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30th March 2009, 08:12
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#9621 (permalink)
| | Royalties Account Holder |  Re: The great interest rate rip off
http://www.bloomberg.com/apps/news?pid=20601110&sid=a3Q DKWhPG9Dw] Quote:
Spain mounted its first major bank rescue in 16 years as the state took over Caja Castilla-La Mancha after efforts to choreograph its purchase by a rival lender failed. The Bank of Spain said yesterday it appointed administrators to run the savings bank after removing its management. As part of the rescue, the government pledged to guarantee as much as 9 billion euros ($12 billion) of the lender’s liabilities.
“There must have been no other way out,” said Jose Carlos Diez, chief economist at Intermoney SA in Madrid. “This was not the preferred option.”
Loan defaults in Spain have tripled since the global financial crisis began in 2007, ending the country’s real estate boom and boosting unemployment to a European-Union high of 14 percent. The economy is in the grip of its worst recession in half a century, with the government forecasting a contraction of 1.6 percent this year.
Finance Minister Pedro Solbes and Prime Minister Jose Luis Rodriguez Zapatero travel to London this week to discuss strategies for tackling the global financial crisis with leaders of the world’s leading industrialized and emerging nations.
The Germany government will take an 8.7 percent stake in Hypo Real Estate Holding AG after it posted a wider-than- expected 5.46 billion euro loss, the company said March 28. Dunfermline Building Society in the U.K. will likely be taken over today, chairman Jim Faulds told the BBC yesterday.
‘Still Very Solid’
“The Spanish financial system is still very solid, but nobody is immune to a difficult economic situation that could drag on,” said Solbes, after the government met in Madrid to approve the takeover. Caja Castilla accounts for about 1 percent of the Spanish financial system, he added.
While Caja Castilla remains solvent, its deteriorating capital position and financial outlook meant that measures were required to ensure the lender could survive further turbulence in financial markets, the Bank of Spain said. The savings bank is holding at least 3 billion euros of loans that are “unrecoverable,” El Mundo newspaper reported March 9 citing a report by the central bank.
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30th March 2009, 08:17
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#9622 (permalink)
| | Royalties Account Holder | Re: The great interest rate rip off
The Quiet Coup - The Atlantic (May 2009) Quote:
The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.
One thing you learn rather quickly when working at the International Monetary Fund is that no one is ever very happy to see you. Typically, your “clients” come in only after private capital has abandoned them, after regional trading-bloc partners have been unable to throw a strong enough lifeline, after last-ditch attempts to borrow from powerful friends like China or the European Union have fallen through. You’re never at the top of anyone’s dance card. The reason, of course, is that the IMF specializes in telling its clients what they don’t want to hear. I should know; I pressed painful changes on many foreign officials during my time there as chief economist in 2007 and 2008. And I felt the effects of IMF pressure, at least indirectly, when I worked with governments in Eastern Europe as they struggled after 1989, and with the private sector in Asia and Latin America during the crises of the late 1990s and early 2000s. Over that time, from every vantage point, I saw firsthand the steady flow of officials—from Ukraine, Russia, Thailand, Indonesia, South Korea, and elsewhere—trudging to the fund when circumstances were dire and all else had failed.
Every crisis is different, of course. Ukraine faced hyperinflation in 1994; Russia desperately needed help when its short-term-debt rollover scheme exploded in the summer of 1998; the Indonesian rupiah plunged in 1997, nearly leveling the corporate economy; that same year, South Korea’s 30-year economic miracle ground to a halt when foreign banks suddenly refused to extend new credit.
But I must tell you, to IMF officials, all of these crises looked depressingly similar. Each country, of course, needed a loan, but more than that, each needed to make big changes so that the loan could really work. Almost always, countries in crisis need to learn to live within their means after a period of excess—exports must be increased, and imports cut—and the goal is to do this without the most horrible of recessions. Naturally, the fund’s economists spend time figuring out the policies—budget, money supply, and the like—that make sense in this context. Yet the economic solution is seldom very hard to work out.
No, the real concern of the fund’s senior staff, and the biggest obstacle to recovery, is almost invariably the politics of countries in crisis.
