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

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This:

"After a property boom, house prices are now falling at a faster rate than any other country in the world - down 24% in the last 3 months.

<snip>

Crunching through the snow at a new apartment block on the outskirts of Riga is property developer, Viktors Savins, of ARCO Real Estate.

Viktors Savins outside his new apartments outside Riga

"From the top of the market, we've had to cut the price of these apartments by around 35%," says Savins surveying the half-finished development."

Savins' company began work on the four-storey flats in 2004 while prices were still rising, since then the property market has fallen by over 60%.

The housing bubble was fuelled by ordinary citizens who were encouraged to borrow up to 10 times their salary by foreign banks who in turn were feeding off the global supply of cheap credit.

"During the boom investors were in the market trying to fulfil their own 'American Dream' of getting rich quickly by doing nothing," says Savins.

But with unemployment set to double to over 10% next year, many Latvians are for the first time beginning to understand the true meaning of 'negative equity' and 'repossession'.

BBC NEWS | Business | Latvia's economic boom turns sour

and this:

The second biggest bank in Latvia has imposed a monthly limit of about EUR 50k on private individuals (a bit more for companies).

Link to Parex webiste

leading to this:

WSJ:How to Combat a Banking Crisis: First, Round Up the Pessimists

Hammered by economic woe, this former Soviet republic recently took a novel step to contain the crisis. Its counterespionage agency busted an economist for being too downbeat.

"All I did was say what everyone knows," says Dmitrijs Smirnovs, a 32-year-old university lecturer detained by Latvia's Security Police. The force is responsible for hunting down spies, terrorists and other threats to this Baltic nation of 2.3 million people and 26 banks.

Now free after two days of questioning, Mr. Smirnovs hasn't been charged. But he is still under investigation for bad-mouthing the stability of Latvia's banks and the national currency, the lat. Investigators suspect him of spreading "untruthful information." They've ordered him not to leave the country and seized his computer.

Finance is a highly touchy subject in Latvia, one that the state tries, with unusual zeal, to shield from loose tongues. It is a criminal offense here to spread "untrue data or information" about the country's financial system. Undermining it is outlawed as subversion.

Mention the financial crisis, go directly to jail | Herald Sun

Dec. 3 (Bloomberg) -- Companies in the U.S. eliminated an estimated 250,000 jobs in November, the most since November 2001, a private report based on payroll data showed today.

The drop was larger than forecast and followed a revised 179,000 decrease in October that was more than previously estimated, ADP Employer Services said.

Companies from Citigroup Inc. to General Motors Corp. have stepped up the pace of firings with the world’s largest economy in its first recession since 2001. A government report in two days may show the economy lost jobs in November for an 11th consecutive month, according to a Bloomberg News survey of economists.

“The report shows a broad and deep contraction of the economy in all nooks and crannies of the economy,” Joel Prakken, chairman of Macroeconomic Advisers LLC in St. Louis, said on a conference call. “We’re teetering over the edge of a hill and we’re going to be rolling down it for a while.”

Bloomberg.com: Worldwide

Its all going tits-up now...

Meanwhile in the UK - a rather odd, hidden clause in the new Banking Bill:

The section the new Banking Bill seeks to abolish reads as follows:

And be it enacted, That an Account of the Amount of Bank of England Notes issued by the Issue Department of the Bank of England, and of Gold Coin and of Gold and Silver Bullion respectively, and of Securities in the said Issue Department, and also an Account of the Capital Stock, and the Deposits, and of the Money and Securities belonging to the said Governor and Company in the Banking Department of the Bank of England, on some Day in every Week to be fixed by the Commissioners of Stamps and Taxes, shall be transmitted by the said Governor and Company weekly to the said Commissioners in the Form prescribed in the Schedule hereto annexed marked (A.), and shall be published....

Guy Fawkes' blog of parliamentary plots, rumours and conspiracy: Something Odd in the Banking Bill

Now then, someone isn't planning to keep quiet the cranking up of the printing presses are they?

Originally Posted by bkkandrew

Now then, someone isn't planning to keep quiet the cranking up of the printing presses are they?

Well lets face it, the countries in the most debt are the ones who will come out of all this on top when their currencies crash as Panda pointed out superbly already.
May as well go out with a bang.

Well lets face it, the countries in the most debt are the ones who will come out of all this on top when their currencies crash as Panda pointed out superbly already.
May as well go out with a bang.


................CRASH - with reference to what?


