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

Chinese state newspaper backs abandoning the USA:

BEIJING, Sept 17 (Reuters) - Threatened by a "financial tsunami," the world must consider building a financial order no longer dependent on the United States, a leading Chinese state newspaper said on Wednesday.

The commentary in the overseas edition of the People's Daily said the collapse of Lehman Brothers Holdings Inc "may augur an even larger impending global 'financial tsunami'."

The People's Daily is the official newspaper of China's ruling Communist Party, and the overseas edition is a smaller circulation offshoot of the main paper.

Its pronouncements do not necessarily directly voice leadership views. But the commentary by a professor at Shanghai's Tongji University, as well as an essay in a Party journal, underscored official alarm at the turmoil in world financial markets.

China's central bank earlier this week cut its lending rate for the first time in six years, a move analysts said was aimed at bolstering the economy and the battered stock market.

"The eruption of the U.S. sub-prime crisis has exposed massive loopholes in the United States' financial oversight and supervision," writes the commentator, Shi Jianxun.

"The world urgently needs to create a diversified currency and financial system and fair and just financial order that is not dependent on the United States."

From:

UPDATE 1-China paper urges new currency order after tsunami | Currencies | Reuters

Abandonment of the US, the dollar and dollar debt by creditors, such as China, is an important step in the US sovereign debt repudiation.

Panic grips credit markets

By Krishna Guha in Washington, Michael Mackenzie in New York and Gillian Tett in London
Published: September 17 2008 18:23 | Last updated: September 17 2008 22:39

Panic in world credit markets reached historic intensity on Wednesday, prompting a flight to safety of the kind not seen since the second world war.

Barometers of financial stress hit peaks across the world. Yields on short-term US Treasuries reached their lowest level since the London Blitz. Lending between banks in effect halted and investors scrambled to pull their funding from any institution or sector whose future had been called into doubt.

The turbulence claimed another British victim in HBOS. The largest mortgage lender is to be taken over by Lloyds TSB in a £12bn deal after the government pressed it into talks having seen its share price halve this week.

The $85bn emergency Federal Reserve loan for AIG, the troubled insurance group, announced on Tuesday night, failed to curb the surge in risk aversion. Instead, markets were hit by a fresh wave of anxiety.

Speculation mounted that the Federal Reserve, which refused to cut rates on Tuesday, could be forced into an embarrassing U-turn. Amid the chaos, traders were pricing in 32 basis points of rate cuts by the end of the month – in essence betting that there was a 60 per cent chance the Fed would cut rates by half a percentage point in coming days.

One cause for fear came when shares in a supposedly safe money market mutual fund fell below par value because of losses on Lehman Brothers debt. This raised the risk that retail investors in other such funds could panic and pull out their money.

All thought of profit faded as traders piled in to the safety of short-term Treasuries. The yield on three-month bills fell as low as 0.02 per cent – rates that characterised the “lost decade” in Japan. The last time they were this low was January 1941.

Shares in the two largest independent US investment banks left standing – Morgan Stanley and Goldman Sachs – fell 24 per cent and 13.9 per cent respectively as the cost of insuring their debt soared, threatening their ability to finance themselves in the market.

The falls in financial stocks have prompted a wave of merger talks. People close to the situation said on Wednesday that Morgan Stanley was holding preliminary merger talks with Wachovia, the troubled regional lender. Washington Mutual, another regional lender, has hired Goldman Sachs to contact potential buyers including JPMorgan Chase, Citigroup and Wells Fargo.

Lending between banks in Europe and the US in effect halted. The so-called Ted spread – the difference between three-month Libor and Treasury bill rates, which measures fear over banks – moved above 3 per cent, higher than the record close after the Black Monday crash of 1987.

US authorities fired back. The Treasury announced it would borrow money to give to the Fed for its emergency lending operations – in essence removing any balance sheet constraint on the size of this assistance.

