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Milkman

The PPI is at an annualized rate of 15.38%.

It won't like be that high but the month of July had very high PPI.

Link: Producer Price Index News Release text

bkkandrew

Bank borrowing from ECB is out of control


By Ambrose Evans-Pritchard

Last Updated: 3:06pm BST 21/08/2008






The European Central Bank has issued the clearest warning to date that it cannot serve as a perpetual crutch for lenders caught off-guard by the severity of the credit crunch.

Not Wellink, the Dutch central bank chief and a major figure on the ECB council, said that banks were becoming addicted to the liquidity window in Frankfurt and were putting the authorities in an invidious position.

"There is a limit how long you can do this. There is a point where you take over the market," he told Het Finacieele Dagblad, the Dutch financial daily.

"If we see banks becoming very dependent on central banks, then we must push them to tap other sources of funding," he said.

While he did not name the chief culprits, there are growing concerns about the scale of ECB borrowing by small Spanish lenders and 'cajas' with heavy exposed to the country's property crash. Dutch banks have also been hungry clients at the ECB window.

One ECB source told The Daily Telegraph that over-reliance on the ECB funds has become an increasingly bitter issue at the bank because the policy amounts to a covert bail-out of lenders in southern Europe.

"Nobody dares pinpoint the country involved because as soon as we do it will cause a market reaction and lead to a meltdown for the banks," said the source.
This "soft bail-out" is largely underwritten by German and North European taxpayers, though it is occurring in a surreptitious way. It has become a neuralgic issue for the increasingly tense politics of EMU.

The latest data from the Bank of Spain shows that the country's banks have increased their ECB borrowing to a record €49.6bn (£39bn). A number have been issuing mortgage securities for the sole purpose of drawing funds from Frankfurt.

These banks are heavily reliant on short-term and medium funding from the capital markets. This spigot of credit is now almost entirely closed, making it very hard to roll over loans as they expire.

The ECB has accepted a very wide range of mortgage collateral from the start of the credit crunch. This is a key reason why the eurozone has so far avoided a major crisis along the lines of Bear Stearns or Northern Rock.

While this policy buys time, it leaves the ECB holding large amounts of questionable debt and may be storing up problems for later.

The practice is also skirts legality and risks setting off a political storm. The Maastricht treaty prohibits long-term taxpayer support of this kind for the EMU banking system.

Few officials thought this problem would arise. It was widely presumed that the capital markets would recover quickly, allowing distressed lenders to return to normal sources of funding. Instead, the credit crunch has worsened in Europe.
Not to miss out, Nationwide recently announced that it was setting up operations in Ireland, partly in order to be able to take advantage of ECB liquidity if necessary. Any bank can tap ECB funds if they have a registered branch in the eurozone, although collateral must be denominated in euros.

Jean-Pierre Roth, head of the Swiss National Bank, complained this week that lenders were getting into the habit of shopping for funds from those authorities that offer the best terms. The practice is playing havoc monetary policy.

"What we should avoid is some kind of arbitrage by banks, which say they are going to go to central bank X, instead of central bank Y, because conditions are more attractive," he said.

My Bold. Taken from:

Bank borrowing from ECB is out of control - Telegraph

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A funny thing happened today - Ant trolls, stalks, prevokes and generally upsets approximately 15 members of the board, yet Noodles goes to jail. Perhaps it was a dream...
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bkkandrew

Aug. 23 (Bloomberg) -- European officials have an ``urgent'' need of plans to cope with a failing bank, particularly in countries where lenders' assets exceed the size of the economy, according to a paper presented today at an annual Federal Reserve conference.

Failure of a large bank in Belgium, Switzerland or a similar country would require cooperation across borders to avert broad economic damage, Franklin Allen of the University of Pennsylvania and the University of Frankfurt's Elena Carletti wrote in the paper.

The paper comes four months after the European Union set aside the question of who pays if a multinational bank needs a bailout to prevent an economic shock rippling across borders. European banks have been roiled by the credit crisis that was sparked by rising defaults on American subprime mortgages.

``The prospect of contagion could effectively freeze many European and some global capital markets with enormous effects on the real economy,'' the professors said in their presentation to the symposium in Jackson Hole, Wyoming.

Fed Chairman Ben S. Bernanke, European Central Bank President Jean-Claude Trichet and other officials are exploring ways to revive credit following the collapse of the subprime- mortgage market, as well as mechanisms for averting another financial crisis.

Failure Scenarios

European governments should quickly prepare to address the collapse of a financial institution, Allen and Carletti said. They looked hypothetically at the possible consequences from trouble at Fortis, Belgium's largest financial-services firm, and UBS AG and Credit Suisse Group AG of Switzerland.