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Peston succinctly portrays the abyss that the US and UK are facing:

Here are some of the numbers that tell us what’s gone wrong. For the UK, if you
aggregate together consumer, corporate and public-sector debt, the ratio of our
borrowings to our annual economic output is a bit over 300%, or over £4000bn.
That’s a similar ratio of debt to GDP as that of the US, and it’s a record.

and

One of the best ways of understanding how all our debts were accumulated is to look
at the gross foreign current liabilities of our banks. These rose from £1,100bn in 1997
to £4,400bn this year (again, about three times the size of our annual economic
output).
This trend tells two stories. It shows the massive and unsustainable growth in the City
of London and our financial services industry - which is now shrinking with a
vengeance, at the cost of massive job losses and evaporating tax revenues (perhaps
£30bn to £40bn of income for the Exchequer gone forever).

In particular, the UK is just like a hedge fund - over leveraged, over exposed and over indebted. That is why I was pessimistic on the pound in the spring/summer...

Quotes from:

http://www.bbc.co.uk/blogs/thereport...capitalism.pdf

^Agreed, the vice-like grip in the real world tightens by the day. I have given up posting articles here that only a month ago would have been attention-grabbing. For instance, we have the 40% of UK businesses considering immediate closure, Woolworths failing to find a buyer out of Administration and UK GDP down over 1% in the 3-months to November alone.

Ho hom, can't say I didn't say so...

Talking of articles, this ones a cracker. linky

The name of the game is volatility a measure of risk, the index are just reflecting that measure, perfectly normal

what is not normal is when you have constant double digit return for the last 20 years, eventually they reverse and it's brutal

Markets overreact, and like the silly newsletter followers who predict the next rally or next downturn by extrapolating the current situation, they eventually get it wrong

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Yep, those US home loans just get more toxic by the day:

Foreclosure Storm Will Hit U.S. in 2009 as Loan Changes Fail

By Dan Levy



Dec. 11 (Bloomberg) -- U.S. foreclosure filings climbed 28 percent in November from a year earlier and a brewing “storm” of new defaults and job losses may force 1 million homeowners from their properties next year, RealtyTrac Inc. said.

A total of 259,085 properties got a default notice, were warned of a pending auction or were foreclosed on last month, the seller of default data said in a report today. That’s the fewest since June. Filings fell 7 percent from October as state laws and lender programs designed to delay the foreclosure process allowed delinquent borrowers to stay in their homes.

“We’re going to see a pretty significant storm next year,” Rick Sharga, executive vice president of marketing for Irvine, California-based RealtyTrac, said in an interview. “There are two or three clouds that suggest a pretty heavy downpour.”
Rising unemployment, expiring foreclosure moratoriums and state efforts that “run out of steam” will push monthly filings toward the record of more than 303,000 set in August, Sharga said. The number of homes that revert to lenders, the last stage of foreclosure and known as “real estate owned” or REO properties, will increase to 1 million from as many as 880,000 this year, he said.

“The forces leading to foreclosure are hard to offset in most cases and impossible in many,” Robert Hall, a Stanford University professor and chairman of the National Bureau of Economic Research committee that calls the beginnings and ends of recessions, wrote in an e-mail. “Job loss is a major source of defaults at all times, and job losses are running at extreme levels now.”

Payrolls Slashed

U.S. companies slashed payrolls by 533,000 last month, the fastest pace in 34 years, for a total of 1.9 million job cuts so far this year. Home prices have fallen by about a fifth from the mid-2006 peak, according to the S&P/Case-Shiller home price index.

“The decline in prices and its devastating consequences” will continue next year with no indication of when they will stabilize, Hall said. Programs that modify the terms of loans, including efforts by Fannie Mae, Freddie Mac, JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. can’t help thousands of borrowers, he said.

“Something like 70 percent of subprime foreclosures are beyond the reach of modification programs because the owners are investors, because the owner is in default for the second time on the property, or because the owner has disappeared,” Hall said.

Delinquencies

The share of mortgages delinquent by 30 days or more in the third quarter rose to a seasonally adjusted 6.99 percent while loans already in foreclosure rose to 2.97 percent, both all-time highs, the Mortgage Bankers Association said in a Dec. 5 report. The gain in delinquencies was driven by an increase in loans with payments 90 days or more overdue.

“Until we see a turnaround in the job situation, we’re not going to see these numbers improve,” said Jay Brinkmann, chief economist of the Washington-based bankers group.

