Bank Run "Kabul Edition"......

Should be no surprise that the name KARZAI is popping up again..... Some folks have learned quite a lot from us ( US & Europe ) when it comes to the play the "Bailout / Moral Hazard Game"...If this wouldn´t be so depressing one could almost "congratulate" the "fraudsters" for recognizing that this bank is definitely TBTF.... :-(

Das hier erneut der Name KARZAI auftaucht dürfte wohl nur noch die Bundesregierung überraschen..... ;-) Bei dem seit Jahren anhaltendem "Anschauungsunterricht" ( besondern in den USA & Europe ) wenig verwunderlich das praktisch weltweit das Thema "Bailout / Moral Hazard" ständig kopiert und wie in diesem Fall besonders "brilliant" gespielt wird...:-( Selten das eine an sich so kleine Bank ohne Zweifel der Kategorie "Too Big To Fail" zuzuordnen ist....



Afghans Move to Bail Out Kabul Bank WSJ

KABUL—Afghanistan's government inched closer to bailing out the country's largest bank, setting aside hundreds of millions of dollars that could be used to keep Kabul Bank solvent, officials said.

The move Sunday came as depositors continued to pull their money from the lender, mobbing branches in Kabul and other parts of the country. In the capital, police and soldiers were ordered to guard Kabul Bank branches and razor wire was strung outside the main branch to keep crowds in check.

Averting the failure of Afghanistan's largest bank, an institution with ties to President Hamid Karzai's administration, has become a priority for U.S. and Afghan officials concerned by the political and economic crisis that could result.

There were conflicting accounts of how much money the Afghan government was preparing to divert to Kabul Bank from its roughly $4.8 billion in foreign-exchange reserves. A central-bank official said the bailout would likely be in the $200 million range; a finance ministry official put the figure "closer to double that."

The central-bank official said several options were being discussed to recover the funds that are likely to be pumped into Kabul Bank. One option is forcing major shareholders who bought their stakes with loans from the bank to either repay what they borrowed or hand over their shares.

Another option is confiscating properties or businesses bought or built by bank insiders with loans from the lender.

Major shareholders include brothers of President Karzai and First Vice President Muhammad Fahim, U.S. and Afghan officials say. The "politics are delicate," the central-bank official said.

Finance Minister Omar Zakhilwal said the Afghan government Saturday transferred $100 million dollars to Kabul Bank to cover salaries for about 250,000 soldiers, police and teachers, who are paid through accounts at the lender.

Kabul Bank's woes became public late Tuesday, when word leaked that Afghanistan's central bank had forced out the lender's chairman and chief executive—its two biggest shareholders—amid allegations that they made hundreds of millions of dollars in sometimes-clandestine loans to themselves and Afghan government insiders.

U.S. and Afghan officials also say the bank used one of Afghanistan's traditional hawala money-transfer outfits to move hundreds of millions of dollars out of the country in an apparent attempt to avoid detection, though it isn't clear what the money was then used for.

On Wednesday and Thursday, depositors withdrew almost $180 million, more than a third of the $500 million the bank had on hand before the crisis.

It isn't clear if Kabul Bank's assets—mostly loans and property—are easily recoverable.

When bankers are more dangerous than warlords Felix Salmon

Speaking Wednesday from his villa in Dubai, which was paid for by Kabul Bank, Mahmoud Karzai, the president’s brother, said cash withdrawals from the bank were a “little bit more than usual” but did not threaten to cause a meltdown. A full-scale run on Kabul Bank, he added, “would be a major disaster.”

Yes, the president’s brother is a part owner of the bank, and he’s living in Dubai, in a villa paid for by the bank — which, incidentally, handles the payroll for Afghan soldiers and schoolteachers — and really, what could possibly go wrong?

Bill Black: “Control Fraud” Crushes Kabul NC

Kabul Bank has been revealed to be a “control fraud.” Control frauds occur when those that control a seemingly legitimate entity use it as a “weapon” to defraud. Control frauds cause greater financial losses than all other forms of property crime – combined. Control frauds can also cause immense damage to a nation because they are run by financial elites that curry favor from political elites. The result is that they are often able to loot “their” banks for years with impunity

The CIA tells us that Afghanistan raised roughly $1 billion in revenues last year and expended $3.3 billion. The shortfall, of course, was funded by us (the West, principally the U.S.). Indeed, that understates the case because Afghanistan raised the $1 billion in revenues primarily through customs duties and the U.S. and other Western nations indirectly or directly funded most of those customs duties.

