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

An interesting article from one of the few commentators to predict the US sub-prime crisis in 2006...:

"The Subprime Crisis Is Just Starting" by Daniel R. Amerman, FSU Editorial 03/20/2008

The Subprime Crisis is Just Starting

by Daniel R. Amerman, CFA | March 20, 2008

Print
Overview

As the author of three books on mortgage finance and related derivative securities, and speaking as someone who first turned mortgages into rated securities in 1983, I’m going to let you in on an unfortunate little secret – the real subprime mortgage securitization crisis may not have even started yet. But, there is a good chance the real crisis will arrive soon.

Cont... Lengthy, but well worth it!

Trouble ahead:

Iceland contagion may spread far and wide - Telegraph

As Iceland goes, so go the Baltics, the Balkans, Hungary, Turkey, and perhaps South Africa. All are living far beyond their means, plugging the gaping holes in their accounts with fickle flows of foreign finance. All have let credit grow far above the safe "speed limit", some exceeding 50pc a year.

Iceland's precarious economy is a warning to other deficit nations about breaking the safe credit 'speed limit'

For Iceland, the high-wire act of the last five years may have finally reached its limits. The central bank was forced to raise interest rates to 15pc this week in an emergency move to halt the collapse of krona, which has fallen 18pc since mid-March.

The country's all-conquering banks - led by Kaupthing, Glitnir, and Landsbanki - have pushed the asset base of the Icelandic banking system to a world record of eight times GDP, tapping the global capital markets to launch Viking raids across Britain, Scandinavia and beyond.

This spigot of easy credit has now been turned off. The spreads on Icelandic bank debt have risen above 800 basis points, near levels seen in Bear Stearns' debt before the Federal Reserve's rescue. Which raises a thorny question: Is the Icelandic government - which presides over an economy the size of Bristol - big enough to underpin its encephalitic banks if push ever comes to shove?

"There are clearly limits to what the government can do," said Paul Rawkins, an Iceland expert at Fitch Ratings. "If the government tried to raise billions in the markets it would damage its own credit worthiness. In any case, these debts are in foreign currencies. The central bank has just $2bn (£1bn) in reserves," he said.

The banks insist they are well capitalised, with enough liquidity to tide them through to 2009. If the credit crunch subsides, the issue will never be put the test.

But Iceland is more than just a Nordic hedge fund masquerading as a country. It is also the first of the deficit states to succumb to investor flight, sending an early warning signal of potential troubles across a great swathe of Eastern Europe and the Mediterranean.

Turkey is first in line for any stress test, said Neil Schering, an East Europe expert at Capital Economics.

"I wouldn't want to keep any money in the Turkish lira: the puzzle is how it has stayed so high for so long. There are huge imbalances in the economy. The current account deficit is nearly 8pc of GDP, and the chief prosecutor is trying to shut down the government," he said, referring to last week's court move to ban the ruling Islamic AKP party, as well as the president and prime minister, for alleged breach of the country's secular laws.

Turkey has a foreign debt of $276bn. The Istanbul bank YapiKredi says Turkish companies may have great difficulty raising some $48bn of fresh loans needed this year to stay afloat.

Until now the country has been the darling of the yen 'carry trade', offering irresistible yields to Japan's army of investors. But the yen's surge in recent weeks has played havoc with these flows. The unwinding of yen positions has undoubtedly been key factor in the sudden capital flight from Iceland this month.

Fitch said countries that run current account deficits above 10pc of GDP for any length time almost always come to grief. East Asia's debt crisis in 1997 erupted before any state reached double digits. Iceland's deficit is now 16pc of GDP. Latvia is at 25pc, Bulgaria 19pc, Georgia 18pc, Estonia 16pc, Lithuania 14pc, Romania 14pc and Serbia 13pc. The region will need $337bn in foreign loans this year.

Borrowing in foreign currencies was all the rage in the heady days of the credit bubble. Most mortgages in Hungary over the last two years have been in Swiss francs, with the Balkans and Poland not far behind. This is now turning into slow torture. The franc has risen 5pc against the euro since October. The real level of the debt is ratcheting up.

The foreign debts have reached 122pc of GDP in Latvia, 101pc in Estonia and 73pc in Lithuania, mostly in euros. For now the debtors are shielded by fixed exchange rates in Europe's ERM system, but this could make the shock even worse should the currency pegs start to snap.

"It's all looks like a pretty ugly cocktail," said Mr Schering. "The good side is that the Baltic banks are not exposed to toxic mortgage securities, and a lot of them are owned by foreign banks, so they are protected."