In November, one in every 488 U.S. households received a foreclosure filing, RealtyTrac said. Nevada had the highest rate for the 23rd straight month with one in 76 households in some stage of foreclosure, more than six times the national average. Filings more than doubled from a year earlier to 13,962.

Florida had the second-highest rate, one in 173 households, and the second-most filings at 49,190, an increase of 68 percent. Arizona had the third-highest rate, one in 198 households, and ranked fifth in total filings with 13,136, up 128 percent.

California, Michigan, Georgia, Ohio, Colorado, Utah and Idaho also ranked among the top 10 highest rates, RealtyTrac said.

California

California had the most filings with 60,491, up 51 percent from a year earlier, and a rate of one filing for every 218 households, more than twice the national average.

Michigan ranked third in filings with 14,594, up 27 percent, and had a rate of one for every 309 households, according to RealtyTrac. Nevada, Arizona, Ohio, Georgia, Illinois, Texas, and Virginia were among the top 10 states with the most filings.

New Jersey had the 15th highest rate, one in 622 households, and had 5,582 filings, up 32 percent from a year earlier. New York had the 39th highest rate, one in 3,040 households, and had 2,601 filings, a decrease of 55 percent, RealtyTrac said.

Florida had three metropolitan areas among the top 10 highest rates, including Cape Coral-Fort Myers in first place with one in 59 households in a stage of foreclosure. Fort Lauderdale was seventh at one in 117 households, and Port Lucie- Fort Pierce was eighth at one in 118 households.

Las Vegas ranked second at one in every 61 households in a stage of foreclosure.
California had six metro areas in the top 10, led by Merced in third place with a rate of one in 76 households in a stage of foreclosure. Modesto, Stockton and Riverside-San Bernardino ranked fourth through sixth, Bakersfield was ninth and Vallejo- Fairfield was 10th, according to RealtyTrac.

Bloomberg.com: Invest

Those people busy 'spotting the bottom' for equities perhaps should look elsewhere for their market guidence.

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AIG tries to quarantine another $10 billion in credit default swaps





NEW YORK: American International Group has said that the $150 billion U.S. government assistance package it received last month is incomplete, and that it still needs to find a way to quarantine about $10 billion worth of troubled financial contracts.

The U.S. insurer said Tuesday that the contracts were credit default swaps, the same insurance-like type of contract that was at the heart of its liquidity crisis in September. But these contracts were insuring a different type of asset than the ones covered by the assistance package.

For that reason, they could not be quarantined in the special-purpose entity that AIG and the Federal Reserve were creating.

"We've got to figure out some other way of unwinding these," said a spokesman for AIG, Nicholas Ashooh. "We're working on it."

Continued here:

AIG tries to quarantine another $10 billion in credit default swaps - International Herald Tribune

This is the problem, once you start, you just can't stop.

"Jim Rogers calls most big U.S. banks "bankrupt"

Jim Rogers, one of the world's most prominent international investors, on Thursday (11th Dec 2008) called most of the largest U.S. banks "totally bankrupt," and said government efforts to fix the sector are wrongheaded.

Speaking by teleconference at the Reuters Investment Outlook 2009 Summit, the co-founder with George Soros of the Quantum Fund, said the government's $700 billion rescue package for the sector doesn't address how banks manage their balance sheets, and instead rewards weaker lenders with new capital.

Dozens of banks have won infusions from the Troubled Asset Relief Program created in early October, just after the Sept 15 bankruptcy filing by Lehman Brothers Holdings Inc (LEHMQ.PK: Quote, Profile, Research, Stock Buzz). Some of the funds are being used for acquisitions.

"Without giving specific names, most of the significant American banks, the larger banks, are bankrupt, totally bankrupt," said Rogers, who is now a private investor.

"What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent," he said. "What's happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics."

Rogers said he shorted shares of Fannie Mae (FNM.P: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.P: Quote, Profile, Research, Stock Buzz) before the government nationalized the mortgage financiers in September, a week before Lehman failed.

Now a specialist in commodities, Rogers said he has used the recent rally in the U.S. dollar as an opportunity to exit dollar-denominated assets.

While not saying how long the U.S. economic recession will last, he said conditions could ultimately mirror those of Japan in the 1990s. "The way things are going, we're going to have a lost decade too, just like the 1970s," he said.

Goldman Sachs & Co analysts this week estimated that banks worldwide have suffered $850 billion of credit-related losses and writedowns since the global credit crisis began last year.

