Sterling's Struggles

It’s been about two months since Sterling Financial Corp., the parent/holding company of Sterling Savings Bank (which has a branch here in Pt. Roberts) received its ‘Cease and Desist’ order from the FDIC.  Sterling’s most important job during this period was to increase its capital by about $300 million.  In order to do this, the corporation could sell stock, sell bonds, or get a line of credit from some other financial outfit.  I guess they could sell assets, as well, including real estate they had foreclosed.  And there might be other things I don’t know about; I’m not an expert in this field—I just follow the news.

Selling stock isn’t very useful because Sterling stock sank on the FDIC order’s news.  The stock price has  bounced around over the last 8 weeks, but mostly it’s bounced down, and is now in the high 60 cent area.  Sterling did set up a web page where they were arranging to sell their foreclosed properties, but that’s not likely to be something that happens fast given the housing market.  Does private equity wish to rescue Sterling?  Would you think it was a good investment to buy Sterling bonds at this point?  No, nor would I. 

Poor Sterling!  It’s even been removed from the NASDAQ Mid-Cap listing because its stock fell below $1.00.  This delisting is a slow process, however, and what this amounts to is NASDAQ saying that they will really, really do it if Sterling's stock stays below a dollar/share over the next six months.  In addition, Sterling still owes interest on the TARP funds that it got from the U.S. Treasury, including the last payment that it missed.

Last week, there were stories in the financial press that Sterling was likely to miss its due date for that capital increase ordered by the FDIC.  That date would be this Tuesday.  Of course, the FDIC doesn’t have to do anything right away, and usually doesn’t.  There are many, many over 500 banks on the ‘Troubled Bank List,’ many more than are about to fail.  Banks that fail are usually on the Troubled Bank List, but it is possible to stay on that list for a long time, and it is even possible to get off that list by rectifying one’s financial problems.

From my vantage, Sterling looks like a pleasure boat surrounded by sharks, though.  This week, two law firms announced that they were looking for people to be members of a class action lawsuit against Sterling for federal securities law violations, relating to allegations that Sterling failed to accurately present its financial status last year.  These two (one, two) law firms are looking for people who bought Sterling stock from July '08 to January '09. 

A third law firm is looking for Sterling employees, whose retirement account funds were used to purchase Sterling stock during that period, as part of an investigation into whether Sterling failed to act prudentially under ERISA, the federal law that deals with retirement fund programs, and thus should be subject to another class action suit.

The company has traded out several of its highest officers.  But the sharks keep swimming closer. 

A few more banks fail almost every Friday.  And for almost all those banks, some other bank takes over the operation immediately.  On Friday, you have an account at Greenstreet Bank; on Saturday, that account is now held by Redstreet Bank, right in the same building it was on Friday.  The customers are safe; even the tellers and other day-to-day employees are usually safe.  It’s the shareholders, bondholders, and the executives who take the hit.  And in this case, it could also be the taxpayers, since there is a TARP investment at stake.  We live in interesting times, where it is possible to learn about things you never thought to learn about previously, including about your own little bank..

Strange Days in Banking

Banner Bank is our second bank in Point Roberts.  I follow it the same way that I follow Sterling Savings Bank as its fortunes ebb and flow (currently more ebbing than flowing), but Banner has been rather more stable.  Banner Bank took the same big initial hit last fall and winter, but then has just been moving along in a relatively steady path.  It's a smaller bank than Sterling; it’s still paying a dividend on its common stock, even though it’s only 1 cent per share in each of the last couple of quarters.  I’ve seen no mention of it in relation to TARP funds.  All of which makes it seem like it's doing okay in this very difficult environment.

Clearly, Banner wasn’t on an upswing.  This past week, it announced $8+ million in losses, but they weren’t as large as expected--analysts had expected losses of twice that much.  And then, yesterday morning,  Banner's stock took off during the first part of the trading day, gaining almost 75 cents--which, if you are selling at less than $3.00 per share, is a very big increase.  And then, during the rest of the day, it lost all that gain and closed back at about $3.00.  

