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bkkandrew

Brilliant idea:

Wall St banks to ring-fence bad assets

http://ftalphaville.ft.com/blog/2008/04/03/12025/wall-st-banks-to-ring-fence-bad-assets/

Wall St banks to ring-fence bad assets.

Wall Street banks are drafting plans to separate troubled assets from the rest of their businesses in efforts to ring-fence problems and restore confidence in the financial sector. A number of US firms are looking to follow the example set by UBS, which this week put securities linked to US mortgages into a separate subsidiary with a view to reducing its exposure to the troubled assets, which have been responsible for more than $30bn of losses so far.

The banks – among them Lehman Brothers - aim to move at least some troubled assets off their balance sheets by selling large stakes in the funds to outside investors.

Translation:

Its a bit like keeping your house, but persuading a mate to have the mortgage...

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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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Bugs

Yea they are so not stupid that they took out loans for houses they could not afford - pure genius those folks. Not to say the companies that gave them the loans are much smarter but just because credit was easy was not an excuse for living above one's means. They both took the risk and they both should suffer for it.

The common working class man that is not living above his means will come out of this mess just fine - maybe in better off as he can pick up a house on the cheap right now.

The common working class man that bought his house using an interest only, zero down, or some other crazy type of mortgage, has maxed out about a half-dozen credit cards, and is about to come to the end of the lease on the car he is driving is surely going to take it in the arse - as he should.

Those that work hard, pay their bills, and live within their means will be just fine.

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bkkandrew

An incisive publication on the current financial position of UK banks:

http://www.thedailymash.co.uk/news/business/banks-use-man%11eating-tigers-to-deter-new-borrowers-20080328827/

BANKS USE MAN-EATING TIGERS TO DETER NEW BORROWERS
BRITAIN'S leading mortgage lenders are to deter new customers with a range of tactics including man-eating tigers and a huge Arab warrior armed with a mighty sword.

'Have you brought three months' pay slips?'

From today the Woolwich will position a pair of ravenous Bengal tigers outside its branches, while the Nationwide has rigged a boobytrap consisting of hundreds of small poisoned arrows that will be triggered by a pressure pad under the doormat.

Customers who survive the arrows will then have to swing across a moat filled with electric eels before entering the Domain of the Scorpion.
The giant scorpion not only carries an instantly fatal poison in its tail but can shoot fire from its pincers. Would-be homeowners will have to stab the creature between the eyes to have any hope of borrowing more than three times their joint salary.

If they defeat the scorpion they will then have to survive Knife Alley and the Room of the Enormous Hammers, making sure they are not distracted by the vultures picking clean the bones of previous failed applicants.

And just as they are in sight of the mortgage adivsor, out of the shadows will step Al-Hassan, an invincible seven foot-tall Arab Warrior, armed with a razor sharp scimitar and wearing a necklace fashioned from the thumbs of his enemies.

Independent financial advisers are urging their clients to either run at the swordsman with a long spear, or if possible, just shoot him in the middle of the chest.

A Nationwide spokesman said: "If you can get past Al-Hassan, then yes, you can have a fucking mortgage."

bkkandrew

Free Homes in the USA!

http://www.bloomberg.com/apps/news?pid=20601109&sid=aefAJU_88vfs&refer=home

April 4 (Bloomberg) -- Banks are so overwhelmed by the U.S. housing crisis they've started to look the other way when homeowners stop paying their mortgages.

The number of borrowers at least 90 days late on their home loans rose to 3.6 percent at the end of December, the highest in at least five years, according to the Mortgage Bankers Association in Washington. That figure, for the first time, is almost double the 2 percent who have been foreclosed on.

Lenders who allow owners to stay in their homes are distorting the record foreclosure rate and delaying the worst of the housing decline, said Mark Zandi, chief economist at Moody's Economy.com, a unit of New York-based Moody's Corp. These borrowers will eventually push the number of delinquencies even higher and send more homes onto an already glutted market.

