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

Lloyds TSB negotiations to takeover HBOS have collapsed, according to Sky sources.








Lloyds had agreed to pay £9.8bn for its rival but there were fears it was paying too much because HBOS shares have plunged.

Financial Crisis: Lloyds TSB Deal With HBOS Collapses | Business | Sky News

Another bkkandrew prediction comes to pass.

Fed Says ECB, Others to Offer Unlimited Dollar Funds (Update2)


By John Fraher and Simone Meier

Oct. 13 (Bloomberg) -- The U.S. Federal Reserve said central banks will offer financial institutions unlimited dollar funds, backing up efforts by governments to restore confidence in markets.

The ECB, the Bank of England and the Swiss central bank will conduct dollar auctions with maturities of seven days, 28 days and 84 days at a fixed interest rate, the Washington-based Fed said on its Web site today. The Bank of Japan will consider introducing ``similar measures.''

Policy makers from the Group of Seven nations pledged at the weekend to take ``all necessary steps'' to stem a market panic after the MSCI World stock index plunged 20 percent last week. Central banks last week cut interest rates in tandem for the first time since 2001, the U.S. plans to buy $700 billion in distressed assets from banks and in Europe, the U.K. is leading a push to keep lenders afloat with taxpayers' money.

``By providing unlimited dollar funds they are acting on the back of the G-7 plan to ensure the system is fully liquidized,'' said Lena Komileva, an economist at Tullet Prebon Plc in London. ``We're going to see even more liquidity provided and more aggressive rate cuts are coming.''

Continued here:

Bloomberg.com: Economy

Will we get lucky 7, or snake eyes?

Bloombergs Dow chart for friday intraday is shite not sure why is doesnt show what actaully happened at the open.



They seem to have 200 points "missing" from the plunge that occurred at the open.

A better representation of what actually happened is here, clearly the selling reversed at 7900 and not 8100.



Perhaps Bloomberg are trying to smooth over whats actually going on out there?

(please ignore the +481 number in blue, that figure represents the futures for monday13 ths opening)

Collapse postponed, but in the real world:

Inflation is still rising:

http://www.telegraph.co.uk/finance/finance...e-per-cent.html

Companies have stopped spending:

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Americans are still defaulting on their mortgages:

America's next nightmare: middle-class foreclosures

And banking layoffs are increasing:

http://www.hemscott.com/news/static/tfn/it...=67476086414256

Icelandic Shoppers Splurge as Currency Woes Reduce Food Imports


By Chad Thomas




Oct. 13 (Bloomberg) -- After a four-year spending spree, Icelanders are flooding the supermarkets one last time, stocking up on food as the collapse of the banking system threatens to cut the island off from imports.
``We have had crazy days for a week now,'' said Johannes Smari Oluffsson, manager of the Bonus discount grocery store in Reykjavik's main shopping center. ``Sales have doubled.''

Bonus, a nationwide chain, has stock at its warehouse for about two weeks. After that, the shelves will start emptying unless it can get access to foreign currency, the 22-year-old manager said, standing in a walk-in fridge filled with meat products, among the few goods on sale produced locally.

Iceland's foreign currency market has seized up after the three largest banks collapsed and the government abandoned an attempt to peg the exchange rate. Many banks won't trade the krona and suppliers from abroad are demanding payment in advance. The government has asked banks to prioritize foreign currency transactions for essentials such as food, drugs and oil.

Continued here:

Bloomberg.com: France

"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."

Bad News For The Bailout - Forbes.com

Too funny - you couldn't make it up!

Credit Chatter Snares India's ICICI Bank

Despite nasty rumors, the bank's health is good. But anxieties about the world economy and future loans cast a dark shadow



Even before the whispers started in early October, the stock price of ICICI Bank (IBN), second in size only to the State Bank of India (SBI.BO) and the country's biggest private-sector bank, was already down 56% from the start of the year. Then rumors about ICICI's health started circulating by anonymous e-mails and text messages. "Pull out your money from ICICI Bank—it will be insolvent," read one message. "ICICI Bank has lent money to Lehman, AIG…," read another. The messages prompted runs on some bank branches in southern India. Retail investors panicked, and the stock skidded.

After a particularly bruising three days of trading that sent the stock down 25% by Oct. 10, ICICI management finally decided to take action. On Oct. 12, ICICI filed a complaint with the police in Mumbai and the southern Indian city of Coimbatore, requesting their help in rounding up the culprits behind the campaign driving down its stock. And hours before dawn on Oct. 13, the bank sent e-mails to customers assuring them it had "zero exposure to U.S. subprime" and that it was "one of the highest capitalized banks in the country." The same day, rating agencies Moody's (MCO) and Standard & Poor's issued statements that ICICI Bank's credit fundamentals were sound. That helped send the bank's shares soaring 24% in two days.

Overseas Exposure

The pressure is still on, though. In trading Oct. 15-16, the stock price dropped 8% amid continued unease about the bank's prospects. Investor nervousness is understandable. ICICI has the greatest exposure overseas, with 25% of its consolidated banking assets in international business. The bank is also India's most aggressive at home. It has issued more than 9 million credit cards, making it the largest credit-card provider in the country. Net profit grew 22% in the 2007 fiscal year (ended in March) and 37% in the 2008 fiscal year, but with the central bank increasing interest rates and asking banks to go slow on lending, ICICI's earnings are likely to fall 10% in the year ending March 2009, according to a forecast (BusinessWeek.com, 10/8/08) by Macquarie Securities.

More at:

Credit Chatter Snares India's ICICI Bank - BusinessWeek

The next part of the systemic collapse...

Just one small shock could threaten our fragile banking system; it may come from the emerging economies, writes Richard Wachman
The Observer, Sunday October 19 2008

Warning lights are flashing in eastern and central Europe, where Hungary and Ukraine are seeking bail-outs from the International Monetary Fund to avoid the turmoil that threatens to bankrupt Iceland.

