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

Icelanders in Reykjavik protesting the government's handling of the financial crisis on Wednesday. The slogan on the shirt worn by the man at right reads "Your bank does not care about you." (Árni Torfason/The Associated Press)

Iceland is all but officially bankrupt


REYKJAVIK: People go bankrupt all the time. Companies do, too. But countries?

Iceland was on the verge of doing exactly that on Thursday as the government shut down the stock market and seized control of its last major independent bank. That brought trading in the country's currency to a halt, with foreign banks no longer willing to take Icelandic krona, even at fire-sale rates.

As the meltdown in the Icelandic financial system quickened, with the government seemingly powerless to do anything about it, analysts said there was probably only one realistic option left: for Iceland to be bailed out by the International Monetary Fund.

"Iceland is bankrupt," said Arsaell Valfells, a professor at the University of Iceland. "The Icelandic krona is history. The IMF has to come and rescue us."

Continued here:

Iceland is all but officially bankrupt - International Herald Tribune

Perhaps Butterfly ought to replace the professor and become the new professor at the University of Iceland in order to explain that, in fact, all is well!

Originally Posted by bkkandrew

Perhaps we ought to send Butterfly there to explain to Johann Sigurdsson that everything is, in fact, fine!

oh so saying that a national bank is still functioning under receivership is the same as saying that everything is fine ?

again stretching the truth and making up facts when your lies are exposed,

Originally Posted by bkkandrew

Perhaps Butterfly ought to replace the professor and become the new professor at the University of Iceland in order to explain that, in fact, all is well!

nice try troll, putting words in my mouth I didn't say

Financial Crisis: Gordon Brown demands £20 bn 'British money' from Iceland

Gordon Brown has issued a public threat to Iceland, demanding the return of up to £20 billion belonging to British savers, companies and local councils.



By James Kirkup, Christopher Hope and Jon Swaine
Last Updated: 7:41AM BST 10 Oct 2008

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Mr Brown told the BBC: We are freezing the assets of Icelandic companies in the UK where we can Photo: PA

The Conservatives said they had identified at least £160 million of council funds exposed in Landsbanki Photo: BLOOMBERG


The Prime Minister said Britain would seize the assets of Icelandic companies and take “further action against the authorities” over the collapse of the island’s banks.

The diplomatic row, which has echoes of the Cod Wars of the 1970s, erupted after it emerged that more than 100 local authorities have deposits in Iceland. They stand to lose a total of more than £1 billion. British companies are said to have as much as £12 billion in the failed banks and individual savers more than £6 billion.

Unless the Icelandic government agrees to return the cash, British taxpayers will have to foot the bill to bail out local councils and other public bodies. This would come through increases in council tax or Treasury funds. It would mean the Government spending more public money because of the financial crisis after staking £500 billion in an attempt to rescue British banks.

Yesterday there were few signs that Mr Brown’s bail-out gamble was paying off. Bank shares rose but the FTSE-100 closed 1.2 per cent down. There was little evidence that banks were more prepared to lend to each other and no British bank has requested any of the £50 billion available.

Mr Brown said the behaviour of the Icelandic government in failing to guarantee the return of British money was “unacceptable”. He vowed to go beyond the action already taken against Landsbanki, one of the Icelandic banks which had its UK assets seized on Wednesday under anti-terrorism laws meant to stop extremist groups laundering money.

Mr Brown told the BBC: “We are freezing the assets of Icelandic companies in the UK where we can. We will take further action against the Icelandic authorities wherever that is necessary to recover the money.”

He has also called on the rest of the world to follow Britain’s “ground-breaking” move to save the banking system. Mr Brown urged other governments to put money into struggling banks and offer similar guarantees to persuade them to resume lending to each other.

Icelandic investment companies own several high street chains including Debenhams, Whistles and Oasis as well as the Premier League football club West Ham United. A war of words started as Geir Haarde, the prime minister of Iceland, used a press conference to denounce the seizure of Landsbanki assets. The use of anti-terrorism legislation was “not pleasant”, he said.

