Is There Anybody Out There Believing That There Will Be A "Transparant" Bad Bank........?

If the recent handling from the Fed & Treasury ( and their western counterparts ) is offering any guide i think the chances that we will see much transparancy is not looking very promising ( same has hapened in Germany with the IKB bailout ) . That Obama has choosen Geithner ( just a younger version of Paulson ) isn´t quite helpful and was a big disappointment ( see also the "rant" from Barry Ritholtz The Moral Hazard of the “Bad Bank” ). Read the following articles and it should be clear that there is no way the Bad Bank will pay nowhere near market prices and make the process of how they "model" their inflated "market price" transparent..... Just another attempt to rip off the taxpayer and to avoid the long overdue punishment of equity and especially debt investors......



Wenn die bisherige Handhabung der Bailouts von Seiten der Fed und des Finanzministeriums ( gleiches gilt auch für Steinbrück in Sachen IKB/KFW!) irgendwelche Anhaltspunkte geben wie es bei der kommenden Bad Bank um die Transparenz bestellt sein wird sieht es, wie nicht anders zu erwarten, zappenduster aus...... Trotz aller großen Reden Obamahs das in allen Bereichen vollkommene Transparenz obersterstes Gebot seiner Regierung sein wird. Das Obama ausgerechnet Geithner nominiert, hat der schon zu Zeiten als Fed Verantwortlicher eine einzige Katastrophe gewesen ist und mir eher wie ne jüngere Version von Paulson vorkommt, spricht Bände ( siehe auch die wenig schmeichelhaften Kommentare zu Geithner via Barry Ritholtz The Moral Hazard of the “Bad Bank” )...... Lest bitte die folgenden Artikel und es dürfte kristallklar sein das die Bad Bank nicht mal ansatzweise aktuelle Marktpreise zahlen wird. Zudem dürfte es keinerlei schlüssige Erklärung geben wie die Bad Bank die deutliche Überbezahlung der Anlagen rechtferigen kann...... Alles in allem ein weiterer Versuch den Steuerzahler ohne entsprechenden Gegenwert die Last der geballten Inkompetenz der Bänker und Aufseher zu schultern..... WICHTIG: Unbedingt diesen Link "Bad Bank - Bad System" von "Querschüsse" lesen um am Beispiel der Wets LB mit offenem Mund zu bestaunen was für Lasten kommen werden.....

> I think it´s safe to say that you can add central bankers to this list......

> Ich denke man kann getrost auch die Zentralbänker dieser Welt dieser Liste (Cartoon) zuordnen.....

Obama Records Pledge Tested By Citigroup Guarantees Jan. 29 (Bloomberg) -- U.S. government guarantees on securities totaling $419 billion for bank bailouts provide an early test of President Barack Obama’s pledge to be open with taxpayers about what they have at risk in the credit crisis.



Bloomberg News asked the Treasury Department Jan. 26 to disclose what securities it backed over the past two months in a second round of actions to prop up Bank of America Corp. and Citigroup Inc. Department spokeswoman Stephanie Cutter said Jan. 27 she would seek an answer. None had been provided by the close of business yesterday.



As Congress debates an $875 billion economic stimulus bill, the guarantees represent a less publicized commitment. The public’s stake has grown along with assurances tying the Treasury to the fate of corporate loans and securities backed by home mortgages, car loans and credit card debt.



Obama promised a new era of government openness as he took office last week, issuing a statement telling agencies “to adopt a presumption in favor of disclosure” in responding to requests under the Freedom of Information Act. Treasury Secretary Timothy Geithner and Lawrence Summers, head of the National Economic Council, said they would emphasize accountability and transparency in using the second half of a $700 billion bank bailout fund.



New Disclosures

Late yesterday, Geithner’s office put hundreds of pages about the fund on the department’s Web site. They did not include documents describing the guaranteed assets.

Members of Congress from both parties have complained about the Bush administration’s lack of disclosure about the spending of the first $350 billion from the fund.



“We have requested information in the past three months and have been rebuffed by the administration,” said Representative Scott Garrett, a New Jersey Republican and member of the House Financial Services Committee. “President Obama comes down the pike now, and maybe, in a week or a month, we’ll know.”

Last fall, the Federal Reserve declined to identify the recipients of about $2 trillion in emergency loans from U.S. taxpayers or the assets the central bank is accepting as collateral.

Fed Is Sued

Bloomberg News asked for details of the lending on May 21 and filed a federal lawsuit against the Fed Nov. 7 seeking to force disclosure. The loans were made under the terms of what became 11 programs in the midst of the biggest financial crisis since the Great Depression. Arguments in the suit may be heard by a judge as soon as next month, according to the court docket.