Banner normally has sales volume of about 220,000 shares per day; yesterday, the sales volume was up in the millions.  A big day for somebody, but not as a result of anything specific to Banner in the financial news that I could find.  Well, other than Obama’s interest in saving community banks that, it turns out, may be too small to fail.  Today, Banner lost another $.19, but with only regular volume.  Maybe just some strange clutch of events that have not yet been reported in the business news?  Maybe a misalignment of the stars?

Sterling’s troubles continue.  Yesterday, it announced enormous 3rd quarter losses, almost a $1/2 billion.  And today, on very high volume, it lost another 25% of its stock price, closing at 86 cents.  Even a quixotic purchase on my part seems dubious right now.

NOTE:  These banking issues reflect problems for the stock/shareholders, not for those who simply have accounts or loans at these banks.

Tarnished Sterling

Sterling Bank’s stock continues to struggle; today down in the $1.70’s per share, and lots more sellers than buyers.  Part of the problem, I assume, is that this past week it was revealed that among the many banks nationwide that received federal money from the TARP (troubled assets relief program), 33 have now failed to make at least one dividend payment to the U.S. Treasury.  (As a condition of receiving TARP money, each bank was to pay a 5% yearly dividend to the Treasury, in quarterly payments.)  Sterling received over $300 million from the TARP program last year, and thus would be expected to pay $15 million yearly/$3.75 million quarterly to the Treasury.

CIT Group also failed to pay its much larger dividend to the Treasury.  CIT Group is almost too big to fail even as it struggles to avoid bankruptcy.  Sterling Financial Corp: not so big.  Sterling previously cancelled its dividend on common stock and preferred stock, and also deferred payments to bondholders.  It did pay its TARP dividend payment in May, but missed the August payment.  This is not good news for our Point Roberts branch.

Banking on Change

Sterling Bank had another impressive adventure today. For a while it has managed to keep its stock at a substantially higher price than Citigroup (at least percentage wise). Citigroup is generally thought to be insolvent except for the fact that the U.S. Treasury thinks it’s too big to fail. But yesterday, Sterling announced plans to expand its ‘shelf registration’ to $500 million. That means it is asking the SEC to permit it to sell, as it needs to, up to a half billion dollars worth of stock, bonds, or whatever else it might have around to sell. At $2 and change per share, that would be a lot of stock. This would seem to suggest that its managers are thinking they’re going to be needing to raise more capital (sort of failing their own stress test?).

The market responded today by knocking off the Sterling Financial share price by 22%, putting it back down under Citigroup by about 16 cents (at $2.49: not as bad as it was in December of 2008, of course). I keep reading that community banks everywhere are about to be hit by commercial real estate loans gone bad. The FDIC keeps putting banks into receivership (but very few, so far, in the Northwest generally or Washington specifically.) Almost 60 banks closed so far this year, but that is nothing compared to what happened in the 1930’s depression. So, maybe it’s just another up and down for Sterling, and they’re just waiting, now, for the up part.

On the other hand, up here on the Sunshine Coast, we are now into another week of Festivals, and the sun keeps shining. Partying on!

Timing the Market

Much talk in the news about glimmers of improvement and the green shoots to be seen here and there. My plan for starting my future investment career was to buy 1,000 shares of our local Sterling Bank if it ever got to a dollar or below/share. And, although it did get very close to that--$1.03, I think, was the bottom so far—it did not meet my timing requirement and so I did not invest in bank shares. Alas, had I done so in early March when it got down very near a dollar, I would now have quadrupled my investment. Of course, because I was going to buy only 1,000 shares, I would have profited only $3,000. I think getting rich probably requires something more than penny stocks, $1,000, and a quixotic timing strategy. By contrast, many have recently found that losing a lot of money doesn’t require much of anything at all by way of strategy.

Sterling (and, to a lesser extent, Banner bank) continue to interest me, though. Sterling was around $9 in January, and now it is $4.33. About a month ago, it surged ahead of Citibank, and has managed to stay ahead, and everybody says that Citibank is insolvent. So the market seems to know that Sterling is better off than Citibank/Citigroup, but then that’s not saying much.