From:

Financial Crisis: Gordon Brown demands £20 bn 'British money' from Iceland - Telegraph

Originally Posted by Butterfly

Originally Posted by bkkandrew

Perhaps we ought to send Butterfly there to explain to Johann Sigurdsson that everything is, in fact, fine!

oh so saying that a national bank is still functioning under receivership is the same as saying that everything is fine ?

Which word were you stuck on?

"Everything is closed. We couldn't sell our stock or take money from the bank," said Johann Sigurdsson as he left a branch of Landsbanki in downtown Reykjavik.

Originally Posted by bkkandrew

Which word were you stuck on?

changing your story again ?

Originally Posted by Butterfly

Originally Posted by bkkandrew

Perhaps we ought to send Butterfly there to explain to Johann Sigurdsson that everything is, in fact, fine!

oh so saying that a national bank is still functioning under receivership is the same as saying that everything is fine ?

again stretching the truth and making up facts when your lies are exposed,

Originally Posted by bkkandrew

Perhaps Butterfly ought to replace the professor and become the new professor at the University of Iceland in order to explain that, in fact, all is well!

nice try troll, putting words in my mouth I didn't say

Yes you did:

Originally Posted by Butterfly

not, they are not. Only a UK branch got fucked, that's hardly EVERY bank in Iceland !!! again making up claims. Another of your extrapolation.

^I'll ask you again, which word were you stuck on?

Originally Posted by Butterfly

Originally Posted by bkkandrew

Which word were you stuck on?

changing your story again ?

On Thursday, October 09, 2008, Nouriel Roubini – Chairman of RGE Monitor and Professor of Economics at the NYU Stern School of Business – lays out his latest views on the global economic and financial crisis and the urgent necessary actions that need to be undertaken globally.

Nouriel Roubini: The world is at severe risk of a global systemic financial meltdown and a severe global depression

The U.S. and advanced economies’ financial systems are now headed towards a near-term systemic financial meltdown as day after day stock markets are in free fall, money markets have shut down while their spreads are skyrocketing, and credit spreads are surging through the roof. There is now the beginning of a generalized run on the banking system of these economies; a collapse of the shadow banking system, i.e. those non-banks (broker dealers, non-bank mortgage lenders, SIV and conduits, hedge funds, money market funds, private equity firms) that, like banks, borrow short and liquid, are highly leveraged and lend and invest long and illiquid, and are thus at risk of a run on their short-term liabilities; and now a roll-off of the short term liabilities of the corporate sectors that may lead to widespread bankruptcies of solvent but illiquid financial and non-financial firms.

On the real economic side, all the advanced economies representing 55% of global GDP (U.S., Eurozone, UK, other smaller European countries, Canada, Japan, Australia, New Zealand, Japan) entered a recession even before the massive financial shocks that started in the late summer made the liquidity and credit crunch even more virulent and will thus cause an even more severe recession than the one that started in the spring. So we have a severe recession, a severe financial crisis and a severe banking crisis in advanced economies.

There was no decoupling among advanced economies and there is no decoupling but rather recoupling of the emerging market economies with the severe crisis of the advanced economies. By the third quarter of this year global economic growth will be in negative territory signaling a global recession. The recoupling of emerging markets was initially limited to stock markets that fell even more than those of advanced economies as foreign investors pulled out of these markets; but then it spread to credit markets and money markets and currency markets bringing to the surface the vulnerabilities of many financial systems and corporate sectors that had experienced credit booms and that had borrowed short and in foreign currencies. Countries with large current account deficits and/or large fiscal deficits and with large short-term foreign currency liabilities and borrowings have been the most fragile. But even the better performing ones – like the BRICs club of Brazil, Russia, India and China – are now at risk of a hard landing. Trade and financial and currency and confidence channels are now leading to a massive slowdown of growth in emerging markets with many of them now at risk not only of a recession but also of a severe financial crisis.