We know certain facts. Afghanistan has no deposit insurance system. Its government has no financial responsibility for bailing out Kabul Bank’s depositors. Nevertheless, Afghanistan’s government has announced it will bail out the depositors. The funds to bail out the depositors will come – indirectly, but surely – largely from the United States Treasury

Karzai Family Political Ties Shielded Bank in Afghanistan NYT

In early 2009, as President Hamid Karzai scanned the landscape for potential partners to run in his re-election bid, he was approached from an unusual corner: a bank.

After the deal, Kabul Bank poured millions into Mr. Karzai’s re-election campaign, Afghan officials said. Mahmoud Karzai and Haseen Fahim, drawing on Kabul Bank’s resources, were able to enrich their families aided by tens of millions of dollars in loans.

“The brothers orchestrated the political deal to serve their business interests,” said a prominent Afghan businessman in Kabul who, like virtually everyone interviewed for this article, spoke only on condition of anonymity. “Fahim became vice president, and the bank financed Karzai’s re-election.

“In Kabul, politics is all about money,” he said. “It’s the same thing.”

FT Alphaville

Afghanistan’s central bank has stepped in to take control of the troubled Kabulbank, its governor said on Tuesday, after suspected irregularities raised concerns over the country’s top private financial institution.

Central Bank Governor Abdul Qadir Fitrat told Reuters investigations had also been started into the dealings of the bank’s top two directors and shareholders, who were told to resign, and a brother of Afghanistan’s First Vice President, Mohammad Qasim Fahim.

"The Unhappiness Of The Seller Does Not Mean That There Is No Market."

As always superb "Anti Spin" from Hussman.....Long read but with all markets at new highs & on a global scale well over 1 trillion in taxpayer money for the still ongoing bailouts , QE, ZIPR etc it is more important than ever to ask what happened to "the toxic assets" ..... Hussman focusses mainly on US mortgages but i think it is safe to say that similar things are true globally when it comes to CRE, corporate loans etc... Fits nicely to Fridays post "Surprise, Surprise....." Big Banks Mask Risk Levels - Quarter-End Loan Figures Sit 42% Below Peak .....I have to repeat myself when it comes to the ÜBERBULLISH Cramer´s Bull Case For Banks

"Would at least be honest if he mentioned the "ultimate moral hazard trade" & the "Enron-esque characteristics" when it comes to accounting as the two main reasons behind the motives to own banks.. ;-)"

Dringend benötigter "Anti Spin" vom gewohnt erstklassigen John Hussman....Recht ausführliche aber im Angesicht der neuen Markthochs aber unbedingt lesenswerte Ausführungen wenn es um das von einigen bereits als "gelöst" bzw. verdrängt geltende Problem der "Toxic Assets" geht....Schon erstaunlich ( einige würden auch sagen schockierend...) was weltweit gesehen wohl locker über 1 Billion an Steuergeldern die noch immer weiter fliessen ( siehe "The Rolling Bailout Bus" ) , QE, ZIRP usw bisher beim Kernproblem der Krise bewirkt haben.....Obwohl Hussman hier in erster Linie Hypotheken abhandelt ist es sicher keine Übertreibung zu behaupten das weltweit ähnliches auch für gewerbliche genutzte Immobilien sowie Firmenkredite gilt....Wie gemacht als perfekte Ergänzung zum letzten Posting "Surprise, Surprise....." Big Banks Mask Risk Levels - Quarter-End Loan Figures Sit 42% Below Peak ......Muß mich leider erneut wiederholen wenn es um zunehmend bullische Bankempfehlungen ( für ein besonders krasses Beispiel siehe Cramer´s Bull Case For Banks ) und damit indirekt auch für den Gesamtmarkt geht.....

"Wäre zumindest ehrlich gewesen wenn er in seinen 10 Gründen die unbedingt dafür sprechen sofort massiv Bankaktien zu kaufen den "ultimativen Moral Hazard Trade" sowie die kreative Bilanzierung die stark "Enron-esque characteristics" aufweist als die Topgründe aufführen würde.... ;-)"

Extend and Pretend John Hussman

With regard to credit conditions, the U.S. financial system continues to pursue a strategy of "extend and pretend." A year ago, the Financial Accounting Standards Board (FASB) suspended rule 157, which had previously required banks to mark their assets to market value when preparing balance sheet reports. The basic argument was that fair values were not appropriate because there was "no market" for troubled assets. Certainly, the FASB could have implemented something at least modestly reasonable, such as 2-year or 3-year averaging, but instead, they changed the rules to allow "substantial discretion" in the valuation of bank assets in their financial reports.