In any case, it may still be too early to give up my dreams of penny stocks. According to the academic economics blog ‘Calculated Risk’ (May 19) ‘Commercial real-estate loans’ (which are the real problem for small banks) “could generate losses of $100 billion by the end of next year at more than 900 small and midsize U.S. banks if the economy's woes deepen, according to an analysis by The Wall Street Journal. . . ..Total losses at those banks could surpass $200 billion over that period “

And today, according to the same source, “the FDIC released the Q1 Quarterly Banking Profile today. The FDIC listed 305 banks with $220.0 billion in assets as “problem” banks in Q1, up from 252 and $159.4 billion in assets in Q4.” That’s 305 banks out of the ‘900 small and midsize U.S. banks.’ And to add to Sterling Financial’s woes: the Fitch Rating Service downgraded the corporation ten days ago: Outlook, Negative.

Those green shoots now…where were they spotted?

Speaking of Debt...

Not that I was, though God knows I spend enough of my time reading about it on the net, trying to understand whether we are truly in a situation where assets are temporarily undervalued or, by contrast, where assets are absolutely correctly valued at their new low prices, having for some considerable number of years been getting themselves highly overvalued.  As an English major and a philosophically inclined sort, I’m partial to some kind of Platonic view of value, which is to say that I like the idea that things have absolute value.  The economist, including the one I live with, is inclined more to the idea that the value of something is what someone is willing to pay for it.  Thus, a house might well have been worth $100K last year but now be worth only $65K this year, even though nothing about the house has changed.

So I am puzzled by the idea that economists talk about the housing bubble, and about how people were paying more for a house “than it is worth,” since I have been schooled by the economists to say that whatever someone pays is what its worth.

And, Huzzah!  As I puzzle over these matters, the CBC brings to my attention last year’s Massey Lecture, a series of five hour-long lectures on the topic of debt.  It is written and presented by that famous economist (irony alert), Margaret Atwood.  I have listened to three hours so far and, though I am not a very big Atwood novel fan, these lectures are a delight.  She is reading them and she is not the best reader of lectures that I have ever heard, but it is easy enough to look/hear/think past that because the material she is presenting is so extremely interesting.  She ranges all over the place: etymology, mythology, religion, literary criticism, economics, history, psychological theory, here there and everywhere she goes, showing how debt and its concept-cluster siblings play a central role in the meaning of western culture.

For example: Debt is likely to be understood differently depending upon whether the culture is in a phase in which having things is seen as a mark of God's favor, as opposed to a more ascetic phase in which having things is an embarrassment.  Another example: Jesus, the redeemer.  I’m obviously used to the phrase from my own religious background, but I never thought about why that is the word that is used to describe his role.  The most common meaning of redemption, for me, is in the context of pawn shops.  You redeem things you’ve pawned with a redemption ticket.  I’ve never actually pawned anything, but it’s a common enough phenomenon in novels.  But what does Jesus have in common with pawn shop redemption?  Ah, you’ll have to listen to the lectures to learn.  (The link function of Blogger isn't working today, so you'll have to cut and paste:  http://www.cbc.ca/ideas/massey/massey2008.html)

The Massey Lectures are one of the things that keep me in mind of Canada’s place in the public intellectual pantheon (as compared to the U.S., say), and especially in the public broadcasting world.  Five nights a week, the CBC puts forward a one-hour program, a documentary in essence, about some important issue.  The program is called Ideas and that’s what it is.  The U.S. public radio system copied the Canadian’s CBC’s news program (“As It Happens”) to give U.S. public radio  ‘All Things Considered.’  Unfortunately, it never took up a similar effort with regard to Ideas, although “This American Life” rises to the challenge many weeks.  But it’s not a five-hour a week program!

In addition, each year, Ideas’ producers select someone to give a five-part Massey Lecture, and then they broadcast it, one hour each night for a week.  I’ve heard most of them over the past 16 years and never been disappointed, though some have stayed with me longer than others.  They’re all available on their website.  Just in case you’ve got five hours available.  They deserve special credit for doing Atwood’s Debt series last year.  Just-in-time supply, indeed.

Looking for Bright Spots

One thing that writing the blog has made me do is focus on the stock prices of banks; not only the local ones but the big ones. And what I can’t for the life of me figure out is why there is all this concern about the shareholders being wiped out. At the current prices for all the banks, the shareholders have been almost entirely wiped out already and, presumably, they will not be much more disadvantaged by the next 5% loss. Well, I guess the thing is that they won’t be around to participate in the amazing rise in bank prices that we will be expecting once we’ve actually gone through all this. Whenever that time might come. Doesn’t look like it will be any time soon.