Were Fortis to fail, Belgium's government would probably be ``unwilling to intervene and assume fiscal responsibility because of the large size of the burden,'' Allen and Carletti said. ``The key issue would be how the burden would be shared between countries of the European Union.''

UBS and Credit Suisse, whose assets are ``significantly in excess'' of Switzerland's gross domestic product, pose a ``classic example'' of the hazards from inadequate government cooperation. The International Monetary Fund or Bank for International Settlements may be necessary to cope with a meltdown of the institutions, the authors said.

The alternative to joint preparations by governments ``is to wait for the catastrophe to occur,'' Allen and Carletti said.

April Meeting

EU finance ministers and central bankers meeting in Brdo, Slovenia, signed an agreement April 4 on how to cooperate in guarding against and responding to any market meltdown. The accord filled in lines of authority among responders to a cross- border crisis, without setting rules for splitting the bill.

Separately, the authors said a Fed program allowing financial institutions to swap as much as $200 billion of Treasuries for mortgage bonds and other debt allows firms to ``window dress'' their balance sheets at the end of a quarter.

From:

Bloomberg.com: Economy

Time to look at funds you hold in EU banks, or indeed in EUROs at all?

bkkandrew

Bank failure rattles U.S. stocks

NEW YORK: U.S. stocks fell Monday for the first time in four sessions as the ninth U.S. bank failure of the year renewed concern that subprime losses will keep rattling the financial system.

Bank of America and JPMorgan Chase dropped more than 1 percent each after Columbian Bank and Trust of Topeka, Kansas, collapsed amid bad real-estate loans.

Lehman Brothers declined more than 4 percent on concern a Korean bank would reconsider a potential investment in the U.S. securities firm.

"The market's going to struggle until we get a clear indication that we know what the bottom is in the financials, and that may be a while," said Peter Sorrentino, senior portfolio manager at Cincinnati-based Huntington Asset Advisors.

The Standard & Poor's 500 Index dropped 7.38, or 0.6 percent, to 1,284.81 points. The Dow Jones Industrial Average slid 79.06, or 0.7 percent, to 11,549. The Nasdaq Composite Index decreased 18.71 to 2,396. Four stocks retreated for each that rose on the New York Stock Exchange.

The S&P 500 extended its first weekly decline since July. The benchmark for American equities slipped 0.5 percent last week as energy prices climbed and concern grew that the government may need to bail out Fannie Mae and Freddie Mac.

Morgan Stanley cut its year-end forecast for the index on concern banks will report more credit-related writedowns and the global economic slowdown will curb profits at technology and industrial companies.

"Our biggest concern for 2009 earnings estimates is that a combination of global growth slowdown, declining operating leverage, a stronger U.S. dollar, less share count reduction and a long tail to dysfunctional credit markets will create powerful headwinds for what appear to very optimistic consensus expectations," Abhijit Chakrabortti, an analyst, wrote in a note to clients.

JPMorgan dropped 57 cents to $37.10. Bank of America retreated 45 cents to $29.76.

Columbian Bank, with $752 million in assets and $622 million in total deposits, was shuttered by the Kansas state bank commissioner's office and the Federal Deposit Insurance, on Friday.

The pace of bank closings is accelerating as global financial firms have reported more than $500 billion in writedowns and credit losses since 2007. The FDIC's "problem" bank list grew by 18 percent in the first quarter to 90 banks with combined assets of $26.3 billion. Prior to yesterday, the FDIC had closed 36 banks since October 2000. The U.S. shut 12 banks in 2002, the highest in the period, and 2005 and 2006 had no closures.

"The closure of Columbian Bank awakened investors' bad memories and shows that we are not through with the topic yet," said Monika Rosen, head of research at BA-CA Asset Management in Vienna.

Lehman slipped 63 cents to $13.78. Shares of the securities firm rose 5 percent in New York trading on Aug. 22 after Korea Development Bank said it was "considering" an investment in the company.

The Korean bank ended talks on a possible investment after Lehman demanded a price 50 percent higher than its book value, the Maeil Business newspaper said, citing an unnamed official in the banking industry. South Korea's financial regulator said that state-controlled banks including Korea Development Bank should consider the risks of buying overseas rivals amid the global credit crisis.
New York-based Lehman has dropped 79 percent this year, the worst performance in the 11-company Amex Securities Broker/Dealer Index.

Lehman's chief executive, Richard Fuld, may face an "internal coup" to strip him of his executive duties, The Observer newspaper reported. Mark Lane, a spokesman for Lehman Brothers, was not immediately available when contacted via telephone and e-mail.

