Warm_Paw

Banks Scramble to Refinance Their Long-Term Debt

For our commentators.
If you dislike the reality of the situation, don't pick on the messenger.
I want to continue to be informed.
Positive news always makes me say "Yeah Right"
Negative news is hard to deliver, so it carries more weight in truth, in my opinion.
Bottom line is - there has been no transparency on where the banks are in ridding themselves of their toxic assets. The fact is, that is the heart of the crisis so just to go into denial on the subject did not make the problem go away.
The govt does not have another $700 billion to throw at this and it hasn't mitigated the damages because the banks have refused to write down the toxic assets in trying to put a positive spin on earnings. So toxic assets are still there, Fed dumping money into market has created Fed Bubble.
When Fed runs out of money - bubble gets pricked.
Banks who then can't get funding will fall like dominos.

What About Citigroup and BofA's Billions in Deferred Tax Assets?

Having two sets of books IS DODGY!
It's an example of how complacent the regulating authorities are.
The book for the taxman is closer to true value than the bright shiny and deluded book handed to the investor.
It's called fraud in the criminal courts but hey, Wall Street writes their own rules. They're BIGGER than the Govt.
Citi's cooked - not just it's books. I'm sure what is being reported by Citi has been adjusted with the suspension of FASB rules so the situation is most likely worse than the rosy picture they're painting.
And with all the CFO's and CEO's declaring they're comfortable with their present situation, what else are they going to say?
"Oh My God!!!! We're going to Crash and Burn!"
They're trying to sucker the unsuspecting public into purchasing their worthless shares?
Recall these execs owning massive amounts of shares in disturbing compensation packages? The warm fuzzy feeling comes from knowing their compensation for driving three large US banks into the ground has less of an intrinsic value than Bathroom tissue.

U.S. Handling of Financial Crisis - A Less Optimistic View

I for one am not blaming Obama for this mess. It began in 1999 2000.
The problem is, Obama's been handed the problem and is listening to the people who created this problem and are lining their pockets on his presidency. Half of the bailout money was handed out pre Obama leaving Obama holding the bag in handing out the other half.
There's no way one wins a presidential election and can be up to speed with the finances of the country.
Bush handed Obama a time bomb.
The problem I have is that Obama continues down the path of his own destruction by not getting his own people, or even expert advice on what is occurring. He's relying on the crooks who did this to inform him. A fox watching the henhouse.
Even yet the people who are responsible for this systemic risk, fight regulation. Guess why that is?
Obama should let whatever institution that took the risk, fail.
Strong institutions are there to pickup business from the risk takers.
No one knows what the result would have been had these institutions had not been bailed out.
They've been bailed out and the average citizen is not enjoying any signifigant change because of that. Just the banks are enjoying survival at the expense of the tax payer.
A naive president believes everything everyone tells him when it offends the senses.
The emporer is wearing no clothes.

The Secret to the Banking Sector's Success

When the greenback becomes the peso, I buy property.
By the time the greenback's on par with the yen , CEO's will be demanding their bonuses in euros.

As Asset Valuations Soar, Earnings Wobble - How Safe Is Banking?

So many articles, so little actually said...

Let's start with question #1.
Of the top ten banks, how much toxic asset does each bank hold?

#2.
What is the book value for these assets?

#3.
What is the market value of these assets?

#4.
How many banks have suspended mark to market accounting?

#5.
If forced to sell these toxic assets, can these banks produce effective capitalization to meet their requirements?

#6.
Can these banks even calculate future losses on MBS' due to bundling?

#7.
When are the next wave of matuiry dates to occur?

There media people - answer these questions.

This should get GE on the ball and sell CNBC before the answers come out. hehe

Where Is the Line Between Conventional Banking and Pure Trading?