Anyway, by now, for those of you who are interested in following this with me, Sterling Bank is down to $1.43 (from a one-year high of $16.63, and today’s Sterling sales volume is almost 2 million shares, way above their average volume of sales, but below yesterday’s peak volume of 6 million); Banner Bank to $3.02 (from a one-year peak of $24.50, and a current volume of about twice its average); Citigroup to $2.88 (from a one-year high of $26.81, and with about half its average sales volume today; and Bank of America to $4.58 (from a one-year high of 42.45, and with only a slightly above-average sales volume today).

What that suggests is that the lack of confidence in the banks continues to deepen. However, Banner Bank gained a few cents today, rather than losing value. By contrast, both Citigroup and Bank of America were taking price percentage losses larger than Sterling’s. All three, however, were losing much more percentage-wise than the Dow or the S&P 500.

And outdoors, here on the beautiful Sunshine Coast of B.C., it is a very sunny day, but there are still, still, still considerable areas of snow leftover from the December snowstorm. But there are also, in our yard, little patches of crocuses smiling up, opening their little petals to the sun. Unlike the banks, these are bright spots in our lives. (The crocuses are a very small variety, barely 3 inches from ground to the tip of the bud.)

Help Needed

Many years ago—in 1968, to be specific--I had three very young children and was divorced. It was the late 60’s; could have happened to anyone in those times. And, like anyone in that situation, there wasn’t much money. I had had a job since I was 15, but for the previous 4 years I’d been raising little kids instead, which certainly was work but not work that paid money. One day, I found myself standing in the kitchen and thinking that if I ate only twice a day, I could save X amount of money. And then I found myself thinking that that was crazy. I needed to get a job, despite the fact that I had three little kids. Eating less than I needed was not a choice I wanted to be making.

And, I didn’t have to make that choice because I was lucky in most other ways: the kids were healthy; their dad was available; I had a M.A. from UCLA; and the job market was reasonably good. I found a job pretty quickly (as a research assistant for a U.S. Congressman in his district office). It was a great job and the kids managed with the additional help of some hired folks. And we all continued to eat three meals a day.

But that is not everybody’s story in such a situation, so since then, I’ve always been particularly sensitive to the idea that people in America, the wealthiest place in the world, ought not, at the very least, have to worry about having enough to eat. And yet, here we are in the wealthiest place in the world (even if not so wealthy as it recently was), and there are people without enough money to ensure adequate food. Oh, they may not be facing malnutrition or starvation, but they are having to feel some sense of alarm about the price of milk and cheese and chicken (even though we in Washington pay a lot less for them than our neighbors in Canada do).

Now, with an unemployment rate slipping upward rapidly, there’s going to be a bigger problem and fewer people anxious to respond to the need. Does that stimulus program include additional food stamp money? What’s the state of local food banks that help to make up the slack for people like I was that day who just didn’t have quite enough money for quite enough food? Are their donations dropping? Probably, as most non-profits’ donations are.

Even in tiny, remote, peculiar Point Roberts, there are people who need some help getting adequate food. Fortunately, Point Roberts has a food bank that is run entirely by volunteer efforts. Nobody in that outfit getting salaries, let alone bonuses. The P.R. Food Bank helps 30 or 40 households here on the Point to not worry about adequate food. They may still have to worry about their rent or their car insurance or their gasoline, but at least, there’s help with food. However, that help doesn't just arrive from the sky: the Food Bank has to solicit help from the community both in terms of funds and in terms of time in procuring, storing, packaging, and delivering the food.

People always talk about how generous Americans are, and I’m sure they are when they see some need for generosity standing right in front of them. But people who need some help with food don’t stand in front of you and ask for help. Who stands in front of you, at least at this moment, is somebody who once could have used some help but had no one to ask. I was lucky and found another way out. For those who aren’t so lucky, who don’t have a lot of job experience, education, work savvy, and a good job market…well, they are still there needing help. Money, a permanent storage space for food, and actual time spent picking up, packaging, distributing food: all of that is needed by the Point Roberts Food Bank. If you are here on the Point, think about offering to help.

