A note of caution for those with deposits in US Banks

This from:

How risky are uninsured bank deposits? - MarketWatch

PALM BEACH GARDENS, Fla. (MarketWatch) -- The Federal Deposit Insurance Corp. is gearing up for the prospect of a large bank failure. So double-check that all your deposits, including interest, are well within FDIC insurance limits.

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If you have uninsured deposits at a bank, should you worry? Possibly. Depositors without FDIC coverage lost money in at least two recent failures -- NetBank, Alpharetta, Ga., and Miami Valley Bank, Lakeview, Ohio.
Of $109 million in uninsured deposits at NetBank, nearly 30&#37; has not yet been reimbursed. Of $14 million in uninsured funds at Miami Valley, only 5.9% of uninsured funds, so far, has been reimbursed.

<snip>

Institutional Risk Analytics, Torrance, Calif., based on FDIC data from that same date, puts Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co, Wachovia Corp. and HSBC Holdings PLC as the riskiest big banks. More recently, Managing Director Chris Whalen cited J.P. Morgan, Citigroup and Bank of America as his chief concerns due to their heavier trading activity.

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So, no-one inmportant then, Bank of America, JP Morgan Chase, Citigroup, Wachovia Corp and HSBC....:rolleyes:

i think most people have their cash in FDIC accounts...but you should make sure that you don't have more than 100,000 in one bank...but if it's a joint account, the insurance goes up to 200 K. it's always smart to diversify...even with the banks holding your money.

people should also be slightly concerned about their money market accounts....i think we're going to see some funds 'break the buck' this year or next.

Meanwhile, the collective sum of all US banks are now technically bust/bankrupt/insolvent/skint/brassic/broke/penniless/short of a bob or two (select your favorite...

See:

FRB: H.3 Release--Nonborrowed Reserves

They now actually have a NEGATIVE sum of money in reserve. Scary...

While on the UK side of the pond - anyone have accounts with these banks:

From:

Credit default swaps: how to spot the riskiest banks - Money Week

So what is the market telling us now? Riskiest of all the major banks is HBOS, with a senior 5-year debt premium of 78 basis points (0.78% above the 5-year gilt yield of 4.3%, i.e. 5.1%). 5.1% is therefore what they have to pay the market for funds. (If they’re paying you much less that’s not a good risk/reward). RBS, Santander (Abbey National) and Barclays aren’t much better but HSBC and Lloyds are considered by the market to be the safest. If you can get a good rate from either of these banks, then given the risks the market thinks you’re taking, that’s a good deal and you should be able to sleep well at night.


I haven’t mentioned the ex-building societies yes just because they are in a group of their own. Alliance & Leicester and Bradford & Bingley both have 5-year CDS spreads that are flashing major warning signs. When these banks give you a higher savings rate, it’s not because they’re being generous, it’s because they have to compete for funds with rather more secure institutions.
Alliance & Leicester is being made to pay 200 basis points (2%) over the odds for 5-year money (i.e. about 6.33%) so no wonder they are offering savers in excess of 6% - they have to in order to get any funds at all. The implication is that a high savings rate from Alliance & Leicester reflects a higher risk that you won’t get your money back. Such fears obviously only apply to people with very large sums because the system insures savers up to a certain amount (£35,000). Still, I don’t think you want to have your life savings in a bank that the bond market views with such suspicion. The same goes for Bradford & Bingley.
Here too, the spread over risk-free 5-year money is very nearly 2%. The credit market won’t lend to BB/ over 5 years unless BB/ pays nearly 6.3%.
The question you have to ask yourself is: should you accept anything less?
Then, there are the foreign banks who are offering us internet savings accounts. The basic rule of thumb here is: if they’re ING, they’re no worse a risk than a UK high Street bank. If they’re Irish, they’re likely to be over leveraged and a bit more of a worry (especially Anglo Irish Bank). But if they’re Icelandic, then be afraid; these banks are starting to be priced for bankruptcy risk and it’s not clear what protection UK savers might have with these foreign accounts.

^ thanks for the info, very useful

people have the false idea that banks and bonds are "secure", whatever the fuck that means.

Banks as we see now act irresponsibly, and they did numerous time in the past, they have a very high risk pattern, and they go down, but people forget about those because it is never a massive event,

Bonds is one of the most risky market with FX,

More worrying news, see:

The Bush Financial Bust of 2008: “It's All Downhill From Here, Folks”

On January 14, 2008 the FDIC web site began posting the rules for reimbursing depositors in the event of a bank failure. The Federal Deposit Insurance Corporation (FDIC) is required to “determine the total insured amount for each depositor....as of the day of the failure” and return their money as quickly as possible. The agency is “modernizing its current business processes and procedures for determining deposit insurance coverage in the event of a failure of one of the largest insured depository institutions.”