Typically, these countries are in a desperate economic situation for one simple reason—the powerful elites within them overreached in good times and took too many risks. Emerging-market governments and their private-sector allies commonly form a tight-knit—and, most of the time, genteel—oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders. When a country like Indonesia or South Korea or Russia grows, so do the ambitions of its captains of industry. As masters of their mini-universe, these people make some investments that clearly benefit the broader economy, but they also start making bigger and riskier bets. They reckon—correctly, in most cases—that their political connections will allow them to push onto the government any substantial problems that arise.
| Continues at the link. | |
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30th March 2009, 08:23
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#9623 (permalink)
| | Royalties Account Holder | Re: The great interest rate rip off
http://www.telegraph.co.uk/finance/economi...f-recovery.html Quote:
The average home in England and Wales lost 0.6% of its value during the month, down from drops of 0.8% in February and 1% in January, according to property intelligence group Hometrack.
The group said the fall was the lowest it had recorded for 10 months, and was likely to reflect increased optimism among estate agents on the back of a rise in both the number of potential buyers in the market and properties sold.
The number of buyers registering with estate agents increased for the second month in a row, rising by 9% following February's jump of 17%.
There was also a 19% increase in sales agreed, after sales levels soared by 36% the previous month, although the group added that volumes still remained well down on normal levels.
The average time a property is on the market fell from 12 weeks last month to 11.3 weeks, while the percentage of their asking price that sellers achieved rose slightly for the first time in two years to 88.8%.
Richard Donnell, Hometrack's director of research, said: "An increase in the volume of sales agreed in the last month, albeit off record low levels, and buyers continuing to register has led to a small but growing sense of optimism among estate agents.
"While market conditions remain extremely tough, and the economic outlook is far from rosy, the net result is that agents are currently marking down prices less aggressively than they were in the autumn when the turmoil in world markets was at its peak."
But he warned that the situation could be reversed in the near-term, as much still depended on improved consumer confidence, a gradual recovery in mortgage lending and greater stability in the economic outlook.
He added that house prices had fallen by 10.3% during the past 12 months, and weak demand was likely to keep them under downward pressure for the foreseeable future.
Mr Donnell said: "Demand is set to remain subdued and while the rate of price falls is likely to moderate slowly, prices look set to remain under downward pressure over the rest of 2009."
| Unemployment will sure kickstart the housing market, the only way is up from here...... | |
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30th March 2009, 08:25
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#9624 (permalink)
| | Royalties Account Holder | Re: The great interest rate rip off
Zero Hedge: Exclusive: AIG Was Responsible For The Banks' January & February Profitability Quote:
Zero Hedge is rarely speechless, but after receiving this email from a correlation desk trader, we simply had to hold a moment of silence for the phenomenal scam that continues unabated in the financial markets, and now has the full oversight and blessing of the U.S. government, which in turns keeps on duping U.S. taxpayers into believing everything is good.
I present the insider perspective of trader Lou (who wishes to remain anonymous) in its entirety:
"AIG-FP accumulated thousands of trades over the years, all essentially consisted of selling default protection. This was done via a number of structures with really only one criteria - rated at least AA- (if it fit these criteria all OK - as far as I could tell credit assessment was completely outsourced to the rating agencies).
Main products they took on were always levered credit risk, credit-linked notes (collateral and CDS both had to be at least AA-, no joint probability stuff) and AAA or super senior portfolio swaps. Portfolio swaps were either corporate synthetic CDO or asset backed, effectively sub-prime wraps (as per news stories regarding GS and DB).
Credit linked notes are done through single-name CDS desks and a cash desk (for the note collateral) and the portfolio swaps are done through the correlation desk. These trades were done is almost every jurisdiction - wherever AIG had an office they had IB salespeople covering them.
Correlation desks just back their risk out via the single names desks - the correlation desk manages the delta/gamma according to their correlation model. So correlation desks carry model risk but very little market risk.
I was mostly involved in the corporate synthetic CDO side.