The Securities and Exchange Commission announced curbs on short-selling that traders called draconian. Short-sellers, who profit from share price declines, were widely blamed for AIG’s troubles. But the efforts failed to avert heavy selling, particularly of US financial stocks.

Traders blamed the Fed for not cutting interest rates amid speculation that the US central bank could be forced into a U-turn. Many analysts also criticised the US authorities for adopting an arbitrary approach to rescues – saving AIG but not Lehman – that failed to boost confidence.

The S&P 500 fell 4.7 per cent, led by a 8.9 per cent slump in financials. Equity volatility was near its highest level since March. Gold benefited, with bullion prices leaping 11.2 per cent to a three-week high of $866.47 a troy ounce. Andrew Brenner, co-head of structured products and emerging markets at MF Global, said: “It feels like no one wants to take anyone’s credit . . . It feels like we are on a precipice.”

FT.com / In depth - Panic grips credit markets

Originally Posted by who

The Dow and S&P represent vastly more money than does the NASDAQ,

NASDAQ is an Exchange Index, so far more representative of a large equity market, it's a composite of thousands of companies, while others are Vendors Index representing only a subset of that equity market. NYSE Composite is also another Exchange Index, measuring the total market value of the NYSE companies. Vendors Index are easy to manipulate, some are heavily biased (survivor bias, and selection bias). An Exchange Index is a good indicator of the price level of the securities that compose it, but Vendors Index might have a better sampling and representation of sectors, except for the DOW of course, which is probably the worst index in the world.

seen the SET to-day ? :(

Last Update : 18 Sep 2008 10:01:59

Status : Open(I)

Aussie Banks Punished:

Macquarie Shares Plunge By Record on Wall St. Fallout (Update1)

By Robert Fenner



Sept. 18 (Bloomberg) -- Macquarie Group Ltd. plunged by a record in Sydney trading, leading Australian financial stocks lower on concern the credit crisis on Wall Street will affect their ability to repay debt.

Macquarie, Australia's largest investment bank, fell 18 percent to A$27.71 at 10:41 a.m. Babcock & Brown Ltd., the nation's second-largest investment company, dropped 18 percent to 75.5 cents. Both companies are based in Sydney.

The global credit crisis that's sent Lehman Brothers Holdings Inc. bankrupt and forced American International Group Inc. into the hands of the U.S. government is raising doubts about debt- driven funding model of Macquarie and Babcock. The outlook on Macquarie's credit rating was yesterday lowered to negative from stable by Standard & Poor's, implying a one-in-three chance of a cut to the bank's rating.

Continued heer:

Bloomberg.com: Worldwide

^A summary to those not in the know, where it says the 'debt-driven funding model of Macquarie and Babcock, this is the same model that was found wanting at Northern Rock...

Morgan Stanley Said to Mull Bank Merger, Fight Short Sellers


By Christine Harper and Jonathan Keehner




Sept. 18 (Bloomberg) -- Morgan Stanley is considering a merger with a bank to revive investor confidence after its shares sank 42 percent this week following the collapse of Lehman Brothers Holdings Inc.

John Mack, Morgan Stanley's chief executive officer, got a call from Wachovia Corp. yesterday indicating interest, said a person with knowledge of the matter, declining to be identified because the talks aren't public and may end without an agreement. The New York-based firm is also seeking ways to limit short sales of its stock, the person said.

A deal would leave Goldman Sachs Group Inc. as the only independent Wall Street investment bank, after Merrill Lynch & Co. sold itself to Bank of America Corp. to avoid the fate of bankrupt Lehman. Morgan Stanley and Goldman, the biggest U.S. securities firms, tumbled the most ever yesterday as the deepening credit crunch fueled concerns about their ability to fund themselves without the access to deposits that banks have.

``John Mack certainly needs the stability of the core deposit base at Wachovia at this point, so I can see some of the broad outlines of such a deal, but I think investors would greet that one with some incredulity,'' Nancy Bush, founder and analyst at NAB Research LLC, said in an interview on Bloomberg Television. ``This is a very extraordinary time.''

