Thread: A note of caution for those with deposits in US Banks

Originally Posted by who

Re: Zero Coupon Treasuries: I personally would not refer to 30 year bonds as 'short term'. I am not familiar with "edging" operations.

US Treasury Bills mature in less than 1 year, usually 6 months and are sold at discount, there are the Zero-Coupon Treasuries, so yes there are short terms,

You might be confused with long term STRIPP, which is the stripping of a long term US Treasury bond by large financial institutions and resold to investors, which is something different and it is not issued by the US Treasury, only the underlying asset is from the US Treasury

So, has the US economy failed as that nutcase BKKA predicated? Fuck, here is an obvious example of a little knowledge is a dangerous thing. Bkka may fool some of you (Like rc) who don't really understand economics since Bkka has learned a few of the words, but Bkka has no real knowledge or analytical ability. He is just a nutcase.

LEH look doomed, Barclays took one look at their books and got on their toes.
Next up is Merril Lynch.

Another week of systemic risk for the Fed to deal with.

^I said a while ago that Lehman going bust 'was a given', but I had never suspected that it might be a proper bankruptcy with no bailout. With only a few hours to go, this is what we are facing!

When I predicted the collapse of the US banking system as we know it and the systemic collapse in the FED, I was waiting for this to spread to Citigroup and had assumed that Lehman and Merrils would be bailed and Citi would prove to be the one too big to bail. It now looks like the FED have decided to circle the wagons now.

Bailouts Will Push US into Depression: Manager

The end result of the global economic slowdown may be the U.S. announcing national bankruptcy as the government cannot afford the bailouts that it promised and the market will not bail out the government, Martin Hennecke, senior manager of private clients at Tyche, told CNBC on Thursday.

"We expect a depression in the United States. We expect a depression, very possibly, also in Europe," Hennecke said on "Worldwide Exchange."

The estimated $300 billion cost of the Fannie/Freddie bailout will probably be considered as a loss that the government will have to take, therefore passing it on to taxpayers, he explained.

"We already have $3 trillion of debt, as far as the U.S. government is concerned. These debt figures across the U.S. economy are rising very sharply."

When the government can no longer pass the United States' "immense debt" on to taxpayers, it will turn to the holders of U.S. dollars, leading to the eventual downfall of the currency, Hennecke said.

"Definitely, it (the dollar) is not a safe place to be invested in, as real inflation is closer to 10 or 11 percent than the actual inflation numbers given by the U.S. government," Hennecke said on "Worldwide Exchange".

Investors should avoid exposure to debt and stay away from leveraging on any investment or asset, including property, Hennecke advised, adding that "banks have been too highly leveraged in the past, private households, everybody."

Hennecke's stock allocations are mainly Asian-based, especially in the Chinese market as the country's government has a large amount of cash and the macroeconomics are fundamentally strong.

He also suggested investing in gold, despite the recent fall in price.

Bailouts Will Push US into Depression: Manager - General * Europe * News * Story - CNBC.com

Wall Street Prepares for Potential Lehman Bankruptcy Filing


By Craig Torres

Sept. 14 (Bloomberg) -- A group of banks and brokers began preparing for a potential Lehman Brothers Holdings Inc. bankruptcy filing today, addressing outstanding trades that the company has in over-the-counter derivatives markets.

Financial firms have started ``netting'' Lehman trades on credit, equity, interest-rate, foreign exchange, and commodity derivatives, according to a statement from the International Swaps and Derivatives Association e-mailed to Bloomberg News.

``ISDA confirms a netting trading session will take place between 2 p.m. and 4 p.m. New York time for over-the-counter derivatives,'' the ISDA said. ``Trades are contingent on a bankruptcy filing at or before 11:59 p.m. New York time, Sunday, Sept. 14, 2008. If there is no filing, the trades cease to exist.''

The announcement came after Barclays Plc, the U.K.'s third- biggest bank, said it abandoned talks to buy Lehman, contending it couldn't obtain guarantees to protect against potential losses at the U.S. securities firm.

Bloomberg.com: Worldwide

Now, when this happens, you know 'its' going to happen, as all counterparties have to work out their 'net' position, i.e. what they owe to and are owed by the bankrupt bank. They can then see if (a) they are themselves bankrupt (quite important), (b) may the necessary report to the SECC, NYSE et al on any loss and (c) prepare to present the claims/payment offers to the liquidators.

So, they are going down. Properly.

I wonder if the Fed will use an interest rate cut ahead of tuesdays announcment as a bone to toss wall street for a few hours?

The statement in full:

ISDA Statement on Lehman Brothers Bankruptcy Trades: Full Text

By Scott Lanman

Sept. 14 (Bloomberg) -- Following is a statement today from the International Swaps and Derivatives Association:

``ISDA confirms a netting trading session will take place between 2 pm and 4 pm New York time for OTC derivatives. Product classes involved are credit, equity, rates, FX and commodity derivatives. The purpose of this session is to reduce risk associated with a potential Lehman Brothers Holding Inc. bankruptcy filing. Trades are contingent on a bankruptcy filing at or before 11:59 pm New York time, Sunday, September 14, 2008. If there is no filing, the trades cease to exist. These trades are subject to a protocol which is being distributed by ISDA (International Swaps and Derivatives Association). Traders should execute the protocol and return to ISDA.''