(http://www.fdic.gov/news/news/financial/2008/fil08002.html#body)
The implication is clear, the FDIC has begun the “death watch” on the many banks which are currently drowning in their own red ink. The problem for the FDIC is that it has never supervised a bank failure which exceeded 175,000 accounts. So the impending financial tsunami is likely to be a crash-course in crisis management. Today some of the larger banks have more than 50 million depositors, which will make the FDIC's job nearly impossible.
Good luck.
It's worth noting that, due to a rule change by Congress in 1991, the FDIC is now required to use “the least costly transaction when dealing with a troubled bank. The FDIC won't reimburse uninsured depositors if it means increasing the loss to the deposit insurance fund....As a result, uninsured depositors are protected only if a bank acquiring the failed bank will pay more for all of the deposits than it would for insured deposits only.” (MarketWatch)
Great. That's reassuring. And there's more, too. FDIC Chairman Shiela Bair warned that “as of Sept. 30, there were 65 institutions with assets of $18.5 billion on its list of "problem" institutions;” although she wouldn't give names.
So, what does it all mean?
It means there's going to be an unprecedented wave of bank closures in the US and that people who want to hold on to their life savings are going have to be extra vigilant as the situation continues to deteriorate. And it is deteriorating very quickly.
Right now, many of the country's largest investment banks are holding $500 billion in mortgage-backed securities and other structured investments that are steadily depreciating in value. As these assets wear-away the banks' capital, the likelihood of default becomes greater. This week, Fitch Ratings announced that it will (probably) cut ratings on the 5 main bond insurers (Ambac, MBIA, FGIC, CIFG,SCA) “regardless of their capital levels”. This seemingly innocuous statement has roiled markets and put Wall Street in a panic. If the bond insurers lose their AAA rating (on an estimated $2.4 trillion of bonds) then the banks could lose another $70 billion in downgraded assets. That would increase their losses from the credit crunch--which began in August 2007---to $200 billion with no end in sight. It would also impair their ability to issue loans to even credit worthy customers which will further dampen growth in the larger economy. Structured investments have been the banks' “cash cow” for nearly a decade, but, suddenly, the trend has shifted into reverse. Revenue streams have dried up and capital is being destroyed at an accelerating pace. The $2 trillion market for collateralized debt obligations (CDOs) is virtually frozen leaving horrendous debts that will have to be written-down leaving the banks' either deeply scarred or insolvent. It's a mess.
There were some interesting developments in a case involving Merrill Lynch last week which sheds a bit of light on the true “market value” of these complex debt-pools called CDOs. The Massachusetts Secretary of State has charged Merrill with “fraud and misrepresentation” for selling them a CDO that was "highly risky and esoteric" and "unsuitable for the City of Springfield.” (Most cities are required by law to only purchase Triple A rated bonds) The city of Springfield bought the CDO less than a year ago for $13.9 million. It is presently valued at $1.2 million---MORE THAN A 90% LOSS IN LESS THAN A YEAR.
Merrill has quietly settled out of court for the full amount and seems genuinely confused by the Massachusetts Secretary of State's apparent anger. A Merrill spokesman said blandly, “We are puzzled by this suit. We have been cooperating with the Secretary of State Galvin's office throughout this inquiry.”

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Originally Posted by bkkandrew

This week, Fitch Ratings announced that it will (probably) cut ratings on the 5 main bond insurers (Ambac, MBIA, FGIC, CIFG,SCA)

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Its a mess, even the ratings companies themselves are under scrutiny by the SEC for "waiting too long to cut ratings"

linky

More bad news from the UK side of the pond:

Britain's battered banks pray for deliverance - Business Analysis & Features, Business - Independent.co.uk

Just glad trusty Nationwide is not on the hit list!

German Bank about to go under:

AFX News Ltd. London : Financial News Products

IKB Deutsche Industriebank AG needs 2 bln eur in additional guarantees to cover risks from failed investments related to the US subprime market, a re-evaluation of its securities portfolio has shown, Frankfurter Allgemeine Sonntagszeitung (FAS) reported.

The total amount of IKB's financial risks now amounts to 11.5 bln eur, the newspaper said, citing capital market sources.

Neither IKB's shareholder KfW Bankengruppe nor IKB itself are able to cover for the new deficit, the report said.

A group of private-sector banks, which has already pledged almost 1 bln eur in guarantees to IKB is now being urged to provide an additional 2 bln eur in funds, but the group of banks has so far resisted the pressure, FAS said.

Meanwhile, Sueddeutsche Zeitung cited unnamed sources as saying that the German government, development bank KfW and several private-sector banks are working on a new package of financial guarantees for IKB.

The paper cited unnamed KfW supervisory board members as saying IKB faces further writedowns of 1.3-1.8 bln eur related to US mortgage backed securities.

Previous guarantees worth 5.3 bln eur that were given to IKB have already been all but exhausted, Sueddeutsche Zeitung said.

Story in German:

Faule US-Kredite: Weiteres Milliardenloch bei der IKB aufgetaucht - Wirtschaft - SPIEGEL ONLINE - Nachrichten

Anyone with an account with this bank should withdraw now IMO.

Is the sky falling again?

Damnit. I really should nip out and pick up some of that sky-falling insurance, but not sure the insurers are any more solvent than the banks.

Need to find a basement.