Freddie Mac lost 6 cents to $2.75 and Fannie Mae declined 37 cents to $4.63. The cost to the largest U.S. mortgage finance companies of raising capital is getting more prohibitive by the day, making it likely that the government will have to inject cash into the two firms.

Declines in the common stocks of Freddie Mac and Fannie Mae accelerated last week to more than 90 percent for the year and yields on their preferred shares more than doubled on speculation Treasury Secretary Henry Paulson may need to bail them out, reducing or wiping out the value of the securities.

Financial shares last week fell the most in six weeks for the biggest drop among 10 S&P 500 industries. The group has retreated 29 percent this year as losses from the subprime mortgage collapse exceeded $500 billion. One year into the financial crisis, central bankers and scholars at the Federal Reserve's annual retreat this weekend couldn't agree on how to prevent a repeat.

The Fed chairman Ben Bernanke, the European Central Bank president Jean-Claude Trichet, former officials and economists meeting in Jackson Hole, Wyoming, appear to be split over whether policy makers should be made responsible for financial stability and how closely to heed the concerns of Wall Street.

The yearlong credit crisis has yet to run its course, with continued turmoil likely in housing and banking, the Bank of Israel governor Stanley Fischer said Saturday at the Fed's symposium

From:

Bank failure rattles U.S. stocks - International Herald Tribune

bkkandrew

U.S. Says Banks on `Problem List' Rose 30% in Quarter (Update2)


By Alison Vekshin

Aug. 26 (Bloomberg) -- The U.S. Federal Deposit Insurance Corp. said its ``problem list'' of banks increased 30 percent in the second quarter to the highest total in five years as more commercial real-estate loans were overdue.

The list had 117 banks as of June 30, up from 90 in the first quarter and the highest since mid-2003, the agency said today in its quarterly report without naming any institutions. FDIC-insured lenders reported net income of $4.96 billion, down 87 percent from $36.8 billion in the same quarter a year ago.

``More banks will come on the list as credit problems worsen,'' FDIC Chairman Sheila Bair said at a news conference in Washington.

Regulators are adding to the list as bank assets, liquidity and other fiscal measures weaken. Nine banks have failed this year, including California-based mortgage lender IndyMac Bancorp Inc., which the FDIC is running as a successor institution, IndyMac Federal Bank FSB.

IndyMac's failure will cost the U.S. deposit insurance fund about $8.9 billion, exceeding a $4 billion to $8 billion estimate, said Diane Ellis, the associate director of financial- risk management. The FDIC discovered additional insured deposits and had time to value the assets, Ellis said.

Continued here:

Bloomberg.com: Worldwide

Milkman

117 banks on a watch list seems like a lot of banks.

IndyMac was not even on a watch list. More reason, once again to make sure you keep your money under the $100,000 FDIC insured limit. Separate your funds into different bank accounts. Check Money-market and CDs also, and get proof of insurance on them in writing from the bank. I've forgotten the exact FDIC rules regarding them, however.

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bkkandrew

Bradford & Bingley gave us a glimpse on Friday of how dicey things were early in July. The bank came uncomfortably close to becoming a second Northern Rock. It admits that customers were rushing to pull out their savings as the bank repeatedly failed to nail down rescue financing.

“It was a scary time, not just for us but for the whole world,” Rod Kent, the chairman, told me. The bank suffered “hundreds of millions of pounds” in net withdrawals as rescue deal after rescue deal crumbled. Kent declines to speculate on the economic and political damage if B&B had failed. “I'm not a historian, I don't write 'what-if?' novels,” he says.

But it seems unlikely that Alistair Darling, the Chancellor, could have survived a second big bank failure on his watch. The same goes for Mervyn King, the Bank of England Governor, and Hector Sants, head of the Financial Services Authority.

It might be fanciful, but a collapse could even have brought down the Government if things had got seriously messy and the contagion had spread. Governments tend to fall after moments of national humiliation. It's hard to overstate the damage done last September by TV images of queues of panicking Rock depositors beamed around the world.

Happily, fourth time lucky, B&B got its £400 million and ministers and regulators are still in their jobs. But it took some serious arm-twisting by the FSA to get the big battalions of high street banking and insurance to rally round and ensure that a deal was done.

The financial world did not cover itself in glory over B&B. The company misled its shareholders over the need for new capital, tolerated hopelessly inadequate management information systems and inexplicably allowed underwriters to its first abortive capital-raising to wriggle free. The external advisers appeared asleep at the wheel, the underwriters were not exactly loyal to the client and one rescue bidder, the private equity group TPG, fled back to America at the first sign of trouble.