But Rogers said sound U.S. lenders remain. He said these could include banks that don't make or hold subprime mortgages, or which have high ratios of deposits to equity, "all the classic old ratios that most banks in America forgot or started ignoring because they were too old-fashioned."

Many analysts cite Lehman's Sept 15 bankruptcy as a trigger for the recent cratering in the economy and stock markets.

Rogers called that idea "laughable," noting that banks have been failing for hundreds of years. And yet, he said policymakers aren't doing enough to prevent another Lehman.

"Governments are making mistakes," he said. "They're saying to all the banks, you don't have to tell us your situation. You can continue to use your balance sheet that is phony.... All these guys are bankrupt, they're still worrying about their bonuses, they're still trying to pay their dividends, and the whole system is weakened."

Rogers said is investing in growth areas in China and Taiwan, in such areas as water treatment and agriculture, and recently bought positions in energy and agriculture indexes.

source

Originally Posted by Spin

the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics."

It is actually worse than this. The effect of the current round of bailouts is perverse. TARP and other plans, such as Brown's debt binge, have the effect of requiring massive bond sales by respective Governments. Without this insatiable thirst for funds, the market that is parking vast sums with an actual negative return on capital for the purpose of US Govt. safety of that capital would otherwise be sat in the very banks that will be next on the bailout list. The fact that they are being starved of these deposits, in turn, makes their bailout requirement all the larger.

A plan that ensures the destruction of the banking system could not have been more dastardly conceived, as it is self-perpetuating. Entity A with $1BN in wholesale funds gets spooked by the prospects at his bank 1, buys T-bills instead, causing bank 1 to need bailing, which requires more T-bills to be sold causing worried entity B to move his $1BN from bank 2 to T-bills, thus causing bank 2 to knock on the FED's door.

How none of our 'enlightened' leaders can't work this spiral of madness out for themselves is beyond me.

Thursday's arrest of Bernard Madoff for fraud will have huge implications for the US financial system. His Ponzi scheme, with losses totalling $50 billion, finally fell apart when investors tried to withdraw $7 billion from his fund last month. His own sons turned him in.

In a just world, the shameless asshole Madoff would end up in a super-max prison being cornholed by gangbangers for the rest of his miserable life:

"Mr. Madoff told the executives he intended to surrender to the authorities in about a week but first wanted to distribute approximately $200 million to $300 million 'to certain selected employees, family and friends.'"

The story didn't make the headlines it deserved, as America's mass media seemed more obsessed with a murder mystery involving Florida mother Casey Anthony.

The real problem is with the types of investors that got screwed. Madfoff was the friggin former chairman of the NASDAQ stock exchange! How many investors, spooked by his arrest, are now trying to withdraw from other funds and corporations? There won't be a run on the insured banks, but there could be a run on many other investment vehicles.

"Madoff's investors included captains of industry, corporations (some of which are publicly traded) that used Madoff almost as a high-yielding cash management account, endowments, universities, foundations and, importantly, many high-profile funds of funds,"

http://www.usatoday.com/money/market...1-madoff_N.htm

^I am surprised he didn't get a bailout...

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These excerpts are from:

Fund Fraud Hits Big Names - WSJ.com

Which is well worth reading in full.

Jeff Fischer, a top divorce attorney in Palm Beach, says many of his clients were also Mr. Madoff's clients. "Every big divorce that came through my office had portfolio positions with Madoff," he says.

Two of his investors said that among his clients, Mr. Madoff was considered a money-management legend; they would joke that if Mr. Madoff was a fraud, he'd take down half the world with him.

Richard Spring, a Boca Raton resident and former securities analyst, says he had about $11 million -- or 95% of his net worth -- invested with Mr. Madoff. "That's how much I believed in him," Mr. Spring said.

Oh dear oh dear, this won't help the situation at all...

Ecuador defaults on foreign debt


Rafael Correa said he was ready to confront international lenders


Ecuador is to default officially on billions of dollars of foreign debt it considers "illegitimate", says President Rafael Correa. Mr Correa said he had given the order not to approve a debt interest payment due on Monday, describing the international lenders as "monsters".


Continued at length here:

BBC NEWS | Business | Ecuador defaults on foreign debt

I have heard of ways to describe one's creditors, but 'monsters' certainly has a ring to it.

Maybe we can all just call off all debt and start over ...

Actually, that's what's happening. Those whose life savings have just been wiped out have lost everything to cover the liars, cheats and thieves.