Taken from:

Bloomberg.com: Worldwide

Originally Posted by Spin

I wonder if the Fed will use an interest rate cut ahead of tuesdays announcment as a bone to toss wall street for a few hours?

They did that last time and it worked. Maybe they think that this would be a winner again?

Greenspan gives his two-cents worth:

Greenspan Says Crisis May Be `Once in Century' Event (Update1)

By Vivien Lou Chen

Sept. 14 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said the financial crisis that began with the collapse of the subprime-mortgage market last year ``is probably a once in a century event'' that will lead to the failure of more firms.

``There's no question that this is in the process of outstripping anything I've seen, and it is still not resolved,'' Greenspan said in an interview today on ABC's ``This Week with George Stephanopoulos.'' Greenspan, 82, retired from the Fed in January 2006 after serving for 18 years as chairman.

Treasury and Federal Reserve officials are working on a sale of Lehman Brothers Holdings Inc., the 158-year-old investment bank that reported a third-quarter loss of $3.9 billion. U.S. Treasury Secretary Henry Paulson, who spearheaded a government takeover of mortgage giants Fannie Mae and Freddie Mac last weekend, has said he's reluctant to use Federal funds to rescue Lehman.

``What they are trying to do with Lehman is find a way in which there is no government money involved in this particular set of negotiations,'' Greenspan said. ``If they can't, they have to make a very key decision as to whether they allow it to liquidate or support it,'' he said, adding that he doesn't know enough details to recommend the right move.

In March, the Federal Reserve took on a $29 billion portfolio of mortgage-backed debt and other assets when it brokered the sale of Bear Stearns Cos. to JPMorgan Chase & Co. It also opened up cash loans to investment banks, a safety net unavailable to Bear Stearns.

`Fundamental' Institutions

``There are certain types of institutions which are so fundamental to the functioning of the movement of savings into real investments in an economy that on very rare occasions, and this is one of them, it's desirable to prevent them from liquidating in a sharply disruptive manner,'' Greenspan said.

Asked whether government bailouts should be used to help the auto industry, Greenspan said that would undermine savings and growth of the economy, leading to stagnation.

Shares of American International Group Inc., the largest U.S. insurer, have plunged 46 percent over the past week on concern that the company may be the next big U.S. financial firm after Lehman to fall short of capital.

The federal government took over Fannie Mae and Freddie Mac, the two largest sources of money for U.S. home loans, on Sept. 7, placing them under conservatorship and establishing procedures for buying their senior preferred stock if liabilities exceed assets.

Winners and Losers

``This is a once in a half century, probably once in a century type of event,'' Greenspan said. ``We shouldn't try to protect every single institution. The ordinary cost of financial change has winners and losers.''

Bloomberg.com: Worldwide

^They're certainly short of options now, I can't think what else they could do to calm any chaos might develop. Next deadline is 11.59 which is the latest bankruptcy can be declared? Thats 11am Monday morning Thai time I think.

^Correct.

I think I am going to get a few hours kip now, as I can't see anything else happening for the next six hours. If any last-minute deal gets done it will, indeed, be at the 11th hour.

Originally Posted by bkkandrew

^I said a while ago that Lehman going bust 'was a given', but I had never suspected that it might be a proper bankruptcy with no bailout. With only a few hours to go, this is what we are facing!

When I predicted the collapse of the US banking system as we know it and the systemic collapse in the FED, I was waiting for this to spread to Citigroup and had assumed that Lehman and Merrils would be bailed and Citi would prove to be the one too big to bail. It now looks like the FED have decided to circle the wagons now.

"systemic collapse in the FED"

What does that mean ?

Bank of America have just announced that like Barclays, they will not do a deal either.

Originally Posted by Spin

I wonder if the Fed will use an interest rate cut ahead of tuesdays announcment as a bone to toss wall street for a few hours?

I hope not. The greatest danger, in the long run, is always inflation.

Originally Posted by who

Originally Posted by bkkandrew

^I said a while ago that Lehman going bust 'was a given', but I had never suspected that it might be a proper bankruptcy with no bailout. With only a few hours to go, this is what we are facing!

When I predicted the collapse of the US banking system as we know it and the systemic collapse in the FED, I was waiting for this to spread to Citigroup and had assumed that Lehman and Merrils would be bailed and Citi would prove to be the one too big to bail. It now looks like the FED have decided to circle the wagons now.

"systemic collapse in the FED"

What does that mean ?

When one entity causes another one to fail due to its own failure.

I was typing fast, more accurately it should have read 'to' not 'in'. I believe that Paulson has now realised that Lehman on top of Freddie/Fannie, on top of Bear will deplete the pot too much and is now drawing back from a bailout.

Originally Posted by bkkandrew

Originally Posted by who

Originally Posted by bkkandrew

^I said a while ago that Lehman going bust 'was a given', but I had never suspected that it might be a proper bankruptcy with no bailout. With only a few hours to go, this is what we are facing!