From:

Bloomberg.com: Worldwide

Funny that, as Wachovia was one of the banks I had earmarked for failure. Perhaps this move is an attempt to make them 'too big to fail'?

Originally Posted by Butterfly

Originally Posted by who

The Dow and S&P represent vastly more money than does the NASDAQ,

NASDAQ is an Exchange Index, so far more representative of a large equity market, it's a composite of thousands of companies, while others are Vendors Index representing only a subset of that equity market. NYSE Composite is also another Exchange Index, measuring the total market value of the NYSE companies. Vendors Index are easy to manipulate, some are heavily biased (survivor bias, and selection bias). An Exchange Index is a good indicator of the price level of the securities that compose it, but Vendors Index might have a better sampling and representation of sectors, except for the DOW of course, which is probably the worst index in the world.

Jibberish

Originally Posted by who

Jibberish

Why? Would like your opinion.

Well, The City didn't think much of Lloyds TSB's decision to 'purchase' a turd (presumably with a view to polishing it?)

Top 10 losers - FTSE100 - 18 Sept 2008

value change %

1. Lloyds TSB Group
DOWN 17.43%

Source: FTSE.

Lloyds intends to pay its final dividend in shares rather than cash to preserve capital.

From: Lloyds TSB chairman struck HBOS deal with Brown at City drinks party | Business | guardian.co.uk

Perhaps they should look for loose change down the back the sofas as well?

Originally Posted by bkkandrew

Morgan Stanley Said to Mull Bank Merger, Fight Short Sellers


By Christine Harper and Jonathan Keehner




Sept. 18 (Bloomberg) -- Morgan Stanley is considering a merger with a bank to revive investor confidence after its shares sank 42 percent this week following the collapse of Lehman Brothers Holdings Inc.

John Mack, Morgan Stanley's chief executive officer, got a call from Wachovia Corp. yesterday indicating interest, said a person with knowledge of the matter, declining to be identified because the talks aren't public and may end without an agreement. The New York-based firm is also seeking ways to limit short sales of its stock, the person said.

A deal would leave Goldman Sachs Group Inc. as the only independent Wall Street investment bank, after Merrill Lynch & Co. sold itself to Bank of America Corp. to avoid the fate of bankrupt Lehman. Morgan Stanley and Goldman, the biggest U.S. securities firms, tumbled the most ever yesterday as the deepening credit crunch fueled concerns about their ability to fund themselves without the access to deposits that banks have.

``John Mack certainly needs the stability of the core deposit base at Wachovia at this point, so I can see some of the broad outlines of such a deal, but I think investors would greet that one with some incredulity,'' Nancy Bush, founder and analyst at NAB Research LLC, said in an interview on Bloomberg Television. ``This is a very extraordinary time.''

From:

Bloomberg.com: Worldwide

Funny that, as Wachovia was one of the banks I had earmarked for failure. Perhaps this move is an attempt to make them 'too big to fail'?

John Mack certainly needs the stability of the core deposit base at Wachovia.

All investment banks would like to have that but if the regulators do their job they will create a firewall between invest banking and retail banking operations in any firm that engages in both businesses. After all if because of the wheeling and dealing of investment bankers caused the entire firm to fail, the FDIC would be on the hook for depositors losses.

Originally Posted by who

John Mack certainly needs the stability of the core deposit base at Wachovia.

All investment banks would like to have that but if the regulators do their job they will create a firewall between invest banking and retail banking operations in any firm that engages in both businesses. After all if because of the wheeling and dealing of investment bankers caused the entire firm to fail, the FDIC would be on the hook for depositors losses.

In all the exitement you may have missed my post 400, here:

https://teakdoor.com/us-domestic-issu...tml#post759878

The FED have just abandoned Section 23A, which is the 'firewall'. Mt comment in post 400:

Also, not good. Not good at all. Section 23A is what prevents the money held by a retail (i.e. high street) bank on behalf of its customers from being pissed away by an investment bank that is part of the same group. Normally an exemption has to be applied for and is subject to strict controls and limits. Now EVERY U.S. bank automatically gets one until January 2009.

