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Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: kirby49 who wrote (145013)	1/21/2002 11:50:05 AM
From: reaper	Read Replies (3) \| Respond to of 436258

I know you didn't ask me, but.... First off, I wouldn't call Enron the FIRST banking failure (though certainly the biggest and more importantly loudest so far). Providian blew up before Enron; while Providian is (like Enron) not a "bank" in the way most people define that term, it really was a bank (it borrowed money at X and loaned it out at Y and made a spread). The Providian story isn't as fun as the Enron story, but it was at its peak a $20 billion equity cap company and in the S&P 500, so that is a pretty important "failure". I would also note that Superior Bank in Illinois failed over the summer, and the Pritzkers had to pony up something like $460mm to re-capitalize the entity (which had like $2 billion in assets) -- so hardly anything catastrophic but a failure nonetheless. Back to the point of your question -- who's next and how long will it take? JPMorgan is my personal and I think the thread overall's favorite. Anybody with big exposure to lending against non-productive over-valued real estate assets -- take you pick from Fannie, Freddie, WaMu, Golden West, CountryWide, Golden State, or the really smelly micro-cap American Business Financial. Anybody with big exposure to deadbeat credits -- take your pick from Americredit (auto finance), the afore-mentioned ABFI (real estate), Metris (credit cards), Conseco (manufactured housing), Household International (private label retail credit cards; general deadbeat unsecured lending), and recently H&R Block (they have gotten into the deadbeat real estate business in size recently). Plus, lots of big ugly industrial companies have for all purposes become banks masquerading as manufacturing businesses -- again take your pick from Ford & GM (autos) and GE & Tyco (industrial conglomerates) and IBM (tech conglomerate). You can also look into insurance, from the mortgage insurers (PMI Group, MGIC Investment, Radian, and Triad) to the credit insurers (Ambac & MBIA) to poorly-capitalized re-insurance (Mutual Risk Management). As to when, who knows. But look at the charts of the things that have already blown up (Enron, Providian, NextCard) -- they go from a lot to a little faster than you can blink, with hardly an up-tick in between. The reason is because these are all "confidence" games; there is nothing really backing these businesses except confidence so when it disappears the equity gets zeroed out pretty fast. I would be very surprised if at least 5 of the above companies don't finish CY02 in the single digits. Cheers