Mr Kent is confident that B&B has sufficient capital to weather whatever the icy winds of the property market throw at it. Its franchise remains more or less intact. And, whisper it quietly, its specialisation in buy-to-let lending has not yet been proved to be the dumb strategy its rivals suggest. Tenant demand is strong, rents are still rising, voids (periods when properties are empty) are falling.

The pain is far from over, however. Arrears are rising, margins are thinning, fraud is on the up and the wholesale funding window is still largely closed. And it's unclear how supportive the bank's new shareholders are going to be: the lock-up preventing sales expires on September 10.

Bradford & Bingley was so close to the edge - Times Online

bkkandrew

Iraq Safer Than Ohio Banks Stung by Credit Crisis

By Lester Pimentel

Aug. 29 (Bloomberg) -- Iraq's bonds are delivering the biggest returns in emerging markets as oil export revenue bolsters government finances and violence declines.

The country's $2.7 billion of 5.8 percent bonds due 2028 gained 45 percent since August 2007, according to Merrill Lynch & Co. indexes. Investors demand 4.84 percentage points more in yield to own the debt instead of Treasuries, down from 7.26 percentage points a year ago. The spread is narrower than for notes of Ohio banks National City Corp. and KeyCorp, suggesting Baghdad may be safer for bond investors than Cleveland.

Oil exports will climb as high as $86 billion this year, more than double the $30 billion annual average from 2005 to 2007, helping the country post a $52.3 billion budget surplus, according to the U.S. Government Accounting Office. A reduction in bloodshed has allowed the Bush administration to consider a ``general timeline horizon'' for troop reductions.

``The main driver'' of the rally is oil revenue, said Gunter Heiland, who manages $12 billion in emerging-market debt, including Iraqi bonds, at JPMorgan Asset Management in New York. ``The other is implied U.S. support. It's half a commodity story, half a political story.''

Yields on the bonds fell to 8.65 percent from a high of 11.81 percent in August 2007, according to data compiled by Bloomberg. The price of the securities surged to 73 cents on the dollar from a low of 54 cents a year ago.

`More Upside'

``There's still more upside,'' said Edwin Gutierrez, who manages $5.5 billion in emerging-market debt, including Iraqi bonds, at Aberdeen Asset Management in London.

Iraq, which has the world's third-largest oil reserves, sold the debentures in January 2006 as part of a settlement with creditors who agreed to forgo claims on debt issued under the regime of Saddam Hussein.

The price of oil, Iraq's biggest export, rose to a record of $147.27 on July 11, and is up 61 percent from a year ago. The country's daily production in the second quarter reached its highest level since the March 2003 U.S. invasion, the U.S. Defense Department said July 30.

Roadside bomb attacks dropped to 14 in June from 76 in the same month last year as a result of the U.S. troop increase and support of local Sunni Muslims battling al-Qaeda fighters, Army Lt. Gen. Thomas F. Metz told reporters Aug. 6, according to the Pentagon's news service. American soldiers would withdraw from cities and towns to nearby bases by next summer under a proposed agreement announced on Aug. 21 between the U.S. and Iraq.

Oil Field Dispute

``The political situation has improved substantially,'' said Jonathan Binder, who began buying Iraqi bonds for the more than $2 billion of emerging-market assets he manages at INTL Consilium LLC in Fort Lauderdale, Florida.

Gains may be tempered should a dispute between Kurds and Arabs for control of oil fields in Kirkuk trigger a resurgence in violence, said Ward Brown, who manages more than $3 billion in emerging-market debt, including Iraqi bonds, at Massachusetts Financial Services in Boston. The disagreement has prevented the Iraqi parliament from reaching a consensus on a law that would provide for elections this year.
Iraq's bonds, which don't have a credit rating, rallied even as more than $500 billion of credit market losses and writedowns drove investors away from all but the safest government securities.

National City and KeyCorp, based in Cleveland, have debt ratings of A and spreads of 9.59 percentage points and 7.55 percentage points. The banks are two of the more than 70 firms worldwide that have recorded about $512 billion in losses and writedowns since the start of 2007 amid the collapse of the subprime mortgage market.

Emerging-market premiums widened 62 basis points, or 0.62 percentage point, from a year ago to an average of 3.03 percentage points, according to New York-based JPMorgan Chase & Co. Iraq's yield spread is smaller than Argentina, Ecuador, Ukraine and Venezuela, JPMorgan indexes show.

``Iraq provides some insulation from the market,'' Brown said. ``The risks are so idiosyncratic that it trades on its own drivers.''