To a large degree, the idea that there was "no market" for troubled assets was false even at the time. Last year, Dean Baker of the well-regarded Center for Economic Policy Research (CEPR) testified before Congress, observing "There has been considerable confusion about the nature of the troubled assets held by the banks. While banks do hold some amount of mortgage-backed securities, these securities are in fact a relatively small portion of their troubled assets. The troubled assets on the banks' books are overwhelmingly mortgages, both first and second or other junior
liens, not mortgage-backed securities. The FDIC has acquired large quantities of mortgages from its takeover of several dozen failed banks over the last year. It auctions these assets off on an ongoing basis. The results of these auctions are available on the FDIC website. Non-performing mortgages typically sell in these auctions at prices in the vicinity of 30 cents on the dollar."

He continued, "It is not clear on what basis these auctions can be said not to constitute a market. While the downturn and the constricted credit conditions affect the market, it is simply inaccurate to claim that there is no market for these assets. The major banks are undoubtedly not pleased at the prospect of having to sell off their loans at these prices, but this merely indicates that they are unhappy with the market outcome, just as a homeowner might be unwilling to sell her house at a loss. However, the unhappiness of the seller does not mean that there is no market."

The impact of "extend and pretend" is to create a gap between the reported value of assets and the value they would have on the basis of the cash flows that those assets can reasonably be expected to generate over their maturity. In order to avoid having to restate assets, banks have allowed an increasing gap to develop between the volume of delinquent loans and the volume of loans actually in foreclosure, creating a growing "shadow inventory" of impaired but unmodified and unforeclosed loans.

Moreover, regulatory changes over the past year have affected what actually gets reported as "troubled." As the New York Times recently observed, " A bank owed, say, $4 million on a property now worth $3 million would previously have had to classify the entire loan as
troubled. Now it can do that to the $1 million difference only." In effect, even though impaired loans tend to sell at only 30-50 cents on the dollar (reflecting a modest haircut to the amount typically received in foreclosure), banks can choose the amount of assets it reports as troubled simply by choosing what value to assign the property while it holds the bad loan on its books.

While it's interesting that credit card delinquencies have eased off modestly in recent months, this is not necessarily a healthy sign. Even in the third quarter of 2009, TransUnion reported that consumers delinquent on their mortgages but current on their credit cards increased by 6.6%. In effect, people have been choosing to pay their credit cards in priority to their mortgages.

As for policy efforts to reduce delinquencies, I've long argued that it is a bad idea for policy makers to announce delinquency prevention plans that have, as their centerpiece, publicly subsidized reductions in mortgage principal. It's one thing to extend the loan in a way that preserves its present value, by swapping a claim on future appreciation in return for principal reduction, but it's quite another to offer to cut the principal outright. The reason ist that instead of confining the assistance to presently troubled borrowers, you create a whole new set of borrowers who then choose to be troubled in order to get the assistance. According to a University of Chicago study, "strategic defaults" - where people choose to default on their mortgages even though they can afford to pay - accounted for 35% of all residential defaults in December 2009, up from 23% in March 2009. Offering public subsidies for this behavior, when too many homeowners are already legitimately struggling, does not smack of a bright idea.

The New York Times recently provided a good picture of how the delinquency situation stood at the end of 2009 (based on FDIC data):

In short, my impression is that investors are deluding themselves about the solvency of the banking system. People learned in the 1930's that when you don't require the reported value of assets to have a clear and tangible link to the value that the assets would have in liquidation, bad things happen. Yet this is what regulatory and accounting rules are allowing for the banking system at present. While I do believe that bank depositors are safe to the extent of FDIC guarantees, my impression is that the banking system is still quietly insolvent.

Will it work? Will it change?

Regardless of whether the U.S. banking system would not presently be able to meet its liabilities with its assets, there is another question: assuming that banks are allowed to extend and pretend for a long enough period of time, will they ultimately be able to accumulate enough retained earnings in the years ahead to cover eventual loan losses? In other words, is it possible that everything will be OK if we just look the other way long enough?