Bloomberg filed a FOIA request yesterday for the list of what was covered by the Citigroup and Bank of America guarantees. Bloomberg asked for records on the fees paid by banks to the government, which securities were rejected for guarantees, as well as any contracts for data services and experts to assess the value of the securities.



Under the information law, passed by Congress in 1966, Treasury has 20 working days to respond to Bloomberg’s request. The measure allows nine exemptions, such as trade secrets or national security, for blocking disclosure.



During his confirmation, Geithner, the former president of the Federal Reserve Bank of New York, didn’t directly answer a senator’s request for more information about Maiden Lane LLC, a special-purpose entity that holds assets from the takeover of Bear Stearns Cos. by JPMorgan Chase & Co.



$301 Billion Guarantee

Citigroup’s guarantee package, completed Jan. 16, totals $301 billion. It kicks in after the bank goes through its $9.5 billion in current loan loss reserves and the first $29 billion of losses. The government also gets $1 billion of the bank’s benefit from hedging contracts. The Treasury, the Federal Deposit Insurance Corp. and the Fed then assume 90 percent of losses from those assets.

Citigroup’s guarantees include $191 billion of consumer loans, with $55.2 billion of them second mortgages, according to a Jan. 16 news release from the bank. Securities backed by commercial real estate total $12.4 billion and corporate loans add $13.4 billion.

> Unfortunately the US is not alone in this kind of behavior ( see ING Gets Massive Dutch Bailout.... Dumping € 27.7 Billion Alt-A RMBS On The Dutch Taxpayer........ ) On top of this our rumored German version of the Bad Bank is structured in a similar way.......

> Unglücklicherweise macht dieses Beispiel Schule..... ( siehe ING Gets Massive Dutch Bailout.... Dumping € 27.7 Billion Alt-A RMBS On The Dutch Taxpayer........ ) Nach allem was man von Steinbrück hört droht uns in Deutschland eine ähnlich skandalöse Konstruktion......

Citigroup has received $45 billion in cash from selling preferred securities to the government under the Troubled Asset Relief Program.

$118 Billion

Bank of America’s agreement, announced the same day, is similar: $20 billion in cash aid, bringing the total to $45 billion,

and $118 billion in asset guarantees. The government said the assets included securities backed by residential and commercial real estate loans and corporate debt and associated derivatives and hedges

. Scott Silvestri, a spokesman for the Charlotte, North Carolina-based bank, declined comment.



Merrill Lynch & Co., which was bought by Bank of America, was the underwriter for $49.4 billion in defaulted collateralized debt obligations, the most of any bank, since October 2007, according to data compiled by Standard & Poor’s and Bloomberg.



Merrill was the biggest CDO underwriter from 2005 to 2007, with more than $102 billion, said Sanford C. Bernstein & Co. research analyst Brad Hintz.



Since October 2007, Bank of America underwrote under its name $15.1 billion in failed CDOs, according to S&P and Bloomberg. Banks have so far understated losses on such securities, and “the tsunami is on the horizon,” Hintz said.



‘Going to Be Huge’

Past sales of CDOs valued them at pennies on the dollar. In July, New York-based Merrill sold $30.6 billion of the securities to an affiliate of the Dallas-based investment firm Lone Star Funds for $6.7 billion. Merrill provided financing for about 75 percent of the purchase price, and the sale valued the CDOs at 22 cents on the dollar.

“By June, it’ll become clear that these guarantees are being drawn and they’re going to be huge,” said Christopher Whalen, managing director of Institutional Risk Analytics, a financial-services research company in Torrance, California. “Every day that goes by, Congress figures it out just a little more.”

High Dive Into the Toxic Pool WSJ

Goldman Sachs Group estimates that troubled assets could exceed $5 trillion, if defined as assets that could show a loss rate close to, or above, 10%. To put that in context, $5 trillion is just over 40% of the $12.3 trillion in total assets of U.S. commercial banks.

> Some of the estimated loss rates ( Commercial, Alt-A, Second Lien) seems overly "optimistic...... Will be (no) fun to watch how big the haircut will be and what kind of "magic" formula they will use to defend their "value estimate" when the Bad Bank will take over the toxic paper..... Here is another view via Naked Capitalsim Goldman: Bank Rescue May Reach $4 Trillion (and "Bad Bank" Issues)

> Nach allem was ich so mitbekomme sind einige der Annahmen zu den kommenden Verlusten ( gewerbliche Immobilien, Alt-A, Home Equity Loans) reichlich "optimistisch......Wird sicher (k)ein Spaß zu sehen sein zu welchen Werten diese Positionen in die Bad Bank gehen werden und mit welch "magischer" Formel der Wertansatz gerechtfertigt wird..... Eine weitere Meinung kommt von Naked Capitalism Goldman: Bank Rescue May Reach $4 Trillion (and "Bad Bank" Issues)



Option ARMs See Rising Defaults WSJ

Nearly $750 billion of option adjustable-rate mortgages, or option ARMs, were issued from 2004 to 2007, according to Inside Mortgage Finance, an industry publication. Rising delinquencies are creating fresh challenges for companies such as Bank of America Corp., J.P. Morgan Chase & Co. and Wells Fargo & Co. that acquired troubled option-ARM lenders.