Odds and Ends

1. Today is Candlemas Day (40 days after Christmas), but it’s a day more celebrated in books than in life, I suspect. It’s also Groundhog Day, and my understanding is that the groundhog in Pennsylvania did indeed see his shadow this morning, prognosticating another six weeks of winter. Originally, in Germany, it was a badger who made this prediction, but when German settlers came to the coal mines of Pennsylvania, they found no badgers, so they had to rely on groundhogs for information. And now, we have the Internet! Up here in Point Roberts, we have neither badgers nor groundhogs as far as I know, but we have lots and lots of voles, and voles were not seeing their shadows this morning, so maybe Pennsylvania gets six weeks of winter and Point Roberts gets spring right away. I’m okay with that; and last Saturday made spring seem like a reasonable prospect.

2. For the past six months, reading the events of the world, I have pondered from time to time whether Point Roberts is a good place to sit out the arriving/already here bad times. I can’t say that I’ve progressed too far in my thoughts. It doesn’t seem like Cormac McCarthy’s The Road is going to be much of a guide to action, but Point Roberts does seem like as good a place as any if you don’t have a lot of debt and do have a little ground in which to grow vegetables. However, last week’s New Yorker (January 26, 2009) has a fascinating article on ‘The Dystopians,’ describing the 'forward thinking' (as the financial types speak of predictions) of various non-religious types’ apocalyptic visions. Unfortunately, the full text isn’t available on the Net, but there is a summary of the article here. These are all people who are getting licenses for pistols, I note, are living on boats, or cataloguing their gold acquisitions. All pretty interesting if you’re not someone who is too susceptible of imagination. In any case, it made me think Point Roberts might be a good place with respect to lack of weapons: a nice gated community and with the gate operated by Homeland Security. Oh, we could end up being grateful to the border agents just as we could end up being grateful to the bulk mailers. We’re not done with irony yet, I guess.

3. With respect to on-going bad times, I find myself checking the status of Sterling and Banner Banks each day as demonstrated by their stock prices. Both have continued to plunge, and at $1.53 (Sterling), plunging much more could be very painful. Banner dropped too, but not quite as hard; now at $2.99. I have no idea what happens when a stock has no value at all.

Banner Obscure

Banner Bank (said to be the oldest savings and loan in Washington state) has its Point Roberts branch office in an office inside our grocery store, the International Market. And Banner Bank also has a little TARP money, but they are less forthcoming than Sterling was about what they’re doing with it and indeed what and how they’re doing more generally. I was surprised at how accessible the Sterling press release was, and then surprised again at how difficult it was to understand the Banner Bank press release; as if they'd discovered a new way to talk. For example, what is a 'loan loss provision’? Is that a loss on a non-performing loan? Or is Banner providing something? Sterling, by contrast, says, ‘here’s what we lost on our non-performing assets.’

Not only obscure, but also unavailable. This morning, the Banner executives had a telephone conference with investors and the public, just as Sterling had the day previously. Sterling posted a transcript of that conference call that anyone could read on their website; Banner wouldn’t let you listen to their teleconference unless you registered (and registering required you to have a business, a title, and various other bona fides). And the replay is available to registrees only briefly; and there is no transcript. [UPDATE: the transcript is available here, thanks to Seeking Alpha.]

In any case, here’s Banner’s story in the TARP adventure. They got $124 million from the U.S. Treasury. In exchange, they issued 124 million shares of Banner preferred stock to the Treasury. This preferred stock will pay 5% for 5 years and, if Banner hasn’t paid the treasury back for these shares within 5 years, the interest rate will rise to 9%. Also, there’s a warrant for the Treasury to purchase 1.7 million shares of Banner common stock at $10.89/share any time in the next ten years. Of course, if Banner goes bust, that warrant won’t be of much use. Indeed, if Banner's stock doesn't rise by about 300%, it won't be of much use.

And what has Banner done with their $124 million? Don’t you worry your little head about that. They’ll be using it to ‘enhance [their] capacity…to support communities…and…expanded lending activities.’ (Probably no redecorating at the International Market.) They’ll also be paying a dividend on common stock shares of 5 cents per share. The issue of executive bonuses was not mentioned. Maybe in the phone conference I couldn’t get to.