A number of countries have had their credit ratings slashed to junk status amid worries that the next leg of the credit crunch is about to explode. Economies are on the verge of collapse after years of easy credit that fuelled an unsustainable property and consumer boom, roaring inflation and widening current account deficits.

A research paper by Lars Christensen, head of emerging markets research at Denmark's Danske bank, written before Hungary and Ukraine appealed for international aid, makes for unsettling reading.

Here is what he says about Bulgaria: 'We see a major risk that the Bulgarian boom could turn into a serious bust. A property market bubble threatens economic stability.'

Elsewhere, Estonia is already in the lurch: 'The hard landing has become a reality; Estonia faces years of sub-trend growth to reduce the excesses.'

Latvia looks like a basket case: 'Larger imbalances here make the economic adjustment more painful.'

In countries such as Hungary, the economy is in free fall as foreign banks and investors withdraw capital, leaving an acute shortage of credit. The Hungarian banks can't help because they are over-leveraged and face calls from overseas institutions for loans to be repaid, threatening the local banking system with meltdown.

If banks in emerging markets implode, it puts a further strain on the international financial system when even a small shock could lead to more panic-selling on global stock markets, as well as undermine efforts to restart interbank lending and restore credit lines.

'Are there more Icelands out there?' asks Christensen. 'Yes, quite a few, it's worrying.'

What happened in Iceland is instructive. It's not the Icelandic government that has gone bust, as the Russian government did a decade ago, but the Icelandic banks. But that has a devastating effect on Iceland's economy; as confidence has drained away, the currency has gone into free-fall.

For Iceland, which is heavily dependent on imported goods, that means costs for businesses and consumers go through the roof, raising the spectre of shortages in the shops, especially where companies have lost money in the banking collapse. And that is quite apart from the devastating effect on confidence flowing from the failure of three of the country's biggest banks.

The value of Icelandic bonds - debt instruments sold to global investors in return for interest payments - have recorded sharp falls. Standard & Poor's has slashed Iceland's debt to just above investment grade; other countries are faring worse, with Ukraine and Serbia reduced to junk status.

Even more alarming, billions of euros worth of credit default swaps, linked to emerging market debt, could leave institutions that underwrote these contracts - banks, hedge funds and insurance companies - with huge liabilities. Credit default swaps make up a $60 trillion market that has grown massively since 2000 and is largely unregulated. CDS products are used by investors to offset the risk of a country defaulting or its prospects deteriorating. They have often been comfortingly described as being like insurance contracts. If only it were that simple.

A parallel derivatives industry has grown up around CDSs, with the risks passed on to speculators prepared to buy swaps in the hope of making a profit when they sell them on.

'It is a bit like shorting a bank share,' says a London-based stockbroker. 'Except that you are betting on the contract's value rising; the more risky the outlook, the more valuable the swaps contract.'

If a country defaults, the liabilities must be paid by the CDS counterparty or counterparties. But CDS prices are an indicator of how close the market believes a country is to defaulting. For example, the cost of using a CDS to insure against Iceland today stands at $15 for every $100 of insurance, up fourfold in three years. Further afield, Pakistan is judged to be very close to default - perhaps a 90 per cent chance - with the cost at $30 for every $100. For Argentina, the price is $24.

It is quite likely that many banks in emerging markets will go bust as they have over-extended themselves.

But what happens if a country defaults? For answers, look back to the Russian banking crisis of 1998, where the state (which owned all the banks) was forced to disclose that it was no longer solvent.

International investors fled, dumping Russian assets, which led to a run on the currency. Wages to state employees went unpaid, causing widespread social unrest. The Russian stock market lost 75 per cent of its value. There was political upheaval.

The International Monetary Fund eventually stepped in with a $23bn financial package and the Russian government was forced to devalue the rouble. Eventually, calm was restored and global panic was narrowly averted.

But remember that crisis was against a backdrop of relative economic stability. The credit crunch, however, has seen the MCSI emerging markets index lose $1.8 trillion of value in a year, while many exchanges in developing countries have notched up a 50 per cent fall in share prices. The West's banking system (not to mention the state of the global economy) remains fragile. Another systemic shock is the last thing it needs.

Another storm is brewing in eastern Europe | Business | The Observer

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ING Gets $13.4 Billion Injection From the Netherlands (Update2)

By Martijn van der Starre and Joram Kanner



Oct. 20 (Bloomberg) -- ING Groep NV, the biggest Dutch financial-services firm, will get a 10 billion euro ($13.4 billion) lifeline from the Netherlands after mounting credit- market losses drove the stock to a 13-year low.

The government will buy non-voting preferred shares and appoint two representatives to the board of ING, which will scrap this year's final dividend, the Amsterdam-based company said yesterday. The securities pay 8.5 percent annual interest, Dutch Finance Minister Wouter Bos told reporters.

Continued here:

Bloomberg.com: Europe

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.....Credit Cart Defaults.

Bank of America Credit-Card Unit Loses $373 Million on Defaults

By David Mildenberg

Oct. 21 (Bloomberg) -- Bank of America Corp., the largest U.S. consumer bank, lost money on credit cards for the first time since its January 2006 purchase of MBNA Corp. as more borrowers missed payments amid the slowing economy.

The card-services unit lost $373 million in the third quarter, compared with a profit of $1.04 billion in the same period last year. Defaults on cards and home mortgages contributed to a 47 percent decline in operating profit at the consumer and small-business division, the Charlotte, North Carolina-based company said today in a regulatory filing.

Credit-card lenders are facing ``an exceptionally challenging period'' as the U.S. unemployment rate climbs, limiting borrowers' ability to repay loans, Moody's Investors Service said in an Oct. 16 report. ``The uncertainty and tempo of the turmoil will test even the stalwarts' ability to adapt.''

Continued at:

Bloomberg.com: Worldwide

Oh dear, did Paulson factor this one in?

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Fed to Provide Up to $540 Billion to Aid Money Funds (Update4)

By Craig Torres and Christopher Condon

Oct. 21 (Bloomberg) -- The Federal Reserve will provide up to $540 billion in loans to help relieve pressure on money- market mutual funds beset by redemptions.

