In otherwords, buying their way out of trouble.

The question everyone else in creation seems to be asking is “Who’s getting the raw end of the deal?” Is $8.5 billion getting off easy? How will other Countrywide investors get shafted? Has hell frozen over? (When I last checked, global warming was limited to the earthly realm!)

So 9 out of 10 government agencies have piped up and done what they can through the courts to get a better look at the deal. Groups like the Delaware Attorney General, the Nevada AG, the FHFA, the FDIC, and just about anyone else with a stake in this business. It’s a scary lot to take on, though maybe the government’s really run out of steam. But they’re putting up quite a fuss and it’ll be interesting to see if Bank of America can stand up to the pressure.

What do you think about this? Is B of A getting off easy? Are other investors getting the short end of the stick? Or is this just a nice way to wrap up some messy numbers? Leave your opinion below.

The Fed keeps track of “problem banks” basically a list of banks that would make more money as parking lots. And that list has been shooting upwards for the last two and a half years and was up to 888. But this quarter the number actually fell to 865. That’s the first decline in problem banks in a long time. Now keep in mind, that’s the first time the list has shrunk even as 365 banks have been shut by the FDIC. That means the new problem banks being added to the list outpaced shuttered banks being taken off the list.

It’s pretty grim but having 23 banks pull themselves back from the brink in time is quite an accomplishment. Like I said, though, it just means less banks are about to fall over, but we’re still years away from a comfortable number.

Sure, some banks are becoming profitable, and some are growing their portfolios. But if you don’t want to wait around for banks to recover, make your mark now. It won’t be easy (well, taking my advice it actually can be REALLY easy) but you’ve got to decide now if you’re ready for the responsibility of making tons of cash.

I know many of you are still sitting on the short-sale sidelines but ask yourself what you’re actually waiting for. In fact, leave a comment below and tell me “What are you waiting for?” If you haven’t gotten involved in short sales yet, then why not? What’s holding you back and what do you need to hear from me to get you moving.

That’s essentially the situation this week. 31 new banks were added to the FDIC’s “Problem List” bringing the total to 806. However, total assests of those banks was down from $403 billion to $379 billion. (Not to freak you out, but this year alone 149 banks have gone under. Oh right, that won’t freak you out if you remember last year’s numbers.)

So back to the issue at hand, is this a better situation or a worse one? On the one hand, less assets at risk provides for more aggressive lending. But more banks added to the Watch List means more neighborhood institutions are going to be careful about their lending practices.

If you ask me, I’d have more capital at risk but less banks. Banks provide the real potential for growth in the economy and there need to be as many sources of capital out there as possible. If the majority of risky assets were concentrated in fewer banks, I think it would prove much better for the economy.

People are tossing around words like “cautiously optimistic” and “recovering from the financial crisis” but their mostly meaningless since they’re used so often. So let’s hear from you guys. Let me know if you think I’ve finally lost my mind and need a long vacation. Or just let me know what your thoughts are on the lending situation.

A few years ago, that would have sounded as absurd as “The sky is falling!”

But that was a few years ago and we live in different times now. You’ve actually got to suspect that your bank might be falling. And suspect it early enough to get out while you can and save yourself lots of hassle.

Now I don’t know if your bank made the list, but 829 banks are currently on the “Problem list” (kind of like the naughty-or-nice list, but scarier). You might ask yourself why. You might want to know what your little, local, leisurely bank could have done to warrant being put on the “Problem list.”

And yet some of you might count yourselves lucky. In just the second quarter of this year, 45 banks actually failed. That makes 118 for the year. And the FDIC won’t release the names of the shaky banks because the news might be self-fulfilling.

The FDIC itself is worried because the failed banks have severely drained their funds. Just 4 months ago, 3 large banks in Puerto Rico failed, pulling resources away from the FDIC.

So you see it’s extremely important for them to know which banks are in trouble. They’ve got to budget for these things the same way everyone else does. And they have some hope that even these troubled banks can pull themselves up. The banking industry as a whole pulled in a $21.6 billion profit last quarter. And 2/3 of all banks actually look better now than they did 6 months ago.

But what the future holds for your local bank, the big multi-national banks, and the state of the economy, can’t be predicted all that well. We’ll need to keep our eyes and ears open to get a sense of what’s to come. So keep reading my blog for everything you need to know.

This new wave of closures will cost the FDIC $419.3 million for just the Georgia banks. The other closures will cost less, though. Just around $232.6 million per bank. Just small change in the bucket, I suppose.

We’re on a bad path this year. Last year was of course a horrible year for banks. So many banks closed I had to start keeping my money buried in the yard. Sure, the interest rate isn’t great, but you can’t beat the security. And, of course, no ATM fees.

But this year I thought, hey, why not give the bank another try. I mean, things seem to be stabilizing. Interest rates are leveling off. And c’mon, banks will probably do everything they can to keep customers happy, right?

Well, it seems some banks just couldn’t cut it. These latest closures are hopefully the last of the worst of last year. But maybe they’re just the tip of the iceberg.

Only time will tell, but we’ve got to keep an eye out for the warning signs. If Washington needs to keep bailing out your local bank, what’s that going to do to the struggling recovery?

Share your thoughts on my blog. We all need to stick together on this one.

Now who’s going to buy toxic assets?

Would you?

Well, they’ve already found a buyer for over 1 billion dollars in bad commercial loans. Private global investment firm Colony Capital bought up 1,200 commercial mortgages at auction. 70% of those loans are behind, mostly located in Georgia, California, Nevada and Florida.

No surprises there right? Those states have been incredibly hard hit from all sides of the economy from unemployment to foreclosure.

Anyway, Colony takes a 40% stake in the loans while the FDIC retains the other 60%. They paid $90.5 million for the assets.

Now let’s do the math for a second.

40% of $1.02 billion = $408 million

Subtract from that the $90.5 million they paid and you’re left with $317.5 million.

Colony capital stands to gain $317 million dollars on their investment. Of course, they are responsible for managing, servicing, and disposing of the loans, so that’ll cut into their profits a bit.

But still, that’s a quite a mark down on those loans simply because of the risk of default.

What do you think? Has the FDIC overestimated the risk of default? Or underestimated it?

They marked down those loans by 77%!

This could prove to be a strong indicator of the strength of the recovery. Where are these loans headed, to repayment or bankruptcy? Will Colony pull a profit from them and how much? How much will the next batch of loans be auctioned off for?

I’d love to hear what you think.