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135 billion dollars remains from bank bailout fund: Geithner
(AFP)
29 March 2009
WASHINGTON - US Treasury Secretary Timothy Geithner said Sunday that 135 billion dollars remained from a 700-billion-dollar fund approved by Congress to shore up the financial sector reeling from crisis.
He said it was crucial for President Barack Obama’s administration to have substantial resources to implement various steps to rehabilitate banks and other financial institutions bruised by the crisis stemming from a home mortgage meltdown.
‘In terms of if you look at what’s not committed yet, it’s roughly 135 billion dollars,’ he said in an interview with the ABC network.
The estimate included money that could be returned by banks that had borrowed but did not need to tide them through the turmoil, he said.
‘That’s a reasonably conservative estimate and gives us, this is very important, substantial resources to move ahead with this broad-basedinitiative to get the financial system back in the business of providing credit,’ Geithner said.
Congress approved in October last year a 700-billion-dollar program to fix the critical financial sector, including government involvement with the private sector to clean up bank balance sheets of ‘toxic’ assets.
The troubled assets mostly involved home mortgage securities that soured.
Geithner said that the government would use the funds to ‘quickly, as carefully as we can,’ to ease credit flows so that the financial system could resume its role in fueling economic growth.
On the prospect of going to Congress again to seek additional funds to beef up the financial sector, he said, ‘We’ll cross that bridge when we come to it whether we need additional resources.
‘If we come to that point we’ll go to the Congress and give us the strongest case possible and help them understand why this will be cheaper over the long run for us to move aggressively.’
Big Banks Pull off the Ultimate Bait & Switch
Submitted by Rolfe Winkler, CFA, publisher of OptionARMageddon
We're not quite as healthy as we thought we were. Oops. (WSJ)
J.P. Morgan Chase Chief Executive James Dimon said...that March was a little tougher than the first two months of the year....Bank of America...CEO Kenneth Lewis also said that March had been a tougher month for his bank. [Convenient that they decided to dump this information on Friday afternoon, and at the close of a very good week].
Readers may recall that a few weeks ago, those two CEOs---along with Citi's Vikram Pandit---said the first two months of the year had been very good:
Pandit, March 10th: “We are profitable through the first two months of 2009 and are having our best quarter-to-date performance since the third quarter of 2007.”
Dimon, March 11th: "Jamie Dimon, the chief executive of JPMorgan Chase, said Wednesday that the bank was profitable in January and February..."
Lewis, March 12th: "We have been profitable for the first two months of the year,” Lewis told reporters after a speech in Boston today.
This was possibly the most nakedly self-serving bullshit the big bank CEOs have offered to date. ("bullshit" being a technical term of course, see Harry Frankfurt)
By February, it was understood that the big banks are all insolvent, certainly Citi and BofA. To deal with them, consensus among the cognoscenti was finally tending to a proper recapitalization: wiping out shareholders and forcing losses onto creditors via debt-for-equity swaps. Call it nationalization, call it preprivatization, call it FDIC receivership, it was clear that losses had to be recognized and by those to whom they properly belong: investors across the capital structure.
But no one really wanted to do this, not in Congress and certainly not in the Obama administration, where Timmy Geithner has made clear that his priority isn't a cleansed banking sector, it's a privately-owned one. For obvious reasons the banks don't like this solution either. So they offered up their self-serving b.s. regarding January and February, buying just enough time for Congress/Bernanke to badger FASB into changing mark-to-market rules and for Geithner to roll out his private-public partnership plan.
Now whatever losses the banks can't hide with revised accounting treatments, they can simply fob off on taxpayers via the partnerships. They got what they always wanted: A bad bank. An entity that will actually absorb losses from the asset side of the balance sheet. Shareholders and creditors don't have to worry about further writedowns, not the ones that can't be hidden anyway. Taxpayers will pick up the check!
Even better, the Geithner plan is so ridiculously complex---and public disclosure is likely to be so minimal---that toxic asset transfers are likely to happen largely out of view. Maybe Treasury will have to increase its borrowing substantially in order to fund the losses, but by that point everyone will be celebrating that banks have started lending again. Hooray!
By the way, are there ANY protections to prevent banks from gaming this plan? What's to stop them from acting as the equity investors in the partnerships, ponying up a sliver of equity to effect a transfer of toxic assets from their own balance sheets to the public's? The FDIC's FAQ for the legacy loans program doesn't even address this particular Q. Is it not being frequently asked?
This is all of a piece. The longer CEO/policy-maker collusion can delay loss recognition, the more time they have to invent ridiculous leverage schemes (more money printing! more government borrowing to fund "stimulus"! more FDIC "guarantees"!) to inflate those losses away....and to continue looting the public's wealth.