From my perspective, it depends on what "OK" means. Simply in terms of long-term solvency - assets being ultimately able to meet liabilities - my impression is that yes, given enough time, retained bank earnings should cover the losses on existing loans. Indeed, it's possible that banks might be able to report fairly healthy "operating earnings" to investors, and then somewhat more quietly write off losses as "extraordinary" charges over a period of years. This type of outcome is beginning to look possible, because investors evidently don't mind repeatedly having their pockets picked as long as "operating earnings" come in above analyst estimates.

Unfortunately, in that sort of world, the economy would likely be hobbled for a long period of time, as Japan has discovered over the past couple of decades. With banks focused primarily on survival and recapitalization, retained earnings would be directed to making the existing liabilities whole, rather than contributing to productive new investment.

So to the extent that "extend and pretend" is successful in averting insolvency concerns, it will also tend to weigh down lending activity, as resources are allocated toward servicing existing debt burdens on bad assets, rather than toward new lending for productive activity. The most efficient outcome is always for lenders who provide capital to take losses if the loans go bad. That sort of market discipline is the only way to ensure that capital gets allocated properly. This is not the world that we have lived in over the past year, as policy makers have pledged public money to make private bank bondholders whole, regardless of how irresponsibly the banks allocated the money. But it is important to recognize that this policy comes with longer term costs.

Needless to say that i think he is spot on....... It will be interesting to see how Mr. Market will react to the quality of ( bank ) earnings / balance sheets during the reporting season.....This could be at least a possible trigger to calm down the "somewhat elevated" risk appetite significantly.....

Überflüssig zu erwähnen das ich zu 100% übereinstimme..... Es wird spannend zu beobachten inwieweit in der jetzt startenden Berichtssaison die Gewinn und Bilanzqualität der Banken hinterfragt wird.... Sehe hier durchaus erhebliches Potential den "leicht erhöhten" Risikoappetit doch merklich zu zügeln.....

UPDATE:

Profit for Banks Dimmed by Home-Equity Loss Seen at $30 Billion

April 12 (Bloomberg) -- Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. may have to set aside an additional $30 billion to cover possible losses on home-equity loans, an amount almost equal to analysts’ estimates of profit at the three banks this year.

Global Banking System Extend and Pretend Insolvency Mish

I happen to agree with John Hussman on all points mentioned. Moreover, it is not just the U.S. banking system that is insolvent, the global banking system is nothing but a giant extend and pretend operation including the PIIGS (Portugal, Ireland, Italy, Greece, Spain), China, the UK, and even Canada as soon Canada's gigantic housing bubble crashes.

Spot On Alex Cartoon :-)!

The DTA dodge FT Alphaville

The issue is that in order for banks to include DTAs in their Tier 1 capital, they need to be able to show regulators that they will generate enough income in the future to actually use them.

Citigroup, for instance, has been racking up enough losses in recent years to generate $47bn worth of DTAs at the end of 2009, about $21bn of which was included in their Tier 1 capital that year. So that’s $21bn coming out of years of losses, but based on the premise that the bank will soon be profitable.

They will find a "creative" way to reassure their future profibility..... The Treasury wants to sell a 7.7 billion shares within the next year... ;-)

Bin mir sicher das hier ein kreativer Weg gefunden wird um die zukünftige Profitabilität zu gewährleisten...Immerhin will das Finanzministerium noch 7,7 Mrd Aktien binnen 12 Monaten auf den Markt schmeissen ;-)

Foreclosure inventories hit record

February's foreclosure rate of 3.31% represented a 51.1% jump from February 2009

From Level I to Level III, the myth of fair value FT Alphaville

Lehman Channeled Risks Through ‘Alter Ego’ Firm NYT

Even now, a year and a half after Lehman’s collapse, major banks still undertake such transactions with businesses whose names, like Hudson Castle’s, are rarely mentioned outside of footnotes in financial statements, if at all.

"ENRON-ESQUE" .......

The search for Basel III loopholes begins Felix Salmon

Most of the arguments could be made only by banks who have been drinking their own kool-aid for so long that they no longer have any idea what sounds ridiculous and what doesn’t.

CHUZPAH!

Meredith Whitney vs the Banks Paul Kedrosky



She has not one single buy rating in the space she is covering.....

Eine der wohl besten Bankenanlaysten hat nicht eine einzige Bank auf "BUY".....

