a year ago; and there are no serious international problems with gold reserves, simply because banks no longer peg their lending to them.
In fact, the current economic woes look a lot like what my 96-year-old grandmother still calls "the real Great Depression." She pinched pennies in the 1930s, but she says that times were not nearly so bad as the depression her grandparents went through. That crash came in 1873 and lasted more than four years. It looks much more like our current crisis.
The problems had emerged around 1870, starting in Europe. In the Austro-Hungarian Empire, formed in 1867, in the states unified by Prussia into the German empire, and in France, the emperors supported a flowering of new lending institutions that issued mortgages for municipal and residential construction, especially in the capitals of Vienna, Berlin, and Paris. Mortgages were easier to obtain than before, and a building boom commenced. Land values seemed to climb and climb; borrowers ravenously assumed more and more credit, using unbuilt or half-built houses as collateral. The most marvelous spots for sightseers in the three cities today are the magisterial buildings erected in the so-called founder period.
But the economic fundamentals were shaky. Wheat exporters from Russia and Central Europe faced a new international competitor who drastically undersold them. The 19th-century version of containers manufactured in China and bound for Wal-Mart consisted of produce from farmers in the American Midwest. They used grain elevators, conveyer belts, and massive steam ships to export trainloads of wheat to abroad. Britain, the biggest importer of wheat, shifted to the cheap stuff quite suddenly around 1871. By 1872 kerosene and manufactured food were rocketing out of America's heartland, undermining rapeseed, flour, and beef prices. The crash came in Central Europe in May 1873, as it became clear that the region's assumptions about continual economic growth were too optimistic. Europeans faced what they came to call the American Commercial Invasion. A new industrial superpower had arrived, one whose low costs threatened European trade and a European way of life.
As continental banks tumbled, British banks held back their capital, unsure of which institutions were most involved in the mortgage crisis. The cost to borrow money from another bank — the interbank lending rate — reached impossibly high rates. This banking crisis hit the United States in the fall of 1873.
Run on the Fourth National Bank, No. 20 Nassau Street New York City, 1873 : WikiMedia Commons
Railroad companies tumbled first. They had crafted complex financial instruments that promised a fixed return, though few understood the underlying object that was guaranteed to investors in case of default. (Answer: nothing). The bonds had sold well at first, but they had tumbled after 1871 as investors began to doubt their value, prices weakened, and many railroads took on short-term bank loans to continue laying track. Then, as short-term lending rates skyrocketed across the Atlantic in 1873, the railroads were in trouble. When the railroad financier Jay Cooke proved unable to pay off his debts, the stock market crashed in September, closing hundreds of banks over the next three years. The panic continued for more than four years in the United States and for nearly six years in Europe.
The long-term effects of the Panic of 1873 were perverse. For the largest manufacturing companies in the United States — those with guaranteed contracts and the ability to make rebate deals with the railroads — the Panic years were golden. Andrew Carnegie, Cyrus McCormick, and John D. Rockefeller had enough capital reserves to finance their own continuing growth. For smaller industrial firms that relied on seasonal demand and outside capital, the situation was dire. As capital reserves dried up, so did their industries. Carnegie and Rockefeller bought out their competitors at fire-sale prices. The Gilded Age in the United States, as far as industrial concentration was concerned, had begun.
As the panic deepened, ordinary Americans suffered terribly. A cigar maker named Samuel Gompers who was young in 1873 later recalled that with the panic, “economic organization crumbled with some primeval upheaval.” Between 1873 and 1877, as many smaller factories and workshops shuttered their doors, tens of thousands of workers — many former Civil War soldiers — became transients. The terms “tramp” and “bum,” both indirect references to former soldiers, became commonplace American terms. Relief rolls exploded in major cities, with 25-percent unemployment (100,000 workers) in New York City alone. Unemployed workers demonstrated in Boston, Chicago, and New York in the winter of 1873-74 demanding public work. In New York’s Tompkins Square in 1874, police entered the crowd with clubs and beat up thousands of men and women. The most violent strikes in American history followed the panic, including by the secret labor group known as the Molly Maguires in Pennsylvania’s coal fields in 1875, when masked workmen exchanged gunfire with the “Coal and Iron Police,” a private force commissioned by the state. A nationwide railroad strike followed in 1877, in which mobs destroyed railway hubs in Pittsburgh, Chicago, and Cumberland, Md.
In Central and Eastern Europe, times were even harder. Many political analysts blamed the crisis on a combination of foreign banks and Jews. Nationalistic political leaders (or agents of the Russian czar) embraced a new, sophisticated brand of anti-Semitism that proved appealing to thousands who had lost their livelihoods in the panic. Anti-Jewish pogroms followed in the 1880s, particularly in Russia and Ukraine. Heartland communities large and small had found a scapegoat: aliens in their own midst.
The echoes of the past in the current problems with residential mortgages trouble me. Loans after about 2001 were issued to first-time homebuyers who signed up for adjustablerate mortgages they could likely never pay off, even in the best of times. Real-estate speculators, hoping to flip properties, overextended themselves, assuming that home prices would keep climbing.
Those debts were wrapped in complex securities that mortgage companies and other entrepreneurial banks then sold to other banks; concerned about the stability of those securities, banks then bought a kind of insurance policy called a credit-default swap, which risk managers imagined would protect their investments. More than two million foreclosure filings — default notices, auction-sale notices, and bank repossessions — were reported in 2007.
By then trillions of dollars were already invested in this credit default swap derivative market. Were those new financial instruments resilient enough to cover all the risk? (Answer: no.)
As in 1873, a complex financial pyramid rested on a pinhead. Banks are hoarding cash. Banks that hoard cash do not make short-term loans. Businesses large and small now face a potential dearth of short-term credit to buy raw materials, ship their products, and keep goods on shelves.
If there are lessons from 1873, they are different from those of 1929. Most important, when banks fall on Wall Street, they stop all the traffic on Main Street — for a very long time. The protracted reconstruction of banks in the United States and Europe created widespread unemployment.
Unions (previously illegal in much of the world) flourished but were then destroyed by corporate institutions that learned to operate on the edge of the law. In Europe, politicians found their scapegoats in Jews, on the fringes of the economy. (Americans, on the other hand, mostly blamed themselves; many began to embrace what would later be called fundamentalist religion.)
The post-panic winners, even after the bailout, might be those firms — financial and otherwise — that have substantial cash reserves. A widespread consolidation of industries may be on the horizon, along with a nationalistic response of high tariff barriers, a decline in international trade, and scapegoating of immigrant competitors for scarce jobs. The failure in July of the World Trade Organization talks begun in Doha seven years ago suggests a new wave of protectionism may be on the way.
In the end, the Panic of 1873 demonstrated that the center of gravity for the world’s credit had shifted west — from Central Europe toward the United States. The current panic suggests a further shift — from the United States to China and India. Beyond that I would not hazard a guess. I still have microfilm to read.
Scott Reynolds Nelson is a professor of history at the College of William and Mary. Among his books is Steel Drivin’ Man: John Henry, the Untold Story of an American legend (Oxford University Press, 2006).
Reprinted by Special Arrangement with the Author. A slightly different version of this article appeared in The Chronicle of Higher Education, October 17, 2008 issue, Volume 55, Issue 8, Page B98, and in the Online Edition, here.
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