Mother-of-all-bailouts planned (along the lines of Resolution after Savings and Loan). Watch this space, I will post details when they are announced.

Resurrect the Resolution Trust Corp.

By NICHOLAS F. BRADY, EUGENE A. LUDWIG and PAUL A. VOLCKER

We are in the midst of the worst financial turmoil since the Great Depression. Absent bold action, matters could well get worse.

Neither the markets nor the ordinary diet of regulatory orders, bank examinations, rating downgrades and investigations can do the job. Extraordinary emergency actions by the Federal Reserve and the Treasury to date, while necessary, are also insufficient to resolve the crisis.

Fannie Mae and Freddie Mac, the giants in the mortgage market, are overextended and now under new government protection. They are not in sufficiently robust shape to meet all the market's needs.

The fact is that the financial system needs basic, long-term reform, but right now the system is clogged with enormous amounts of toxic real-estate paper that will not repay according to its terms. This paper, in turn, is unable to support huge quantities of structured financial instruments, levered as much as 30 times.

Until there is a new mechanism in place to remove this decaying tissue from the system, the infection will spread, confidence will deteriorate further, and we will have to live through the mother of all credit contractions. This contraction will undercut the financial system, and with it, the broader economy that so far has held up reasonably well.

There is something we can do to resolve the problem. We should move decisively to create a new, temporary resolution mechanism. There are precedents -- such as the Resolution Trust Corporation of the late 1980s and early 1990s, as well as the Home Owners Loan Corporation of the 1930s. This new governmental body would be able to buy up the troubled paper at fair market values, where possible keeping people in their homes and businesses operating. Like the RTC, this mechanism should have a limited life and be run by nonpartisan professional management.

Such a stabilizing mechanism would accomplish four much-needed tasks:

- First, by buying paper that otherwise is effectively not trading, it would help restore liquidity to the marketplace and help markets to function more fluidly again.

- Second, by warehousing the troubled paper for a longer period than, for instance, the Fed's discount window typically should or could, it would allow for a more orderly liquidation of this paper, and the chance for much of it to recover a portion of its value.

- Third, by giving the agency the ability to manage mortgages with flexibility to keep people in their homes and businesses running, it should lessen the number of foreclosures. This, in turn, would help moderate the decline in real estate values and the deterioration of neighborhoods, thus supporting house prices that in fact lie at the heart of the crisis.

- Fourth, where necessary, like the RTC of the 1980s, this new mechanism can assist the Federal Deposit Insurance Corporation in resolving sick institutions that are so clogged with the troubled paper they cannot continue as independent entities. However, we would hope that purchasing the mortgage-related paper will minimize the need to provide emergency, short-term assistance to solvent banking institutions.

It is certainly the case that the new institution we are proposing will in the short run require serious money. That will involve a risk to the taxpayer; but the institution, administered by professionals, means that ultimate gains to the taxpayer are also possible.

Moreover, a failure to act boldly in the fashion we are suggesting would cost the taxpayer and the country far more. The pathology of this crisis is that unless you get ahead of it and deal with it from strength, it devours the weakest link in the chain and then moves on to devour the next weakest link. A deteriorating financial system, diminished economic activity, loss of jobs and loss of revenues to the government is enormously costly. And the cost to our citizens' well-being is incalculable.

Crisis times require stern measures. America has done well in the past to face up to economic turmoil, take strong measures, and put our problems behind us. RTC-like mechanisms have worked well in past crises. Now is the time to take a similarly forceful step.

The American economy still has enormous underlying strengths. What we need, and in part are proposing, is a road map to financial stability.

Mr. Brady was U.S. Treasury secretary from 1988-1993.
Mr. Ludwig was U.S. comptroller of the currency from 1993 to 1998.
Mr. Volcker was chairman of the Federal Reserve from 1979-1987.

