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bkkandrew

^wish I could change the name of my business to 'Bank' and claim my 2BN...

Norton

This holds true not matter the economic climate. Can be a bit painful if like RC you have 20 or 30 accounts to worry but well worth the pain when things go bad.

raycarey

now that would be a problem well worth having.

bkkandrew

More trouble - the insurers insuring the debt are now unable to provide insurance...

Bloomberg.com: Exclusive

Feb. 11 (Bloomberg) -- Bond insurance sold by MBIA Inc., Ambac Financial Group Inc. and Security Capital Assurance Ltd. is backfiring on counties, universities and hospitals across the U.S., more than doubling some borrowing costs.

Park Nicollet Health Services in Minneapolis may pay an extra $5 million to $6 million this year, about a quarter of its operating profit, because interest on $375 million in floating- rate debt doubled in the last six weeks, said Chief Financial Officer David Cooke. The rate on $98 million insured by Ambac climbed to 6 percent on Jan. 30 from 3.06 percent on Jan. 2.

``We'll have to reduce our capital expenditure program, which means less equipment, less modernization of facilities,'' Cooke said in an interview. The hospital paid Ambac to ``count on that AAA insurance for 30 years. Now it's going away on us.''

Investors are shunning insured bonds after three of the biggest guarantors, owned by Ambac, Security Capital and FGIC Corp., were stripped of at least one AAA credit rating amid losses on debt tied to subprime mortgages. Interest costs on floating-rate bonds sold by more than 100 governments, hospitals and colleges rose as much as 7 percentage points since the beginning of January even as the Federal Reserve lowered its benchmark rate for U.S. borrowing by 1.25 percentage points.

Essentially this means any company that has PAID for insurance for the bonds they issue (such as Arsenal FC, for the Emirates Stadium), now faces massive increases in their interest payments, as the insurance policies are worthless!

As a Spurs fan, I find the latter effect quite funny actually...

blackgang

Yes Norton, but ol Ray baby is so smart and knows so much about so many things that if he lost a few it would only take him a couple days at NYSE to recoup,
I had 3 accounts closed and moved the cash to Gold mining so I think it will pay off, fact has made a goodly amount in the last 4 years already.

Texpat

Actually, I don't have much money in banks. And my mutual funds and IRAs are steady on.

I airily dismiss such matters because you go out of your mind if you read the financial papers every day. I did for about two decades and finally got sick and tired of experts babbling on about why the markets are going down. Like Sabang said, there are natural cycles. Get used to it. Maybe someday the financial sky will actually fall, but until then, I'll remain airy.

The boy who cried wolf didn't get much attention after about the fifth false alarm.

britmaveric

Should be weary of all Banks in the world.

bkkandrew

I am not quite sure of the point you are making, but to be clear, the reason why I started this thread is that those who live here and maybe are not in the loop of financial matters could be at risk of their savings being in a bank in danger of failure.

I have also simply quoted other sources, rather than making any dramatic comments myself. Whether you read them is up to you...

Texpat

Right. I suppose my remarks could be construed as flip -- not my intent. Just adding a little levity and my opinion that it probably isn't as bad as some make it out.

bkkandrew

Update - German Taxpayer shells out 1BN Euros to help stricken bank, IKB, tries to find larger sums from other banks (again) without much success:

(Article in German)

Krise der Mittelstandsbank: Staat pumpt Rettungs-Milliarde in IKB - Wirtschaft - SPIEGEL ONLINE - Nachrichten

So the krauts can be proud; they have their very own Northern Rock!

bkkandrew

Further update, with article in English:

BBC NEWS | Business | Third aid loan for struggling IKB

Third aid loan for struggling IKB

The German government has agreed a 1.5bn euros ($2.19bn: £1.11bn) rescue package for IKB, the third bailout since the bank hit trouble last summer.


Finance minister Peer Steinbrueck said the move was needed as the consequences of an IKB collapse were "incalculable."
IKB, already given 6bn euros of loan aid, lost billions on investments in assets backed by risky US home loans.

If I had an account with them, I would be heading for the exits! (unless it was overdrawn)

bkkandrew

Gulf investors may not save Citigroup, Dubai executive says

Gulf investors may not save Citigroup, Dubai executive says - MarketWatch

By Mirna Sleiman and Andrew Critchlow

Of ZAWYA DOW JONES
DUBAI

(Zawya Dow Jones)--Mideast sovereign wealth funds may fail to save troubled U.S. banking giant Citigroup Inc.