During Jan/Feb AIG would call up and just ask for complete unwind prices from the credit desk in the relevant jurisdiction. These were not single deal unwinds as are typically more price transparent - these were whole portfolio unwinds. The size of these unwinds were enormous, the quotes I have heard were "we have never done as big or as profitable trades - ever".
As these trades are unwound, the correlation desk needs to unwind the single name risk through the single name desks - effectively the AIG-FP unwinds caused massive single name protection buying. This caused single name credit to massively underperform equities - run a chart from say last September to current of say S&P 500 and Itraxx - credit has underperformed massively. This is largely due to AIG-FP unwinds.
I can only guess/extrapolate what sort of PnL this put into the major global banks (both correlation and single names desks) during this period. Allowing for significant reserve release and trade PnL, I think for the big correlation players this could have easily been US$1-2bn per bank in this period."
For those to whom this is merely a lot of mumbo-jumbo, let me explain in layman's terms:
AIG, knowing it would need to ask for much more capital from the Treasury imminently, decided to throw in the towel, and gifted major bank counter-parties with trades which were egregiously profitable to the banks, and even more egregiously money losing to the U.S. taxpayers, who had to dump more and more cash into AIG, without having the U.S. Treasury Secretary Tim Geithner disclose the real extent of this, for lack of a better word, fraudulent scam.
In simple terms think of it as an auto dealer, which knows that U.S. taxpayers will provide for an infinite amount of money to fund its ongoing sales of horrendous vehicles (think Pontiac Azteks): the company decides to sell all the cars currently in contract, to lessors at far below the amortized market value, thereby generating huge profits for these lessors, as these turn around and sell the cars at a major profit, funded exclusively by U.S. taxpayers (readers should feel free to provide more gripping allegories).
What this all means is that the statements by major banks, i.e. JPM, Citi, and BofA, regarding abnormal profitability in January and February were true, however these profits were a) one-time in nature due to wholesale unwinds of AIG portfolios, b) entirely at the expense of AIG, and thus taxpayers, c) executed with Tim Geithner's (and thus the administration's) full knowledge and intent, d) were basically a transfer of money from taxpayers to banks (in yet another form) using AIG as an intermediary.
For banks to proclaim their profitability in January and February is about as close to criminal hypocrisy as is possible. And again, the taxpayers fund this "one time profit", which causes a market rally, thus allowing the banks to promptly turn around and start selling more expensive equity (soon coming to a prospectus near you), also funded by taxpayers' money flows into the market. If the administration is truly aware of all these events (and if Zero Hedge knows about it, it is safe to say Tim Geithner also got the memo), then the potential fallout would be staggering once this information makes the light of day.
And the conspiracy thickens.
| More at the link. | |
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30th March 2009, 20:08
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#9625 (permalink)
| | Royalties Account Holder | Re: The great interest rate rip off
Ireland Loses AAA Rating at S&P on Deficit, Slump (Update4) - Bloomberg.com Quote:
Ireland had its AAA credit rating removed by Standard & Poor’s in the fourth downgrade of a euro- region government this year as the global financial turmoil fueled borrowing costs and swelled the budget deficit. The rating was lowered one step to AA+ with a “negative” outlook, S&P said in a statement today from London, indicating the rating company is more likely to lower the classification again than raise it or leave it unchanged. Ireland received the top rating in October 2001.
“The deterioration of Ireland’s public finances will likely require a number of years of sustained effort to repair, on a scale greater than factored into the government’s current plans,” Trevor Cullinan and Frank Gill, analysts at S&P in London, wrote in a report today.
Euro-region governments are increasing borrowing to bolster ailing economies and bail out banks reeling amid the fallout from the global credit crisis. S&P lowered the ratings of Spain, Portugal and Greece in January. The European Commission forecast in January that Ireland’s budget deficit may widen to 11 percent of gross domestic product this year, almost four times the European Union’s approved limit.
The cost of protecting Irish government bonds from default rose 31 basis points to 252, according to CMA DataVision prices for credit-default swaps. It reached a record 396 basis points on Feb. 17.