..... more than 55% of borrowers with option ARMs owe more than their homes are valued at, according to J.P. Morgan Securities Inc.

As of December, 28% of option ARMs were delinquent or in foreclosure, according to LPS Applied Analytics, a data firm that analyzes mortgage performance. That compares with 23% in September. An additional 7% involve properties that have already been taken back by the lenders. By comparison, 6% of prime loans have problems.

Problems with subprime are still the worst. Just over half of subprime loans were delinquent, in foreclosure, or related to bank-owned properties as of December. The nearly $750 billion of option ARMs issued from 2004 to 2007 compares with roughly $1.9 trillion each of subprime and jumbo mortgages in that period.

Nearly 61% of option ARMs originated in 2007 will eventually default, according to a recent analysis by Goldman Sachs

, which assumed a further 10% decline in home prices. That compares with a 63% default rate for subprime loans originated in 2007. Goldman estimates more than half of all option ARMs outstanding will default.

In a recent conference call, Bank of America said it had added $750 million to its impaired portfolio reserves to offset higher-than-expected losses related to its acquisition of Countrywide Financial Corp. The company said the increase "was focused principally in the pay option ARM product." This week, Wells Fargo said $59.8 billion of its "Pick A Payment" option ARM mortgage portfolio was "credit impaired," including $24.3 billion in loans on which the company has taken a credit write-down.



> Mhhhhh, i wonder how much of this paper will end at the Bad Bank......



> Tippe mal das wir einen gewaltigen Teil aus den unten aufgeführten Bilanzpositionen demnächst in der Bad Bank wiederfinden werden.....



Why Meredith Whitney thinks a “bad bank” is a bad idea FT Alphaville





> Here comes a reminder on how "honest" you should take the estimates for taypayer losses when they come from the Fed, Treasury or 90% of politicians......

> Nur zur Erinnerung wie glaubhaft Aussagen zu möglichen Verlusten für den Steuerzahler sind die von Seiten der Notenbänker, Finanzminister oder von 90% der Politiker kommen verweise ich auf das Beispiel Fannie Mae und Freddie Mac......

Fan and Fred's Lunch Tab WSJ

It seems a lifetime ago, but it's only been six months since the Congressional Budget Office put a $25 billion price tag on the legislation to bail out Fannie Mae and Freddie Mac. At the time, then CBO Director Peter Orszag told Congress that there was a "probably better than 50%" chance that the government would never have to spend a dime to shore up the two government-sponsored mortgage giants.

A spokeswoman for Fannie promoter Barney Frank said then, "we especially like that there is less than a 50% chance that it will be used." The CBO had figured that there was a 5% chance that losses would reach the $100 billion cap on the credit line created by the July law. Now CBO's best guess is more than double that.

The bigger picture here is that politicians like Mr. Frank have been telling us for years that Fannie and Freddie's federal subsidy was a free lunch. We are now slowly, and painfully, learning the price of Mr. Frank's famous desire to "roll the dice" with Fan and Fred. Keep that in mind the next time you hear a politician propose a taxpayer guarantee. The only sure thing is that the taxpayers will pay.

A quarter-trillion dollars later, and rising.............

How Not To Restore Confidence....."United Arab Emirates & Spain Edition"

So much for the transparancy...... Looks like the prospects for the gulf region reagion are somewhat "clouded"...... This is especially true for the Dubai where the drop height is particularly high..... :-) ( see also No Kidding.... Dubai May Need Help To Repay Debt....)

Einmal mehr zeigt sich das der Ruf nach mehr Transparenz rund um den Globus zu hören ist nicht mehr als Lippenbekenntnisse sind. Schade das man nicht mehr nur explizit auf Fed & Co aus den Staaten schimpfen kann........ Die Aussichten für die noch vor einem Jahr "unverwundbare" Golfregion haben sich nicht nur wegen des fallenden Ölpreises merklich eingetrübt. Zum Glück sind immerhin Teile der Region dank Ihrer Sovereign Wealth Funds nicht von der Gnade ausländischer Kreditgeber abhängig. Dummerweise gilt das nicht für Dubai wo die Fallhöhe besonders hoch ist...... :-) ( siehe auch No Kidding.... Dubai May Need Help To Repay Debt.... )

Hat tip to Tim and his blog The Mess That Greenspan Made

‘Banks are hereby required not to be in a hurry to publish their audited annual accounts’ FT Alphaville

Yes, that’s right.