``Short-term debt markets have been under considerable strain in recent weeks'' as it got tougher for funds to meet withdrawal requests, the Fed said in a statement in Washington. About $500 billion has flowed out of prime money-market funds since August, a Fed official said.

The initiative is the third government effort to aid money- market funds, which in stable times are a key source of financing for banks and companies. The exodus of investors, sparked by losses from the aftermath of the Lehman Brothers Holdings Inc. bankruptcy, contributed to the freezing of credit that threatens to tip the economy into a prolonged recession.

Continued here:

Bloomberg.com: Worldwide

They better fit those extra numbers to the debt clock real quick!

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OK - Technically Iceland haven't defaulted yet (mind you account holders at the nationalised Icelandic banks might disagree ), so they and Pakistan (see past posts on this thread) are now joined by past masters of the default game - Argentina!

Argentine Bonds, Stocks Plunge on Pension Takeover Speculation

By Drew Benson and Bill Faries

Oct. 21 (Bloomberg) -- Argentine bond yields soared above 24 percent and stocks sank the most in a decade on speculation the government will seize private pension funds and use the assets to stave off the second default this decade.

President Cristina Fernandez de Kirchner will unveil a new pension fund plan at 4 p.m. New York time today, the country's social security administration said in a statement. Fernandez will nationalize the system, giving the government control of $29 billion in retirement accounts, La Nacion reported, citing government officials it didn't identify.

``It's horrible,'' said Jaime Valdivia, who manages $1 billion of assets for Emerging Sovereign Group in New York. ``We're going back to the dark ages. Not even in times of the worst financial stress did the government ever think about taking over the private pension system.''

Continued here:

Bloomberg.com: Worldwide

You know - Bob Maxwell topped himself when he was found to have nicked all the pensions; the Argies think that it is a rational response to a financial crisis...

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The UK banking system was closer to collapse earlier this month than at any time since the start of World War I, Mervyn King has warned.

But speaking at an event in Leeds, the governor of the Bank of England said the UK had "turned the corner", thanks to the government's bail-out package.

He said the £50bn recapitalisation plan would slowly lead to a resumption of normal levels of bank lending.

Yet Mr King agreed "it now seems likely the UK is entering a recession

From:

BBC NEWS | Business | Banks 'were close to collapsing'

The Stark Choice Now Facing America

America, and Americans face a stark decision - and a choice that must be made now.

Not next month at the polls, not next week.

Today.

I have been writing on this subject, petitioning Congress, and both calling and faxing Congress - and you - for the last year and a half.

We now sit literally days away, with a high probability, of a credit market "dislocation" that will change American finance and decimate the stock market.
That is, worse - far worse - than what has happened thus far.

Try on for size 2-3,000 points down on the Dow from here. 25% more than has been lost thus far, more-or-less "all at once." The probability of this event is now in excess of 70% - within the next few days to two weeks.

The Politicians know this.

They were promised that the market would not blow up if they passed Paulson's and Bernanke's bill.

They were lied to, and the first "blowup" happened.

You, the people, were promised that passing this "stabilization" bill was the right thing to do too.

You were lied to.

Now we are sitting on the edge of the second blowup - "The Big One."
Among other things, today we learned that The Fed has lost control of the Effective Fed Funds Rate - their own overnight lending rate. They were forced to change their interest rate on reserves in order to try to get it back under control - and there is no reason to believe their efforts will be effective.

The truth is that our nation, and indeed the world, has too much debt for its ability to earn income and has had since 1968. As this became apparent to the people at The Federal Reserve and Treasury, in the 1980s starting with Alan Greenspan, interest rates were artificially kept low for a long period of time to encourage you and others to go into that debt - debt you and these firms cannot possibly repay.

This is why we had the crash in 1987, why LTCM blew up in the 1990s, why we had an Internet Bubble and now why we had a Housing Bubble.

All of these bubbles were intentionally created by The Fed, Treasury and Wall Street Banks to keep the charade alive that you could take on more and more debt and they could make more and more money.

We are now out of bubbles and ability to support bubbles, and America (and the world, in fact) is out of the ability to support more debt.

We are now borrowing money to cover up the fact that millions of Americans and tens of thousands of companies are bankrupt, and the banks and other institutions that loaned them money are likewise bankrupt, as the people who owe them that money can't and never will be able to pay.

The people who in turn loan America the money it needs to operate - over $2 billion a day - have become aware of this fact.

This is very bad, because nobody will loan money to someone forever when they have no reasonable belief that they will ever be paid back.

There are only two options remaining for America, and we as Americans, and our politicians, must choose one of these two paths.

Neither path is easy.

Neither path is pain-free.

The path that will lead us to where we can prosper involves a great deal of short-term pain. It involves forcing all of the bad debt - perhaps your mortgage, the bad corporate debt, the "Ponzi-Scheme" style debt that has been layered up one on top of another - out into the open and forcing it to default.
On purpose.

This means that if you are underwater on your home, you will lose it and your credit will be destroyed for a few years. It means you may have to file for bankruptcy. It means a great deal of short term pain if you are in this position. It means that companies that have taken on too much debt will be forced to either pay down what they can, or go bankrupt if they cannot.

This path will result in higher unemployment for a time, it will result in lower standards of living. You will not be able to spend money you do not have, and neither will our government. Both the government and we the people will be forced to live within our means.

The second path is for Ben Bernanke, Henry Paulson our government and you to attempt to do what we have been doing.

That is, to borrow more money to pay the interest on money we have already borrowed. To refuse to accept that those who borrowed too much, and who can't pay, must declare that fact and face the potential bankruptcy that comes from being too far in debt and unable to make good on obligations.

This is now a critical matter for our nation, because our nation's political leaders have chosen to take the private debt of companies and individuals and attempt to guarantee it with the credit of the United States.

However, The United States is just as broke as we are individually - in fact, more so.

Treasury will have to issue three trillion dollars of new debt over the next 12 months in an attempt to make this work. But Treasury has been using very short-term debt - mostly four week and 13 week "bills", to fund the existing debt, because they are cheaper. As such the total amount of these auctions could easily reach five trillion dollars over the next 12 months.