Ed Parker, head of Fitch for Eastern Europe, said the agency had already downgraded Latvia to BBB+ and issued a further alert in January. Turkey is even lower at BB-.

"There's now a risk of psychological contagion from Iceland. People are starting to look more closely at all these countries. The deficits were easy to fund in times of abundant liquidity, but we think the global credit crunch is going to make it a lot harder," he said. "The history of financial crises suggests that it can be dangerous to think 'it's different this time'."

Icelandic stakes in UK Plc:

Baugur (investment company)

Mosaic Fashions, Coast, Karen Millen, Oasis, Odille, Principles, Shoe Studio Group, Warehouse, Whistles, Jane Norman, MK One, All Saints, House of Fraser, Booker, Iceland, Woodward Foodservice, Julian Graves and Whittard of Chelsea, Hamleys, Aurum, Goldsmiths, Mappin & Webb, Wyevale Garden Centres, Watches of Switzerland, Debenhams, Woolworths, French Connection, Moss Bros

Arev (investment company)

Aspinal of London, Blooming Marvellous, Cruise, Duchamp, Hardy Amies, GHOST, Jones Bootmaker, Limeys, Linens 'n Things, Mountain Warehouse, Unisport

Kaupthing (investment bank)

Singer & Friedlander, Somerfield

FL Group (investment company)

Inspired Gaming Group, House of Fraser

Landsbanki (investment bank)

Icesave

Bjorgolfur Gudmundsson (Icelandic billionaire)

West Ham Football Club Box Label DT

Originally Posted by Butterfly

Texpat is the typical American fraud, who attribute his success to hard work and a system of injustice and dreams, when at the end all he has is luck and a survival instinct (which would explain why he would "QUIT" Iraq),

I have seem too many of his types to comment further without being nasty,

Then what are you Bfly, a welfare case, expecting the likes of Tex, myself and others to pay for your free ride? 555

^ Spoken like a true merican. Humble and caring.

^^ You did a great service to your country TexP, and they should be thanking you for that. (I do.) I don't know what these folks are on about.

^^Where I come from personal responsibility is a virtue. Take care of yourself. If everyone did that, our governments wouldn't have to tax the sweet bejeezus out of us to take care of those that haven't.

Originally Posted by Texpat

Why the angst Sputter? I don't hate you. Does it irritate you that I'm optimistic?

Don't take it personally Texpat, I was just trying to illustrate the like of you, their false dreams and the myths they live on. You are alright most of the time, even though some off your comments are out of line sometimes, but hey, nobody is perfect.

Originally Posted by Texpat

Does it confound your fragile reasoning skills that I believe the world will go on and this is merely a blip on the big picture?

I think you are overly naive, and a bit ignorant. Doesn't make you a bad person, just a bit annoying when you claim to know more than others or be on the right side. You aren't, it's that simple, my problem is with you not realizing it.

Originally Posted by Texpat

Why must you, and your buddy RC, continually harp on my honorable service to my country which was awarded by a lifetime pension adjusted annually for inflation?

I have no problem with your comfortable pension, what would you think that ? btw, isn't that some kind of "social welfare" at the end ? I do hope you support all kind of "social welfare programs" since you are the first one to benefit from it, why not the others ? I support social welfare programs, so your fat pension is definitely not a problem for me, good for you.

Originally Posted by Texpat

Why do you insist I quit Iraq?

You seem to think it's a righteous conflict and that America is on her high horse to save the day, or worse you agree with the initial plan to loot the country of its oil reserves for the benefit of America. Either way, it's a black and white issue for you, and I find it funny that you don't see the irony of you quitting the army when they needed you the most.

Here we go again. Let's not make this about me or RC will be in like a schoolmarm chastising me for braggadocio and lack of decorum.

Just a few, then I'll move on...

False dreams: I have none. I also understand there may be a point in the future when I'll go back to work. Good thing I'm highly educated and have two decades of solid experience. Working, meh! Yeah, I'm getting bored collecting all these US government entitlements that have been subsidized for years by greedy European banks hither and yon. When I hear the term Northern Rock I think they're saying Open cock-- beer's flowing. I really do appreciate your contribution to my lifestyle... honest. If I ever get the chance to meet you, I'll buy you half a beer.

Naive nor ignorant: I've never claimed to know more than others. I merely state my opinions and then watch the fireworks. Thanks for worrying about me though ... Good to know somebody has my back.

Livlihood: You claim my pension is comfortable. Not sure I've ever characterized it as such. Maybe. Certainly never thought of it as fat, like you claim. I pay full taxes every year and will be a social security recip when my time comes, if there's any left. But I'm not bitter. It's a tough situation, much like many other nations are facing aroung the globe. But I'll survive.