But losses aren't going away. Trading smaller private liabilities for larger public liabilities in order to artificially inflate asset prices does nothing to repair the economy's aggregate balance sheet. At the end of the day, we're still just lending more and more against a dwindling pool of real equity. The unwind is coming. Adding more leverage to delay it will only increase the pain.
Commercial Real Estate Collapse Picking Up Steam
Posted Mar 26, 2009 08:40am EDT by Joe Weisenthal
From The Business Insider, March 26, 2009:
Even if banks were being completely honest about their marks -- which we know they're not -- the accelerating collapse of the commercial real estate market would mean billions more in writedowns.
WSJ: The delinquency rate on about $700 billion in securitized loans backed by office buildings, hotels, stores and other investment property has more than doubled since September to 1.8% this month, according to data provided to The Wall Street Journal by Deutsche Bank AG. While that's low compared with the home-mortgage delinquency rate, it's just short of the highest rate during the last downturn early this decade.
Some experts say it now looks as if the current commercial real-estate slump will rival or even exceed the one in the early 1990s, when bad commercial-property debt played a big role in dragging the economy into a recession. Then, close to 1,000 U.S. banks and savings institutions failed. Lenders took about $48.5 billion in charges on commercial real-estate debt between 1990 and 1995, representing 7.9% of such debt outstanding.
This is one area in particular where banks are carrying assets an unrealistically high levels. Citigroup (C) is marking many of its loans at .95 on the dollar and up. And though it's already rivaling the last bust, our sense is that this will prove to be far worse than that one, deliquency-wise, when all is said and done.
If a bucket loses water through 4 holes at the bottom it does not help to seal 1 or 2 holes and fill in again more fresh water. It is lost water. You have to close all four holes before pouring in again fresh water. National budget gets dehydrated right now by pouring valuable water in a still porous bucket. Moreover, a lot of people have started recently to pour in again there own water in the stock market. It is too early imo.
We need first to remove all the water from the bucket, completely repair the bucket (which is effectively some sort of nationalization of several banks -possibly not all of them-, AIG, etc.) and then fill it again. In order to repair it you first have to remove the water.
Japan did not completely repair its own bucket in the eighties but decided to pour in a lot of water right away.
This concept of flushing the markets with cheap money creates already the next bubble. This won't be the answer but makes it even worse. After banks ruined themselves now the governments ruin themselves as well by accumulating debt without really changing the system. A discrepancy between stock prices and the real shape of economy develops these days again. Honeymoon will be over soon.
Read the signs, crisis far from over
CEO of DB strictly ruled out taken government money throughout the whole crisis so far
-----------------------------------------------------
First announcement in the morning, March 24, 2009
Deutsche Bank (DBKGn.DE) will return to profit this year if the global economy, financial markets and the regulatory environment develop as expected, the bank's Chief Executive said on Tuesday."I am pleased to report that we have made a good start to 2009," Josef Ackermann told shareholders in the company's annual report, adding the German flagship bank's business model remained valid.He said he expected the industry to face significant challenges this year, but that there was a good chance that the banking industry would recover at least partially in 2010.
-------------------------------------------------------------
Second news in the afternoon, 24.03.2009 17:17
Deutsche Bank Can't Rule Out SoFFin Use If Mkts Worsen More
FRANKFURT (Dow Jones)--Deutsche Bank AG (DB) Tuesday said it can't entirely rule out tapping the German government's financial markets stabilization fund if market conditions worsen further.
"Our senior management has stated that it currently doesn't intend to participate in the program of the Financial Market Stabilization Fund. However, further deterioration in market conditions or the competitive environment might require a change of such (an) intention," Deutsche Bank said in its annual report, published Tuesday.
Germany's EUR500 billion financial markets stabilization fund SoFFin provides capital and state guarantees, which are tied to the issuance of state-guaranteed bonds.
Earlier Tuesday, Chief Executive Josef Ackermann, in a letter to shareholders published Tuesday along with the bank's annual report, said that Deutsche Bank doesn't need fresh capital as its 2009 funding requirements are lower than in 2007 or 2008, and it could return to profitability this year, despite a still challenging market.
DOW rather 6000 than 9000 in May, my take
there is more and more a huge difference between what investors expect these days (wishful thinking) and those who analyze the real shape of the worldwide economy.
We will soon have a discussion that this Geithner plan rather hurt than helped the recovery. I got pretty negative since Bernanke's printing press turned into full speed.
Respected scientists still say some sort of bankruptcy is unavoidable for most of the big banks to clean this up. We are only wasting time right now by delaying this. Check out this interview, frightening:
http://www.pbs.org/now/shows/511/index.html
Don't forget to take your profits.