Already, Treasury is issuing more than $100 billion dollars in this debt a week, on average, including new issues and rollovers. This is about double the total amount of debt that foreigners (or US interests) hold in total, and we have barely begun to actually issue the debt necessary to make the "TARP" operate.

We are, in effect, borrowing to pay interest. If you have ever tried to do this personally, you know that doing so almost always leads to bankruptcy.

It will for us as a nation if we don't stop it now.

Our choice as citizens is to either accept that those of us who have taken on too much debt will and must go bankrupt, declaring our insolvency and settling what we can, whether we are an individual, a corporation, or even our nation, or whether we will continue to attempt the charade of printing up more and more debt (or money) in an attempt to cover it up.

We are very close to the point where more debt causes the GDP - that is, the totality of our nation's output - to contract instead of expand.

At the point that line is crossed, our nation's monetary and economic system will fail with disastrous consequences.

This is, effectively, what happened in Iceland, and it came almost without warning. The price of everything they import tripled overnight.

We as a nation must choose, and we must do it now.

Nobody wants to accept that they cannot have a new car if they can't put down 10 to 20% of the purchase price, and that they can't "roll over" the old balance into the new loan, but that doesn't make it not true. It is, in fact, true.

Nobody wants to accept that they really need to put 20% down on a house and that houses can't sell for more than 3x incomes, on average, but it is in fact true.
Nobody wants to accept that having college cost $200,000 for four years is obscene and that allowing our kids to graduate with that sort of debt is outrageous, but it is in fact true.

Your 401k has already been turned into a 201k because our government has decided to lie about the fact that dozens if not hundreds of banks and tens of thousands of businesses, not to mention millions of individual Americans, maybe even you, are in fact broke.

Not everyone, however, is broke - but everyone's 401k, 403b and IRA is being decimated, and if we do not act now, we will all - the broke and the prudent - suffer the consequences of trying to lie about the financial state of our nation's banking system, our nation's companies and our nation's families.

We may be days away from an international credit incident originating outside of the United States. Foreign nations, banks, and businesses have "levered up", or taken more risk, than we have. They too have chosen to lie.

As money has flowed from "not guaranteed and possibly lying" firms' debt to that which is guaranteed by the government, the government has seen necessary to guarantee more and more liars, lest further firms and types of debt fail. As each type of debt becomes guaranteed it "sucks the money" from the non-guaranteed, and within weeks or days The Fed is obligated to guarantee yet another type of debt, lest it collapse too. We now have general corporate debt blowing out to wide levels, which will soon shut off all new corporate borrowing - even for sound companies - because there is no reason to buy their debt when you can buy guaranteed debt of some other type.

The Federal Reserve, starting with the "TAF", now has an entire alphabet soup of "facilities" to guarantee various debts, and the FDIC has increased its coverage. In recent weeks The Fed's facilities have even been extended overseas via "swap lines" and various other charades - it is no longer just United States interests being backstopped, it now includes foreign banks as well.

All of this is for one purpose - to cover the fact that many of these businesses are broke - that is, to cover up the lying.

But as each lie is covered up, the market calls the bluff and forces yet another coverup. The Fed is now creating new facilities to the tune of hundreds of billions of dollars they do not have, effectively displacing private lending on a global scale, now operating with leverage of more than 40:1 - all so the lies do not have to be admitted to.

But with each new charade the spiral tightens at an increasing rate.

At some point the people who have lent all of these firms money will cease to be willing to do so because all debt will become equivalent to US Debt, and all of it will be considered "dangerous."

The people who loan us money - the oil producers, the Japanese and the Chinese - are able to do the same math I am.

They know the same facts I know, and you should know.

They know the same facts that Henry Paulson and Ben Bernanke know, but have not shared in an open and honest fashion with The American People - or with Congress.

We are on the cusp of this dislocation - and this realization - being forced upon us.

I believe Treasury has been attempting to "kick the can down the road" as is the usual pattern in Washington DC.

Unfortunately the can has filled up with cement and there is now a very high probability that instead of the can being able to be kicked down the road until next year after the elections the second-level dislocation - the "big one" - is going to happen within days.

It is my opinion that we must, at all costs, protect the borrowing ability of our government - the Treasury of The United States.

We must not use our government to protect the liars in American business, no matter whether they are banks, automakers, the local store owner or ordinary Americans.

If we are to get through the difficult economic times we are in and which lie ahead, we must guarantee that our government is able to borrow money at a competitive rate.

We must make sure that the government is not lumped in with the liars, lest the government's ability to borrow get cut off or become prohibitively expensive.

This decision to differentiate the government from the liars must be made now.
Our leaders must stand up and demand that Ben Bernanke and Hank Paulson stop backstopping the bankrupt.

We must withdraw the TARP and not allow $70 billion dollars of borrowed money to go to pay bonuses at major Wall Street banks - $70 billion dollars we do not have.

We must not allow this money to be used to run mergers and other corporate "raids."

We must stop Ben Bernanke from expanding his "alphabet soup" of lending facilities, and force those who are in fact bankrupt into the open, where the free market's solution - bankruptcy - awaits.

We must force home prices down so that you can truly afford to buy a house, not keep prices artificially high so that the banks and other lenders don't lose money.
We must recognize and admit that the debt merchants - the banks - are opposed to doing the right thing not because their opposition is good for America and it is to everyone's benefit that they be protected, but because by forcing hidden defaults into the open some of them will go broke, and all of them will, in the future, have far less business to compete for.

Once the bad debt has been forced from the system then and only then should Congress step in, if necessary, and charter new banks. Spin them off to the public in IPOs with the money was going to be used for the TARP - but only after we have restored the ability of America to use credit once again by defaulting the bad debt that currently exists.

If we do not make this choice, and make it now, those who have the money we are borrowing - the Chinese, the Saudis, The Japanese and others - will make this decision for us.

They will come to the conclusion that they will never be paid back.
At this point our way of life will be irretrievably altered.

