Bulls, Bears & Bucks #15: 400 punten sneuvelt

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Take Downs and Drawing the Wrong Straw
wallstreetexaminer
Saturday, July 12th, 2008 at 9:23 AM

The FDIC take down of IndyMac has occurred. This bank had $19.06 billion in deposits, and from the FDIC site it looks like the insurance pool will eat $4-8 billion on this one. With about $52 billion in FDIC reserves on hand, we can get some idea of the possible burn rate as this process unfolds with other banks.


From Aaron Krowne’s Bank Implode-Meter comes a comment about IndyMac defaulted homebuilder loans, and the problems and costs associated with half constructed housing projects. Aaron also offers some comments on Wachovia who appears to have brought in a Paulsen crony from Goldman Sachs. This is probably significant to my general theory that the last six months of the Bush administration will mark one of the greatest periods of systematic looting in American history. Never again will so many assets be handed off to regulators and corrupt apparatcheks for “distribution” to the privileged. This may make the “privatization” of the Soviet Union to Russian oligarchs look like a cake walk. Aaron also mentions that fact that JP Morgan will likely make a move in the Southeast. Wachovia? Maybe, but there are also a slew of smaller regional banks in that region too.

In asking the question of who gets looted and who gets the distressed pickings, I think it is important to consider who is most exposed. The answer is the investment banks who have thin capital bases relative to their fictitious capital holdings and obligations. The biggest plum of all are the assets of GSE’s Fannie Mae and Freddie Mac. Therefore I think we are going to see them dropping one by one like flies. And it really does look like the next crisis is Lehman Brothers. It is not that LEH is terribly more exposed than the others, it’s just that they apparently drew the wrong straw. I will also mention that with enormous amounts of wealth already transferred to oil sheiks and Asians that you can look for them to be the new owners of many marked down American assets. They have the purse, and the only nationality or race that is important is the green. You can count on that as much as you can count on the sun going down at night. Follow that ball.

Source: Reggie Middleton

I believe the pile on and stealing of American banks will happen at a very rapid pace, maybe even within just a few weeks. It really has to be a done deal by the end of this year. The events that tipped me off were wholesale downgrades of virtually all regional banks by Goldman Sachs, Citicorp and a chorus of lacky lapdogs in June. In addition the old Risklove rabble is running stock prices of banks into the ground with extremely aggressive short selling. For example short positions as % of float on June 15, (probably even higher now) : FHN 25.8%, CNB 36.3%, NCC 20.4%, SNV 19%, RF 12.3%, And now as if problems didn’t exist before, there is suddenly a panic recognition phase about Fannie Mae and Freddie Mac. What a coincidence! And what a coincidence that the overdue closure if IndyMac occurred this week. And next week we get a slew of 2nd quarter bank reports.

Allow me to give you a quick simplified primer (we can get more anal in the comments if you wish) on banks. Banking is a great business in almost all times. That is why I am convinced the great monied interests are lathered up for a crisis about now and before Paulsen and his lapdog Bush leaves office. A generic bank takes cheap deposits, lends to credit worthy businesses and Gente, and collects a spread of say 3-3.5%, minus operating expenses, netting out around 2.8%. Just using rounded numbers, for each dollar of capital skin in the game, they can take in deposits of $10, and make loans, and net out 28 cents against the Skin. Losses are then subtracted off, and the remaining profit is added to the Skin. If losses are running higher than previously anticipated (universal now) than it is reserved for and taken off of Skin.

In a banking crisis it is important to look at potential losses. One way to ball park whether the Skin shareholders are going down or to what degree they will be diluted is called the Texas ratio. This takes non-performing loans divided into tangible equity capital plus loan loss reserves. It is important to recognize that a non-performing loan is not a complete loss. Recoveries are a complete topic in and of itself, that I will attempt to shed light on as this phase unfolds. There are recoveries especially on mortgages. Figure that a ratio of 50% jeopardizes not only all the profit of banking, but also damages the leverage capital that is needed to exist as a bank. That bank will need to raise capital (preferred or common equity) to make that up, and right now the ability to do so is severe constrained even for more solid lower Texas ratio banks. The other method is as ominous, reduce or liquidate loans to bring in line with depleted capital.


We are about to get quite a snap shot of American banking conditions at mid-year, buckle your seat belts. If there is interest, I am available to respond to and develop more discussion on this specific topic all weekend. I am going to ask that all comments on today’s post be directly related to this topic.