The crisis was caused by the largest leveraged asset bubble and credit bubble in the history of humanity where excessive leveraging and bubbles were not limited to housing in the U.S. but also to housing in many other countries and excessive borrowing by financial institutions and some segments of the corporate sector and of the public sector in many and different economies: an housing bubble, a mortgage bubble, an equity bubble, a bond bubble, a credit bubble, a commodity bubble, a private equity bubble, a hedge funds bubble are all now bursting at once in the biggest real sector and financial sector deleveraging since the Great Depression.

At this point the recession train has left the station; the financial and banking crisis train has left the station. The delusion that the U.S. and advanced economies contraction would be short and shallow – a V-shaped six month recession – has been replaced by the certainty that this will be a long and protracted U-shaped recession that may last at least two years in the U.S. and close to two years in most of the rest of the world. And given the rising risk of a global systemic financial meltdown, the probability that the outcome could become a decade long L-shaped recession – like the one experienced by Japan after the bursting of its real estate and equity bubble – cannot be ruled out.

And in a world where there is a glut and excess capacity of goods while aggregate demand is falling, soon enough we will start to worry about deflation, debt deflation, liquidity traps and what monetary policy makers should do to fight deflation when policy rates get dangerously close to zero.

At this point the risk of an imminent stock market crash – like the one-day collapse of 20% plus in U.S. stock prices in 1987 – cannot be ruled out as the financial system is breaking down, panic and lack of confidence in any counterparty is sharply rising and the investors have totally lost faith in the ability of policy authorities to control this meltdown.

This disconnect between more and more aggressive policy actions and easings, and greater and greater strains in the financial market is scary. When Bear Stearns’ creditors were bailed out to the tune of $30 bn in March, the rally in equity, money and credit markets lasted eight weeks; when in July the U.S. Treasury announced legislation to bail out the mortgage giants Fannie and Freddie, the rally lasted four weeks; when the actual $200 billion rescue of these firms was undertaken and their $6 trillion liabilities taken over by the U.S. government, the rally lasted one day, and by the next day the panic had moved to Lehman’s collapse; when AIG was bailed out to the tune of $85 billion, the market did not even rally for a day and instead fell 5%. Next when the $700 billion U.S. rescue package was passed by the U.S. Senate and House, markets fell another 7% in two days as there was no confidence in this flawed plan and the authorities. Next, as authorities in the U.S. and abroad took even more radical policy actions between October 6th and October 9th (payment of interest on reserves, doubling of the liquidity support of banks, extension of credit to the seized corporate sector, guarantees of bank deposits, plans to recapitalize banks, coordinated monetary policy easing, etc.), the stock markets and the credit markets and the money markets fell further and further and at accelerated rates day after day all week, including another 7% fall in U.S. equities today.

When in markets that are clearly way oversold, even the most radical policy actions don’t provide rallies or relief to market participants. You know that you are one step away from a market crash and a systemic financial sector and corporate sector collapse. A vicious circle of deleveraging, asset collapses, margin calls, and cascading falls in asset prices well below falling fundamentals, and panic is now underway.

At this point severe damage is done and one cannot rule out a systemic collapse and a global depression. It will take a significant change in leadership of economic policy and very radical, coordinated policy actions among all advanced and emerging market economies to avoid this economic and financial disaster. Urgent and immediate necessary actions that need to be done globally (with some variants across countries depending on the severity of the problem and the overall resources available to the sovereigns) include:

another rapid round of policy rate cuts of the order of at least 150 basis points on average globally;
a temporary blanket guarantee of all deposits while a triage between insolvent financial institutions that need to be shut down and distressed but solvent institutions that need to be partially nationalized with injections of public capital is made;
a rapid reduction of the debt burden of insolvent households preceded by a temporary freeze on all foreclosures;
massive and unlimited provision of liquidity to solvent financial institutions;
public provision of credit to the solvent parts of the corporate sector to avoid a short-term debt refinancing crisis for solvent but illiquid corporations and small businesses;
a massive direct government fiscal stimulus packages that includes public works, infrastructure spending, unemployment benefits, tax rebates to lower income households and provision of grants to strapped and crunched state and local government;
a rapid resolution of the banking problems via triage, public recapitalization of financial institutions and reduction of the debt burden of distressed households and borrowers;
an agreement between lender and creditor countries running current account surpluses and borrowing, and debtor countries running current account deficits to maintain an orderly financing of deficits and a recycling of the surpluses of creditors to avoid a disorderly adjustment of such imbalances.