From: Resurrect the Resolution Trust Corp. - WSJ.com

At last, a plan that *might* just work. Lets see it is aking to the one to be proposed later today.

Commentator on BBC World Business Report stated that M-O-A-B would cost IORO $2TRILLION.

Oh dear, thats a lot of money to print (because no-ones going to lend them that much)...

THE FSA'S 'ENDANGERED SPECIES LIST

FT Alphaville
19 September 2008

Right, here it is. Prepare for the mother of all bear squeezes.

1 ADMIRAL GROUP PLC
2 ALLIANCE & LEICESTER PLC
3 ALLIANCE TRUST PLC
4 ARBUTHNOT BANKING GROUP PLC
5 AVIVA PLC
6 BARCLAYS PLC
7 BRADFORD & BINGLEY PLC
8 BRIT INSURANCE HOLDINGS PLC
9 CHESNARA PLC
10 EUROPEAN ISLAMIC INVESTMENT BANK PL
11 FRIENDS PROVIDENT PLC
12 HBOS PLC
13 HIGHWAY INSURANCE GROUP PLC
14 HSBC HOLDINGS PLC
15 ISLAMIC BANK OF BRITAIN PLC
16 JUST RETIREMENT HOLDINGS PLC
17 LEGAL & GENERAL GROUP PLC
18 LLOYDS TSB GROUP PLC
19 LONDON SCOTTISH BANK PLC
20 NOVAE GROUP PLC
21 OLD MUTUAL PLC
22 PRUDENTIAL PLC
23 RESOLUTION PLC
24 ROYAL BANK OF SCOTLAND GROUP PLC
25 RSA INSURANCE GROUP PLC
26 ST JAMES’S PLACE PLC
27 STANDARD CHARTERED PLC
28 STANDARD LIFE PLC
29 TAWA PLC


Source:

FT Alphaville » Blog Archive » The FSA’s endangered species list

Its a long list!

Source:

Jesse's Café Américain

(In turn taken from contraryinvester.com)

Originally Posted by bkkandrew

Resurrect the Resolution Trust Corp.
By NICHOLAS F. BRADY, EUGENE A. LUDWIG and PAUL A. VOLCKER

The thing is that stupid Greenspan is partially responsible for all that shit, the guy should be hanged, at least VOLCKER had some credibility to stop inflation in the early 80s,

Originally Posted by bkkandrew

At last, a plan that *might* just work. Lets see it is aking to the one to be proposed later today.

so would that mean that your prediction of the collapse of the entire financial system has been wrong, and put off ? gee, what a surprise, again

Originally Posted by bkkandrew

Originally Posted by who

John Mack certainly needs the stability of the core deposit base at Wachovia.

All investment banks would like to have that but if the regulators do their job they will create a firewall between invest banking and retail banking operations in any firm that engages in both businesses. After all if because of the wheeling and dealing of investment bankers caused the entire firm to fail, the FDIC would be on the hook for depositors losses.

In all the exitement you may have missed my post 400, here:

https://teakdoor.com/us-domestic-issu...tml#post759878

The FED have just abandoned Section 23A, which is the 'firewall'. Mt comment in post 400:

Also, not good. Not good at all. Section 23A is what prevents the money held by a retail (i.e. high street) bank on behalf of its customers from being pissed away by an investment bank that is part of the same group. Normally an exemption has to be applied for and is subject to strict controls and limits. Now EVERY U.S. bank automatically gets one until January 2009.

Abandoning 23A is not only insane it's criminal !!!

Originally Posted by bkkandrew

Commentator on BBC World Business Report stated that M-O-A-B would cost IORO $2TRILLION.

Oh dear, thats a lot of money to print (because no-ones going to lend them that much)...

What do all the initials stand for ?

^Mother Of All Bailouts and In The Region Of...

Originally Posted by who

Abandoning 23A is not only insane it's criminal !!!

But its also what's happening!