L.A. Bank Death Watch: Downey, First Federal, Washington Mutual, Fremont

You’ll show up one day and there’ll be a notice that this bank has been taken over the FTIC and if you have money there, it’ll take a couple of days to get it.

Or Bank of America buys them out for $2 a share.

If you deposit a $100 in a bank, they only have to hold a couple of bucks and lend the rest. They may give some home boy in Riverside a $95 loan. They put it on their books as a $95 asset. They get 7% from this bloke and they pay you 2%.

Downey, First Federal, Washington Mutual, Fremont. I doubt their reserves are enough to absorb their losses. They have a ton of negative amortization on their books.

According to Wikipedia: "In finance, negative amortization, also known as NegAm, occurs whenever the loan payment for any period is less than the interest charged over that period so that the outstanding balance of the loan increases. As an amortization method the shorted amount (difference between interest and repayment) is then added to the total amount owed to the lender. Such a practice would have to be agreed upon before shorting the payment so as to avoid default on payment. Also known as deferred interest or Graduated Payment Mortgage (GPM). This method is generally used in an introductory period before loan payments exceed interest and the loan becomes self-amortizing."

About Luke Ford

I've written five books (see Amazon.com). My work has been noted in the New York Times, the Los Angeles Times, and 60 Minutes. I teach Alexander Technique in Beverly Hills (Alexander90210.com).
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