If you happen to be a bank in the United Arab Emirates you have most likely received the above request from the central bank, according to reports from the Zawya Dow Jones newswire. Could the regional lender of last resort be trying to buy some time? As the agency reports (our emphasis):

DUBAI (Zawya Dow Jones)–The United Arab Emirates’ central bank has sent letters to local lenders asking them not to rush the announcement of their fourth-quarter earnings and to be fair in evaluating their investments, a senior banker said Tuesday. “The central bank sent letters to banks on Saturday to ensure prudent application of disclosure principles.

The central bank asked banks not to rush to announce their results,” the banker, who spoke on condition of anonymity, told Zawya Dow Jones. Under U.A.E. regulations, local banks have a 45-day period from Dec. 31 to report their results. “Banks are hereby required not to be in a hurry to publish their audited annual accounts,” Central Bank Governor Sultan bin Nasser Al Suwaidi said in the letter, seen by Zawya Dow Jones. “It’s a very prudent step to ensure the central bank is able to provide guidance for consistency across all banks in the U.A.E., in particular regarding determination of fair value and on general provisioning such as portfolio level rovisions,” said Sanjay Uppal, chief financial officer at Emirates NBD.

In the letter, the central bank tells bankers that both it and the federal government are aware of the impact the global credit crisis is having on world markets and are addressing the issue of liquidity in the U.A.E., but that banks also have a role to play. “Under these circumstances, banks should exercise vigilance and utmost caution before they publish their audited annual accounts for the year 2008,” Suwaidi said, adding that world markets remain highly volatile as investors have been prone to overreact and as a result securities may be hard to assess. Suwaidi said the central bank has started to examine the “true value” of asset quality in banks. But gauging this may take more time than under normal circumstances, as the central bank needs to identify carefully the nature and value of the assets, Suwaidi said. The central bank also asked financial institutions to build adequate provisions and reserves.

From Creditflux via Alea / FT Alphaville

Spanish website Cotizalia reports that Spain’s banks and cajas are negotiating on a one-to-one basis with the Bank of Spain to “fine-tune” their 2008 accounts in order to avoid taking catastrophic write-downs on lans.According to the article, the central bank has agreed to allow the banks to increase the “calendar of amortisation” of these troubled assets, which are said to be mostly loans to property developers.

ING Gets Massive Dutch Bailout.... Dumping € 27.7 Billion Alt-A RMBS On The Dutch Taxpayer........

They call it "illiquid"... I call it "toxic"..... A fantastic deal for ING and a lousy one for the taxpayer..... The loss assumptions for the transfered ALT-A is overly optimistic and the structure of the deal is just another poorly hidden bailout postponing a nationalization with no upside for the taxpayer.....Looks like they have adopted the UBS, Citi, Merrill/Bank Of America structure leaving the taxpayer with a massive disatvantage ( no equity stake ) ..... I think the term "looting" is not a massive overstatement.....

Ziemlich dreist. ING nennet die Position "illiquide", eine bessere Bezeichnung währe sicher " toxisch"...... ING mußte offensichtlich erneut gerettet werden. Für ING ein fantastischer Deal der den Steuerzahler ziemlich teuer zu stehen kommen dürfte. Die Verlustprognosen der ALT-A Positionen sind überaus rosig und stehen im totalen Kontrast zu den jüngsten Bewertungen bei anderen Instituten. Alles in allem ein peinlicher Versuch eine weiter direkte Mrdschwere Kapitalbeteiligung die dem Steuerzahler zumindest einen massiven Aktienanteil ( sprich ne verkappte Verstaatlichung) und damit die Chance bei einer Erholung zumindest einen Teil der Verluste zurückzuerwerben..... Das ganze ähnelt der UBS, Citi, Merrill/Bank Of America Variante (bei denen allerdings der Schrott größtenteils bei den jeweiligen Notenbanken gelandet ist ) die man guten Gewissens als "Plünderung" der Steuerzhaler betiteln kann....


ING update on results and measures to reduce risk and costs
ILLIQUID ASSETS BACK-UP FACILITY
ING and the Dutch government have reached an agreement on an Illiquid Assets Back-up Facility covering 80% of ING’s Alt-A mortgage securities. Market prices for these securities have become depressed as liquidity dried up, which had an impact on ING’s results and equity far in excess of reasonably expected credit losses. The transaction will significantly reduce the uncertainty regarding the impact on ING of any future losses in the portfolio.