``We don't have a sense of the magnitude of what's really going on because the whole process is being delayed,'' Zandi said in an interview. ``Looking at the data, we see the problems, but they are probably measurably greater than we think.''

Lenders took an average of 61 days to foreclose on a property last year, up from 37 days in the year earlier, according to RealtyTrac Inc., a foreclosure database in Irvine, California. Sales of foreclosed homes rose 4.4 percent last year at the same time the supply of such homes more than doubled, according to LoanPerformance First American CoreLogic Inc., a real estate data company based in San Francisco.

Reluctant Banks

``Some people stay in their houses until someone comes to kick them out,'' said Angel Gutierrez, owner of Dallas-based Metro Lending, which buys distressed mortgage debt. ``Sometimes no one comes to kick them out.''
Banks are reluctant to foreclose on homeowners for a variety of reasons that include the cost, said Peter Zalewski, real estate broker and owner of Condo Vultures Realty LLC, a property consulting firm in Bal Harbour, Florida.
Legal fees and maintaining a vacant property while paying the mortgage, insurance and taxes can add up to as much as 15 percent of the value of the home, and it may take months for the foreclosure to work through the legal system, he said.

``The end result is taking back a property that the bank will have to manage, rent out and or sell,'' Zalewski said.

In many cases, lenders also have to foot the bill for fixing up vacant homes that have been vandalized.

Empty Houses

Real estate broker Georgia Kapsalis is offering a home for sale in Birmingham, Michigan, a Detroit suburb, where the owner last wrote a mortgage check in July. He still lives in the house, she said.

``Some of the banks just don't want the houses to be empty, especially if it's in an area where there's a lot of theft or there are five other houses empty on the street,'' said Kapsalis, who works at Added Value Realty LLC in Livonia, Michigan, another Detroit suburb. ``They'll lose toilets, plumbing, appliances, everything. Banks are getting wise and allowing people to live there longer.''

Alexis McGee, president of Internet database Foreclosures.com in Sacramento, California, said she toured a property where the departing resident tried to make off with the outdoor air conditioning unit by sawing the metal legs off its concrete apron.

``People take what they want to take,'' McGee said. ``They feel that they're owed.''

Flooded Market

With home sales dropping and national inventories rising, the lenders have another reason to delay foreclosures, said Howard Fishman, a real estate investor based in Minneapolis.

``What are the banks going to do?'' Fishman said. ``They don't want the house. They have a mortgage for $1 million and the house is worth $750,000.''
In February, 5 million existing homes were sold on a seasonally adjusted, annualized rate, down 31 percent from the peak of 7.25 million in September 2005, data compiled by the Chicago-based National Association of Realtors show. More than 4 million existing homes were on the market in February, 53 percent more than the 2.6 million average of the past nine years, the Realtors reported.
``Excess inventories pose the biggest risk to the market,'' Michelle Meyer and Ethan Harris, New York-based economists at Lehman Brothers Holdings Inc., wrote in a report last month. ``As long as inventories are high, home prices will fall.''

New Foreclosures

Growing inventory pulled median home prices down to $195,900 in February, a 15 percent drop from the peak of $230,200 in July 2006, the Realtors said.
New foreclosures rose to 0.83 percent of all home loans in the fourth quarter from 0.54 percent a year earlier, according to the Mortgage Bankers Association.
The civil court in St. Lucie County, Florida, is getting about 44 foreclosure cases to file every day. That's the same number it averaged in a typical month in 2005, said Clerk of the Circuit Court Ed Fry.

``It's pretty overwhelming,'' he said.

Fry said he has 12 full-time employees and two temporary workers he just hired handling nothing but foreclosures. Still, the 50-page filings sit in cardboard boxes for three weeks before the court staff can process them, Fry said. Then it takes another two months to get a date on the court docket, he said.
Mortgage servicers, who collect monthly payments and are responsible for starting the foreclosure process, also were caught short-staffed, said Grant Stern, a mortgage broker and owner of Morningside Mortgage Corp. in Miami Beach, Florida.