Your 401k, which is now a 201k, will become a 101k or even a 51k. The DOW could fall to below 5,000 and the S&P 500 to 500 or less, with 20 years or more of gains wiped out.

You have already seen nearly half of your money disappear.
You could see another half disappear - within days.

That is a 75% loss from October 2007 values, and before you scoff at it, look at a chart of the Nasdaq from 2000 to 2003. Our entire stock market and economy have become just as farcical as the Nasdaq was from 1995-1999. I ran a company in the Internet space in the 1990s - I saw it all, and most of the firms that failed during the Tech Wreck were more honest than the banks and mortgage lenders during the housing bubble and to this day!
The day for we, as Americans, to make this decision has arrived.

We must do so today, not after the election and not in January.

We must tell Congress now that it is critical for them to protect America's credit as a nation, not the credit of banks, business who have done imprudent things, and even ordinary Americans who have done imprudent things, whether those imprudent things were done intentionally or not.

We must make clear that we understand this will not be an easy decision, or a painless one - but it is a necessary decision, it is our decision, and it is the decision we demand they enforce as our elected representatives.

Congress must "grow a pair" and stand up for Americans, here and now, today, telling the world that these liquidity facilities will not be permitted to continue, that banks and other firms who have concealed the true state of their finances will be closed and their executives jailed if they do not immediately confess, and that house price "supports" will and must be withdrawn, including the provision of "low down payment" and "high debt-to-income" loan options.

Congress must direct Ben Bernanke to either withdraw his "alphabet soup" or Congress must revoke The Fed's charter and replace The Fed with a monetary authority that will tell the truth and act with full transparency.

Treasury must be directed to cease implementation of the TARP and return all funds not yet spent to the general fund. The short-term cash management debt that Treasury has issued must be allowed to run down and not be rolled over so that the radical expansion of issue in the Treasury market ceases and in fact is reversed.

We must choose America.

You have seen, today, another five percent decline in the stock market, despite the claims that "credit is improving."

That claim is a lie.

Credit is not improving - it is being replaced by The Fed being the only issuer and guarantor of credit - an impossible situation that is ruinous to our nation and its prospects.

We face an imminent collapse of both stock and credit markets if we do not act, and act today.

To Congress: Is there not one statesman or woman who will stand for America and her people, not for the bankers and fraudsters on Wall Street who have given you millions in campaign contributions?

To The People: You were promised a solution, and you didn't get it. Are you going to sit on your hands while our nation's economy implodes?

Those are your choices, and you must make them today.

Choose wisely.

(I hope I'm wrong, but fear I'm not.....)

Posted in full from:

The Market Ticker

This is it folks. You were warned.

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Oct. 23 (Bloomberg) -- Hundreds of hedge funds will fail and policy makers may need to shut financial markets for a week or more as the crisis forces investors to dump assets, New York University Professor Nouriel Roubini said.

``We've reached a situation of sheer panic,'' Roubini, who predicted the financial crisis in 2006, said at a conference in London today. ``There will be massive dumping of assets,'' and ``hundreds of hedge funds are going to go bust,'' he said.

``This is the worst financial crisis in the U.S., Europe and now emerging markets that we've seen in a long time,'' Roubini said. ``Things will get much worse before they get better. I fear the worst is ahead of us.''


More at:

RGE - Nouriel Roubini's Global EconoMonitor

Developing Nation Bond Yields Soar on Russia Rating Outlook Cut


By Lester Pimentel and Laura Cochrane

Oct. 23 (Bloomberg) -- Developing nations' borrowing costs neared a six-year high after Standard & Poor's threatened to cut Russia's debt ratings as the global credit crisis deepened.

The extra yield investors demand to own emerging-market government bonds instead of U.S. Treasuries surged 39 basis points to 8.41 percentage points, the biggest since November 2002, according to JPMorgan Chase & Co.'s EMBI+ index. The annual cost to protect Russia's bonds from default soared as S&P lowered Russia's ratings outlook to negative on concern the cost of the government's bank rescue will climb.

Russia has committed as much as 15 percent of its gross domestic product to propping up banks, including a $50 billion credit line to development bank Vnesheconombank. Russia's international reserves, the world's third largest, declined by $14.9 billion last week after the central bank sold currency to support the ruble as investors pulled money out of the country.

``There is now no safe haven globally other than a deeply indebted U.S. government,'' said Jim Reid, head of fundamental credit strategy at Deutsche Bank AG in London. ``The events of the last few days are categorical evidence of the globalization of the credit crunch and its subsequent problems.''

Ex-Soviet republic Belarus added to requests from Iceland, Pakistan, Hungary and Ukraine for at least $20 billion of emergency loans from the International Monetary Fund as the financial crisis leaves nations unable to repay their debt. Belarus has requested ``no less than'' $2 billion and may also seek funds from central banks and commercial banks in other countries, said central bank spokesman Anatoly Drozdov.

Argentine Nationalization

In Argentina, lawmakers are battling to block President Cristina Fernandez de Kirchner from using $29 billion in nationalized pension fund assets to repay debt as the government struggles to avert its second default this decade. Fernandez announced plans to take over private pension funds on Oct. 21, sparking a rout in the country's financial markets. Argentina last seized retirement savings in 2001, before it reneged on $95 billion of debt and triggered a global selloff.

Continued here:

Bloomberg.com: Worldwide

So, if I were a bookie....:

Iceland 2/1 ON Favourite
Pakistan Evens Second Favourite
Argentina 3/2
Ukraine 2/1
Hungary 4/1
Russia 5/1
7/1 Bar

Emmanuel Roman, of GLG Partners, said 25pc-30pc of the world's 8,000 hedge funds would disappear "in a Darwinian process", either going bust or deciding meagre profits are not worth their efforts.

"This will go down in the history books as one of the greatest fiascos of banking in 100 years," said Mr Roman, who co-runs London and New York-based GLG, a former division of Lehman Brothers Holdings with assets of $24bn (£14.8bn). "There need to be some scapegoats, and the regulators are going to go hunt people. That will be good in the long run."