"Surprise, Surprise....." Big Banks Mask Risk Levels - Quarter-End Loan Figures Sit 42% Below Peak

At least one has to conclude / "admire" that they have "CHUZPAH"....... Just one more reason for Cramer´s Bull Case For Banks ... You really need a good dose of "humor" & GOLD to stay calm these days....;-)

Vor soviel "CHUZPAH" muß man ehrlich den Hut ziehen....... Ein Grund mehr für Cramer´s Bull Case For Banks .... Heutzutage muß man schon ein sehr "humorvoller" Zeitgenosse & "GOLD-BUG" sein um den tagtäglichen "Wahnsinn" nicht nur kopfschüttelnd zu erleben..... ;-)

Taken from the excellent Randy Glasbergen collection

Big Banks Mask Risk Levels WSJ

Quarter-End Loan Figures Sit 42% Below Peak, Then Rise as New Period Progresses; SEC Review

Major banks have masked their risk levels in the past five quarters by temporarily lowering their debt just before reporting it to the public, according to data from the Federal Reserve Bank of New York.

A group of 18 banks—which includes Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Bank of America Corp. and Citigroup Inc.—understated the debt levels used to fund securities trades by lowering them an average of 42% at the end of each of the past five quarterly periods, the data show. The banks,which publicly release debt data each quarter, then boosted the debt levels in the middle of successive quarters.

The data highlight the banks' levels of short-term financing in the repurchase, or "repo," market. Financial firms use cash from the loans to buy securities, then use the purchased securities as collateral for other loans, and buy more securities. The loans boost the firms' trading power, or "leverage," allowing them to make big trades without putting up big money. This amplifies gains—and losses, which were disastrous in 2008.

According to the data, the banks' outstanding net repo borrowings at the end of each of the past five quarters were on average 42% below their peak in net borrowings in the same quarters. Though the repo market represents just a slice of banks' overall activities, it provides a window into the risks that financial institutions take to trade.

The SEC now is seeking detailed information from nearly two dozen large financial firms about repos, signaling that the agency is looking for accounting techniques that could hide a firm's risk-taking. The SEC's inquiry follows recent disclosures that Lehman used repos to mask some $50 billion in debt before it collapsed in 2008.

The practice of reducing quarter-end repo borrowings has occurred periodically for years, according to the data, which go back to 2001, but never as consistently as in 2009.

The repo market played a role in recent accusations leveled by an examiner in Lehman's bankruptcy case. But rather than reducing quarter-end debt, Lehman took steps to hide it.

Interactive Graph : Masking Risk

UPDATE:

Evidence That Primary Dealers Have Collectively Engaged In Repo 105 And Qtr-End Book Cooking Type Schemes For Years ZH

The graphic representation of the Primary Dealer holdings of net assets shown as a Lo-High range during any given quarter, together with the closing net assets (presented by the red dot), is shown on the chart below.

We are confident that armed with this data, the SEC will be able to provide a prompt and logical response ( JMF : SARCASM AT ITS BEST!) why the PDs have such a peculiar pattern in downshifting their assets toward quarter end, and much more relevantly, who the counterparties are that would consistently take the other side of these quarter end window-dressing trades.

The Bailout Bus Keeps Rolling......

Looking into the PMI Investor Presentation & MGIC Investor Presentation and their "sky high" ( not just a few billions.... ) in exposure it should be clear that this is also another "hidden" bailout for the banks......The knowledge that the "Bailout Bus" keeps on rolling might explain Cramer´s Bull Case For Banks.... Even if he wasn´t honest enough to mention the "moral hazard trade" in his 10 reason to rush into the banking sector.....;-)

Ein Blick in die PMI Investor Präsentation & MGIC Investor Präsentation die einen "astronomisch" hohen Betrag ( rede nicht nur von einigen Mrd... ) an versicherten Schadensfällen ausweisen genügt um zu erkennen das hier neben den PMI Aktionären und Anleihebesitzern vor allem die Banken begünstigt werden die seinerzeit die Versicherung gezeichnet haben......Genau diese Bailoutgarantie erklärt auch Cramer´s Bull Case For Banks... Schade nur das er nicht so ehrlich gewesen ist den "Moral Hazard Trade" unter den 10 Kaufaurgumenten in Sachen Banken aufgeführt hat.... ;-)

H/T Matson

Insuring Against an End to Moral Hazard WSJ

The bailout bus keeps rolling. Last week's programs to forgive mortgage principal were good news for mortgage insurers. But PMI Group's share-price surge had an extra lift from Freddie Mac.