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Op zaterdag 12 juli 2008 20:44 schreef Ali_Kannibali het volgende:
Wat gaat er nu gebeuren? Krijgen we nu dat domino-effect of iets?

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Op zondag 13 juli 2008 09:08 schreef indahnesia.com het volgende:
Filmpje is voor mij niet te laden helaas.. maar hoeveel is er al bekend/uit de markt van die 1.6 triljard?

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* Merrill Lynch - $37.5B/*/$34.4B (1)
Posted on July 11, 2008 8:03 PM
* Lehman Brothers - $7.2B/$6B/$42 (2)
Posted on July 11, 2008 10:05 AM
* Wachovia - $6.8B/$10.5B/$30.4B (4)
Posted on July 10, 2008 11:23 AM
* Bank of America - $4.4B/*/$31.4B (4)
Posted on July 8, 2008 12:16 PM
* Citigroup - $69.1B/$36B/$22.7B (7)
Posted on July 7, 2008 1:13 PM
* Barclay’s PLC - $6.4B/$7.8B (0)
Posted on June 30, 2008 6:02 PM
* HBOS PLC - $2.5B/$4B (0)
Posted on June 25, 2008 1:45 PM
* JP Morgan Chase - $9.9B (3)
Posted on June 23, 2008 5:45 PM
* Canadian Imperial Bank of Commerce(CIBC) - $6.7B (0)
Posted on June 23, 2008 11:44 AM
* Wells Fargo - $2.9B/0/$23B (2)
Posted on June 21, 2008 12:09 PM
* Morgan Stanley - $23.2B (0)
Posted on June 19, 2008 1:38 PM
* Fifth Third Bancorp - $155M/$2B (0)
Posted on June 18, 2008 5:16 PM
* Goldman Sachs - $6.2B (3)
Posted on June 17, 2008 5:15 PM
* National City - $200M (0)
Posted on June 6, 2008 10:45 AM
* Royal Bank of Scotland - $3.6B/$24B (2)
Posted on June 4, 2008 5:34 PM
* Societe Generale SA- $13.7 /$8.5B (0)
Posted on June 4, 2008 3:08 PM
* BNP Paribas SA-$2.5B/ $0 cash (0)
Posted on June 4, 2008 2:39 PM
* Washington Mutual - $1.6B (2)
Posted on June 2, 2008 1:03 PM
* UBS - $45.0B/$41.5B (2)
Posted on June 1, 2008 11:22 AM
* Royal Bank of Canada - $1.4B (0)
Posted on May 29, 2008 6:07 PM
* Bank of Montreal (BMO) - $611M (0)
Posted on May 29, 2008 1:02 PM
* Mizuho MFG - $5.4B (0)
Posted on May 22, 2008 2:09 PM
* Bayern LB - $9.8B (0)
Posted on May 19, 2008 7:42 AM
* WestLB AG - $4.8B (0)
Posted on May 19, 2008 7:35 AM
* Natixis - $3.4B (1)
Posted on May 19, 2008 7:31 AM
* HSBC Bank PLC - $6.6B (0)
Posted on May 19, 2008 5:32 AM
* Credit Agricole SA-$13.8B (0)
Posted on May 12, 2008 5:18 PM
* Credit Suisse - $5.95B (0)
Posted on May 2, 2008 5:20 PM
* Deutsche Bank - $18.6B (1)
Posted on May 2, 2008 5:19 PM
* Mitsubishi Financial Group - $760M (0)
Posted on April 23, 2008 12:54 AM
* US Bancorp - $1.2B (0)
Posted on April 16, 2008 12:13 PM
* SunTrust - $718.7M-$1.5 B (1)
Posted on April 13, 2008 6:33 PM
* Bank of NY Mellon - $118M (0)
Posted on April 9, 2008 11:19 AM
* Sovereign Bancorp - $1.580B (0)
Posted on April 8, 2008 1:29 PM
* IKB - $12.91B (0)
Posted on March 20, 2008 8:13 PM
* DZ BANK AG - $2.1B (0)
Posted on March 7, 2008 9:52 PM
* HSBC - $26.5B (0)
Posted on March 5, 2008 5:25 PM
* Commerzbank - $855M (1)
Posted on February 15, 2008 9:48 AM

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Op zondag 13 juli 2008 09:20 schreef indahnesia.com het volgende:
Precies, hoewel niemand opschiet met een complete systeemcrash lijkt dat doemscenario (een van de velen overigens ) toch dichterbij te komen voor mijn gevoel.

