by User Submitted

Submitted by reader Matthias

Given the “consolidation” in the banking space that has started with IndyMac, the person that looks to become the heir of the U.S. retail banking industry, is FDIC Chairman and future Chief Holder of the Bag (CHB (disambiguation, this is not a reference to Dan Shaughnessy)), Sheila Bair. But who is Sheila Bair?

Per the FDIC web site, her background is in authoring children’s books, which undoubtedly will come in handy, as she explains to the depositing public the finer points of what exactly is NOT covered by FDIC insurance. The trouble is, the original story of “Rock, Brock and the Savings Shock” is just leading the Nation’s children down an ill-conceived path to risky savings, rather than opening their eyes to the prudent possibilities of borrowing.

From the book description on Amazon:

Rock and Brock may be twins, but they are as different as two twins can be. One day, their grandpa offers them a plan-for ten straight weeks on Saturday he will give them each one dollar for doing their chores. But there is a catch! Each dollar they save, he will match.

Rock is excited-there are all sorts of things he can buy for one dollar. So each week he spends his money on something different-a toy moose head, green hair goo, white peppermint wax fangs. But while Rock is spending his money, Brock is saving his. And each week when Rock gets just one dollar, Brock’s savings get matched. By summer’s end, Brock has five hundred and twelve dollars, while Rock has none. When Rock sees what his brother has saved, he realizes he has made a mistake. But Brock shows him that it is never too late to start saving.

Contrast this with the more recent thinking coming from CHB Bair:

The FDIC’s seizure of IndyMac has given Ms. Bair the ability to put her strong views into action. She has complained that lenders weren’t moving fast enough to help borrowers with troubled loans move into more affordable mortgages and avoid foreclosure.

Last October, she shocked mortgage servicers, investors and many in Washington when she pushed lenders to freeze introductory interest rates on certain high-cost loans to protect borrowers from unaffordable mortgage payments. As foreclosures snowballed, her plan attracted more attention. In December an industry coalition agreed to freeze interest rates for five years for certain borrowers who qualified.

Ms. Bair was pleased, but kept pushing. She argued for more, bigger government action. This spring, she proposed a $50 billion government-loan program that qualified borrowers could use to pay down a portion of their mortgages.

Recommendation: I think it is time to tell the real story of Rock and Brock. The one, where Brock puts his money into an FDIC insured savings account, while Rock asks his friend Kerimov to hook him up with some later-untraceable source of leverage, investing the proceeds in Russian oil assets. At the end of 10 weeks, Brock’s savings bank is kaput, wiping out most of his savings. Over the same period, Rock’s oil assets have doubled, which leaves him with enough cash to purchase the operating assets of Rock’s S&L, after negotiating a free put from the Fed. And a Ferrari Enzo.

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  1. Strattie
    July 16th, 2008 | 10:46 am

    “The difference between humans and other animals is their ability to analyze and reason.” – so much for that…

    BTW, why no mention of the fact that a good portion of those that are going into foreclosure overpaid and it’s an exit strategy for them? They are getting out of a losing position?

  2. Juan
    July 16th, 2008 | 11:11 am

    You assume of course that they actually throw you out of your house when you stop paying your mortgage. Not in our new reality. If you need me I will be having my cake and eating it too.

  3. Strattie
    July 16th, 2008 | 3:39 pm

    I do residential appraisers, REOs and foreclosures on the side. They will throw you out, in 30 days after sheriff’s sale. The sheriff will personally inspect that you did not take the bank’s property (at the very least in 8 counties in NJ, DE, and PA that I’ve done this in).

    Your only hope is to make a short sale deal (bank will sell to an interested buyer at 80%, PMI covers the rest) where you lose the house but it’s like an amicable divorce and you don’t get a foreclosure on your record. And if you want your personal property, you have to pay for your own truck.

    You do realize until you hold title to your property you are just renting it from the bank, who is the true and rightful owner? If I’m hired by the bank, I can enter the grounds and it’s not trespassing.

    Note to Self: Short PMI co’s.

  4. Charlie McDanger
    July 16th, 2008 | 10:15 pm

    The difference between humans and animals is that animals don’t expect a phone call the morning after.

  5. July 17th, 2008 | 5:37 pm

    I wonder if Sam Israel has that time machine of his laying around, I’d love to go back to somewhere around mid-2006 and get me one of those no-doc, stated-income, negam 125% LTV loans, live like a baller for 2 years, and then, eh, like the funny car racing videos, just walk away mostly unscathed.

    Also, does anyone know of an ETF or other security that would allow me to short logic and reason?

  6. July 18th, 2008 | 2:45 pm

    In the Mugabe-style swindle department, there’s an online poker fiasco that’s getting better by the minute. I catalogued it briefly here:


  7. Strattie
    July 18th, 2008 | 3:09 pm

    “Tax and Tax, Spend and Spend, Elect and Elect, because the people are too damn dumb to know the difference”. – Harry Hopkins

    “There are three kinds of lies: lies, damned lies, and statistics.” – Benjamin Disraeli

    Talk amongst your selves!

  8. July 21st, 2008 | 2:14 pm

    @ Strattie

    Thought that quote was from Twain, no?

  9. July 21st, 2008 | 3:07 pm

    I thought it was a Mike Myers line.

  10. howard in nyc
    July 21st, 2008 | 7:31 pm

    one dollar a week becoming $512 by the end of the summer? i guess grandpa was trying to teach rock and brock the virtues of loansharking.

  11. Strattie
    July 22nd, 2008 | 10:09 am

    The original line was by Disraeli in a speech or interview he gave when he was in office.

    Twain/Clemens attributes the quote to Disraeli in his Autobiography.

    Leonard Courtney was involved somewhere in between and Twain possible took the quote from him and attributed to Disraeli. Lord Courtney was a Statistician, he started the society.

    Next topic: The Independent Party is neither independent or a party, discuss. (Along the same lines: the constitution declares us a Republic not a Democracy, why then do we resolve to call our selves Democratic? Hint: Look up the constitution and the definitions for both types of government.)