More carnage to come (believe me). Canny sabang will then start buying again.

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Originally Posted by Texpat

Is the sky falling again?

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Perhaps not for those retired and comfy in Isaan but for many the state of the economy is a serious matter to which livelihoods are attached. I wish I could be so blase about it but my trading dollar account tells me to believe the worst right now.

^ It's darkest before dawn spin. This volatility and cyclicality is a necessary adjunct of our financial system, due actually to the primal emotions of greed and fear. It was overdue, but thats normally the case.

It's easy for me to be sanguine I realise, but from your point of view a time is coming that will present a low risk buying opportunity that you likely only see every twenty years or so. Just wait a bit longer. Generally, the clarion call is when everyone is shouting 'Doom'. ;)

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Originally Posted by Texpat

Is the sky falling again?

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I guess for those with no money in the bank, you need not worry about the likely failure of said bank.

I do not fall into this catagory, I can only assume why you airily dismiss such matters...:rolleyes:

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Originally Posted by sabang

^ It's darkest before dawn spin. This volatility and cyclicality is a necessary adjunct of our financial system, due actually to the primal emotions of greed and fear. It was overdue, but thats normally the case.

It's easy for me to be sanguine I realise, but from your point of view a time is coming that will present a low risk buying opportunity that you likely only see every twenty years or so. Just wait a bit longer. Generally, the clarion call is when everyone is shouting 'Doom'. ;)

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Well put. Trouble is that dark point seems some way off yet...:(

Most central banks have a built-in rescue system, it's called the window discount rate, basically a "special discount" rate for banks to "borrow" reserves from central banks,

That UK bank with the bank run a few months ago did exactly that,

Yes it's a disaster, and the news are quiet about it for good reasons, the last thing you need is a bank run as this would collapse the whole system, like it did in the 1920s

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Originally Posted by Butterfly

Most central banks have a built-in rescue system, it's called the window discount rate, basically a "special discount" rate for banks to "borrow" reserves from central banks,

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Thats what has been happening in the US, to the point that the FED has lent a sum greater than the sum held on deposit. See post 3. Yet still the problem intensifies.

The issue with the newly crocked German bank detailed above, is that the German authorities are now reduced to pleading to other private banks to help out. The ECB has already injected over 100BN Euros through its window, to little effect...

^ the ECB made it available, it doesn't mean it was injected in the system yet,

using the discount rate is a very political move for a bank, it basically means trouble and greater scrunity from the Feds, it basically advertise to authorities and "investors" and credit agency that you fucked up somewhere, hence used by banks on the very last resort, it's your nuclear option when everything else has failed, or when a disaster to come is so big, that the Fed might give you a break,

^No - all 94.8BN Euros taken up by 49 banks in total. See:

ECB Quenches Europe's Liquidity Thirst - Forbes.com

^ oops, that's not good :)

I guess "cheap" money is still better than getting nothing, or selling out like American Banks did,

2 billions per bank is still reasonabe :)

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

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Originally Posted by raycarey

i think most people have their cash in FDIC accounts...but you should make sure that you don't have more than 100,000 in one bank...but if it's a joint account, the insurance goes up to 200 K. it's always smart to diversify...even with the banks holding your money.

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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.;)

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Originally Posted by Norton

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.

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:)

now that would be a problem well worth having.

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...:rofl:

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Originally Posted by 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.

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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.

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Originally Posted by bkkandrew

Quote:

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Originally Posted by Texpat

Is the sky falling again?

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I guess for those with no money in the bank, you need not worry about the likely failure of said bank.

I do not fall into this catagory, I can only assume why you airily dismiss such matters...:rolleyes:

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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.

Should be weary of all Banks in the world. :)

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Originally Posted by Texpat

Quote:

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Originally Posted by bkkandrew

Quote:

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Originally Posted by Texpat

Is the sky falling again?

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I guess for those with no money in the bank, you need not worry about the likely failure of said bank.

I do not fall into this catagory, I can only assume why you airily dismiss such matters...:rolleyes:

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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.

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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...

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.

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!:england:

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:))

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, [email protected]
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...:rolleyes:

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...

Even the Carlyle group is getting OWNED!!!

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Originally Posted by WSJ

Missed Margin Calls Slam Stocks
The Dow industrials plunged 214.60 points, or 1.8&#37;, to end at 12040.39 after missed margin calls at Carlyle Capital and Thornburg Mortgage raised new fear of credit-market turmoil. Shares of banks and REITs were especially hard-hit. 5:40 p.m.

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Originally Posted by Butterfly

Even the Carlyle group is getting OWNED!!!

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Originally Posted by WSJ

Missed Margin Calls Slam Stocks
The Dow industrials plunged 214.60 points, or 1.8%, to end at 12040.39 after missed margin calls at Carlyle Capital and Thornburg Mortgage raised new fear of credit-market turmoil. Shares of banks and REITs were especially hard-hit. 5:40 p.m.

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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...'

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!

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.

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”.:eek:

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.

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 !!!

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Originally Posted by 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 !!!

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That will the one...