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31st March 2009, 07:50
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#9634 (permalink)
| | Royalties Account Holder | Re: The great interest rate rip off
"Geithner’s Dirty Little Secret" by F. William Engdahl. FSO Editorial 03/30/2009 Quote: US Treasury Secretary Tim Geithner has unveiled his long-awaited plan to put the US banking system back in order. In doing so, he has refused to tell the ‘dirty little secret’ of the present financial crisis. By refusing to do so, he is trying to save de facto bankrupt US banks that threaten to bring the entire global system down in a new more devastating phase of wealth destruction.
The Geithner Plan, his so-called Public-Private Partnership Investment Program or PPPIP, as we have noted previously (Obamas Rettungsplan für die Banken: keine Lösung, sondern legaler Diebstahl), is designed not to restore a healthy lending system which would funnel credit to business and consumers. Rather it is yet another intricate scheme to pour even more hundreds of billions directly to the leading banks and Wall Street firms responsible for the current mess in world credit markets without demanding they change their business model. Yet, one might say, won’t this eventually help the problem by getting the banks back to health?
Not the way the Obama Administration is proceeding. In defending his plan on US TV recently, Geithner, a protégé of Henry Kissinger who previously was President of the New York Federal Reserve Bank, argued that his intent was ‘not to sustain weak banks at the expense of strong.’ Yet this is precisely what the PPPIP does. The weak banks are the five largest banks in the system.
The ‘dirty little secret’ which Geithner is going to great degrees to obscure from the public is very simple. There are only at most perhaps five US banks which are the source of the toxic poison that is causing such dislocation in the world financial system. What Geithner is desperately trying to protect is that reality. The heart of the present problem and the reason ordinary loan losses as in prior bank crises are not the problem, is a variety of exotic financial derivatives, most especially so-called Credit Default Swaps.
In 2000 the Clinton Administration then-Treasury Secretary was a man named Larry Summers. Summers had just been promoted from No. 2 under Wall Street Goldman Sachs banker Robert Rubin to be No. 1 when Rubin left Washington to take up the post of Vice Chairman of Citigroup. As I describe in detail in my new book, Power of Money: The Rise and Fall of the American Century, to be released this summer, Summers convinced President Bill Clinton to sign several Republican bills into law which opened the floodgates for banks to abuse their powers. The fact that the Wall Street big banks spent some $5 billion in lobbying for these changes after 1998 was likely not lost on Clinton.
One significant law was the repeal of the 1933 Depression-era Glass-Steagall Act that prohibited mergers of commercial banks, insurance companies and brokerage firms like Merrill Lynch or Goldman Sachs. A second law backed by Treasury Secretary Summers in 2000 was an obscure but deadly important Commodity Futures Modernization Act of 2000. That law prevented the responsible US Government regulatory agency, Commodity Futures Trading Corporation (CFTC), from having any oversight over the trading of financial derivatives. The new CFMA law stipulated that so-called Over-the-Counter (OTC) derivatives like Credit Default Swaps, such as those involved in the AIG insurance disaster, (which investor Warren Buffett once called ‘weapons of mass financial destruction’), be free from Government regulation.
| Continues at the link. | |
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31st March 2009, 07:51
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#9635 (permalink)
| | Royalties Account Holder | Re: The great interest rate rip off
Banks Lose $836 Million in First Derivatives Loss (Update1) - Bloomberg.com Quote:
The U.S. banking industry had its first loss in derivatives trading last year, driven by a fourth- quarter $9 billion rout in credit markets. U.S. commercial banks lost $836 million in 2008 from trading over-the-counter cash and derivatives contracts, compared with a $5.5 billion gain in 2007, the Office for the Comptroller of the Currency said today in a report. Among the five largest banks trading derivatives, only Goldman Sachs Group Inc.’s bank unit reported a revenue gain in the fourth quarter.
Banks lost $9.2 billion in the quarter ending Dec. 31, with $9 billion stemming from credit market losses. Foreign exchange generated $4.1 billion in gains, with commodity trading producing $338 million in revenue. Interest-rate trading declined $3.4 billion, with equities losing $1.2 billion, OCC said.
“Unfortunately for the banking companies, they had probably the worst combination they could get in the fourth quarter,” Kathryn Dick, deputy comptroller for credit and market risk, said in a conference call with reporters.