Under the terms of the Back-up Facility, a full risk transfer to the Dutch State will be realized on 80% of ING’s EUR 27.7 billion portfolio of Alt-A RMBS at ING Direct USA and ING Insurance Americas. The Dutch State therefore will participate in 80% of any results of the portfolio. This risk transfer will take place at a discount of 10% of par value.

ING will remain the legal owner of 100% of the securities and will remain exposed to 20% of any results on the portfolio. > For more details from todays "taxpayer looting" see the ING Presentation

> If you want to see the details of the "illiquid" ALT-A RMBS visist page 56 - 63 Third Quarter 2008 Results . It´s the latest update i could find. Probably no coincidence that there was no update in todays release...... Wouldn´t be surprised if we will very soon see other "illiquid" assets like corporates bonds, CMBS etc being dumped under similar terms.......

> Wer mehr Details zu den "illiquiden" ALT-A Portfolio sehen möchte empfehle ich die Seiten 56-63 Third Quarter 2008 Results. Sind bis heute die aktuellsten Daten die verfügbar sind. Sicher kein Zufall das es dazu heute kein Update gegeben hat........ Würde mich nicht wundern wenn wir demnächst ähnliche Versuche in anderen sog. "illiquiden" Bilanzpositionen sehen werden ( denke hier besonders an Unternehmensanleihen und Positionen die mit gewerblichen Immobilien zu tun haben )......

As a consequence of the transaction, the Dutch State will be entitled to receive 80% of the cash flows of the total portfolio. ING will pay to the Dutch state an annual Guarantee Fee consisting of a fixed amount plus a percentage of the payments received on the securities. The net present value of this fee is EUR -0.6 billion. ING will receive from the Dutch State payments representing a net present value of EUR 0.5 billion. In addition ING will receive from the Dutch State a management fee with a net present value of EUR 0.7 billion. As a consequence of the factors above, the transaction will have a limited impact on ING’s first quarter profit & loss.

The effects of the transaction on ING’s capital and balance sheet will include a reduction of equity volatility, a positive impact on shareholders’ equity of EUR 5 billion through a reduction of the negative revaluation reserve. Risk-weighted assets will be reduced by approximately EUR 15 billion, raising ING Bank’s Tier-1 ratio by approximately 40 basis points to 9.5% and the core Tier-1 by 32 basis points to 7.4%, both on a pro forma basis. The transaction is expected to close in the first quarter of 2009, subject to further documentation and regulatory approval.

ING will earmark part of the capital released by the Back-up Facility to support the growth of the Dutch lending business for an amount of EUR 25 billion at market conforming conditions. Under the terms of the agreement, ING commits itself to pro-actively use EUR 10 billion of the Credit Guarantee Scheme of the State of the Netherlands to support the scheme.

For the duration of the Back-up Facility, ING will maintain the corporate governance measures agreed upon issuing core Tier-1 securities to the State in November 2008. In addition, the government-nominated members of the ING Supervisory Board will have approval rights on certain executive appointments. The Executive Board of ING has agreed to forego all bonuses until a reviewed remuneration policy will be completed. (LOL)!!!!This policy will include criteria on sustainability for the Executive Board and is expected to be proposed to the annual General Meeting of Shareholders in 2010.

“With this agreement, we take a firm stride to reduce the risks on our balance sheet. We much appreciate the measures the Dutch government is taking in this phase to restore confidence in the financial sector and stimulate the economy and thank them for reaching this agreement,” said Jan Hommen.

> No wonder the stock is now up almost 25 percent.....Time to renegotiate the stock options / bonus programms....... More bailout news out of Europe France to support Airbus via banks: source & Schaeffler and Continental in aid talks ( even more outrageous than ING )

> Kein Wunder das die Aktie mal eben satte 25% höher springt......Höchste Zeit fürs Management die Aktienoptionsprogramme sowie die Boniprogramme nachzuverhandeln.... Mehr in Sachen Bailout die einem die einem zumindest mit dem Kopf schüttel lassen kommt aus Frankreich ( siehe France to support Airbus via banks: source ) sowie aus Deutschland Staatshilfe für Schaeffler und Conti geplant. Besonders der Fall Fall Conti/Schaeffler is ein klares Anzeichen dafür das selbst größte Inkompetenz momentan erstklassige Chancen hat vom Steuerzahler rausgehauen zu werden.....

China´s National Bureau Of Statistics Is Funny.....

This kind of "accounting" makes even the BLS & BEA jealous.....

Diese Zahlen können es fast mit "Berchnungsmodellen" ( denke hier besonders an den Arbeitsmarktbericht und das GDP ) der USA aufnehmen........ Allen die immer noch auf dem Trip sind das China die Lokomotive für die Erholung sein wird sollten sich nicht von den offiziellen Zahlen blenden lassen und Ihre Erwartungen merklich zurückschrauben......