The mortgage giant gave a new PMI subsidiary the green light to write insurance for loans that Freddie guarantees. PMI needed the blessing—and got a similar one from Fannie Mae—because its main subsidiary may be banned in some states from writing policies if it breaches regulatory capital rules.

If that happened, PMI's future would be in even greater doubt. The company lost nearly $1.6 billion over the past two years and warned that "as a result of continued losses, we will need to raise significant additional capital and/or achieve significant statutory regulatory relief."

What is curious is that Freddie's and Fannie's support potentially puts taxpayer dollars at risk, while helping PMI shareholders—the company's stock jumped more than 40% last week. The moves also come as debate continues over how much skin in the game homeowners should have.

Help for PMI, and for Mortgage Guaranty Insurance Corp. last month, is also notable because Freddie has suggested that firms like this mightn't be able to meet future claims.

Freddie in its annual filing said "some of our mortgage insurers lack sufficient ability to fully meet all of their expected lifetime claims-paying obligations to us as they emerge." PMI has the lowest credit rating of Freddie's rated mortgage-insurance counterparties.

With the government, through Fannie and Freddie, willing to play such games to keep small fry like PMI and MGIC alive, it shows quite how far away Uncle Sam is from a real solution on "too big to fail."

See also As GSE Delinquencies Hit All Time Highs, What About The Monolines? ZH

Got GOLD ?

Foreigners Holding 75 % of Greece’s Current Debt Stock

One of the main reasons why the "Smoke & Mirrors" ( excellent link via Yves Smith / NC ) Greece "Rescue" & a hidden bailout ( see the ECB U-TURN My Big Fat Greek Collateral Conversion ) has been orchestrated..... It´s still the number one goal to bail out banks & insurers ( see PIIGS Claims On European Banks: $1.5 Trillion; France Most On Hook In PIIGS Implosion & Ireland Stunned To Uncover "Truly Shocking" Information By Its Banks ).....Nobody is too small too fail....Sarcastically one can argue that in hindsight it seems the Lehman "incident" was one of the best things that could have happened to the industry......

Denke das wir hier einen der Hauptgründe für den "Smoke & Mirrors" ( fantastische Zusammenfassung via Naked Capitalism ) Rettungsversuch bzw die indirekten ( siehe die 180 Grad Drehung der EZB My Big Fat Greek Collateral Conversion ) Bailoutbemühungen sehen.... Es geht wie leider immer noch darum Banken und Versicherungen vor möglichen Schäden zu "beschützen" ( siehe PIIGS Claims On European Banks: $1.5 Trillion; France Most On Hook In PIIGS Implosion & Ireland Stunned To Uncover "Truly Shocking" Information By Its Banks )...... Keiner ist unwichtig genug um zu fallen...."Spitz" formuliert könnte man fast meinen das im Nachhinein Lehman für die Branche der bestmöglich anzunehmende Unfall gewesen ist......

The kindness of (bond market) strangers FT Alphaville

With foreigners already holding three quarters of Greece’s current debt stock, convincing them to buy even more becomes increasingly difficult. Here’s what Deutsche’s Gillian Edgeworth says:

"Euroland insists that the Greek sovereign continues to access the market if possible. The sovereign issuer will hope that foreigners remain keen buyers of bonds, though foreigners already hold 75% of the total debt stock.

In the absence of further foreign buying, local institutions will only likely be able to absorb government issuance if domestic banks continue to draw off [European Central Bank] liquidity facilities in size."

Lucky, then, that the ECB decided to revise its acceptance rules for the collateral pledged by Greek banks on Friday

Too bad for the "architects" that so far the spreads havn´t narrowed in a meaningful way.....;-)

Leicht problematisch für die Bailoutakrobaten lediglich das sich zumindest momentan die Spreads nicht wesentlich "eingeengt" haben...... ;-)

Greek debt – spreading like it’s 1999 FT Alphaville

It looks like Hellenic Republic bond spreads over German bunds are back at 1999 levels — when Greece first attempted to join the eurozone but failed because it didn’t meet the required economic criteria

No wonder Gold has been hitting a series of new ATH in € terms ...

Da verwundert es wenig das Gold seit Wochen eine Serie von neues Allzeithoch auf € Basis markiert.....

Hedge Fund Herding Into Citigroup............