^But Tex, are you not on some US Government pension?

This is all from:

Money Beat

Jerry Reisman, an attorney with Reisman Peirez & Reisman in Garden City, N.Y., who is representing people who invested with Madoff, told Newsday that "one of the wealthiest real-estate families on Long Island" had been "totally wiped out" by Madoff. He declined to name the family, who are clients of his.

In South Korea, institutional investors may have lost $100 million. French bank BNP Paribas, Tokyo-based Nomura Holdings and Zurich's Neue Privat Bank also suffered losses.

Spanish newspapers reported that a fund run by leading bank Santander was heavily exposed and that investors in Spain risk losing about $3 billion. And Swiss bankers face losses of up to $5 billion.

Among the boldface names who have lost money are Kay Windsor women's apparel founder Carl Shapiro, who lost $150 million to $400 million; and Nine West founder Jerome Fisher, who lost $150 million, the New York Post reports. Sen. Frank Lautenberg's office has confirmed he had an account with Madoff, and reportedly so did a former owner of the Philadelphia Eagles.

Irwin Kellner, the chief economist of MarketWatch.com, already has filed a lawsuit, claiming a $3 million loss.

Leaving aside the schadenfreude of this, the effect is a further distruction in tangible money. This will only hasten the capitulation of the US financial system.

And then, we must be aware of this:

Less well-heeled people lost money, too. The New York Daily News has the story of a retired carpet salesman and his wife from Long Island, N.Y. and Boynton Beach, Fla., whose life savings of nearly $1 million is gone.

"Two days ago, it was all wiped out," Arnold Sinkin, 76, told the paper.

"Nobody in our lives gave us anything. We worked hard for every penny that we had," Joan Sinkin, 75, said through tears, according to The Daily News. "There is really no more lowlife than that man. My whole life fell apart."

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€10 billion fund to support banks

The Government has announced support for a recapitalisation programme of up to €10 billion for credit institutions.

In a statement issued tonight, it said its objective was to ensure the long-term sustainability of the banking sector in Ireland.

The Government said it would support the programme alongside existing shareholders and private investors, and would underpin its contribution through the availability of credit to individuals and businesses in the real economy.


After a day of meetings, Minister for Finance Brian Lenihan confirmed that money from the National Pensions Reserve Fund will be used in the recapitalisation programme.

RTÉ News: &#x20AC;10 billion fund to support banks

More details on bank losses from the Madoff fraud:

Two major European banks said they have exposure worth billions of dollars to a US broker accused of a $50bn (£33bn) Wall Street fraud scheme.

Spain's largest bank, Santander, which also owns three UK banks, said one of its funds had $3.1bn invested in the firm run by Bernard Madoff.

France's BNP Paribas estimated its exposure to be more than $460m.

Mr Madoff has been charged with fraud, in what is being described as one of the biggest-ever such cases.

BBC NEWS | Business | Two banks exposed to '$50bn con'

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Dollar Staggers as U.S. Unleashes Cash Flood, Deficit

Dec. 15 (Bloomberg) -- The biggest foreign-exchange strategists and investors say the best may be over for the dollar after a four-month, 24 percent rally.

The currency weakened 5.9 percent measured by the trade- weighted Dollar Index after strengthening between July and November as investors bought the greenback to flee riskier assets and repay dollar-denominated loans from lenders reining in credit. Ever since peaking on Nov. 21, the dollar fell against all 16 of the most-widely traded currencies, according to data compiled by Bloomberg.

U.S. policy makers are flooding the world with an extra $8.5 trillion through 23 different plans designed to bail out the financial system and pump up the economy. The decline shows that the increased supply of money may be overwhelming investors just as the government steps up debt sales, the trade and budget deficits grow and de-leveraging by investors slows.

Continued here:

Bloomberg.com: Worldwide

Finally people are smelling the coffee and realising that the US, the FED and the Dollar are a busted flush, drowning in their own debt. Off the cliff we go!

The big joke is on the rest of the world who are silly enough to lend the USA money. The USA floods the world with $USs and borrows $trillions while the $ value is up. That spooks the investors who have been buying $US for security and the $US value takes a big dive. Lenders get paid back in $USs that will only buy a portion of what it did when they lent the money. US exports become more competitive and the internal US economy starts to recover.

The US led recovery will ultimately be paid for by countries other than USA.

So long as the $US remains the worlds default trading currency the US can go on living on debt to the rest of the world and borrow their way out of trouble every time.