It appears the plan where the Fed dumps money into the financial system - while investors like Goldman Sachs reap the benefits of the stimulus, still aren't enough to get the banks to a state where they can unwind these toxic assets once and for all.
I doubt the toxic assets have even been dented.
Goldman has discussed purchasing these assets yet anyone stricken with them does not want to sell them at firesale prices for fear of the damage to the balance sheet and the mad scramble to increase reserves. Now if Goldman believes it can purchase mortgages on pennies to the dollar and that the real estate market will just jump back to the 2005 era, they're delusional.
Unemployment, govt defecit and the loss of billions of dollars of market value are going to keep that from happening.
The pre 2005 easy money era was stoked by crazy lending practices and if we repeat that mistake again the next hit will be hell to pay. The govt is creating legislation to make lending practices accountable.
The govt should never have bailed out anyone and let a free market system correct itself. The destruction of what doesn't work into the rebuilding of that which is more efficient and stronger.
Because the govt has subsidized the crooks going against logic and the natural order of such events in financial systems, the economy is going to hang in limbo, on life support, until a time when the next waves of destruction reset the financial system to a base level which is then ready to build itslef up from the ashes.
It's inevitable.

If a Bubble Bubble Bursts Off the Balance Sheet, Will Anyone Be There to Hear It?

I applaud the writers at Seeking Alpha for actually informing the public of the real issues confronting America. I'm surprised you have not been censored or your web site infected.
I doubt the powers that be wish to discuss the truth until the American public has taken these toxic assets off the banks books.
The FASB accounting rules are allowing the suspension of mark to market accounting until March 2010.
Jan 2010 is the next tidal wave of Option A loans and I doubt the Fed has another 700 Billion to deal with this wave.
Whoever thinks the recession is over may be correct in that the world may need to consume at a marginally higher rate, but the money and employment isn't there. The world will starve at a higher rate. The dollar falling apart may bring employment to America but only if textile mills and manufacturing return to the USA.
The bottom line - America, with unionized wages could afford big ticket items. Then manufacturing was offshored to China, India and Mexico for workers earning $2 a day. America lived on it's line of credit and home equity loan (second mortgage).
We import everything cheaper than we can produce it.
Now that we're broke - $2 a day workers are getting layoff notices.
All the big money Wall St. crooks reinvested the wealth amassed in shady back room deals and the resulting destruction has wiped out their profit. Now we're unemployed and can't live off the profits of the shady investing practices.
Bundling MBS's that weren't AAA grade and stamping them AAA has caused huge systemic chaos to the financial system.
I've heard the bundling and writing CDS's for these MBS's was legal.
There's a law which would deal with what has occurred.
Everyone involved should be charged with treason...

Bank Earnings: Reality Check Ahead

The bank earnings are going to be slightly positive but aren't true earnings. The FASB accounting rule changes are still in place. There isn't true transparency. Mark to market rules have been suspended. So for the average schmuck the markets will go higher and everyone will believe the worst is over.
Timothy Long has it correct about the credit cycle.
Unwinding toxic assets has been deferred.
The crisis is still underlying. The banks don't want to unwind them because they will have to find money to increase their capital reserves. The Fed isn't pushing the matter because only maturity of the toxic assets will indicate how bad the situation is and the hope is time will let these securities unwind themselves.
The next wave of Option Arm is Januaty 2010 so markets could go higher until then. It is a sucker's rally though. The higher the markets go, the more the unwitting fool is to lose come 2010.
What if the situation is ten times worse than forcasted?
No one truly knows what these bundled MBS are truly worth until they're unwound. The real estate market is in shambles and people are still foreclosing, only commercial properties are tanking now.
High unemployment is adding to the fray.
Of course greed is a strong emotion and the masses invest without a clue as to what is occurring around them. One would think with existing losses they'd stay away from markets.
It must be the desire to lose.