Bloomberg.com: Exclusive

bkkandrew

EVERY episode in the credit crunch has had its dramatic flourish. There were the defenestrations at Citigroup and Merrill Lynch late last year; then, in March, the Bear Stearns fiasco; the humbling of UBS; and now Fannie Mae and Freddie Mac, a tale of hubris that might impress Shakespeare himself. What next?

With the tragedy of the mortgage giants still unfolding, another dark drama is entering its second act, and it has rather a lot of players. It concerns America’s commercial banks. “Pretty dismal” was the frank description of their recent performance offered on August 26th by Sheila Bair, head of the Federal Deposit Insurance Corporation (FDIC). That was just after announcing a rise in the number of banks on its danger list, from 90 to 117.

Nine banks have failed so far this year, felled by shoddy lending to homeowners and developers—six more than in the previous three years combined. The trajectory is steep: Institutional Risk Analytics, which monitors the health of banks, expects more than 100 lenders—most, but by no means all, tiddlers—to fold over the next year alone. Alarmingly, the ratio of loan-loss provisions to duff credit is at its lowest level in 15 years.

The FDIC will soon have to replenish its deposit-insurance fund, which collects premiums from banks and stood at around $53 billion before the downturn. One of this year’s failures, IndyMac, has alone depleted the fund’s coffers by one-sixth—and it was no giant. This has pushed the fund’s holdings below a trigger point that requires the FDIC to craft a “restoration” plan within 90 days.

Ms Bair has indicated that banks with risky profiles—which already pay up to ten times more than the typical five cents per $100 insured—will be asked to “step up to the plate” with even higher premiums. This would ensure that safer banks are not unfairly burdened. But it will heap yet more financial pressure on strugglers. Bankers’ groups have already started to protest loudly.

How much will be needed? Possibly far more than the FDIC is letting on, reckons Joseph Mason of Louisiana State University. Extrapolating from the savings and loan crisis of the early 1990s, and allowing for the growth in bank assets, he puts the possible cost at $143 billion.

That would force the FDIC to go cap-in-hand to the Treasury. The need to do so could become even more pressing if nervous savers began to move even insured deposits (those under $100,000) away from banks they perceived to be at risk—which no longer looks fanciful given the squeeze on the fund. Ms Bair’s admission, in an interview with the Wall Street Journal, that the FDIC might have to tap the public purse, albeit only for “short-term liquidity purposes”, will have done little to calm nerves.

It is also sure to reinforce a growing sense that the financial-market crisis has a lot further to run. Risk-aversion, measured by spreads on corporate debt, fell sharply after the sale of Bear Stearns in March but has leapt back in recent weeks as the spectre of systemic meltdown resurfaced. Sentiment towards spicier assets is astonishingly grim: prices of junk bonds and home-equity loans imply a default rate consistent with unemployment of around 20%, points out Torsten Slok, an economist at Deutsche Bank.

American banks | When sorrows come | Economist.com

My Bold. Just gets worse. There's always a bill to pay you see!

US Soverign debt repudiation in late September I reakon.

Butterfly

how is the end of the world thread going ?

Texpat

I've heard the worldwide oxygen-rationing system goes into effect next month. I'm starting to collect 2 liter bottles of air from which I'll harvest the oxygen when times get tight.

Bugs

Of this year?

Butterfly

the funny thing is Japan has more debt per GDP than the US, and it's the second world power, they have low growth, a low currency and are stuck in a liquidity trap from a 20 years recession,

and yet I don't see their country leading a worldwide financial collapse, even though they are huge and would make as much damage as the US, they are still there, and the factories are still rolling, cars running, and people fucking,

gee, I wonder what they are doing to make things go, probably nothing

bkkandrew

Sadly, I have come to know Butterfly's MO now and assumed that his financial 'knowledge' extended to the Wikipedia.

So, looking at the Wiki figures, one could be lulled into a false sense of comparative debt, which the naive Butterfly has. The CIA-compiled rank of countries debt per GDP is marked as disputed. Butterfly would have ignored or not noticed this, so would not have discovered that centrally in the dispute over the US figures is this:

Not noticing this, Butterfly then raced to post the post above.

Source:

Talk:List of countries by public debt - Wikipedia, the free encyclopedia

Butterfly

^ looks like I have touched a nerve and again, and exposed your stupidity

Federal debt is what matters. Not what some silly conspiracy theorists says on Wiki,

besides, there are other sources for those stats, and they all have the same perspective, Japan is far worse, and so is Italy if I remember correctly. Italy is not important, but Japan ? it does matter

You are really a lame ignorant teacher, aren't you ?