China’s National Bureau of Statistics is gathered in a “scientific and realistic method,” Ma Jiantang, the agency’s director, said at a briefing in Beijing yesterday

Albert Edwards LOL China FT Alphaville

As the debate over how bad things in China are rages on, growing Sino-sceptic Albert Edwards offers his two pennies on the country’s latest statistics.

Well, to be accurate, he laughs out loud at them:

That this outturn was bang in line with the median estimate of economists surveyed by Bloomberg makes it all the more unbelievable in my mind. All other economic data worldwide have been surprising massively on the downside and China should be no exception. A few hours earlier, for example, South Korea reported Q4 GDP had declined a hefty 5.6% QoQ, massively worse than a Reuter’s consensus which looked for a contraction of 2.7%! I naively thought that this QoQ decline was already annualized, but it was not. On a US style of reporting, the South Korean economy contracted at a 20% annualised rate in Q4. Asia is in depression. Whatever the heavily manipulated Chinese GDP is telling us, that economy must now be contracting. The Yuan needs to be devalued.

So the key thing that’s fishy according to Edwards is just how bang on line the numbers were. As for Tim Geithner’s bizarre declaration on Thursday that China was manipulating its currency (presumably a call for China to allow the yuan to appreciate?) Alberts actually believes the reverse is needed. The yuan must be devalued.

And he’s got a point. As he highlights, inter-regional trade within Asia is what appears to be suffering the most (blowing all notions of “decoupling” firmly out the window). This is clearly reflected by the sharp fall in Japanese exports, which fell no less than 35 per cent year-on-year in the last quatrer according to the latest figures. As Alberts stresses (his emphasis):

…we cannot highlight strongly enough how truly mindboggling Japan’s collapse in exports to China are. Last July they were expanding at a 16% yoy pace. Now they are contracting at a 35% yoy rate! This is a phenomenon throughout the region. Hence despite the notoriously manipulated Chinese GDP data showing a shocking slowdown in GDP growth to 6.8% yoy, I would eat my hat if the Chinese economy was doing anything other than contracting right now.

So there you have it readers, if the Chinese economy proves not to be contracting Mr. Edwards will - for he has said so - eat his hat.


> Combine the economic slump with the suppression from the comminust party you have a very "explosive" mixture..... And i think the "events" in China will easily rival the protest we are already facing in parts of Europe ( see European governments face protests over economy / Reuters )

> Wenn man die Talfahrt jetzt mit der Unterdrückung der herrschenden Partei kombiniert dürfte das für eine extrem explosive "Stimmung" sorgen. Teile Europas machen gerade vor was trotz Zensur auch in China ans Licht kommen wird ( siehe European governments face protests over economy / Reuters )

Merrill Delivered Bonuses Before BofA Deal

Looks like Thain has manage to find billions to honor a quarterly loss of $ 21.5 billion at the expense of the taxpayer...... The imprudence is just unbelievable.......But with no restrictions from government i don´t know if Thain & Co are really the ones to blame.....? I somewhat surprised that the "outrage" in the public is still muted........ See update at the end of post....

Sieht ganz so aus als wenn Thain es geschafft für sein Unternehmen ohne die Übernahme durch Bank Of America längst Pleite gegangen wäre noch mal ordentlich auf Kosten des US Steuerzahlers abkassiert hat...... Diese Dreistigkeit bei einem Quartalsverlust von $ 21,5 Mrd $ verschlägt einem fast den Atem.... Schön zu sehen das die Bedingungen der Rettungsprogarmme ( TARP ) anscheinend keinerlei Sanktionen beinhalten und so diese Selbstbedienungsmentalität keinerlei Einhalt gebieten....Die wirklich Schuldigen sind also nicht ausschließlich bei Thain & Co zu suchen...... Das ganze wirkt natürlich besonders pervers wenn zur gleichen Zeit Gelder für anderen Industrien nicht oder nur zögerlich bereit gestellt werden..... Ich bin nicht nur in diesem Fall mehr als verwundert das der öffentliche Aufschrei immer noch mehr als verhalten ist...... Beachtet bitte das Update am Ende.....


FT Merrill Lynch took the unusual step of accelerating bonus payments by a month last year, doling out billions of dollars to employees just three days before the closing of its sale to Bank of America.

The timing is notable because the money was paid as Merrill’s losses were mounting and Ken Lewis, BofA’s chief executive, was seeking additional funds from the government’s troubled asset recovery programme to help close the deal

Merrill and BofA shareholders voted to approve the takeover on December 5. Three days later, Merrill’s compensation committee approved the bonuses, which were paid on December 29. In past years, Merrill had paid bonuses later – usually late January or early February, according to company officials.