Either the "Too Big Too Fail Moral Hazard Play" is still alive & kicking or they are just averaging down..........Probably both.... SCHADENFREUDE that at least so far the timing was "subpar"...... ;-) .... Just as a reminder Citi has still a marketcap of $ 100 Billion! But this cannot stopp Dick Bove to give a price target of $ 8.5, bringing the market cap close to $ 250 billionen.......Even the $ 100 billion would be far bigger than any German company listed in the DAX..... Not bad for a bank that Chris Whalen calls the "queen of the zombie dance party".....

Entweder die "Too Big Too Fail & Moral Hazard Karte" wird von den Big Boys weiter heftig gezogen oder hier wird schlichtweg "verbilligt".....Wahrscheinlich eine Kombination von beidem..... Kann die Schadenfreude bei dem bisherigen Kursverlauf nicht wirklich verhehlen...... ;-) Verweise zusätzlich nochmal darauf hin das Citi aktuell einen Börsenwert von knapp 100 Mrd $ auf die Waage bringt.....Überflüssig zu erwähnen das Dick Bove bereits ein KZ von 8,5 $ ausruft.... Also mal eben schlappe 250 Mrd $..... Bereits 100 Mrd $ wären deutlich mehr als jedes im DAX gelistete Unternehmen ..... Nicht übel für ein Institut das Chris Whalen als queen of the zombie dance party" adelt......


Citigroup Proving Irresistible to Hedge Funds Led by Paulson Bloomberg

Firms run by John Paulson, Eric Mindich and George Soros purchased almost half a billion shares in Citigroup Inc. last quarter as more than 120 hedge funds said they bought stock in the bank.

Paulson & Co. reported a stake equal to 506.7 million shares in New York-based Citigroup, up from about 300 million at the end of the third quarter, according to a government filing yesterday. Mindich’s Eton Park Capital Management LP acquired 138 million shares, making the company its largest holding. Soros Fund Management LLC reported 94.7 million shares worth $313.4 million.

Citigroup stock bought by hedge funds outnumbered the amount sold by a ratio of more than 10 to 1 in the October-to- December period, with about 1.2 billion shares added on a net basis, according to Securities and Exchange Commission filings compiled by Bloomberg.

The shares traded for an average of $4.10 in the quarter, 24 percent above its closing price yesterday of $3.31, data compiled by Bloomberg show. The company had 28.5 billion shares outstanding as of Dec. 31, the data show.

I doubt that they all bought at the low during the Monster stock offering ( see Citi prices $17 billion stock offering at $3.15 a share; Treasury not selling its shares )....

Kann mir kaum vorstellen das hier alle am Tief im Rahmen der Megakapitalerhöhung zum Zuge gekommen sind ( siehe Citi prices $17 billion stock offering at $3.15 a share; Treasury not selling its shares ) ........

Taxpayers still own 7.7 billion Citigroup shares....

Citigroup has had to issue almost 23 billion new shares to bolster a weakened capital base. Investors who were shareholders prior to the financial crisis were left with about one-fifth their original stakes.

Let´s hope they will still be there when Citi has to issue another round of new shares....... This would be for a change good news for the taxpayer......

Bleibt zu hoffen das die bei den zukünftig regelmäßig nicht unwesentlichen anstehenden Kapitalerhöhungen immer noch an Bord sind....... Wäre für die Steuerzahler ausnahmsweise mal ne gute Nachricht....

UPDATE:



Thanks CHRIS!

The Government Won´t Make Any Money On This Deal.......

Looks like a "Deja Vu".....Compare this with the news from July ...... They have kicked the can three month down the road ( DESPERATION when you look at the maturity schedule )....... BRAVO! Needless to say that when they received the TARP money CIT were classified as "well capitalised".......If the WSJ & Reuters are correct it is very good news that we finally see the Debt To Equity Swap in a not so small ( see CIT Analyst Presentation ) financial company ....Too bad for CIT that they are not TBTF like Citi ( see yesterdays news Citi is still using FDIC TLGP ) ......

Fühlt sich wie ein Deja Vu an......Vergleicht die heutige Meldung bitte mal mit der vom Juli...... CIT hat es immerhin geschafft sich ganze 3 Monate Luft zu verschaffen ( pure Verzweiflung wenn man einen Blick auf die Fälligkeiten wirft )......BRAVO! Ganz nebenbei bemerkt war CIT zum Zeitpunkt der als die TARP Mrd flossen "well capitalized".....Sollten das WSJ & Reuters richtig liegen bleibt festzuhalten das wir endlich den ersten Debt To Equity Swap in einem nicht ganz kleinen Finanzinstitut ( ein Blick in die CIT Analysten Presentation gibt eine gute Übersicht ) zu sehen bekommen. Dumm für CIT hat sie nicht wie Citi ( siehe gestrige Meldung Citi Still Using FDIC TLGP ) in die Kategorie "Too Big Too Fail" fallen.....