At this point anything short of these radical and coordinated actions may lead to a market crash, a global systemic financial meltdown and to a global depression. The time to act is now as all the policy officials of the world are meeting this weekend in Washington at the IMF and World Bank annual meetings.


_______________________

This is the main reason I listen to this guy:

On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac.

The audience seemed skeptical, even dismissive.

http://www.nytimes.com/2008/08/17/ma...ss&oref=slogin

Originally Posted by bkkandrew

^I'll ask you again, which word were you stuck on?

you keep asking the same question, I already proved it with the links above where you made false claims, how many times do I have to repeast myself ?

Originally Posted by bkkandrew

On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac.

The audience seemed skeptical, even dismissive.

well, he has some good points, but even if his sentiment was shared with the audience, they still had no solution. It's the same story, they see it coming, but they can't pre-empt the solution until it happens, the problem is too big to be pre-empted, it has to happen before meaningful actions can be taken.

Originally Posted by Butterfly

Originally Posted by bkkandrew

^I'll ask you again, which word were you stuck on?

you keep asking the same question, I already proved it with the links above where you made false claims, how many times do I have to repeast myself ?

I am not asking you to repeast (sic) yourself, I am asking you which word you were stuck on in this quote:

"Everything is closed. We couldn't sell our stock or take money from the bank," said Johann Sigurdsson as he left a branch of Landsbanki in downtown Reykjavik.

When you said this:

Originally Posted by Butterfly

not, they are not. Only a UK branch got fucked, that's hardly EVERY bank in Iceland !!! again making up claims. Another of your extrapolation.

Originally Posted by Butterfly

well, he has some good points, but even if his sentiment was shared with the audience, they still had no solution. It's the same story, they see it coming, but they can't pre-empt the solution until it happens, the problem is too big to be pre-empted, it has to happen before meaningful actions can be taken.

Does this mean you are finally coming round to my opinion that complete worldwide financial collapse is now inevitable?

^ there is a big difference between inevitable and possible, I think you are confusing those 2 terms

^Nope, at the start of this thread I stated possible, now (and since July) I believe inevitable. The difference is 6-months. 6-months that saw no averting action.

Off out for the day, so you can ramble on on your own on the thread for a bit.

Cost of U.S. Crisis Action Grows, Along With Debt (Update1)


By Matthew Benjamin

Oct. 10 (Bloomberg) -- The global financial crisis is turning into a bigger drain on the U.S. federal budget than experts estimated two weeks ago, ballooning the deficit toward $2 trillion.

Bailouts of American International Group, Fannie Mae and Freddie Mac likely will be more expensive than expected. States are turning to Washington for fiscal help. The Federal Reserve said this week it will begin buying commercial paper, the short- term loans companies used to conduct day-to-day business, further increasing costs. And analysts now say the $700 billion bank- rescue plan passed by Congress last week may have to be significantly larger.

``I always assumed they would be asking for more money along the way if it was necessary, and it looks like it's going to be necessary,'' said Stan Collender, a former analyst for the House and Senate budget committees, now at Qorvis Communications in Washington. ``At the moment, there's nothing happening here that's positive for the budget. Nothing.''

The 2009 budget deficit could be close to $2 trillion, or 12.5 percent of gross domestic product, more than twice the record of 6 percent set in 1983, according to David Greenlaw, Morgan Stanley's chief economist. Two weeks ago, budget analysts said the measures might push deficit to as much as $1.5 trillion.

Continued here:

Bloomberg.com: Exclusive

This would represent a 20% increase in the National Debt from an already unsustainable figure. It is like when your calculator returns an 'E' after a sum resulting in too many digits.