FDIC: A New Concern for Bank Liquidity

Maybe AIG and the GSE's will bounce back to profitability and solve the Governments medical and pension problems.
It would be nice if they just bounced back to pay back the Fed.
Where else does the govt stow these toxic assets until they can be unwound and their true worth discovered?
As for Goldman, Paulson saved their backsides.
They should be the sole bank that gives money to the FDIC.
They pay all the banks installments.

Are Banks Being Naughty Again with Derivatives? Could Be Good

AIG reports earnings in Oct. If the Fed doesn't continue to prop them up the next bank that leans on them for insurance on a CDS is going to find out the CDS wasn't worth the paper it was written on.
AIG could see a loss of -$3 to -$20 a share.
Intrinsic value is probably in the negatives already.
I can only wonder who is purchasing their shares?
The banks don't have a choice on trying to earn their way out of this.
That's what's occurring. Money's being dumped in to create value to mitigate losses.
That means that once money starts to flow, it will be removed from the markets where it can. That means sideways if not stagnant recovery.
My question is, if each individual on the planet is balance their books and be fiscally responsible, why can't governments do it?
Or is capitalism one big defecit to bankruptcy, only to start again once prices inflate?

Taylor Bean: A Cautionary Tale for Ginnie Mae

The banks have to rid themselves of these toxic assets without taking too big a loss. Once the banks have clean capitalization they can free up reserve money and lend it. Lending it gets money flowing and circulating again.
On a crisis of this size, those toxic assets have to go somewhere.
The GSE's are the logical dumping ground.
The toxic assets are close to worthless only while everyone abandons their mortgage. If these mortgages were left in a pile somewhere until each mortgage was allowed to either come to maturity or be defaulted on, the existing mortgage backed toxic assets would then find one third of their value as worthless, one third reduced and one third of quality value.
The GSE's are a staging area just to seperate the toxic assets.
They can't be unwound until they come due or are defaulted upon.
Any toxic asset where the original borrowers continue to meet payment, isn't a toxic asset. Only time will allow discovery.
If all three GSE's - Ginnie, Fannie and Freddie were to hold all the toxic assets, the banks would be freed. The govt continues to prop up the GSE's until the toxic assets are unwound. Quality MBS's would remove the GSE's losses as they're seperated. Partial losses and total losses leave the GSE's with the property to now hold instead of the securities. Who better to organize that transition than Ginnie, Fannie and Freddie?
Who better to resell to when the banks are restored in balance sheet and capable of lending money to home buyers?
The alternative was the collpase of the financial system of America and many countries around the world.

Options Trader Friday Outlook: Up, Up and Away

I'm of the opinion we'd be in free fall right now if the public was allowed to know the truth. Delinquincies are easing only because mortgage resets are easing. Next summer will be the next wave of downturn as Option ARMS reset at a pace close to the sub prime resets we've just worked through.
Banks have been allowed some accounting rule changes which don't truly reflect where they really are.
When mortgages were lent, the banks booked real time value on mortgage backed securities that weren't really of the quality the banks were lead to believe. With each foreclosure, banks are learning what exactly their mbs is really worth.The banks haven't had to show the public what their market value is at this point. They're still showing book value as if the foreclosures were a non event. Like someone soon will repurchase the property and pay the outstanding mortgage, giving value back to their mbs. Banks would like to write off losses if they could only realize them. As each foreclosure occurs, the bank truly holds less money. It would be interesting to know where the banks are in losses. The part that closes the bank is the fact they need X amount of capitalization to what they lend the public.
If we learned what their losses were, they'd have to find cash to recapitalize and there's nowhere to find that cash. Everyone else is hurting too. The Fed won't have enough to give again.
Fractional Reserve Banking reuses money deposited so banks usually actually own probably 1/5 of the actual dollars they circulate.
The FDIC is almost broke so the depositor is going to get a 1929 feel to this downturn.
America is out of gas and if manic efforts to rally this market fail - it's going to be a fire sale to people who have no money.
Ironic how the whole house of cards is built on faith and the value of anything is only what someone else will pay for it at any given moment.
If people knew the truth not only would they not invest, they'd keep deposits to a minnimum.
I pick September 17 2009 as the day someone points out the emporer isn't wearing any clothes.
It's the beginning of the next wave of resets.

