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

Originally Posted by bkkandrew

Originally Posted by Texpat

Is the sky falling again?

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...

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.

Originally Posted by Texpat

Originally Posted by bkkandrew

Originally Posted by Texpat

Is the sky falling again?

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...

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.

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!

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...

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...

Originally Posted by Butterfly

Even the Carlyle group is getting OWNED!!!

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.

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”.

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 !!!

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 !!!

That will the one...

Looks like Bear Stearns will pip all-comers to the post in the race to be the first to go bust!

FT Alphaville » Blog Archive » This Bear market

This Bear market

The Bear rumours are back. As in Bear Stearns - stock down 12 per cent in New York on Thursday, while the five year CDS has gapped 120bp to 700bp. All sorts of uncorroborated rumours are flying.

The Times Today:

Alistair Darling ignores the looming collapse of financial institutions - Times Online

Alistair Darling ignores the looming collapse of financial institutions

Alistair Darling's footling initiatives yesterday were a sideshow. There is one overwhelming challenge facing the business world and it is not going to be addressed by £10 million more for science teachers or £12 million for women entrepreneurs.

Western capitalism is, bluntly, being haunted by the spectre of a catastrophic domino-like collapse of financial institutions, one that if not prevented would without question lead to an economic ice age.

Mr Darling did at least acknowledge that a number of credit markets were “barely functioning” but then moved on to more trifling matters. Outside Westminster, however, fears remain that a major financial institution is close to collapse, or that policymakers at least believe it could be. Nothing else explains Tuesday's co-ordinated campaign by central banks and their increasingly desperate measures to pump more liquidity into a system showing fresh signs of paralysis. As one senior City figure put it yesterday: “There's the smell of death all right but no one can locate the corpse.”

En masse, the world is de-leveraging. On an individual level, moves by banks to call in debt and tighten loan conditions make perfect sense. Collectively, they could be devastating. Asset fire sales lead to falling prices which lead to shrinking collateral values and the need for more fire sales. It would not take all that much to tip the credit markets from the current state of paralysis (bad) to panic (much worse).

...And so it continues. Maybe I should start a poll - which Bank to go bust first (obviously excluding NR and the ones that already have...)

Originally Posted by bkkandrew

Looks like Bear Stearns will pip all-comers to the post in the race to be the first to go bust!

FT Alphaville » Blog Archive » This Bear market

This Bear market

The Bear rumours are back. As in Bear Stearns - stock down 12 per cent in New York on Thursday, while the five year CDS has gapped 120bp to 700bp. All sorts of uncorroborated rumours are flying.

And so it passes...

Bear Stearns | Stripped Bear | Economist.com

Bear Stearns
Stripped Bear

Mar 14th 2008 | NEW YORK
From Economist.com
Rescuing a Wall Street bank



AP
A CENTURY after John Pierpont Morgan bailed out Wall Street, his bank is at it again. In a dramatic move on Friday March 14th, the Federal Reserve Bank of New York and JPMorgan Chase made emergency funding available to Bear Stearns after other market players lost confidence in the beleaguered investment bank as a trading partner. As the credit crunch has deepened and broadened, the worst fear of many on Wall Street has been the collapse or forced rescue of a big bank or broker. That moment is now upon them.

JPMorgan Chase is Bear’s clearing bank and will act as a conduit for Fed funding. In a special vote, the central bank’s governors chose to allow JP Morgan Chase to bring collateral from Bear, including mortgage assets, to the Fed discount window in return for 28-day loans. Bear does not have direct access to the window because it is not a depository institution. The Fed has agreed not to hold JPMorgan Chase liable for any losses on the collateral posted. The central bank has resorted to such an arrangement only twice before, in the depression of the 1930s and in the 1960s.

...Cont...

And, who next? My money is on Lehmen Brothers or Citigroup to go bust. UK-wise Alliance and Leicester, Bradford and Bingley, HBOS and Barclays look like the betting-man's candidate...

Anyone still hold accounts with them?

Originally Posted by bkkandrew

And, who next? My money is on Lehmen Brothers or Citigroup to go bust. UK-wise Alliance and Leicester, Bradford and Bingley, HBOS and Barclays look like the betting-man's candidate...

Anyone still hold accounts with them?

Forgot, any European account holders should beware UBS (already insolvent) and without a Sovereign Central Bank for bail-out....

My bet would be for UBS to go down, but which branch I don't know,

JPMorgan gets Bear Stearns for a bargain-basement $236M - USATODAY.com

NEW YORK (AP) — JPMorgan Chase said Sunday it will acquire rival Bear Stearns in a deal valued at $236.2 million, a stunning collapse for one of the world's largest and most venerable investment banks.

JPMorgan Chase & Co. said the $2 a share, all-stock deal has received the required approvals from the federal government and the Federal Reserve. Bear Stearns shares close Friday at $30 a share.
The Fed will provide special financing to JPMorgan Chase for the deal, JPMorgan Chase said. The central bank has agreed to fund up to $30 billion of Bear Stearns' less liquid assets.

At almost the same time as the deal for control of Bear Stearns was announced, the Federal Reserve said it approved a cut in its lending rate to banks to 3.25% from 3.50% and created another lending facility for big investment banks. The central bank's official meeting is on Tuesday. Before the emergency move to lower the discount rate, which is the rate at which banks lend each other money, the Fed was widely expected to again cut its headline rate by as much as a full point to 2%.
The announcement from both the Fed and JPMorgan comes ahead of what some analysts expected to be a brutal day for global stocks. Already, before the announcements, New Zealand's markets opened drastically lower — then began to recover after the deal was unveiled.

A collapse of Bear Stearns could have created a further crisis of confidence in world financial markets amid a deepening credit crunch. JPMorgan's acquisition of Bear Stearns represents roughly 1% of what the investment bank was worth just 16 days ago.

The deal represented a 93.3% discount to Bear Stearns' market capitalization as of Friday, and roughly a 98.8% discount to its book value as of Feb. 29.

"The past week has been an incredibly difficult time for Bear Stearns," said Bear Stearns Chief Executive Alan Schwartz in a statement. "This represents the best outcome for all of our constituencies based upon the current circumstances."

98.8% discount eh? I'm off shopping...

yeah, something strange, I mean 98% that's not a fire sale, it's a rape sale

^Yes, my man at JMP opined that if the deal wasn't done BSC would have gone Chapter 11 and possibly brought down JPM as a result, as they are by far and away their biggest trading partner and have massive exposure.

The FED are essentially lending JPM the money ($30BILLION) to protect the money that they (JPM) are owed. Nice to friends like that eh?

Meanwhile back in the UK, HBOS looks down the back of the sofa for some spare cash...:

HBOS raises £750m of new capital in a bid to beat credit crunch - Times Online

HBOS raises £750m of new capital in a bid to beat credit crunch


Iain Dey, The Sunday Times


HBOS has raised £750m of new capital at a staggering interest rate of almost 9.5%, in a clear sign of the funding crisis facing the world’s banks.

...Cont...

9.5%....!!!!!!!!!!!!!!

Why didn't they just put the dosh on someone's credit card? They would have got a better rate than 9.5%... Maybe all the Director's cards were maxed out.

Actually, I like how JP did the deal on a Sunday with the Fed trimming 25bp from its interbank rate, also today, a Sunday. A little morning cheer when Wall Street opens tomorrow?