U.S. Stocks Drop in Rollercoaster Day; Dow Swings 1,000 Points


By Lynn Thomasson




Oct. 10 (Bloomberg) -- U.S. stocks fell for an eighth straight day in a whipsaw session that sent the Dow Jones Industrial Average to its biggest point swing ever.

The Standard & Poor's 500 Index capped its worst week since 1933, as concern that the financial crisis will send the global economy into a recession pushed Morgan Stanley, CBS Corp. and Exxon Mobil Corp. down more than 8 percent. The Dow recovered from a 697 point tumble and rose as much as 322 points in the last hour after an industry group said the bankruptcy auction of Lehman Brothers Holdings Inc.'s debt won't worsen credit losses.

``At this point, investors are just focusing on getting through the day,'' said Alan Gayle, the Richmond, Virginia-based senior strategist at Ridgeworth Investments, which oversees about $70 billion. ``The markets are being driven by emotion and rumor.''

Continued here:

Bloomberg.com: Worldwide

Initial Summary of the day (another one tomorrow morning after I have had time to think):

Stock markets worldwide down between 5-10%, inc. FTSE down 9%. LIBOR still rising despite bailouts. Day of reckoning for Lehman CDO Insurers. G7 meeting. Iceland saying they are not bankrupt when clearly they are.

And then the wild DOW ride:



I have never seen a chart like this for one day's trading....

I stated on William's 'Black Friday' thread that there are two possibilities to this madness:

1) Complete NWO-style 1-currency, 1-World bank 'solution'.

2) Complete financial collapse.

Either way, it is a moot point whether the markets will open Monday, or indeed for some while...

The question is why? Not why on the above, but why we have reached this point? The name that keeps cropping up is Robert Peston. Today he has inferred option (1) in his blog (no link, just fucking look for it). Yet he is the 'father' of the credit crunch when he broke the story of BNP Paribas being unable to value its US mortgage-backed assets last year. There is a fine line between being 'ahead of the game' and being a mouthpeice for those that aim to change paradigms.

Anyway (disclaimer), too much wine on board, so proper analysis in the morning, assuming the hangover is cured.

Back to Cars:


GM and Chrysler 'in merger talks'


Chrysler is the No3 maker in the United States, and GM the No1


US car giants General Motors and Chrysler are in talks about a possible merger, US media say.

Reports say the talks have been going on for a month but details of the deal vary from a merger to an acquisition by GM of Chrysler.
GM is the leading manufacturer and Chrysler third after Ford. All have been suffering with a plunge in US sales to 15-year lows.
Neither of the parties have made any direct official comment.

Ford move

Sources told the Wall Street Journal that Cerberus Capital Management, which owns 80.1% of Chrysler had proposed trading its automotive operations to GM in return for GM's stake in the auto lender GMAC Financial Services.

The New York Times's sources spoke of a merger that was a "50-50" possibility, although it could take weeks to finalise and had been stalled by the turmoil in the financial markets.

GM spokesman Tony Cervone said: "Without referencing this specific rumour, as we've often said, GM officials routinely discuss issues of mutual interest with other automakers."

Analysts have questioned Chrysler's position, given its reliance on North America for 90% of its revenue.

Both companies have been hard hit by falling truck and SUV sales and are struggling to push through job cuts against union opposition.

GM shares hit a 60-year low this week. It posted a second-quarter net loss of $15.5bn. Separately, Reuters reports that Ford is planning to sell most of its 33.4% holding in Japan's Mazda.


BBC NEWS | Business | GM and Chrysler 'in merger talks'

What do you get when marrying two bankrupt companies merge?
a) A big bankrupt company.
b) Economies of scale for the insolvency practitioner.

Now having read the G7 5-point plan in full, I can exclusively reveal the contents:

1. We
2. Don't
3. Have
4. A
5. Plan

Tom Bawden in New York and Suzy Jagger in Washington

Lehman Brothers, the bust investment bank, triggered one of the biggest corporate debt defaults in history yesterday as it emerged that the US Federal Reserve is harbouring grave concerns about whether Washington’s $700 billion (£413 billion) bailout fund will avert a financial meltdown.