Much of the credit-market losses came from continued writedowns of cash assets including securities and collateralized debt obligations linked to residential and commercial mortgages, as well as loans to companies with below- investment grade ratings, Dick said.
| More at the link. | |
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31st March 2009, 07:52
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#9636 (permalink)
| | Royalties Account Holder | Re: The great interest rate rip off
How Michael Osinski Helped Build the Bomb That Blew Up Wall Street -- New York Magazine Quote:
I have been called the devil by strangers and “the Facilitator” by friends. It’s not uncommon for people, when I tell them what I used to do, to ask if I feel guilty. I do, somewhat, and it nags at me. When I put it out of mind, it inevitably resurfaces, like a shipwreck at low tide. It’s been eight years since I compiled a program, but the last one lived on, becoming the industry standard that seeded itself into every investment bank in the world.
I wrote the software that turned mortgages into bonds.
Because of the news, you probably know more about this than you ever wanted to. The packaging of heterogeneous home mortgages into uniform securities that can be accurately priced and exchanged has been singled out by many critics as one of the root causes of the mess we’re in. I don’t completely disagree. But in my view, and of course I’m inescapably biased, there’s nothing inherently flawed about securitization. Done correctly and conservatively, it increases the efficiency with which banks can loan money and tailor risks to the needs of investors. Once upon a time, this seemed like a very good idea, and it might well again, provided banks don’t resume writing mortgages to people who can’t afford them. Here’s one thing that’s definitely true: The software proved to be more sophisticated than the people who used it, and that has caused the whole world a lot of problems.
The first collateralized mortgage obligation, or CMO, was created in 1983 by First Boston and Salomon Brothers, but it would be years before computer technology advanced sufficiently to allow the practice to become widespread. Massive databases were required to track every mortgage in the country. You needed models to create the intricate network of bonds based on the homeowners’ payments, models to predict prepayment rates, and models to predict defaults. You needed the Internet to sail these bonds back and forth across the world, massaging their content to fit an investor’s needs at a moment’s notice. Add to all this the complacency, greed, entitlement, and callous stupidity that characterized banks in post-2001 America, and you have a recipe for disaster.
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31st March 2009, 07:55
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#9637 (permalink)
| | Royalties Account Holder | Re: The great interest rate rip off
Three Dollar Threats, Two Energy Trends, One Interesting Chart and More! | 5 Min. Forecast Quote: On the housing front, a ray of hope. According to this chart, the precipitous fall in home prices might start to ease up soon.
The current crisis has finally wiped out the bubble in home prices. Adjusted for inflation, the median price of a single-family home has plunged 33% from its 2005 high. Now at pre-mania levels, an average of $165,000, home prices have a reason to at least slow down their rapid decay.
Ouch… sorry if you bought your home during the height of the housing boom in the 1979. The median, inflation adjusted return over the last 30 years is negative 1.6%.
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31st March 2009, 08:01
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#9638 (permalink)
| | Royalties Account Holder | Re: The great interest rate rip off
http://www.timesonline.co.uk/tol/news/poli...icle6005810.ece Quote:
President Sarkozy yesterday threatened to wreck the London summit if France’s demands for tougher financial regulation are not met.
France will not accept a G20 that produces a “false success with language that sounds good but contains no commitments”, his advisers said.
Asked if this meant a possible walk-out, Xavier Musca, Mr Sarkozy’s deputy chief of staff for economic affairs, said: “A basic rule with nuclear deterrence is that you do not say at what point you will use the weapon.”
The French threat dramatically raised the temperature hours before President Obama arrives in London today. If carried through, it would ruin a summit for which Mr Brown and Mr Obama have high ambitions, believing it vital to international recovery.
Mr Sarkozy, who blames the “Anglo-Saxons” for causing the economic crisis, told his ministers last week that he would leave Mr Brown’s summit “if it does not work out”.
A deal to tighten regulation will be one of the key features of the G20 accord but France wants a global financial regulator, an idea fiercely opposed by the United States and Britain. Mr Brown has described the notion as ridiculous.
Germany and other nations are reported to be against a global regulator and sources said that President Sarkozy must know that the proposal would not make progress.
| The G20 is certainly going to be interesting.