More at:

Thousands of hedge funds to close, says GLG chief Emmanuel Roman - Telegraph

And to think the biggest crisis of the last 10-years before the credit crunch was one Hedge Fund (LTCM) going belly-up. Now we face 2400 of them meeting this fate!

You won't like Peston's latest article if you hold (or earn) Sterling or Won.......

Now there are runs on countries
Robert Peston 23 Oct 08, 10:11 AM The sickness afflicting the global financial economy has entered a new and worrying phase.

It started last summer with the closing down of big chunks of the wholesale money and securities markets.

Then we saw a succession of crises at individual banks, as institutional providers of funds withdrew their cash from banks they perceived as weak (culminating here in the nationalisations of Northern Rock and Bradford & Bingley, and the rescue takeover of HBOS).

In September the entire banking system was on the brink of total meltdown, because of semi-rational fears that almost no bank was safe from collapse.

And now we're seeing a massive flight of capital out of economies perceived to have been living beyond their means - either because they have a substantial reliance on foreign borrowings, or because they are net importers of good and services, or both.

Commercial lenders to these economies - banks, hedge funds, mutual funds and so on - want their money back now. That's driving down their currencies, pushing up the cost of borrowing for their respective governments and undermining the strength of their respective banking systems.

So they need financial help to tide them over - and with the global economy slowing down, those economies perceived as lacking the resources to cope on their own may need support for months and years.

Queuing up for the intensive care ward are Iceland, Hungary, Pakistan, Ukraine and Belarus, all of which are in discussions about accessing special loans from the International Monetary Fund, the emergency medical service for the global economy.

But there has also been a substantial withdrawal of capital from South Africa, Argentina and - most worrying of all - South Korea.

Let's put this into some kind of context.

The annual economic output of Pakistan, Hungary and Ukraine is something over $100bn each - which is not trivial but does not put them near the top of the rankings in terms of the size of their GDP.

However, the output of Argentina is well over $200bn and that of South Korea is around $900bn. In fact, South Korea is the 13th biggest economy in the world.

If you add together the GDPs of all the economies currently diagnosed with toxic BO by international investors you arrive at a sum that's not far off the economic output of the UK.

And the sums of debt involved are also fairly substantial. Hungary has external debt of more than $100bn, Ukraine has foreign borrowings of $50bn, while Pakistan's dependence on overseas funding is nudging $40bn.

As for South Korea, which hasn't requested formal help from the IMF, its foreign debt is nearer $200bn.

Now you may think this is all about remote countries, with no relevance to you. Well, that would be wrong. We're all connected.

It's been very fashionable for pension funds to invest in developing economies in recent years. If you're saving for a pension, you may own a chunk of South Korea or Argentina.

If you're very unlucky, your pension fund may have belatedly put some of your cash into one of the many hedge funds being royally mullered by the way they borrowed vast sums to invest in some of these emerging economies.

And of course the woes of these economies reduce their ability to purchase from abroad, which acts as a further serious drag on global economic growth.

Also the UK is being buffeted directly by international investors' re-awakened distaste for economies perceived to be too dependent on foreign capital or credit from institutions and companies.

What's happening to South Korea - where its currency, the won, has fallen 29% in the past three months, and shares have fallen well over 20% in a week - is particularly worrying for us.

South Korea is a great manufacturing and exporting nation. Its balance of trade is vastly healthier than the UK's.

But like the UK, South Korea's banks are dependent on wholesale funds that are being withdrawn because of fears that those banks face losses on imprudent deals (not lending to homeowners, as is the case in the UK, but currency hedges with local companies - see my note "Crisis is business as normal").

Of course, our banks - and South Korea's - are being shored up by massive financial support from taxpayers.

But if investors no longer think the UK's banks are at risk of collapse, they then look at our other vulnerabilities - such as public sector borrowing which is rising very sharply because of the costs of the bank rescues, dwindling tax revenues and the need to spend our way through the economic downturn.

They also look at our structural trade deficit and our huge reliance on financial flows generated by a City of London and a financial services industry that's shrinking fast.

As I've pointed out in a tediously repetitive way, the sum of all we've borrowed - the aggregate of corporate, personal and public sector debt - is equivalent to three times our annual economic output.

That's a vast amount of debt to repay - and it's all the harder to do so at a time when our most successful industry, financial services, is in some difficulty and the global economy is slowing down.

If international investors fear our credit isn't what it was and are selling pounds, we should hardly be surprised.

Source:

BBC NEWS | The Reporters | Robert Peston

The American sub-prime mortgage market plunged deeper into crisis during the third quarter as US foreclosure filings rocketed by 71 per cent to hit their highest number on record.

Figures released by RealtyTrac, the California-based data service, today showed 765,558 US properties received a default notice, warning their owners of a pending auction of their home or foreclosure in the three months to September.

As the number of people losing their homes rose, it emerged that the US Government is considering putting together a $40 billion (£24.7 billion) proposal to help prevent foreclosures.

Sheila Bair, chairman of the Federal Deposit Insurance Corporation (FDIC), has suggested that the Government turns mortgages in danger of defaulting into affordable loans to help struggling homeowners.

She told Congress today: "Loan guarantees could be used as an incentive for servicers to modify loans. By doing so, unaffordable loans could be converted into loans that are sustainable over the long term.”

Ms Bair added that the FDIC is working “closely and creatively; with the Treasury Department on such a plan."

The proposal for a new fiscal scheme helped push Wall Street shares higher, with the Dow Jones industrial average up 183.83 points by midday in New York after a fall of 5.6 per cent yesterday as companies released a series of disappointing results.

Data on foreclosures during the third quarter revealed a 71 per cent rise on the same three months of last year but just a 3 per cent increase on the previous quarter as laws introduced by states to slow repossessions began to take effect.

The new law also helped reduce foreclosures from August to September, which fell by 265,968 over the past month. In California, rules requiring lenders to make contact with borrowers at least 30 days before filing a Notice of Default (NOD), meant that foreclosures fell by more than half, or 51 per cent, in the region.