`Moral Hazard'

``The most experienced people you can bring in are origination people,'' Stern said. ``But for a bank it's a moral hazard to have the same people who originated the loans now modifying those loans. That wouldn't be desirable. Once around is enough.''

The five largest servicers -- Countrywide Financial Corp., Wells Fargo & Co., CitiMortgage Inc., Chase Home Finance Inc. and Washington Mutual Inc. -- together manage more than half the home loans in the U.S., according to New York-based National Mortgage News, an industry publication.
While more than 100 mortgage originators have suspended operations, closed or sold themselves since the beginning of 2007, mortgage servicing units are expanding.

Chase Home Finance, a unit of New York-based JPMorgan Chase & Co. and the fourth-largest U.S. servicer, expects to spend $200 million more servicing loans in 2008 than it did last year, said spokesman Thomas Kelly.
Delayed Foreclosure

Kelly wouldn't say how many Chase borrowers have quit paying their mortgages and remain in their homes.

Efforts to keep borrowers paying their bills have slowed the foreclosure process, Mark Rodgers, a spokesman at CitiMortgage, a division of New York-based Citigroup Inc., said in an e-mail message.

``In a number of cases, we have delayed foreclosure proceedings to allow our loss mitigation teams additional time to explore potential solutions to keep distressed borrowers in their homes,'' Rodgers said.
Joe Ohayon, vice president of community relations for Wells Fargo Home Mortgage in Frederick, Maryland, a unit of San Francisco-based Wells Fargo, said trying to modify loan terms case by case adds time to the foreclosure process.

``Foreclosure is only a last resort after all available options for keeping the customer in the home have been exhausted,'' Ohayon said in an e-mail message.
Affordable Payments

Olivia Riley, a spokeswoman at Seattle-based Washington Mutual, said in an e-mail that the company's goal is to keep customers in their homes ``with payments they can afford.''

Representatives for Calabasas, California-based Countrywide, the biggest U.S. mortgage servicer last year, didn't respond to requests for comment.
Few mortgage companies will admit they allow homeowners to stay in their homes without paying their bills.

``No servicer will say you can live rent-free for six months, go ahead,'' said Paul Miller, a mortgage industry analyst at Friedman Billings Ramsey & Co. in Arlington, Virginia. ``Eventually, the servicers will clear these guys out.''

Homeowners usually get 90 days to resume paying before foreclosure proceedings begin with the filing of a complaint or notice of non-payment.

State laws determine the length of time between the filing and an auction of the house. In most states, it's two to six months, according to Foreclosures.com. In Maine, it can be up to a year and in New York, 19 months; in Georgia, it's as quickly as one month, and in Nevada, it can be 35 days, according to the database.

Borrowers in California who fight foreclosure can stretch the process to 18 months, said Cameron Pannabecker, chapter president of the California Association of Mortgage Brokers and president of Cal-Pro Mortgage Inc. in Stockton.

That doesn't take into account the woman he knows who hasn't made a mortgage payment in eight months and hasn't heard from her lender, Pannabecker said.

``Now she's afraid to mail in a payment for fear it'll come to somebody's attention,'' he said.

bkkandrew

Wall Street brokerages borrowing $38.1 billion a day from Federal Reserve


http://www.freep.com/apps/pbcs.dll/article?AID=/20080403/BUSINESS07/80403058

WASHINGTON -- Big Wall Street investment companies are stepping up their borrowing a bit from the Federal Reserve’s unprecedented emergency lending program.

The Federal Reserve reports Thursday that those firms averaged $38.1 billion in daily borrowing over the past week from the new lending program. That compared with $32.9 billion in the previous week and $13.4 billion in the first week the lending facility opened.


The program, which began on March 17, is part of the Fed’s effort to aid the financial system.


The Fed, for the first time, agreed to let big investment houses temporarily get emergency loans directly from the central bank. This mechanism, similar to one available for commercial banks for years, will continue for at least six months. It was the broadest use of the Fed’s lending authority since the 1930s.