DOW rather 6000 than 9000 in May
there is a huge difference between what investors expect and those who look at the real
The thing that really concerned me last week was the way how heli Ben is pumping the markets recently. He almost acts like a pinkie CEO. Desperate stuff, printing money he cannot realistically pay off. Like a pinkie CEO starting death spiral financing just to keep this whole thing alive for a few more months. The Fed looks like running out of options.
Switching debt from the market to the government does not mean paying off debt. Debt has simply not been paid off yet, but only transferred. Inflation and future taxes will make us pay. However, more and more people believe again they can continue now as usual after the government has injected "some" money. However, only a tiny amount of the toxic waste out there has been covered by government action yet and a lot of governments all over the world are already running out of steam in terms of injecting money. After the housing and banking system got poisened, now the national budgets get chronically poisened as well. We risk to end up in economic and social depression.
My personal sentiment has darkened signficantly the last couple of days. I get more and more the impression that the government paints a much more rosier picture than the data indicate.
No idea what will indeed happen on Monday
Treasury's bank rescue plan to be announced Monday
Sunday, March 22, 2009 11:53 AM
(Source: Associated Press/AP Online)tracking WASHINGTON - There's confirmation that the Treasury Department will announce on Monday its plan for dealing with banks' bad assets.
Senior White House economist Austan Goolsbee said Sunday on CBS' "Face the Nation" that's when the public-private partnership will be outlined.
Earlier Sunday, the head of the president's Council of Economic Advisers said that the government needs investors to help buy up bad assets that are weighing on banks' balance sheets and keeping banks from lending to consumers and businesses.
Christina Romer said the plan will team up with the private sector and the Federal Reserve and the Federal Deposit Insurance Corp. to make a limited amount of government bailout money go farther.
Romer spoke on "Fox News Sunday."
Toxic Bank Assets Plan Delayed Again
By: Ron Haruni Friday, March 20, 2009 1:04 AM
http://www.istockanalyst.com/article/viewarticle/articleid/3134024
Patience is a virtue
I would be rather careful because generally you can not make profits by following a trend everybody expects.
Normally you make money by doing the unexpected and waiting it out afterwards. In other words, as everybody expects now a bigger drop again, this looks too easy.
The only thing that really counts for me is whether Lewis outlook will become true: No more government money.
Overall sentiment is still negative,
hence this stock is shorted especially after some updays and second, also longs are not holding but selling again, taking profits (check the comments of people posting on this board who actually like BAC but trade it quickly again).
So, long term buyers are still missing basically, thereby creating again and again winning opportunities for those who shorted or took profits. Those who like BAC expect to buy this stock cheaper in the future.
While this could work moderately at the moment, this will change radically one day (soon?) and those, who feel comfortable now with relatively small profits, risk to pay big in the future. I recently heard an analyst on TV saying that nobody knows when the banks finally rally again but it will be really powerful and when this happens, he does not want to be caught on the wrong side. The prices are ridiculous right now for those banks who will recover the next couple of years. We have a good candidate here imo.
Btw I'm not so sure that high frequent trading these days brings significant profits. You still need to anticipate the movements which are highly unpredictable these days, more than ever. People normally post their wins but refuse to mention when they were wrong. A lot of shorters lost money this week for sure.
Oh I agree, some solid numbers for Q1 and this will fly.
Normalization instead of nationalization!
That would do the job already at these prices. The markets like to see that management departments finally regain control over their corporations.
would be surprised if the CEO of BAC has miscalculated the financial situation for the next quarter by an amount of 100 billion.
This would seal his fate immediately and probably would have more severe consequences for him then only losing his seat. He must be very confident with the interim numbers on his table when expressing such positive outlook.
Also surprisingly to me, almost no serious person has really challenged such positive outlook. At least, I don't hear a controversial discussion about Lewis' outlook. Isn't it amazing?
However, confidence was hurt massively with all the bad surprises in the sector. So, only the outcome of the stress test will make the difference.
I would say that this slow constant rise is accumulation. Impressive, people seek to own this stock again.
I agree, pension funds hold positions in BAC, don't they?
This is effectively the retirement money of the ordinary worker.
Therefore, I believed that nationalization was not a serious option, this would have erased the future financial basis for many hard working people (effectively a second case of Enron).
The question is: What is the most effective way of stabilizing the whole system while having only limited resources at hand ?
Every dollar spent these days against the crisis must be repaid someday and will be missed somewhere else. Inflaton will be the next crisis to arrive.
There are possibly still some more skeletons in the closet but this stock approached 2$ recently because nationalization and completely wiping out the stockholders was a "realistic scenario" for the street.
This seems to be over, BAC will survive (privately owned) if you ask me, so I would be surprised to see 2$ again. Having said that 20$ won't happen soon either.
But who cares if you hold it long-term. Where is the stock price in 5 or 6 years ? Defintely not 2 $, so I'm positive, this is a historic chance to start a position.