US mulls new bailout amid rising mortgage defaults - Times Online

Its reaching an unstoppable demise. Where is your cash?

.

So much for that story. A few days ago, when Hank Paulson called the heads of the nine families to Washington and shoved cash down their throats, he announced that the banks would use this new taxpayer cash to lend. They won't, of course. They'll hoard it like a starving family who has just been given a grocery cart full of food. And after a few days of silence, even the banks are finally admitting that. So it's back to the drawing board for Paulson & Co.

Next steps? Find a way to force the banks to write their assets down to nuclear winter levels, so 1) private investors don't have to worry about getting sandbagged and therefore invest more in the banks, and 2) the banks know they won't be forced to take more multi-billion dollar losses. Only then will the banks begin to lend again. And at that point, the only challenge will be finding people and companies to lend to, in an economy headed straight into the tank.)

NYT: , John Thain, the chief executive of Merrill Lynch, said on Thursday that banks were unlikely to act swiftly. Executives at other banks privately expressed a similar view.

“We will have the opportunity to redeploy that,” Mr. Thain said of the new capital on a telephone call with analysts. “But at least for the next quarter, it’s just going to be a cushion."...

“I don’t think that the market wants to see that capital being put to work to leverage the business up again,” said Roger Freeman, an analyst at Barclays Capital, which acquired parts of the now-bankrupt Lehman Brothers last month. “My expectation is it’s quarters off, not months off, before you see that capital being put to work.”...

Jamie Dimon, the chairman and chief executive of JPMorgan, said his bank was in a stronger position to use the money than some of its competitors.

“It’s clear that the government would like us to use the capital,” Mr. Dimon said on a conference call with analysts on Wednesday. “If you are a bank that is filling a hole, you obviously can’t do that.”

Who is "a bank that is filling a hole"? Seven of the nine that just got taxpayer money.

See Also:
Sorry, Hank, Bailout Isn't Working

This is from:

Banks Admit Bailout Won't Work

And you still think your 'money' is safe?

American International Group (AIG), the struggling insurer, has already used up three quarters of a $123 billion (£78 billion) rescue loan from the US Government and has given warning that the bailout may not be enough to save it.

The Government swooped in to rescue AIG from meltdown last month by extending to it an $85 billion loan, in exchange for a 79.9 per cent stake in the group. On October 8, the Government authorised a second cash infusion, this time of $37.8 billion, as it emerged that AIG had spent most of the first loan.

AIG had borrowed $90.3 billion from the Fed's credit line as of Thursday night, with much of it being used to honour payouts on insurance contracts relating to defaulted debts.

Edward Liddy, AIG's chief executive, said that whether the government bailout succeeded in its aim was “very much a function of two things: one, our ability to stop the bleeding that we have in the financial products areas ... [and] what happens to the capital markets”.

However, Mr Liddy added that, on balance, he was optimistic about AIG's prospects: “Some of the moves that the Federal Reserve has put in place over the last couple of weeks since our rescue ... seem to be working, they seem to be lubricating the markets, and I think we should be OK.”

Details of how much of its loans AIG has spent emerged two days after it agreed to freeze any compensation payments that had been due to Martin Sullivan, its British-born former chief executive, whose contract calls for $19million plus other benefits.

AIG has also agreed with Andrew Cuomo, the New York attorney-general, to freeze the $600 million deferred payment and bonus pot of its financial products unit. Mr Cuomo said this week: “The American taxpayer is now supporting AIG, making the preservation of these taxpayer funds a vital obligation.” The financial products unit was “largely responsible for AIG's collapse”, he said.

From:

US taxpayers may have to dig deeper for AIG - Times Online

Its one big black hole.

The crisis in Hungary recalls the heady days of the UK’s expulsion from the ERM.

By Ambrose Evans-Pritchard
Last Updated: 9:17PM BST 25 Oct 2008

The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump.

Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992.

“This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon.

Experts fear the mayhem may soon trigger a chain reaction within the eurozone itself. The risk is a surge in capital flight from Austria – the country, as it happens, that set off the global banking collapse of May 1931 when Credit-Anstalt went down – and from a string of Club Med countries that rely on foreign funding to cover huge current account deficits.

The latest data from the Bank for International Settlements shows that Western European banks hold almost all the exposure to the emerging market bubble, now busting with spectacular effect.

They account for three-quarters of the total $4.7 trillion £2.96 trillion) in cross-border bank loans to Eastern Europe, Latin America and emerging Asia extended during the global credit boom – a sum that vastly exceeds the scale of both the US sub-prime and Alt-A debacles.

Europe has already had its first foretaste of what this may mean. Iceland’s demise has left them nursing likely losses of $74bn (£47bn). The Germans have lost $22bn.

Stephen Jen, currency chief at Morgan Stanley, says the emerging market crash is a vastly underestimated risk. It threatens to become “the second epicentre of the global financial crisis”, this time unfolding in Europe rather than America.

Austria’s bank exposure to emerging markets is equal to 85pc of GDP – with a heavy concentration in Hungary, Ukraine, and Serbia – all now queuing up (with Belarus) for rescue packages from the International Monetary Fund.

Exposure is 50pc of GDP for Switzerland, 25pc for Sweden, 24pc for the UK, and 23pc for Spain. The US figure is just 4pc. America is the staid old lady in this drama.

Amazingly, Spanish banks alone have lent $316bn to Latin America, almost twice the lending by all US banks combined ($172bn) to what was once the US backyard. Hence the growing doubts about the health of Spain’s financial system – already under stress from its own property crash – as Argentina spirals towards another default, and Brazil’s currency, bonds and stocks all go into freefall.

Broadly speaking, the US and Japan sat out the emerging market credit boom. The lending spree has been a European play – often using dollar balance sheets, adding another ugly twist as global “deleveraging” causes the dollar to rocket. Nowhere has this been more extreme than in the ex-Soviet bloc.