Fed Chairman Ben Bernanke and his colleagues opened the facility as it raced to deal with the sudden crash of the venerable Wall Street firm Bear Stearns, which was on the brink of bankruptcy. Fearful that other investment firms could be in jeopardy given the intense fear that gripped the markets at that time, the Fed moved to give investment firms a place to go for overnight cash loans.


The lending facility is seen as similar to the Fed’s “discount window” for commercial banks, where the Fed acts as a lender of last resort. Commercial banks and investment companies pay 2.5 percent in interest for overnight loans from the Fed.


Banks also stepped up their borrowing from the Fed’s discount window. Banks averaged $7 billion in daily borrowing for the week ending April 2. That compared with $550 million the previous week.

(My comment) Can someone show me where to join the queue for daily $Billion borrowings? I fancy barfining a few streets in BKK - I am sure the pussy will be collateral enough, given the recent relaxation on requirements...

Texpat

For what it's worth:

I watched three TV newscasts on UBC today where analysts (BBC, CNN and Bloomburg) suggested this crisis isn't nearly as big as first reported.

Boon Mee

This says it all about those who are hyping doom and gloom in the US economy.

"PINK SLIP NATION:"

"Actually, though, the unemployment rate in November 1996, when Clinton rode a soaring economy to victory, was 5.4%. That's right--three tenths of a percent higher than the "grim picture" of a "pink slip nation" painted by this month's unemployment report"

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bkkandrew

Soros Says Credit Crisis Will Worsen Before Improving

http://www.bloomberg.com/apps/news?pid=20601087&sid=apH9eS1SYZ34&refer=home

April 10 (Bloomberg) -- Billionaire George Soros said the seizure in global credit markets caused by the subprime collapse will get worse before it gets better.

Lack of oversight is partly responsible for problems in the financial markets, Soros told reporters on a teleconference today. He said regulators and the U.S. administration ``failed to perform their job'' in a crisis that began in the U.S. housing market and which the International Monetary Fund estimates will cost global financial institutions almost $1 trillion.

``This is a man-made crisis and it's made by this false belief that markets correct their own excesses,'' Soros, 77, said. ``It will take much longer for the full effect of the decline in the housing market to be felt.''

More than 45 of the world's biggest banks, including Citigroup Inc. and UBS AG, have recorded a combined $232 billion in asset writedowns and credit losses since the beginning of 2007, including reserves set aside for bad loans.

``The credit market is on a very vulnerable cusp at the moment,'' said Tim Barker, head of credit research at Morley Fund Management in London, which oversees 160 billion pounds ($317 billion) of assets. ``The market's road to recovery will be bumpy because we still have major economic headwinds. Even if the U.S. is not in a recession, it certainly feels like it is.''

Taking Responsibility

The Federal Reserve added $4.5 billion in temporary reserves to the banking system on March 14, and provided financing to help JPMorgan Chase & Co. buy Bear Stearns Cos. for a fraction of the troubled bank's market value, in an attempt to forestall losses in the credit and equity markets.

Authorities did not accept the responsibility ``to try to control asset bubbles from going too far,'' Soros said. Recently established markets, including credit-default swaps, are ``totally unregulated; that's the cause of the troubles.''

Credit-default swaps, contracts designed to protect investors against default and used to speculate on credit quality, grew 49 percent to cover a notional $43 trillion of debt in the six months ended June 30, according to the Bank for International Settlements.

The market for derivatives grew at the fastest pace in at least nine years to $516 trillion in the first half of 2007, the BIS said in a report. Money at risk through credit-default swaps increased 145 percent from last year to $721 billion, according to the BIS, which was formed in 1930 to monitor financial markets and regulate banks.

More Losses

Total losses for banks, hedge funds, pension funds, insurance companies, and sovereign wealth funds may swell to $945 billion, the IMF said in a report on April 8.

``I think it's a pretty accurate estimate of the loan losses,'' Soros said. ``But we have not yet seen the full effect of possible recession. It only relates to the decline in the value of the various financial instruments which are held by the banks and other institutions.''