When I predicted the collapse of the US banking system as we know it and the systemic collapse in the FED, I was waiting for this to spread to Citigroup and had assumed that Lehman and Merrils would be bailed and Citi would prove to be the one too big to bail. It now looks like the FED have decided to circle the wagons now.

"systemic collapse in the FED"

What does that mean ?

When one entity causes another one to fail due to its own failure.

I was typing fast, more accurately it should have read 'to' not 'in'. I believe that Paulson has now realised that Lehman on top of Freddie/Fannie, on top of Bear will deplete the pot too much and is now drawing back from a bailout.

When I try to type fast my 2 fingers begin to ache.

Originally Posted by Spin

Bank of America have just announced that like Barclays, they will not do a deal either.

Where did you read/hear that ? I want to know more.

Originally Posted by who

When I try to type fast my 2 fingers begin to ache.

Originally Posted by who

Originally Posted by Spin

Bank of America have just announced that like Barclays, they will not do a deal either.

Where did you read/hear that ? I want to know more.

Sept. 14 (Bloomberg) -- Bank of America Corp. abandoned talks to buy Lehman Brothers Holdings Inc., according to a person with knowledge of the matter, less than three hours after Barclays Plc said it wouldn't buy the faltering investment bank.

Bank of America, the biggest U.S. consumer bank, and Barclays, the U.K.'s third-largest lender, had been among the leading candidates to acquire all or parts of New York-based Lehman.

The two potential bidders pulled out amid a third day of emergency negotiations led by the U.S. Treasury and Federal Reserve, Leigh Bruce, a spokesman for London-based Barclays, said in a phone interview today.

Bloomberg.com: Worldwide

I posted this when I thought that Lehman might be the next to go (in May):

Back in mid-March when the bank reported, Bear Stearns had collapsed the day before and Lehman was in the market's cross hairs. Lehman posted a $489 million profit, calming investors. But ever since then, investors have questioned those numbers, asking whether the profit was due to some one-time, unrealized gains.

https://teakdoor.com/us-domestic-issu...tml#post636474

Looks like someones going to have to explain themselves over those numbers. Probably to a Judge.

Bank of America saving Merrills instead?

Bank of America, Merrill Lynch In Merger Talks


By Matthew Karnitschnig, Susanne Craig and Dennis K. Berman
Word Count: 94
Bank of America and Merrill Lynch & Co. Inc. are in merger discussions, according to people familiar with the matter.

The talks come amid a Wall Street scramble to sort out a potential liquidation of Lehman Brothers Holdings Inc.

Bank of America had considered buying Lehman, but when those talks failed to result in a deal, BofA turned its attention to Merrill, which is considered a better fit for the bank.

Much remains uncertain and conditions were fluid.


Free Preview - WSJ.com

Subscription needed for full report.

Dow futures have opened and are -314 points -2.73% at 11144.

Lehman to file for bankruptcy more here

Also, Schedule 2 TSLF auctions will be conducted each week; previously, Schedule 2 auctions had been conducted every two weeks. In addition, the amounts offered under Schedule 2 auctions will be increased to a total of $150 billion, from a total of $125 billion. Amounts offered in Schedule 1 auctions will remain at a total of $50 billion. Thus, the total amount offered in the TSLF program will rise to $200 billion from $175 billion.

The Board also adopted an interim final rule that provides a temporary exception to the limitations in section 23A of the Federal Reserve Act. It allows all insured depository institutions to provide liquidity to their affiliates for assets typically funded in the tri-party repo market. This exception expires on January 30, 2009, unless extended by the Board, and is subject to various conditions to promote safety and soundness.
Also, Schedule 2 TSLF auctions will be conducted each week; previously, Schedule 2 auctions had been conducted every two weeks. In addition, the amounts offered under Schedule 2 auctions will be increased to a total of $150 billion, from a total of $125 billion. Amounts offered in Schedule 1 auctions will remain at a total of $50 billion. Thus, the total amount offered in the TSLF program will rise to $200 billion from $175 billion.

The Board also adopted an interim final rule that provides a temporary exception to the limitations in section 23A of the Federal Reserve Act. It allows all insured depository institutions to provide liquidity to their affiliates for assets typically funded in the tri-party repo market. This exception expires on January 30, 2009, unless extended by the Board, and is subject to various conditions to promote safety and soundness.

FRB: Press Release--Federal Reserve Board announces several initiatives to provide additional support to financial markets, including enhancements to its existing liquidity facilities--September 14, 2008

More liquidity - Paulson's hand hard down on the inflation pump.

Also, not good. Not good at all. Section 23A is what prevents the money held by a retail (i.e. high street) bank on behalf of its customers from being pissed away by an investment bank that is part of the same group. Normally an exemption has to be applied for and is subject to strict controls and limits. Now EVERY U.S. bank automatically gets one until January 2009.

This means that Bank of America can happily spend its depositors cash on propping up Merrills. Nice for you to know if you have a deposit account with BoA...