The region has borrowed $1.6 trillion in dollars, euros, and Swiss francs. A few dare-devil homeowners in Hungary and Latvia took out mortgages in Japanese yen. They have just suffered a 40pc rise in their debt since July. Nobody warned them what happens when the Japanese carry trade goes into brutal reverse, as it does when the cycle turns.

The IMF’s experts drafted a report two years ago – Asia 1996 and Eastern Europe 2006 – Déjà vu all over again? – warning that the region exhibited the most dangerous excesses in the world.

Inexplicably, the text was never published, though underground copies circulated. Little was done to cool credit growth, or to halt the fatal reliance on foreign capital. Last week, the silent authors had their moment of vindication as Eastern Europe went haywire.

Hungary stunned the markets by raising rates 3pc to 11.5pc in a last-ditch attempt to defend the forint’s currency peg in the ERM.

It is just blood in the water for hedge funds sharks, eyeing a long line of currency kills. “The economy is not strong enough to take it, so you know it is unsustainable,” said Simon Derrick, currency strategist at the Bank of New York Mellon.

Romania raised its overnight lending to 900pc to stem capital flight, recalling the near-crazed gestures by Scandinavia’s central banks in the final days of the 1992 ERM crisis – political moves that turned the Nordic banking crisis into a disaster.

Russia too is in the eye of the storm, despite its energy wealth – or because of it. The cost of insuring Russian sovereign debt through credit default swaps (CDS) surged to 1,200 basis points last week, higher than Iceland’s debt before Götterdammerung struck Reykjavik.

The markets no longer believe that the spending structure of the Russian state is viable as oil threatens to plunge below $60 a barrel. The foreign debt of the oligarchs ($530bn) has surpassed the country’s foreign reserves. Some $47bn has to be repaid over the next two months.

Traders are paying close attention as contagion moves from the periphery of the eurozone into the core. They are tracking the yield spreads between Italian and German 10-year bonds, the stress barometer of monetary union.

The spreads reached a post-EMU high of 93 last week. Nobody knows where the snapping point is, but anything above 100 would be viewed as a red alarm. The market took careful note on Friday that Portugal’s biggest banks, Millenium, BPI, and Banco Espirito Santo are preparing to take up the state’s emergency credit guarantees.

Hans Redeker, currency chief at BNP Paribas, says there is an imminent danger that East Europe’s currency pegs will be smashed unless the EU authorities wake up to the full gravity of the threat, and that in turn will trigger a dangerous crisis for EMU itself.

“The system is paralysed, and it is starting to look like Black Wednesday in 1992. I’m afraid this is going to have a very deflationary effect on the economy of Western Europe. It is almost guaranteed that euroland money supply is about to implode,” he said.

A grain of comfort for British readers: UK banks have almost no exposure to the ex-Communist bloc, except in Poland – one of the less vulnerable states.

The threat to Britain lies in emerging Asia, where banks have lent $329bn, almost as much as the Americans and Japanese combined. Whether you realise it or not, your pension fund is sunk in Vietnamese bonds and loans to Indian steel magnates. Didn’t they tell you?

From:

Europe on the brink of currency crisis meltdown - Telegraph

The next stage of the collapse - looks like the European banking collapse could follow the US....

German politicians were fast to blame "Anglo-Saxon" excesses for the financial crisis but the country's own banks, particularly state-owned lenders, have been anything but risk-averse.

Figures this week from the Bank of International Settlements showed that German banks were by far the most enthusiastic when it came to lending money to Iceland, the Nordic island state teetering on the brink of financial collapse.

Iceland owed banks in Europe's biggest economy over $21 billion (€16.5 billion), almost a third of the island's total liabilities and far more than any other country, data from the central banking body showed.

"This was a very surprisingly high number ... Iceland only has around 300,000 inhabitants, the same as a town like Wuppertal," said Konrad Becker, banking analyst at the private Merck Finck bank. "And no one is going to lend Wuppertal $21 billion.

"German banks, even state-owned ones, were not examples of a prudent, conservative way of banking," Becker told AFP.

The North Atlantic island has been hit hard by the financial crisis, with its government forced to nationalise its three largest banks and seek emergency bailouts from other countries and from the International Monetary Fund.

Germany's loans to Iceland were five times higher than those of banks in Britain, with regional German bank BayernLB's liabilities alone exceeding those of all Italy's main banks combined, according to the Handelsblatt daily.

The figures are from June, but it is unlikely that banks would have been able to reduce significantly their exposure before the financial crisis snowballed in mid-September, analysts said.

And it is not just Iceland. The data also showed that German banks have also been at the forefront of investing in other European countries offering high returns - and high risks - most notably in Ireland and Spain.

Ireland last month became the first eurozone member to be in recession after years of breakneck growth, while the collapse of Spain's once-booming property market has left many investors with their fingers badly burnt.

German banks have not yet given much detail but if the regional lender BayernLB is any guide - it has written off as worthless €800 million in loans to Iceland - this is going to add considerably to the pain already being felt in other areas.

BayernLB, one of Germany's Landesbanks, this week became the first lender to seek help from the government's €480-billion financial rescue package. Hamburg-based HSH Nordbank has since followed suit, and West LB is expected to take up the offer next week.

It is these state-owned lenders that are expected to be at the front of the queue for further bailouts, not private banks like Deutsche Bank or Commerzbank.

Meanwhile, the German finance minister turned up the heat on banks unwilling to take up the government offer. Peer Steinbrück criticized as "irresponsible" their reluctance to take the aid and see the banks fail instead.

"I would consider it irresponsible if a bank board were not to accept the protection offer and deliberately put up with a collapse of their institutions instead," he told Bild am Sonntag newspaper.

From:

Iceland creates banking pain in told-you-so Germany - The Local

Butterfly - please ignore this article as you believe that Iceland just had one branch (in the UK) of one its banks go bust, so clearly what you see here is not real.

Originally Posted by bkkandrew

Butterfly - please ignore this article as you believe that Iceland just had one branch (in the UK) of one its banks go bust, so clearly what you see here is not real.

LOL, rewriting history I see, didn't realize that IceSave was representating all of Iceland,

you are a silly little fraud