Within days of the compensation committee meeting, BofA officials said they became aware that Merrill’s fourth-quarter losses would be greater than expected and began talks with the US Treasury on securing additional Tarp money.

Last week, BofA said it would be receiving $20bn in Tarp money, in addition to the $25bn that had been earmarked for it and Merrill last year. It was then revealed that Merrill had suffered a $21.5bn operating loss in the fourth quarter.

Despite the magnitude of the losses, Merrill had set aside $15bn for 2008 compensation, a sum that was only 6 per cent lower than the total in 2007, when the investment bank’s losses were smaller.

The bulk of $15bn in compensation was paid out as salary and benefits throughout the course of the year.

A person familiar with the matter estimated that about $3bn to $4bn was paid out in bonuses in December

Nancy Bush, an analyst with NAB Research, described the size of the 2008 Merrill bonus payments as “ridiculous”.

BofA said: “Merrill Lynch was an independent company until January 1 2009. John Thain (Merrill’s chief executive) decided to pay year-end incentives in December as opposed to their normal date in January. BofA was informed of his decision.”

BofA declined to specify when Mr Thain informed the bank of his decision.

A source familiar with the matter says Mr Thain, in the weeks leading up to the December 8 compensation committee meeting, had been weighing the possibility of requesting a bonus of at least $10m for himself before ultimately deciding against such a move.

UPDATE:

Thain Forced Out, NY Attorney General Cuomo Investigating Merrill Bonuses....

But the noise about Thain's compensation is probably less important than how it unintentionally serves to divert attention from the real issue. Many (all?) of the big players in the financial sector are insolvent, period. Their credit losses (whether marked to market or a realistic cash flow basis) are bigger than their net worth. These firms are therefore wards of the state.

Yet we keep pretending that they are still private concerns, still keep the managements in place that created the mess, still allow them to pay themselves orders of magnitude more than average workers. As we have discussed, this is looting and the looting continues

AMEN! Yves from Naked Capitalism nails it one more..... Another good piece comes from Floy Norris

Amen! Denke Yves von Naked Capitalism sagt es wie es ist..... Floyd Norris steht dem in nichts nach.....

Wall Street Paychecks May Wither

It is one thing when the best-paid people seem to be the smartest and the most accomplished. Those who make much less may not like it, but the differential seems understandable. It is another thing when those people are shown to have committed huge blunders that would have driven their companies out of business, and them into the unemployment line, but for government bailouts.So it is now with Wall Street.

In both Europe and the United States, antipathy toward the bailout is rising amid complaints that the money has not helped the economy by encouraging loans, but has kept the bankers in Champagne and caviar

I have to reiterate my view that i still think the "outrage" so far is very very "muted"....

Muß mich wiederholen und darauf hinweisen das ich nach wie vor finde das die bisherige "Empörung" noch immer unverständlich gemäßigt ist......

Pounding The Pound

The Queen is probably "not amused" .........

Sterling continued its slide on currency markets on Tuesday, dropping 2.7% on a trade-weighted basis amid uncertainty about the terms of the government insurance for toxic assets held by banks and fears of creeping nationalisation of the sector. Analysts said sterling had been trading with strong correlation with UK bank stocks, which suffered fresh falls. The likelihood that the Bank of England would soon create money to buy assets has intensified speculation that sterling’s value will be progressively eroded. This week, it has fallen 4.5% against the euro, 5.8% against the yen and 6.1% against the dollar, retreating about 34% against the dollar from highs in November 2007

> The following chart is a little bit outdated but gives a good impression what is going during the past 6 month..... See the FT link to take yesterdays action into account.....



> Der nachfolgende Chart beiinhalted noch nicht die Bewegugen siet Beginn der Woche......Verweise auf den FT Link für die aktuellen Absicherungspreise....



CDS report: Sovereigns rattle markets

The cost of buying five-year credit protection on the UK gapped wider to 133bp on Tuesday, compared to Monday’s close at 124.9bp. Ireland was out at 281bp from 275.2bp yesterday, Spain was at 156.3bp, compared to 142.5bp, Austria climbed to 157.5bp from 146bp and Germany edged wider to 55.8bp from 55bp on Monday, according to CMA.

The UK has nothing left to sell, official

To quote Jim Rogers (he who broke the Bank of England with George Soros on Black Wednesday in 1992): “It’s simple, the UK has nothing to sell.”

Ambrose Evans-Pritchard is SERIOUSLY ALARMED

For the first time since this crisis began eighteen months ago, I am seriously worried that British government is losing control.