Bank Lending Stays on the Sidelines

Banks want to repay 50 billion back to the govt over the year, yet want to give exec bonuses of 63 billion.
Time for the govt to legilate that excessive exec compensation is a criminal offence.
As long as these banks had to borrow to stay alive, they respect their debt by repaying as much as they can as soon as they can.
The fact they were near destroyed has me conclude, no one deserves a bonus!

Bank Lending Stays on the Sidelines

I take it the banks are trying to figure out where they are.
Lending while purging would only create more info to differentiate and keep track of.
The banks are helping the govt by purchasing treasuries to keep money circulating.
Joe Public will take the hit for Non GSE mortgages.
The hit's coming. Sept 17 through to mid Oct.
Option ARMS reset at 25 billion dollar value .
Sub Prime and Alt A at 20 billion dollar value each.
The real hit comes mid 2010. Option ARM's will reset like Sub Prime did in 2008. These resets are high right through to 2011.
Here's the question...
How many of these resets will default?
Next question...
Who's holding the mortgages (or the mortgage backed securities)???
The lack of transparency and the tentative way in which the Fed is approaching this has me believe they don't know either.
The fact they're using the CMT as an arena for clearing Credit Default Swaps shows that someone wants to find a way to record what banks have been doing over the counter in the way of hedging risk against these MBS'.
Surely mortgage brokers are registered in each state and all banks and brokers, including Fannie and Freddie could list what has been lent out in Option ARM's, Sub Prime etc. to give the Fed a rough dollar amount of mortgages coming due.
I realize the worth of these loans pre crisis will be substantially different to their value at this point - but investors would like to know where we are in all of this.
Values only an issue on defaulting mortgages, so I reckon they have to default before a record can be created. Then to sort out what bundles MBS' hold the defaulted amounts.
Tracking who bundled and sold what is another issue.
How did this kind of thing not have regulation. It's a shell game.
We've got two more major hits to the financial system.
One in these next two months and one mid 2010.
2011 will be rough but we'll have a handle by then.

The Coming Consequences of Banking Fraud

This is a good article. It's obvious there are no shortage of negatives in the face of this bull run.
The cause of the crisis is the sub prime mess.
No one discusses the sub prime mess anymore.
Just like it went away over night.
Is it reality that markets are being promoted to unwind those toxic assets on the unsuspecting public.
To recoup share price on zombie banks to some acceptable level and leave the public holding the bag when that level is reached?
I believe sub prime mortgages come due mid november and that option ARMS then peak in coming due right into 2010.
The options ARMS are in larger volumes than what we've experienced with the sub prime mortgages.
With low employment, the world economy in a holding pattern, oil amassing to the point there is little storage remaining,taxpayers going bankrupt and now a deficit (not spiraling) but instantly out of control, I'm not very bullish either.
The media use percentages to claim certain stocks have gained fifty percent over the last three months after the given stock has collapsed 1000%. A $1 stock gaining .50 is fifty percent. Percentages are deceiving.
As the economic indicators continue their downward trend the stats are being discussed as not as bad as what investors expected.
Who decided what investors expected?
Downward is downward, no amount of lipstick will help the pig.
Greed seems to keep the high rollers coming back. Or is it stimulus dollars being used to prop up an otherwise barren landscape.
As for sideline money - you don't lose trillions of dollars of wealth and still have sideline money. There is no cavalry. Come up with a new source of eternal springing hope.
Sideline money is a dead horse.
Mid september the pain begins.
Of course AIG will be worth $100 a share while having an intrinsic value of -$38 billion dollars. Such is the ability to manipulate these days. Either way, my moneys to precious to have it pulled out from under me like a rug.