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Uit het onderzoek van KPMG blijkt dat bijna 60% van de traditionele vermogensbeheerders gebruik maakt van derivaten. Het gebruik van hedge funds ligt met 61% zelfs hoger.

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Op zondag 13 juli 2008 09:31 schreef indahnesia.com het volgende:
Inderdaad boeiend, en dezelfde vraag die ik me twee weke geleden stelde..

Waarom HSBC zo lekker stabiel lijkt, het kan gewoon niet goed zijn, al zitten ze maar voor een klein deel in de VS.

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Op zondag 13 juli 2008 09:41 schreef Drugshond het volgende:

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HSBC was wel de instelling die het eerste aan de bel trok bij de aanloop van de kredietcrisis. Geen idee hoe ze met hun posten hebben liggen schuiven (over de afgelopen 2 jr). Maar als ik de cijfers bekijk lijkt het erop dat ze N-America hebben losgelaten. Maar goed... ook in China en India vallen klappen.... de inflatie is daar double digits.

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Op zondag 13 juli 2008 09:44 schreef indahnesia.com het volgende:

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alleen is iedereen nog druk doende met de verdere groei van de problemen in de VS/UK/Europa voordat er naar India en China gekeken wordt.. kan nog een harde klap worden dus... volgend jaar dan maar? Gewoon 1 voor 1 de problemen achter elkaar zetten is wel zo overzichtelijk

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Op zondag 13 juli 2008 10:05 schreef indahnesia.com het volgende:
2010-2012, dus dit gezeik gaat nog vier jaar (minimaal!) duren... o jee...

Volgens mij staan de geldpersen al te draaien om toch maar vooral zoveel mogelijk dollars te hebbe mocht het nog fouter gaan.

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Op zondag 13 juli 2008 09:08 schreef indahnesia.com het volgende:

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Filmpje is voor mij niet te laden helaas.. maar hoeveel is er al bekend/uit de markt van die 1.6 triljard?

En wat voor Fannie en Freddie? dat is 5 triljard USD die 'gered' moet worden..

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Op zondag 13 juli 2008 10:37 schreef Wheelgunner het volgende:

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1,6 triljard? Dat is 1.600.000.000.000 miljard...

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Op zondag 13 juli 2008 10:37 schreef Wheelgunner het volgende:

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1,6 triljard? Dat is 1.600.000.000.000 miljard...

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Obama Says U.S. May Not Take Any Action to Aid Fannie, Freddie
July 13 (Bloomberg) -- Democrat Barack Obama left open the possibility that the federal government won't need to take any steps to aid mortgage giants Fannie Mae and Freddie Mac, saying it needs to watch the evolving situation before making a decision.

“I think we need to watch carefully to see how it plays out before we make a decision about which steps need to be taken, if any,” Obama, 46, said aboard his campaign plane from Chicago to San Diego late Saturday. It was the first time Obama addressed concerns over the stability of the two firms that own or guarantee almost half the $12 trillion in U.S. mortgages.

Obama, his party's presumptive presidential nominee, said he's committed to making sure there's liquidity in the housing markets and that Fannie Mae and Freddie Mac “play critical roles in that process.” Obama said he's been monitoring the situation “closely”' and that it's “of extraordinary concern.” If the government were to step in and provide the firms with more liquidity, “there are a lot of different definitions of what a bailout would look like,” Obama, an Illinois senator, said without providing specifics.

“There are issues related to the short term liquidity — can they borrow money — versus issues related to whether the underlying assets of the two corporations are really unsound,” he said.

Mortgage Crisis
U.S. Treasury Secretary Henry Paulson on Friday signaled that a government takeover of the two firms, the biggest buyers of U.S. mortgages, won't be necessary, saying they should continue as shareholder-owned companies with federal charters. Senator John McCain of Arizona, the presumptive Republican presidential nominee, told reporters July 11 that Fannie Mae and Freddie Mac would “very likely require some kind of government assistance,” and while he didn't know what the best immediate action would be, McCain said he'd “support effective action to keep them from going under.”

Obama said the “bigger problem” is the broader mortgage crisis and that with “some prudent steps by the government that we'll be able to stabilize the situation.”