I wonder what the saviour of the world is thinking? | |
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31st March 2009, 08:03
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#9639 (permalink)
| | Royalties Account Holder | Re: The great interest rate rip off
Bradford & Bingley’s loan write-offs soar as borrowers struggle Quote:
Bradford & Bingley is writing off bad loans at 22 times the rate it was in 2007, the nationalised bank revealed yesterday.
The buy-to-let specialist said that losses on the loans soared to £508 million last year, compared with £22.5 million in 2007. It had adopted a more conservative stance on loan valuation since its bailout by the Government in September.
In its annual report released yesterday, the bank said that its mortgage book had deteriorated sharply, with 4.6 per cent of accounts now at least three months in arrears compared with 1.6 per cent in 2007. The bank said that it still expected to repay in full all cash injections from the taxpayer. Richard Pym, its chief executive, said: “While 2008 was a turbulent year for banks and Bradford & Bingley in particular, the restructuring we are undertaking will, we expect, ultimately repay the taxpayer and the Financial Services Compensation Scheme [FSCS] in full.”
B&B is winding down its business and has said that it will repay the Treasury and the FSCS “as soon as market conditions allow”. The lender added that its pretax profits had risen from £126 million in 2007 to £134 million last year.
The lender’s profits were bolstered by a one-off payment from Santander, the Spanish bank that bought its retail deposit business for £216 million when B&B was nationalised last year. A one-off accounting gain contributed another £183 million to the balance sheet. The lender hopes to cut its mortgage book to £36.3 billion by the end of 2011, as well as selling commercial loans and its Treasury investments.
B&B said that there had been 80 voluntary redundancies and 75 resignations since the nationalisation, although it had recruited a further 87 staff in its arrears-handling department.
B&B’s annual report also showed that Steven Crawshaw, the former chief executive, is receiving an annual pension of £105,318. Mr Crawshaw was responsible for concentrating the bank’s resources on risky buy-to-let and self-certified mortgages.
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31st March 2009, 08:19
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#9640 (permalink)
| | Royalties Account Holder | Re: The great interest rate rip off
http://www.nytimes.com/2009/03/31/bu...1&ref=business Quote: Nearly 70 percent of the Pentagon’s 96 largest weapons programs were over budget last year, for a combined total of $296 billion more than the original estimates, a Congressional auditing agency reported Monday.
The findings, compiled by the Government Accountability Office, seemed likely to add to the pressure on officials to make sizable cuts in the most troubled programs as they work out the details of a proposed $664 billion defense budget for fiscal 2010.
President Obama has said that the “days of giving defense contractors a blank check are over.” Pentagon officials have said they will finish putting together a list of proposed cuts in April.
In a letter to Congress, Gene L. Dodaro, the acting comptroller general for the G.A.O., an auditing agency, said that while there had been modest improvements in the last year, the Pentagon’s management of the contracts remained poor, and cost overruns were “still staggering.”
The accountability office reported that the programs were behind schedule by an average of 22 months, up from 21 months last year and 18 months in 2003.
The office had previously said that the cost of a similar portfolio of programs had risen by $295 billion through 2007, or $301 billion when adjusted for inflation.
In the report released on Monday, the G.A.O. said the Pentagon often had to reduce the number of planes and ships it could buy.
The report said, for instance, that the cost of 10 of the largest weapons systems was running 32 percent higher than projected, and the quantities that could be purchased had been cut.
Some programs, like the Air Force’s F-22 fighter jet and the Army’s Future Combat System, are among the systems that Defense Secretary Robert M. Gates has said he is scrutinizing.
According to the G.A.O., the F-22, which was designed in the 1980s, was originally expected to cost $88 billion in 2009 dollars for 648 planes. The program is now expected to cost $73.7 billion for the 184 planes.
Some military analysts say they believe that Mr. Gates will recommend canceling the plane, or buying fewer planes than the Air Force wants.
But the G.A.O. also said the Pentagon had done a better job of managing some newer programs.
| Good job it's only money, I'm sure more tax cuts will help make up the difference. | |
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