Overall, they’re announcing a net loss of $128.5 million for 2008, including $62.4 million in loan losses. Their share price has gone from $27.19 to $4.84 over the past year. Yesterday’s market close, just before Banner issued their 2008 earnings report, was $5.69. Today, the stock lost another third of its value closing at $3.78, so one has to conclude that investors were not heartened by yesterday’s report. The trade volume today was almost a million shares, whereas the average daily volume is 170,000 shares. But then, there were buyers as well as sellers, so somebody still thinks it’s a good deal.

[Note: in the course of gathering us this information, I had occasion to read many pages of the actual legislation that authorizes the TARP program . As a former English teacher, I feel obliged to point out that the word ‘includable’ is used many times and is consistently misspelled in the bill. The U.S. Congress, it appears, prefers to think of things being ‘includible.' Does their computer not have a spelling program?]

We Buy Banks!

Well, our Sterling Savings Bank’s parent company, Sterling Financial Corporation, did indeed issue its 4th quarter report as it said it would, and indeed, it is losing a lot of money as it said it was, and it has a lot of ‘non-performing loans,’ as we suspected it would. Which explains the fact that all U.S. citizens are now the proud and joint owners via the Treasury Department of 303,000 shares of Preferred Stock (and warrants to buy 6.5 million shares of common stock) of the Sterling Bank Corp at the price of only $303 million. Although Sterling Bank is no longer paying dividends on its common shares of stock, it will be paying 5% interest on preferred shares, so the U.S. Treasury will be getting a little check now and then for our investment.

The report had some other news. The Board has decided to eschew bonuses this year for its executive team. I think the financial companies would all be better advised to phrase that news a little differently. Something like “Of course there will be no bonuses paid to bank executives this year because we wouldn’t even think of paying bonuses to people who are presiding over a company whose stock has gone from $19.72 to $2.44 in the space of a year. We at Bank of Whatever believe that bonuses go to executives who perform, not to executives who pass the time in their offices and do not perform.” But instead, they keep saying they’ve decided not to pay their executives any bonuses, as if a lot of midnight oil had been burned over that difficult decision. The non-peforming assets (ie, loans in trouble) are almost all (79%) construction loans (as opposed to loans to individuals for housing), and mostly residential construction although commercial construction loans are also increasingly going non-performing.

It is pretty strange to have the TARP money so close to home. I tend to imagine all those TARP dollars sheltering and insulating, so to speak, buildings in the big cities, the big financial centers. But here is little Sterling, with its headquarters in Spokane, getting a piece of the action. We can go down to the branch office and see if there’s any redecorating going on as an indication of what they’re doing with our $303 million. They say that they’ve put it in municipal bonds and government guaranteed loans “initially,” but they don’t say where it is right this minute. My guess is municipal bonds and government guaranteed loans which are paying them slightly over 5% in order to repay that preferred stock 5% dividend. But redecoration has proved to be an alternative explanation other places. Not going to new loans, in any case. Well, when Congressman Grayson is next carrying on about where the Treasury is sending all that money, I can give him a call to tell him where at least $303 million of it is.

On Tuesday, Sterling Bank’s stock closed at $2.44 on a volume of 1.5 million shares, and that was before it released its 4th quarter report. On Wednesday, it closed at $2.29, on a volume of 2.6 million shares. The ‘tangible book value,’ the company says, is $11.41. Sounds like a bargain, but then what doesn’t, these days?

Tomorrow, we look at Banner Bank, Point Roberts’ other bank.

What's Ahead?

While contemplating the financial free-fall, I was wondering today what was the fate of local banks, so I Googled up Sterling Savings Bank, which has a local branch, one of two small banks in Point Roberts. I’ve never been clear about why so few people needed two banks, but maybe it’s the competition thing.

In any case, a quick perusal of Google hits suggested that our own Sterling Bank is indeed being hit hard; it’s canceled its dividend, it’s reporting $230 million in credit losses, and another $300 million loss of good will. Not much good will left after that, I’d think. The U.S. Treasury now owns $300 million of preferred stock in Sterling Savings Bank. The bank expects a net loss for the fourth quarter and the year. And we will know more about what’s to come for Sterling Savings Bank on the 27th when they issue their fourth quarter report, and you can talk with them on the morning of the 28th about it when they have a phone report. You can read this all, in their January 13th press release.