Citigroup, Inc

Unless more cash is pumped into the lender, the head of a $13 billion Dubai-owned investment firm said Tuesday.

Sameer Al Ansari, Chief Executive of Dubai International Capital told delegates at a private equity conference that it will take more than the combined efforts of the Abu Dhabi Investment Authority, the Kuwait Investment Authority and Saudi investor Prince Alwaleed bin Talal to save the bank.

"It's going to take more than that to rescue Citi," Ansari said. He added that more write downs are expected and that Gulf investors would be required to bolster Citi.

The Abu Dhabi Investment Authority, or ADIA, a sovereign wealth fund owned by the world's fourth-largest oil exporter, last year bought a 4.9% stake in Citigroup.
The Kuwait Investment Authority also said in January it would invest $3 billion in Citigroup.

Al Ansari said "it would take a lot more money to rescue Citigroup." A spokesperson for Citi was unable to comment immediately when called Tuesday.
Dubai International Capital, an investment firm controlled by Dubai's ruler Sheikh Mohammed bin Rashid al Maktoum, owns a stake in HSBC Holdings PLC (HSBA.LN), bought 3.12% in European Aeronautic Defence & Space Co last year. The company also owns a stake in Standard Chartered PLC (STAN.LN), according to Zawya Investor.

The intervention of sovereign funds such as ADIA, which pumped $7.6 billion into Citi, has failed to stem a decline in the bank's share price that was first triggered by the emergence last year of an $11 billion sub-prime write-down that led to the resignation of the then embattled chief executive Charles 'Chuck' Prince.
Citi's share price has fallen by more than 33% since late November, when the ADIA stake purchase was first reported, till date to close at $23.09 Tuesday.
The bank said in January that it lost $9.83 billion in the fourth quarter spurred by $18 billion in write-downs. To stem the losses Citi said it planned to raise $14.5 billion in capital by selling stakes to investors including Saudi's Prince Alwaleed, the lenders largest single shareholder.

Since coming out in support of former chief executive Prince prior to his resignation billionaire Alwaleed has commented little on Citi's current travails.
A spokesperson for Prince Alwaleed's office didn't answer calls on Tuesday.
Middle East sovereign funds flush with cash from record oil earnings are looked upon as possible saviors for many international lenders reeling from continued U.S. sub-prime losses.

Sheikh Hamad bin Jassem Al Thani, chief executive of the Qatar Investment Authority, QIA, told Zawya Dow Jones in January that the emirate's sovereign wealth fund planned to invest up to $15 billion buying stakes in up to 12 blue-chip U.S. and European banks.

-By Mirna Sleiman, Dow Jones Newswires, +9714 364 4966, mirna.sleiman[at]dowjones.com
Copyright (c) 2007 Dow Jones & Company, Inc.
(END) Dow Jones Newswires
March 04, 2008 06:18 ET (11:18 GMT)
-Contact: 201-938-5400

(My comment): 'Save' Citi..? sounds like things are really gearing up for trouble. Then again, I don't suppose many people have accounts with such a shaky bank, do they...

bkkandrew

Corporate Bond Risk Soars as Concerns of Bank Failures Grow
By Shannon D. Harrington

March 6 (Bloomberg) -- The cost to protect corporate bonds from default soared to a record as hedge fund failures and rising bank funding costs stoked concern that a financial institution may collapse.

Real bad stuff:

Bloomberg.com: Worldwide

Personally, I would not maintain funds in Citi from this point forward, FED guarentee or not. Citi has so many accounts that their collapse would paralyse the FED. I believe that Citi is now doomed to collapse...

Butterfly

Even the Carlyle group is getting OWNED!!!

bkkandrew

Yes, link:

FT Alphaville » Blog Archive » Banks call time as Carlyle Capital fails margin calls

Carlyle Capital’s CEO said:
The last few days have created a market environment where the repo counterparties’ margin prices for our AAA-rated U.S. government agency floating rate capped securities issued by Fannie Mae and Freddie Mac are not representative of the underlying recoverable value of these securities. Unfortunately, this disconnect has created instability and variability in our repo financing arrangements. Management is actively working with the Company’s repo counterparties to develop more stable financing terms.

Which is a bit like saying 'my house is worth $100Million, but as no-one wants to pay that, I won't sell it and continue to value it at the same figure...'

bkkandrew

Carlyle Capital Suspended; Lenders Force Asset Sales (Update2)

See:

Bloomberg.com: Worldwide

March 7 (Bloomberg) -- Carlyle Group's mortgage-bond fund was suspended in Amsterdam trading after creditors forced the sale of some holdings, jeopardizing shareholders' capital.
Lenders who issued default notices have liquidated some residential mortgage-backed securities held by the fund and may sell more as talks continue, Carlyle Capital Corp. said in a statement today. The fund had ``substantial'' margin calls and additional default notices from lenders yesterday, it said.