IMF's estimates don't ``in any way reflect possible decline in the quality of the loans that they hold. These are the eventual losses that are yet to be seen,'' he said.

Last year, Soros returned to a more active role in managing the $17 billion Quantum Endowment Fund, whose profits pay for his philanthropic projects, because of concerns about market declines that started with rising subprime-mortgage defaults.

Mistrust in Markets

Uncertainty about the ability of investors and traders to meet contract obligations is creating ``mistrust'' in the markets that ``will not be fully cleared up until you have a regulated delivery mechanism and oversight over this market,'' he said.
Morgan Stanley Chief Executive Officer John Mack said on April 8 the credit crisis will last a couple of quarters longer and that the markets are facing the most difficult conditions he's seen in 40 years.

Soros said the crisis will last longer than authorities predict.

``They claim that there will be a pickup in the second half of the year,'' he said. ``I cannot believe that.''

raycarey

but why is no one being held accountable?
in fact, they've been rewarded.
why are the people at the big five investment banks allowed to keep their obscene bonuses from last year? since they've all been writing off billions of dollars these last few months, how can they justify the bonuses? particularly the guys at BSC.

bkkandrew

I would close any account with Bradford & Bingley at this point:

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/04/13/cnbanks113.xml

Gordon Brown to meet banks in summit over mortgage crisis



Britain's most senior banking executives will meet Gordon Brown for crucial talks in Downing Street this week as one of the country's biggest mortgage lenders prepares to tap shareholders for hundreds of millions of pounds in fresh capital.

Bosses at Nationwide and Britain's largest high-street lenders will hold a summit meeting with Brown and Alistair Darling, the Chancellor, on Tuesday morning to discuss new ways of halting the paralysis in the mortgage market.

As the banks prepare to convene at No 10, The Sunday Telegraph has learned that Bradford & Bingley, Britain's biggest buy-to-let lender, is plotting a rights issue to try to bolster its ailing balance sheet.

People close to B&B said last night that Citigroup has been asked to assist with a capital-raising that could occur before the bank's annual meeting on April 22. The decision to press ahead with the rights issue has not yet been formally taken by B&B's board and its possible extent has also yet to be decided. It is thought likely, however, that it would attempt to raise several hundred million pounds.

B&B's talks about raising new capital will provide a gloomy backdrop to the Downing Street meeting, which will be attended by executives including John Varley, the chief executive of Barclays; Sir Fred Goodwin, of Royal Bank of Scotland; Graham Beale, boss of Nationwide; Andy Hornby, chief executive of HBOS; and representatives from HSBC, Abbey and Lloyds TSB.

The talks will focus on the state of the housing and interbank borrowing markets and a potential "kitemarking" solution that would help to identify the highest-grade mortgages for money-market investors. They are also likely to discuss the mandate of Sir James Crosby, the former chief executive of HBOS, who was last week given a brief by the Government to promote ways of addressing the funding shortage in the mortgage market.

Crosby is expected to report back in June, and some lenders are understood to be concerned that his findings will not be able to be implemented with sufficient speed to assist hundreds of thousands of homeowners who need to secure immediate borrowing packages.

B&B has faced punishing conditions as the mortgage-lending environment has deteriorated, and has significantly scaled back its operations in recent months. Moody's Investors Service, the rating agency, downgraded B&B's long-term ratings last month to reflect a deterioration in the bank's asset quality, a weaker capital position after asset writedowns and the probability of slower business growth. So far this year, B&B's share price has fallen by more than 35 per cent. On Friday the stock closed at 167.3p.

Steven Crawshaw, chief executive of B&B, warned last week that mortgage-lending in Britain could halve this year unless the Bank of England acts to pump more money into the financial system.

Cont.......

bkkandrew

Oh dear - entire UK banking sector downgraded (except the fine fellows at Standard Chartered) and "at least 2 FTSE companies nearly fail to pay their dividend, but to UK banks' lack of funds"!