If the Government is forced to nationalise RBS and perhaps Barclays with their vast exposure in dollars, euros, and yen, it risks being submerged. It is one thing for a sovereign state to let its national debt jump in a crisis — or a war — perhaps even to 100pc of GDP. It is another to take on foreign debts on such a scale with no reserves. Yes, the banks have foreign assets as well to match the debts. But how much are these assets really worth?

We cannot even do what Iceland did to save its skin. Reykjavik refused to honour the foreign debts of its buccaneering banks. It let them default, parking the losses in Resolution Committees. Small islands can do that. Iceland has fish instead, and lots of metals

England has not defaulted since the Middle Ages. There is a real risk it may do so now.

RBS et mon droit: HM deficits

Did you know that by assets, RBS is the world’s largest company?

Naturally, the UK government is rather keen RBS does not fail. And indeed, it has gone all out. Just about every conceivable measure has now been thrown down to stave off disaster for the UK banking system: recapitalisation, asset guarantees, commercial paper guarantees, liquidity backstops, quantitative and qualitative easing and subversion of Basel II risk weightings.

The hope is that they will work. Clearly RBS’s shareholders don’t believe so. It would seem that they are discounting for the effect of the one policy option remaining: Nationalisation.

Nearly matching RBS’ £1.9 trillion of assets, RBS has £1.8 trillion of liabilities.

To put that into perspective with regard to the (small) risk of nationalisation: inclusive of the Northern Rock nationalisation, the UK public debt, defined by the ONS, is currently only £650bn. Nationalising RBS would increase UK public debt 369 per cent.

A couple of other pieces of info for UK Plc: the world’s third largest organisation by assets is Barclays. And the fourth is HSBC.

UPDATE Bloomberg Barclays Falls Seventh Day on Nationalization Fears

> After looking at the next graph it not surprising that the BOE is now ready to use "unconventional measures"....



> Nachdem man einen Blick auf die nächste Grafik geworfen hat ist es nicht weiter verwunderlich das die BOE demnächst die Notenpresse anschmeissen wird........





Bank of England to Start Quantitative Easing Naked Capitalism

In his first speech of the year, Mr King outlined radical plans for the Bank to buy up an initial £50bn of illiquid assets in the market to increase the flow of credit, with the option of ex-tending the scheme to boost the money supply by effectively creating new money.

> Probably no surprise Gold in Pound is at a historic high & that the the flight to "the real money" around the globe continues .....

> Sicher kein Zufall das ausgerechnet in diesen Zeiten Gold in Pfund gerechnet neue historische Hochs erklimmt & die Flucht in "wahre Werte" weltweit anhält .......

Thanks to Tim from The Mess That Greenspan Made

Just in time to "celebrate" Gordon Brown´s wisdom ( see Gordon Brown's 415 tonnes Gold Sale Blunder, 10 Years On ) & Times

Da paßt es gut das der jetzige Premierminister Gordon Brown vor ziemlich genau 10 Jahren 50% aller britischen Reserven zum absoluten Tief verscherbelt hat ( Times )

Brown offloaded the gold at a 20-year low in the market — now nicknamed the “Brown Bottom” by dealers. The 17 auctions achieved prices for the gold of between $256 and $296 an ounce, with an average of $275.

Couldn´t resist......... Konnte einfach nicht widerstehen.........

> Needless to say that the UK has still a AAA rating...... I wouldn´t be surprised to see "The Sex Pistols" with their "Anarchy In The UK" to get quite popular again..... :-)

> Überflüssig zu erwähnen das UK immer noch ein AAA Rating hat....... Ich persönlich würde mich nicht wundern wenn wir zukünftig die Sex Pistols mit "Anarchy In The UK" demnächst wieder öfter zu hören bekommen...... :-)

Cartoon Of The Week.......

With "Bad Banks" around the globe on the way overpaying with taxpayers money for toxic assets i think this cartoon sums it up..... The entire talk is even more outrageous because nobody seems to even considering a (tiny) nominal haircut from the bank bondholders to contribute/share at least a fraction of the burden.......

Mit "Bad Banks" weltweit in der Mache die den Steuerzahler die Suppe alleine auslöffeln lassen passt der folgende Cartoon recht gut..... Absurd wird das ganze eigentlich erst wenn man bedenkt das zumindest ich bisher noch keine Rufe dahingehehend gehört habe das die Anleihebesitzer der Banken ebenfalls einen nominalen Abschlag auf Ihre Ansprüche tragen müßten um zumindest einen Bruchteil der Kosten zu tragen.... Wie sehr die "Koordinaten" des guten Geschmacks inzwischen aus den Angeln gehoben sind beweist "vorbildlich" dieses Beispiel ( Tricksereien - HSH schüttet aus trotz Verlust )

Thanks to / Dank an Adams via Telegraph