<snip>

Emma Thorpe, a spokeswoman for Carlyle in London, didn't immediately return calls for comment.

<snip>

I bet she didn't. After all, she may be worried about whether her salary cheque will bounce!

bkkandrew

Hedge funds on the brink as US Federal Reserve cash fails to ease crisis


Hedge funds on the brink as US Federal Reserve cash fails to ease crisis - Times Online

Several hedge funds with assets of more than $4 billion (£2 billion) were on the brink of collapse last night or had halted withdrawals, despite moves by the US Federal Reserve this week to ease America’s deteriorating credit crisis with a $200 billion collateral lending facility.

The potential closure of six funds came as a leading private equity executive, who declined to be named, said that such funds were “snapping like twigs”, with one failing every day.

<snip>

Separately, GO Capital Asset Management, an Amsterdam investment group, said that it had frozen its $881 million Global Opportunities hedge fund, preventing investors from withdrawing their capital. About half the fund’s investors have already asked to withdraw their investment.

Mr Faillace and Mr Luttrell told investors that the closure of their fund was one option but that they were also considering an arrangement whereby investors could choose whether to be repaid over the next 18 months or have their capital rolled over into a new fund.

ING, the Dutch bank, said that it had frozen two investment trusts in New Zealand that were highly exposed to mortgage-backed bonds, blaming the global credit crunch. ING said that the two funds held assets worth €275 million between them.

bkkandrew

Meanwhile, back at Carlyle...

BBC NEWS | The Reporters | Robert Peston

The Fed and Carlyle

• Robert Peston
• 13 Mar 08, 07:13 AM

Carlyle Capital Corporation, the leveraged-mortgage vehicle of the famous, eponymous private-equity firm, said over night that it has been unable to stabilise its financing and that its “lenders will promptly take possession of substantially all of the company’s remaining assets”.

So almost within the blink of an eye, a business that had borrowed $21bn from the world’s biggest banks to invest in high-quality mortgage-backed securities will be gone, liquidated, kaput.

Such is the whirlwind blowing through global financial markets.
What’s the damage? Well the equity in the business, about $670m, looks as though it will be wiped out.

In the scale of credit-crunch losses, that’s an “ouch” rather than a “yikes”. The suppliers of that equity include Carlyle’s own partners. They’re a bit poorer than they were.

More worrying is the explanation for why lenders are seizing the assets, which are US government agency AAA-rated residential mortgage-backed securities (RMBS).
Carlyle says: “negotiations deteriorated late on March 12 when, among other things, the pricing service utilized by certain lenders reported a drop in the value of RMBS collateral that is expected to result in additional margin calls”.

That statement will reverberate through global markets today.

Why?

Well, the point of Tuesday’s dramatic $200bn intervention by the Federal Reserve in mortgage-backed markets was to stabilise the price of US government agency AAA-rated residential mortgage-backed securities and – by implication – to encourage the big banks NOT to seize assets in the way they’ve been doing at Carlyle.

Right now, it’s not clear that the Fed’s medicine has worked.
In fact, it’s arguable that the banks’ seizure of Carlyle’s $20bn-odd in assets has actually been encouraged by the Fed's mortgages-for-Treasuries offer. Because the Fed’s new lending emergency lending facility allows the banks to swap mortgage-backed debt for Treasury Bills in a way that Carlyle could not do.

So it would be rational for the banks to take Carlyle’s assets and exchange them for top-quality, liquid US government bonds, rather than leave loans in place to a business, Carlyle, whose assets remained highly illiquid.

If that’s the case, there will be some very scared people in hedge-fund land today. Hedge funds that have borrowed from banks against the security of mortgage-backed debt could be about to see their assets sucked into the banking system and their businesses vanish.

It’s a process known as de-leveraging the global financial economy, yet another manifestation of the puncturing of the debt bubble.
Many will see it as a healthy cleaning of the Augean stables. But if it is, it certainly won’t be completed in a day – and, as I’ve said many times, it won’t be painless for the rest of us, because de-leveraging also means they'll be less credit for all of us.

Butterfly

Isn't the Carlyle group the neocon investment private fund that financed heavily companies for the Iraq war outsourcing ?

if that's the case, fucking OWNED !!!

bkkandrew

That will the one...