An auction of Lehman’s bonds yesterday determined that the bank’s borrowings were worth only 8.625 cents on the dollar. The valuation leaves the insurers of the debt a bill of about $365 billion. It is not clear whether the insurers, which are required to settle the bill in the next two weeks, will be able to pay – a development that could further undermine increasingly stressed capital markets.

The $365 billion default came as stock markets around the world suffered one of their worst days since the crash of 11 years ago. Panicking about the prospect of global recession, the FTSE 100 index of leading shares in London crashed within seconds of opening, losing 8.9 per cent of its value, its worse fall since October 1987.

The index recovered to close down 225 points, marking a 5 per cent decline, but more than a fifth was wiped off London shares this week alone. Issues in New York fluctuated wildly as the Dow Jones industrial average slumped by 312.14 points at lunchtime before closing at 8,451.19, down 128.00. Both markets had been scared by losses in Tokyo, where the Nikkei lost 10 per cent of its value.

Amid the mayhem across the world’s stock markets, senior Fed officials now doubt whether Washington’s bailout fund will work unless it is launched in some form in the next two weeks.

The Times has learnt that central bankers in America are anxious that if the Treasury is not able to accelerate the speed at which it launches its rescue scheme, it will have no effect. At the moment, the Treasury, which controls the fund, is working to a five-week schedule to get the rescue package up and running. Under present plans, the bailout fund is not expected to buy its first distressed mortgage-backed bonds until after the US elections on November 4.

It is understood that the Fed believes that this will be too late to help the banks that are suffocating under market conditions. Credit markets have frozen up and many banks have been cut off from being able to borrow from one another.

Mr Paulson’s bailout fund is designed to buy up distressed bonds held by troubled banks. This week the former chairman of Goldman Sachs appointed Neel Kashkari, one of his protégés at the Wall Street bank, to run the fund. Mr Kashkari had already been working closely with Mr Paulson during the negotiations over the passage of the “troubled asset relief programme” on Capitol Hill.

Mr Paulson is also considering a range of other forms of financial assistance, which include the Treasury using taxpayer funds to buy stakes in Wall Street banks. Under such a plan, the cash received in return for the shareholding would provide much-needed capital for the banks.

Lehman’s corporate debt default promises to increase the stress across global credit markets. Sean Egan, of the Egan-Jones ratings agency, said: “This is a killer. Lehman said a month ago that it was in terrific shape and now you can’t even get ten cents on the dollar for its debt.

“It underscores the deep structural flaws in our financial system, knocks confidence in the financial markets and raises the cost of capital. It also demonstrates that we are experiencing not only a crisis of confidence, but a crisis.”

About 350 banks and investors are thought to have insured an estimated $400 billion of Lehman’s debt through complex derivatives, known as credit default swaps. These include Pacific Investment Management, the manager of the world’s largest bond fund, Citadel, the US hedge fund, and American International Group, the insurer that the US Government recently bailed out with two loans totalling about $123 billion.

The Times has learnt that the US Treasury has been overwhelmed with requests from executives of other beleaguered sectors who are seeking a similar bailout scheme for themselves. It is thought that representatives from the US car and airline industries have approached the Government for assistance. It is understood that Mr Paulson does not believe that it is his job to help them. Rather, he is intent on addressing the root problems of the financial crisis.

From:

Lehman Brothers demise triggers huge default - Times Online

My bold/highlighting.

This underscores the point. $365BN to be found when the Paulson plan only allows $250BN now, $100BN on request, with $350BN only available after further approval from Congress (currently involved in an election)....

The numbers are completely at odds with each other. The latest nonsense from the G7 is posturing and meaningless. It will be seen as such. The queue for bailouts now is a long line indeed.

It is clear that, after my flight to Bangkok on Monday, I will devote substatially more time to the 'US Martial Law' thread...