He praised the $300 billion housing rescue package that the Senate passed this week and called on President George W. Bush to sign it, saying the U.S. has moved into a recession and it's necessary to move “swiftly” on a final housing bill. Obama also reiterated his call for an additional $50 billion stimulus package. Still, he said, the Senate housing bill “is not the end-all, be-all; there's going to still be some working out to do.”

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Beware of Sending Fannie and Freddie Stock to Zero
The press and many professional stock analysts are predicting that Fannie Mae’s (FNM) and Freddie Mac’s (FRE) stock price will go to zero in a government bailout. The level of fear is so intense that the shorts have hit without caution. At the same time, the press and Wall Street professionals are saying bondholders will be safer with a government bailout. Nobody really knows what form a bailout would take or even if one is necessary. But we are being told to watch the Freddie Monday debt offering intently for clues.

While I think most of the fear mongering is engineered by the shorts, I don’t know if the GSE’s “accounting insolvency” will become a real liquidity crisis. Remember that the GSE’s only guarantee a stream of payments, not immediate payout on default. Write downs and cash flow are two entirely different things.

Let’s say the basis for fear is sound and the Treasury opts to kill the Fannie and Freddie equity. How does this affect the rest of the banking system? This would be the second bailout under Treasury Secretary Paulson’s “moral hazard” rhetoric. Just like Bear Stearns (JPM), Paulson would want to make sure that Fannie and Freddie equity holders are hurt. What would stop him?

All this rush to judgment is forgetting that once even one more pivotal financial institution’s shareholders are wiped out, no other financial companies will be able to raise capital. The fear of equity investors would be so great that Citibank (C), Lehman (LEH), Merrill Lynch (MER), and even venerable JP Morgan (JPM) will completely lose access to raising new equity. What’s more, current outstanding equity prices will plummet. Paulson cannot afford this level of moral hazard.

Paulson is being awakened to the need to balance moral hazard with building confidence. Too much moral hazard and banks, along with the GSEs will be forced to shrink their balance sheets. This will further apply the brakes to the economy. I believe Bear Stearns was enough moral hazard; now is the time to rebuild confidence.

Two proposals that surfaced in the press that make sense: the Treasury buying GSE preferred stock and the Treasury or Fed extending a line of credit to the GSEs. The Treasury purchase of convertible preferred stock would create a major delusion, but current shareholders would still be able to participate in the recovery. Opening the discount window or expanding the Treasury’s line of credit would instill immediate confidence in the GSE debt. Both of these actions would allow the GSEs to return from technical insolvency.

The worst moral hazard would be to put the GSEs into receivership. Then the government would equate GSE debt with treasuries. This would give Congress free will to use the GSEs to promote social policy with no constraints, and substantially grow the public debt. No conservative administration can take comfort in this.

I am sure Paulson does not want to constrain the entire banking system to teach Fannie and Freddie shareholders a lesson. The GSEs might never have to access the line anyway, but just having it would actually kill the shorts. The side effect might be to save Lehman too.

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Op zaterdag 12 juli 2008 18:53 schreef icecreamfarmer_NL het volgende:
Nu nog GM wat omvalt en de chaos is compleet

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Grootste hypotheekverstrekker Amerika stort ineen

zaterdag 12 juli 2008 10:07

De nog steeds uitdijende kredietcrisis in Amerika heeft zijn grootste slachtoffer tot nu toe gemaakt: IndyMac Bank, een van de grootste aanbieders van hypotheken is overgenomen door de Amerikaanse overheid.

Amerikaanse hypotheekverstrekkers nog steeds in problemen door dalende huizenprijzen Amerikaanse hypotheekverstrekkers nog steeds in problemen door dalende huizenprijzen

Het Federale Bureau Toezicht Spaarbanken (OTS) heeft vrijdag de controle over de bank overgenomen omdat werd gevreesd dat er niet meer aan de betalingsverplichtingen kon worden voldaan.

'Deze instellingen faalde vandaag vanwege een liquiditeitscrisis,' verklaarde OTS-directeur John Reich. Maandag gaat de bank weer open onder de naam IndyMac Federal Bank FSB.

Overleven
IndyMac is de grootste spaar- en hypotheekbank van de VS en de op één na grootste financiële instelling die er ineenstort, na de ondergang van de Continental Illinois National Bank and Trust Company in 1984.