Interesting FT Alphaville today...:

http://ftalphaville.ft.com/blog/2008/04/15/12330/markets-live

bkkandrew

General Bank of England bailout to keep the wolves at bay (won't be good for Sterling ):

http://www.reuters.com/article/marketsNews/idUSL169544420080416

BoE close to terms for mortgage intervention - FT

LONDON (Reuters) - The Bank of England is close to finalising the terms for an intervention in the mortgage market, the Financial Times reported, after leading bankers warned the government on Tuesday over the growing strain on small lenders.

Citing people familiar with the proposal -- which still needs government approval -- the paper said on Wednesday that the plan would see the Bank would swap UK mortgage-backed securities for government loans for a period of one to three years.

The newspaper said the Bank would not accept mortgages agreeed after the end of December 2007.

The Wall Street Journal meanwhile reported the UK government could be shifting to a more activist role in lending a hand to the sector worst hit by the credit crunch, and said it could ask the Bank of England to relax the terms of loans it makes to banks.

The newspaper said Prime Minister Gordon Brown, at the meeting with bankers on Tuesday, indicated he favoured widening the range of collateral the Bank would accept on a variety of loans.

This would be done on the condition that banks pass on the benefits to customers by easing mortgage terms and rates, the Wall Street Journal reported.

bkkandrew

^Looks like the markets like it!

http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/currency/11/11678/intraday.stm

Sterling up across the board - should open up against THB after trading resumes after SK...

bkkandrew

Shock Revalation That Banks 'LYING' Over Borrowings!!!

(Note for people who don't follow this stuff - LIBOR is the market that banks borrow from. Rates on LIBOR affect every bank rate used worldwide. If it is inaccurate, then the entire monetary system is innaccurate, from your savings rate, through credit cards to loans and mortgages. No-one has EVER suggested that banks have LIED about LIBOR borrowings before, not even in the Great Depression. This is BIG and could be the next phase in the credit crunch crisis if proved true...).

http://online.wsj.com/article/SB120831164167818299.html?mod=hpp_us_pageone

LIBOR FOG


Bankers Cast Doubt
On Key Rate Amid Crisis


LONDON -- One of the most important barometers of the world's financial health could be sending false signals.

In a development that has implications for borrowers everywhere, from Russian oil producers to homeowners in Detroit, bankers and traders are expressing concerns that the London inter-bank offered rate, known as Libor, is becoming unreliable.

Libor plays a crucial role in the global financial system. Calculated every morning in London from information supplied by banks all over the world, it's a measure of the average interest rate at which banks make short-term loans to one another. Libor provides a key indicator of their health, rising when banks are in trouble. Its influence extends far beyond banking: The interest rates on trillions of dollars in corporate debt, home mortgages and financial contracts reset according to Libor.

In recent months, the financial crisis sparked by subprime-mortgage problems has jolted banks and sent Libor sharply upward. The growing suspicions about Libor's veracity suggest that banks' troubles could be worse than they're willing to admit.

The concern: Some banks don't want to report the high rates they're paying for short-term loans because they don't want to tip off the market that they're desperate for cash. The Libor system depends on banks to tell the truth about their borrowing rates. Fibbing by banks could mean that millions of borrowers around the world are paying artificially low rates on their loans. That's good for borrowers, but could be very bad for the banks and other financial institutions that lend to them.

True Borrowing Costs

No specific evidence has emerged that banks have provided false information about borrowing rates, and it's possible that declines in lending volumes are making some Libor averages less reliable. But bankers and other market participants have quietly expressed concerns to the British Bankers' Association, which oversees Libor, about whether banks are reporting rates that reflect their true borrowing costs, according to a person familiar with the matter and to government documents. The BBA is now investigating to identify potential problems, the person says.

Questions about Libor were raised as far back as November, at a Bank of England meeting in which United Kingdom banks, the firms that process bank trades and central bank officials discussed the recent financial turmoil. According to minutes of the meeting, "several group members thought that Libor fixings had been lower than actual traded interbank rates through the period of stress." In a recent report, two economists at the Bank for International Settlements, a sort of central bank for central bankers, also expressed concerns that banks might report inaccurate rate quotes.

Cont...