1. Banks-
Enough cannot be said about the financial condition of banks today. Many banks across
the world have closed already. In 2008 in the United States over 25 banks closed. Some
banks you might not recognize like Sanderson State Bank in Texas or Haven Trust Bank
in Duluth Georgia. Others, like large bank Downey Savings in California had $12.8 us
billion in assets when it closed. Of course there was a tremendous amount of
consolidation with major banks with major risky assets on their books such as $307us
billion Washington Mutual. One of the well know bank’s whose downfall was very
public was IndyMac bank one of the first major banks to be rescued by the FDIC.
Besides banks, major insurer’s also suffered greatly by their packaging and buying
mortgage backed securities causing insurers like AIG which needed over $180 us billion
bailout from the government. Investment companies merged also like Bank of America
buying one time Wall Street giant Merrill Lynch. One large investment firm, Lehman
Brothers was allowed to fail.
The Troubled Asset Relief Program, called TARP, was supposed to curtail the banking
industries problems and get banks to begin writing loans and losing up the credit market.
The first $350 us billion dollars issued to the banks did virtually nothing. There was no
accountability or understanding the on the bank’s behalf and most ended up hording the
money and holding on to it rather than releasing it in the form of loans as was the original
purpose.
President Obama continues to be publically vocal about fixing the banking problem in the
United States. New Treasury Secretary Timothy Geithner has promised he is looking
into a range of options with details to be released soon. There are three main options
being seriously considered.
The first is the government acting as a “bad bank,” buying bad assets currently on
banks’ balance sheets. That would eliminate their risk of holding those assets and give
them positive momentum in writing good loans again. This strategy has roots in how the
government solved the savings and loan crisis through the Resolution Trust Corporation
in 1989.
The second option is another round of capital infusions as when former Secretary Hank
Paulson purchased 350 billion in bank’s preferred stock. This time the Obama
administration may do this again but with more money and buying common not preferred
shares of bank’s stock. The need for this type of plan is based on the massive sell-off of
bank stocks by investors so far this year. Many people view this as a step closer to
nationalizing banks which many Wall Street types see as a very dangerous move.
Some of the banks have started to pay this money back.
The third major initiative would involve insuring bank’s assets. This would mean placing
a “floor” on the prices of these bad assets and guarantee them future losses beyond that
point. The government has already done that to some degree with Citigroup and Bank of
2. America whose stocks are already battered down to just a few dollars per share. There is
a widely shared view that the difficulty of this plan would be pricing what the banks
would pay for this insurance.
Clearly the start of the problem is with housing. (or the easy money of the 90’s) Many
consumers should not have received loans. Most got larger loans than they could afford.
Often times these “no doc” loans where no proof of income or assets were loans that
came with a big price- a low interest rate upfront with a huge balloon after 5 or 7 years.
When those loans re-set they became completely un-affordable to them. Because these
were exotic loans to begin with many put no or very little down on their home and when
the trouble came- they simply walked away leaving the house vacant. Now some entire
communities and developments are completely empty. There is no way for asset holders
to re-coup any of their money except to foreclose on the house and put it up for sale for
pennies on the dollar.
That in turn is creating a huge loss of wealth for the American homeowner. People who
paid $500,000 for their home may owe a significant chunk of that on their loan, yet their
neighbor’s house across the street is now worth only $200,000 because it’s been
foreclosed. This too is causing homeowners in good standing to walk away from their
house because they are so upside down and don’t feel their home will ever be worth what
they paid for it.
There are other hardships today too. With unemployment at an all time high and many
companies letting go thousands of people, many just don’t have the money to pay their
mortgage. Further, many ARM loans will now be re-setting forcing consumers to re-
finance at a higher rate or to not qualify for a loan today at all.
The trickle down effect of the economy only delivers more bad news to the housing
market. In many areas 75% or more of housing sales are foreclosures and many experts
think it will be years before all of the foreclosures are out of the market and housing can
rebound.
Another trickledown effect is China has started to change international banking. China
has used it’s power in the Asian Development Bank to delay loans to India. India
stopped China from taking land away from them in 1962. This is the future of China’s
influence in multilateral financial decisions. China leaders have no problem in seeking
its interests by using ADB, Organization for Economic Co-operation and Development,
or the International Monetary Fund to get oil, raw materials, or markets in the Third
World. China sees power projection as more important than partnership with others.
China’s leaders see themselves on a ride with a tiger, with a aging population and a
people who have tasted freedom. China and its front companies using banks and cash,
will start to take control of raw materials across the world. ie: Brazil’s oil fields China
still has the near term problem of exports down over 40%
Back to the US, Banks are looking to convert these homes as into cash as fast as they can.
With foreclosures being the major of the real estate business today, many are rushing into
3. the REO market without experience in selling foreclosed homes. Real Estate people
without experience in REO sales can make the process harder, more difficult to close
transactions and don’t give the banks the best return they could get when working with an
REO expert.
Leadership is never easy, but it’s incredibly tough today. The global financial system is
basically paralyzed, the recession is the largest in most peoples’ lifetimes, and trust in
institutions and the people who lead them is at a all time low. Who better to put the
subject of crisis leadership in perspective than a local Southern California company,
Terra Asset Management.com who IS the expert in liquidation risk and works to sell
property to interested and able parties. Operating in Palm Springs, Terra Asset Managers
have unique foreclosure expertise and are the leading foreclosure specialists in Southern
California. Terra Asset Management.com can cut your time of sale down. Equally
important, Terra can limit your liquidation risk and most importantly Terra has the
resources and the relationships to get your property sold quickly.
The 4 step process of Terra Asset Management.com takes the worry off your shoulders
and handles all aspects of selling the property.
Step 1: Terra takes over the property so you don’t have to be involved
We give firm direction towards achieving the goal of selling.
Step 2: They put it on the right path. They will handle all repairs or other things
that may keep you from selling it quickly.
Step 3: Terra handles all of the day to day operations of the property including
maintenance and upkeep.
Step 4: Terra disposes of your property in the quickly and easily and puts the most
money back into your pocket.
Terra Asset Management is a full services real estate firm and has contractors,
CPA’s, legal and other help that may be necessary for you to sell your property.
Terra Asset Managers does not just lead an organization of people; we manage the reality
in which we operate. This requires confronting the market as well as
delivering new opportunities. It calls for managing past failures as well as
today’s success. The effective manager is a screen through which the
people he leads experience the realities of the marketplace, of competition
and changes in the economy, of success, and of failure. We change past
failures in to present successes.
If you are a bank or asset holder and have foreclosed properties, multi-units or larger
projects and you need them turned into positive results, call the experts, Terra Asset
Management.com (760) 408-8998 .or reolord@aol.com