My service: I've never spent 5 minutes in the Army. Thanks for trying though.

Meanwhile, back on topic:

BBC NEWS | Business | $100bn Fed move over credit fears


$100bn Fed move over credit fears


There Fed has upped the amount of cash available at auction.


The US Federal Reserve will make a further $100bn (£50bn) available to major banks in April, trying to ease concerns about a global credit crunch. The sum, offered across two auctions, is in addition to $260bn provided in short-term loans to the end of March. Other unorthodox steps include the Fed allowing investment banks to borrow from it directly - previously only possible for commercial banks.


A $100 billion here, a $100 billion there, hardly makes the news any more...

More trouble ahead:

Bloomberg.com: Worldwide

March 25 (Bloomberg) -- Wall Street banks, brokerages and hedge funds may report $460 billion in credit losses from the collapse of the subprime mortgage market, or almost four times the amount already disclosed, according to Goldman Sachs Group Inc. Profits will continue to wane, other analysts said.
``There is light at the end of the tunnel, but it is still rather dim,'' Goldman analysts including New York-based Andrew Tilton said in a note to investors today. They estimated that residential mortgage losses will account for half the total, and commercial mortgages as much as 20 percent.

Earnings and share prices at U.S. financial institutions tumbled in the past year as fallout from the mortgage crisis spread to other markets. Demand for mortgage-backed securities evaporated, leading to the collapse of Bear Stearns Cos., once that market's largest underwriter, and a Federal Reserve-led bailout by JPMorgan Chase & Co. earlier this month.

Goldman's own share-price estimate was cut 3.7 percent to $210 at Fox-Pitt Kelton Cochran Caronia Waller. The research firm also reduced its profit estimates for the world's biggest securities firm for the rest of this year and all of 2009.

Merrill Lynch & Co. had its 2008 profit estimates cut by 45 percent at JPMorgan on concern the third-largest U.S. securities firm by market value may disclose further writedowns on subprime mortgages. Merrill may report a total of $5 billion in additional losses on collateralized debt obligations, so-called Alt-A mortgages and commercial mortgages, New York-based analyst Kenneth Worthington said.

Bank of America

Bank of America Corp., the second-biggest U.S. bank by assets, was downgraded to ``sell'' from ``neutral'' at Merrill Lynch. The company, based in Charlotte, North Carolina, also had its earnings-per-share estimate lowered to $3.30 from $3.50 in 2008 and to $4.00 from $4.40 in 2009, analysts including New York-based Edward Najarian wrote in a note to clients today.

Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, had its share-price forecast cut 16 percent to $70 at Fox-Pitt. The brokerage's 2008 and 2009 profit estimates were also reduced.

Goldman said the $460 billion in credit losses it foresees may ``result in a substantial tightening in credit conditions as these institutions pull back on lending to preserve their reduced capital and to maintain statutory capital adequacy ratios.''

Credit-card loans, auto loans, commercial and industrial lending and non-financial corporate bonds make up the rest of the $460 billion in credit losses.
Goldman, which has lost 16 percent this year on the New York Stock Exchange, rose 75 cents to $179.63 in composite trading at 4:07 p.m. Merrill fell 53 cents to $47.85, Lehman declined $1.43 to $45.21 and Bank of America dropped $1.48 to $40.97.

To contact the reporter on this story: Zhao Yidi in New York at at [email protected].
Last Updated: March 25, 2008 16:10 EDT

Originally Posted by bkkandrew

More trouble ahead:

Bloomberg.com: Worldwide

March 25 (Bloomberg) -- Wall Street banks, brokerages and hedge funds may report $460 billion in credit losses from the collapse of the subprime mortgage market, or almost four times the amount already disclosed, according to Goldman Sachs Group Inc. Profits will continue to wane....

So, there are likely more losses in addition to this, like there already has been.

Therefore.....I think....it may....get worse.

and it keeps getting better and better, you wonder how those banks can run a business with so many security holes

BBC NEWS | Business | Lehman to sue over Japan 'fraud'

First Direct (Part of HSBC) suspend offering mortgages:

http://www.firstdirect.com/mortgages/rates.shtml

Translation:

We haven't got any more dosh to lend out...

^Also the Co-Op Bank joined the bandwagon and pulled its mortgages. I hear that the Mighty Halifax (HBOS) are close to doing likewise...

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...

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."

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.

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...

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.

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.''

This is a man-made crisis

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.

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.

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