Financial crisis: Darling ready to take control of banks

Banking shares across the G7 nations could be suspended tomorrow as governments mount a desperate effort to implement rescue packages designed to repair the battered global financial system.


The measure was among several being considered as Gordon Brown, the Prime Minister, is considering emergency steps to take majority stakes in large British banks in an attempt to avert the collapse of the industry.

With markets in the US and Japan closed on Monday, the remaining G7 nations are determined to avoid further slumps in banking stocks that could compound the global contagion.

Treasury sources confirmed that the Government had drawn up plans to take on a majority stake in Royal Bank of Scotland and big holdings in Lloyds TSB, HBOS and Barclays under its £500bn plan to bail out the banking industry.

Analysts believe a further 20 per cent fall in bank shares this week would leave the Government with little option but to nationalise virtually the entire sector with the four leading banks requiring as much as £35bn in additional tier-one capital between them.

On Monday, RBS is expected to ask the Government to underwrite a £15bn cash call with HBOS requesting up to £10bn, Lloyds TSB £7bn and Barclays £3bn.
Details of the potentially stunning move emerged as the International Monetary Fund warned global equities could plunge by a further 20 per cent in the coming days unless governments deliver concrete action to address the crisis.

The world financial system was standing on the “brink of systemic meltdown”, Dominique Strauss-Kahn, the IMF managing director, said. “Intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown.”

Continued here:

Financial crisis: Darling ready to take control of banks - Telegraph

Nobody has mentioned anything about Canada, or the RBC

surely they are badly affected too?

^Canada has actually got one of the stronger banking sectors, which is why it has been off the radar. The Royal Bank of Canada is not a bank I have seen any adverse reports of, but then again, I haven't been looking.

It will, however, be crippled once the complete collapse happens as all its counterparties will collapse and default.

...And another 20% off stock markets this week.

IMF warns of meltdown
Reuters
By Lesley Wroughton and James Mackenzie Reuters - Sunday, October 12 04:34 am

WASHINGTON (Reuters) - The IMF warned the world's financial system was near meltdown and France promised that a meeting of European leaders in Paris will detail measures to keep a market panic from triggering the most severe global downturn in decades.

Continued at:

IMF warns of meltdown - Yahoo! News UK

Friday, October 10, 2008

International Trade Seizing Up Due to Banking Crisis (Updated)



I have been more than a tad concerned about near-paralysis in the money markets and imploding equity prices. But this e-mail, from a well connected international investor not prone to alarm or (normally) the use of capital letters says that the banking crisis is staring to bring international shipping to a halt.

By way of background, letters of credit of various sorts are essential for trade. For instance, imagine the difficulty if you are, say, a Chinese manufacturer who wants to sell his wares to buyers overseas. How can he be sure the goods he ships will ever be paid for? Imagine the considerable difficulty and cost of chasing a deadbeat in a foreign country. Letters of credit. issued by banks, assure payment. They can also serve to finance the shipment (ie, fund the inventory while it is in transit).

Not only are banks now leery of lending to each other for much longer than overnight, they are also starting to refuse to honor letters of credit from other banks. From the above-mentioned reader:

At the end of the day, if every counterparty is bad then you don't have a market and you don't have an economy. I spoke to another friend of mine this afternoon, whose father has been in the shipping business forever. Pristine credit rating, rock solid balance sheet. He says if he takes his BNP Paribas letter of credit to Citi today for short term funding for his vessels, they won't give it to him. That means he can't ship goods, which means that within the next 2 weeks, physical shortages of commodities begins to show up. THE CENTRAL BANKS CAN'T LET THAT HAPPEN OR WE HAVE NO ECONOMY, LET ALONE A CREDIT SYSTEM.

We spoke later in the evening and said he had heard of another instance of a trade transaction failing, different parties entirely, this a shipment of coal, again due to the unwillingness of the seller's bank to accept an LC from the buyer.

naked capitalism: International Trade Seizing Up Due to Banking Crisis (Updated)

This, if true, would really bring this crisis home to me and I suspect many to those here that work in export markets...