Het bedrijf kwam in de problemen omdat steeds meer spaarders geld van hun rekening begonnen te halen, nadat de Democratische senator van New York, Charles Schumer, zich eind juni openlijk afvroeg of IndyMac de crisis wel kon overleven. In bijna twee weken werd er vervolgens ruim 800 miljoen dollar (502 miljoen euro) teruggetrokken.

Reddingsplan
De IndyMac Bank is dit jaar de vijfde instelling die de crisis - veroorzaakt door dalende huizenprijzen en te gemakkelijk verstrekte hypotheken - niet overleeft.

Ook andere hypotheekaanbieders verkeren in zwaar weer: Freddie Mac en Fannie Mae, de twee grootste spelers, zagen hun beurskoers gisteren met 50 procent dalen.

De koersen herstelden pas toen de Amerikaanse minister van Financiën Henry Paulson verklaarde dat hij er alles aan doet om de twee bedrijven te steunen. Plannen voor een omvangrijk reddingsplan voor hypotheekverstrekkers wilde hij volgens de Britse zender BBC niet bevestigen.

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Op zondag 13 juli 2008 13:05 schreef indahnesia.com het volgende:

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hmjah, die dollars lagen nog te drogen!

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Op zondag 13 juli 2008 13:01 schreef pberends het volgende:
Ik snap iets niet:
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Je gaat me toch niet zeggen dat een uberbank en uberhypotheekverstrekker als IndyMac niet eens een lousy 800 miljoen dollar cash achter de hand heeft?

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Op zondag 13 juli 2008 12:34 schreef Martijn_77 het volgende:

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Dan gaat er veel meer in de USA. Dan gfa je een domino effect krijgen

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Op zondag 13 juli 2008 13:05 schreef indahnesia.com het volgende:

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hmjah, die dollars lagen nog te drogen!

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“If the state takes away the market discipline that compels the recognition of mistakes…capitalism can generate losses and misallocation of resources even faster than socialism.”

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Op zondag 13 juli 2008 13:31 schreef henkway het volgende:

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Dan gaat Fortis er ook aan , want die 8 miljard kan ook zo op zijn, die banken hebben vaak belangen in elkaar

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Op zondag 13 juli 2008 16:24 schreef dewaal het volgende:

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Dat zal niet gebeuren dat Fortis omvalt.

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Op zondag 13 juli 2008 17:21 schreef henkway het volgende:

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Ik denk dat grote instituten hun geld al weg halen bij Fortis en bij de RABO onderbrengen, ofniet??

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Op zondag 13 juli 2008 17:45 schreef dewaal het volgende:

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Dat denk ik niet. Zelfs balkenende zei FORTIS valt niet om.

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Op zondag 13 juli 2008 18:48 schreef ItaloDancer het volgende:
Maandag gaan we gewoon omhoog hoor.

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Op zondag 13 juli 2008 18:50 schreef henkway het volgende:

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ok, maar de trend is down

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Op zondag 13 juli 2008 18:48 schreef ItaloDancer het volgende:
Maandag gaan we gewoon omhoog hoor.

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India's Inflation Accelerates to Fastest in More Than 13 Years

By Kartik Goyal

July 11 (Bloomberg) -- India's inflation accelerated to the fastest pace since 1995, raising concerns the central bank will increase borrowing costs for a third time this year.

Wholesale prices rose 11.89 percent in the week to June 28, after gaining 11.63 percent in the previous week, commerce ministry spokesman Rajeev Jain told Bloomberg News in an interview today. Economists expected an 11.75 percent increase.

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Op zondag 13 juli 2008 18:54 schreef Drugshond het volgende:

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Tot aan de beursopening van de States.
Ik verwacht nogal wat vuurwerk...

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Op zondag 13 juli 2008 17:45 schreef dewaal het volgende:

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Dat denk ik niet. Zelfs balkenende zei FORTIS valt niet om.

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Op zondag 13 juli 2008 17:45 schreef dewaal het volgende:

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Dat denk ik niet. Zelfs balkenende zei FORTIS valt niet om.

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Op zondag 13 juli 2008 19:34 schreef ItaloDancer het volgende:

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Niet te hopen, heb een paar calletjes lopen

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Op zondag 13 juli 2008 20:24 schreef henkway het volgende:

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nou er is veel angst in de markt, zeker nu net op TV was dat china de bodem in Olie putten ziet en ieder jaar MINDER olie gaat pompen, dus niet, Niet meer, nee MINDER.