“…there are indications that the severest phase of the recession is over…”
– Harvard Economic Society (HES) January 18, 1930

Jim Sinclair’s Commentary

This is going to sap FDIC capital big time.

FDIC Seized Colonial Bank Branches and Deposits Going to BB&T
Montgomery, Alabama-based Colonial has two branches in Palm Coast.
By Toby Tobin

Palm Coast, FL – August 14, 2009 – In what may be the biggest bank failure of ‘09, BB&T, a Winston-Salem-based regional bank (Branch Banking and Trust) will reportedly purchase Colonial BancGroup’s deposits and 355 branches under an agreement with the Federal Deposit Insurance Corp. Colonial has about $25 billion in assets and branches in Florida, Alabama, Georgia, Nevada, and Texas.

A Federal judge ordered a freeze of Colonial’s assets noting that Colonial was "on the brink of collapse and is suspected of criminal accounting irregularities…." Earlier this month, Federal agents raided an Orlando branch of Colonial BancGroup as well as the headquarters of Taylor, Bean & Whitaker Mortgage Corp (TBW). TBW has suspended its mortgage lending operations and has been barred from making or servicing federally guaranteed loans by the Department of Housing and Urban Development, Freddie Mac and Ginnie Mae.TBW had planned a $300 million equity infusion into Colonial.

Colonial has two Palm Coast area branches; one on Boulder Rock Dr in the city; the other in the Hammock.

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Jim Sinclair’s Commentary

Not in Fat Cat City, Wall Street. The distance between the haves and have nots is getting to revolutionary levels.

Pay Raises Are the Worst in 33 Years
By BARBARA KIVIAT Wednesday, Aug. 12, 2009

Feel like your company has been particularly stingy on the raises this year? You’re not imagining it. For 2009, the typical non-hourly worker will see a 1.8% bump in salary, according to a survey by the human-resources consultancy Hewitt Associates. That increase, the smallest in at least 33 years, doesn’t even keep up with inflation.

Yes, it’s true, we’re in a recession, and nearly 1 in 10 workers is unemployed. There are plenty of people willing to work for less money. But in other recent recessions salary growth hasn’t slowed this much. Going back to the early 1990s, base salaries never increased by less than 3.4% a year, according to Hewitt, which polled 1,156 large companies to get its latest data. Companies desperate to slash costs are turning to worker salaries more deliberately than they have in the past. Some 48% of companies have frozen salaries this year, compared to just 2% last year.

Numbers from the Society for Human Resource Management (SHRM) speak to the same effect for new employees. Each month the human-resources trade group surveys more than 1,000 manufacturing and service-sector companies. The number of firms reducing new-hire salaries and benefits now outstrips the number of companies increasing packages. Falling compensation for new hires is unusual too, even during a downturn, according to analysts at SHRM — smaller increases are the more typical response.

One silver lining, according to the Hewitt survey, is that performance-based compensation is on the rise. If you’ve got the numbers to prove you’re a top worker, your earnings are somewhat insulated from the broader trend. For 2009, a full 12% of corporate payrolls have been devoted to bonuses, according to Hewitt. That’s up substantially in recent years, from just 9.5% in 2004.

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Jim Sinclair’s Commentary

Monty, come to CT. I have plenty of room.

California’s Prison Crisis: Be Very Afraid
By ALISON STATEMAN / LOS ANGELES Friday, Aug. 14, 2009

The exact cause of the 11-hour riot that broke out Aug. 8 at the California Institution for Men in Chino, Calif., won’t be known until an official investigation by the California Department of Corrections and Rehabilitation (CDCR) is completed. However, to some criminal-justice experts the violence that erupted at the facility, located about 40 miles east of Los Angeles, was an inevitable consequence of a state prison system long hobbled by massive overcrowding, program cuts and understaffed facilities. And given the state’s ongoing budget woes — with $1.2 billion in cuts mandated to the prison budget — the situation is likely to only get worse.

"The overcrowding is the first issue," says Barry Krisberg, president of the National Council on Crime and Delinquency in Oakland, Calif. "You’re talking about hundreds of men moved into triple bunks in what used to be gyms and cafeterias. They’re not even cells. They’re just empty places where we’re shoving people." According to the most recent statistics from the CDCR, California’s 33 state prisons house 154,649 prisoners in facilities designed to hold just 84,271 prisoners. The Chino prison is among the worst, with 5,877 prisoners in a facility designed to hold 2,976.

Governor Arnold Schwarzenegger and state political officials have been well aware of the issue of overcrowding, and the deplorable conditions that go along with it, for some time. In 2006 Schwarzenegger declared a state of emergency because of "severe overcrowding" in California’s prisons, saying it had caused "substantial risk to the health and safety of the men and women who work inside these prisons and the inmates housed in them." In response, legislators passed AB 900, which earmarked $1.2 billion in jail-construction funding through state lease-revenue bonds. However, more than two years later, construction is still on hold as lawmakers quibble about the details. But it’s not just a lack of buildings that is the problem. Says Krisberg: "Without programs and without services, the tensions that exist to begin with are going to be greatly exacerbated. The elected officials of California have been playing Russian roulette with the lives of the guards and the inmates in these prisons."

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