CIT Readies Plan to Hand Control to Bondholders WSJ

Lender Readies Plan to Hand Control to Bondholders; Bankruptcy Filing Is an Option

The fate of CIT Group Inc. was hanging in the balance Tuesday as the large commercial lender readied a plan that would likely hand control of the company to its bondholders.

CIT is preparing a sweeping exchange offer that would eliminate 30% to 40% of its more than $30 billion in debt outstanding, said people familiar with the matter.

The plan would offer bondholders new debt secured by CIT assets, as well as nearly all of the equity in a restructured firm. The new debt would mature later than current debt, the impending maturity of which has posed a problem for CIT.

The plan sets up a potential showdown between bondholders with debt coming due soon and those whose debt does not come due for years. If the company doesn't receive enough bondholder support, it plans to execute the restructuring in bankruptcy court, the people familiar with the situation said.

While the plan is being developed by a steering committee of bondholders in consultation with CIT management, many of those involved said they didn't expect that the company could avoid seeking Chapter 11 bankruptcy protection, given competing bondholder interests.

If CIT does file, it would be the fifth-largest bankruptcy filing, by assets, in U.S. history, trailing only Lehman Brothers Holdings Inc., Washington Mutual Inc., WorldCom Inc. and General Motors Corp. CIT would continue operating under creditor protection, although other financial businesses have struggled to remain viable in bankruptcy.

CIT declined to comment. The people familiar with the matter cautioned that talks remained fluid and many details remained to be determined, including the amount of debt CIT needed to extinguish to avoid a bankruptcy filing.

Having run out of funding options this summer, given its "junk" credit rating, CIT faced the looming need to roll over debt that was maturing. The firm teetered on the verge of a bankruptcy filing before it got a rescue package in late July.

CIT had sought relief from federal regulators and last December did receive $2.3 billion under the Treasury's Troubled Asset Relief Program.

In 2009, however, federal regulators declined further aid, having determined that a failure by CIT wouldn't severely harm the economy. That left the lender scrambling to right a balance sheet burdened by bad real-estate and commercial loans.

CIT avoided a bankruptcy filing in late July when a group of large bondholders such as Pimco, Oaktree Capital and Silver Point Capital infused $3 billion in last-minute financing. The money acted like a "bridge" for CIT to prepare a debt-exchange offer.

UPDATE via Zero Hedge ( couldn´t resist )

Citi and CIT Are Primed for Upside, by Jim Cramer 9/29/2009, 1:54 PM EDT

....I put both of these up there as examples of companies that won't die, and because they won't die, they live. I know that seems a little circular in reasoning, but because Citigroup never suffered a run like Wachovia and Washington Mutual did, it made it and as our flagship site mentioned, it is safe. If it is safe, it can go higher. Because no one forced CIT into bankruptcy, it can live to play again, and when I read in the New York Post that Paulson owns CIT debt, I realized that he's powerful enough to save this company, particularly because he is one of the investors in IndyMac and knows his way around the bottom of the debt barrel.

These two stocks represent lottery tickets that are no longer rip-ups because they have made it out of the "critical care" stage and are recovering. I would buy them both.

> Nice timing Jim..... Add this expertise to his "Ten Trillion $ Worth Of Good Calls"..... ;-) But after watching the other ZOMBIE stocks ( AIG, FRE, FNM ) spiking higher & considering the market rationale these days it would not surprise me to see the stock move higher..... Stock closed down 45 percent.....

> Autsch......Gelungenes Timing..... Denke dieser Expertenrat reiht sich nathlos an die Reihe der "Ten Trillion $ Worth Of Good Calls" ein..... ;-) Nachdem was ansonsten mit anderen ZOMBIEAKTIEN ( AIG, FRE, FNM, Arcandor, Hypo Real Estate usw ) geschehen ist bzw man die aktuelle Risikobereitschaft berücksichtigt ist nicht ausgeschlossen das selbst diese Meldung noch zu Kurssprüngen führt... Aktie reagiert überraschenderweise mit einem "Abschlag" von 45% vollkommen rational....