Well, as they point out in the press release, their deposits are all covered by FDIC, so we’ll just hope for the best as to what is to come on that front.


On other fronts, better news. I went out on a brief photographic safari this morning in the sun and 30 degree temperatures to ascertain signs of spring. And found lots of them, despite the great mounds of snow that were everywhere a month ago and the six weeks of freezing temperatures that are still with us.

I doubt if there will be crocuses for Valentine’s Day, but there will be crocuses.


If I could ever master placement of photographs in this blog template, I would identify all these in the proper place, but I haven't yet achieved that skill. So, may it suffice to say that, in order, they are daffodils, crocuses, opium poppies+a strawberry plant, columbines, chrysanthemums, and shasta daisies. Enough for a spring garden, I'd think.

Vocabulary Lesson

If nothing else good can be said about the crises of our time, they at least give us new vocabulary words. For example, today it was reported that the infamous $700 billion for the Wall Street Bailout will not be presented all at once to the Bailout Czar. Instead, it will come in tranches. Barney Frank felt confidence in saying that not because it is true, although it may be, but because this past week we have, if we have been paying attention to national news of high finance, learned all about tranches: it is our new vocabulary word. Last month, no one speaking to the public could have said that something was coming out in tranches. We would have all stared rudely at him/her, stunned and puzzled and wondering just what kind of elitist he/she was.

I made a loaf of bread today, and we are eating it in tranches. Our bacon, too, is being laid upon our breakfast plates in tranches. It is even possible that yesterday, I tranched myself with a knife, but not seriously. I say tranche all the time, nowadays.

Tranche we have previously known in English in other forms: trench, trencher (and trencherman), as well as trenchant and retrench and even trench coat. Tranche is a very old French word (maybe from Latin, truncare, from whence comes truncate and maybe tree trunk, too). Truncare means to cut. Tranche means, to slice. A slice into the earth is a trench. A second earth slice and you have decided to retrench. If you slice off a slab of wood to put your cooked meat on, it is a trencher. If you eat a lot off that trencher, you are a trencherman. If it rains a lot when you are in a trench, you need a trench coat. If you make a remark that cuts to the heart of the matter, the remark is trenchant.

Thus it is that when the investment banks ‘slice and dice’ the mortgages into little pieces and then sell them in tranches, they have tranched them by slicing them, and then have put them back together hugger-mugger into new bundles which are then sliced again not into slices but into slabs called tranches. And, according to Barney Frank, when the federal government puts out our tax dollars to buy the tranches, it will put the money out in tranches. It could be a new slogan for the end times we seem to be in: Tranches for Tranches!

It scarcely makes sense, of course, but I think that’s the point.

Notes for the Curious:

tranche Noun, feminine (a) slice of meat, cake, bread, rasher of bacon; edge of a coin, book; section, tax band, bracket, credit instalment, time slot; ~ de boeuf beefsteak; couper en ~s to slice

trench
c.1386, "track cut through a wood," later "long, narrow ditch" (1489), from O.Fr. trenche "a slice, ditch" (1288), from trenchier "to cut," possibly from V.L. *trincare, from L. truncare "to cut or lop off" (see truncate). Trenches for military protection are first so called c.1500. Trench warfare first attested 1918. Trench-coat first recorded 1916, a type of coat worn by British officers in the trenches.
trencher Look up trencher at Dictionary.com
c.1308, "wooden platter on which to cut meat," from Anglo-Fr. trenchour, from O.N.Fr. trencheor "a trencher," lit. "a cutting place," from O.Fr. trenchier "to cut" (see trench).
trenchant Look up trenchant at Dictionary.com
c.1330, "cutting, sharp," from O.Fr. trenchant "cutting, sharp," prp. of trenchier "to cut" (see trench). Figurative sense is recorded from 1603.
entrench Look up entrench at Dictionary.com
c.1563, from en- "make, put in" + trench.
retrench Look up retrench at Dictionary.com
1598, "dig a new trench as a second line of defense," from Fr. retrencher "to cut off," from re- "back" + O.Fr. trenchier "to cut." Sense of "cut down, reduce (expenses, etc.)" is from 1625.