Stock prices can only reflect the real value of the respective company in the long run and stock prices rise when the value of the company increases (this has been accepted over decades as a general investment strategy illustrated by the success of Warren Buffet who always tried to invest in corporate value).
The last couple of years some people made us believe (or even themselves believed) that value can be created by pure speculation, essentially because others will follow and pay for it. The result was that few got rich but many more ended (or will end soon) in the dust. You can not seriously run an economy on such principles. This is what needs to be fixed now.
BAC will rise again when people realize that buying this stock means buying future value (cash flows and profits not only artifical stock price fluctuation)
The only essential difference between stocktrading and gambling is that stocks are traded for future value, not for pure anticipation of an event happening in the future.
just a few remarks about today:
this is actually the former way of running the economy:
giving speeches, opinions ("our economy is in good shape, blablabla...") or even simple promises in order to make the people consuming, buying stock or even property (they can not afford).
let's hope that the new government sees its role in more than the few things mentioned above. I actually like how they have addressed the problems of the banking sector so far. No panic action only because stocks are down.
Geithner has been critized for being "not specific enough" recently (actually the only thing he has not done was promising Wall Street was Wall Street wanted to here: "keep going as always, we pay for it in any case" (essentially the approach of the former government). So Wall Street "punished" him for this recently. How impolite by the new government, it does not give them what they want. Or remember how the car industry bosses flew with their private jets to the congress. They did not even consider it necessary to have a plan, they just wanted to fill their bags with money and leave again.
However, keep going as usual is not the answer.
I acknowledge that the new government first evaluates the situation before taking action (although it was painful for us) instead of simply doing nothing (Lehman) or simply throwing out money without thinking about it.
Some things need to be fixed, not only talked away. There have been to many speeches the last couple of years. We don't need speeches only because the DOW is down.
Geithner's plan has substance because it helps those who deserve it but also exposes those who try to live by simple promises. I'm confident that BAC belongs to the first.
Did you realize every so-called investment expert or stock guru considered nationalization imminent and unavoidable a few days ago. On Friday it seemed only a matter of hours before this will happen. Kudos to those who stood straight.
Just wait a few more days and all those clowns will then express that nationalization would have been nonsense and devasting. Then you can realize what kind of morons are running the stock markets. They pick up some words and spread it further, that's all.
Good to see that the new government finally follows its own plan.
It is cruel for those who panicsold last friday believing they would save at least the last few bucks of their investment.
finally N fear fades
there is sure a lot of cheap money waiting on the sidelines. markets have been flushed all over the world with cheap money.
BAC is not (only) about a momentum play but a long term decision,
just my feeling but volatility seems to cool off today and market will start to accept more and more that this is still a strong bank which might has some issues at present but also a bright future
some investors will close their positions in other banks (C and WFC) and come over, BAC is the better investment.
Tide could change today
Monday will be interesting
White House says supports private banking system
WASHINGTON, Feb 20 (Reuters) - The White House said on Friday it strongly believed in a privately held bank system, after rumors that the U.S. government could nationalize banks saw shares in Bank of America (BAC.N) and Citigroup (C.N) plummet.
"Let me reassure as best I can on banks," White House spokesman Robert Gibbs told a news conference.
"This administration continues to strongly believe that a privately held banking system is the correct way to go, ensuring they are regulated sufficiently by this government.
"That's been our belief for quite some time and we continue to have that."
lol remember that guy
from my cold dead hands
those who shorted today are equally nervous
guess we are just watching a historical day for bank stocks
now, imagine monday morning
after Obama has given a speech on Sunday declining nationalization.
we just see/saw the bottom or nationalization
Interesting, thanks, but have they met that outlook after announcing it ?
That's the critical question, not the fact that it has been published.
Can somebody post again the link to this silly home-made webcam investor update please ?
thanks
finally it has become possible again for this stock to go down lol (-20% today)
Could somebody remind these clowns that they have forgotten to announce the R/S
(as they have forgotten to mention it in there latest update)
it will be interesting to see
(tomorrow very likely)
if such PR is useless blabla news (received great interest at NADA,.., blabla, expect to ..., in the future, ... we believe ... soon, ...) or if they have inked something with substance already.
Hope they don't use PR activity only to assist dilution. let us see tomorrow, good luck.
thanks
this stock will run hard when progress occurs
it is all about the business, right now there is no buying pressure, only controlled dilution, some progress will change this quickly, ask looks quite thin
mca, they have to pay for this big booth on the expo in some way
so ?
They are printing shares, not surprising, is it ?
I never believed one second that the expo could move this stock imminently. Finally all the unrealistic clowns who dreamed of the expo got silenced.
This is about hard work, earning contracts by working on it throughout 2008. That takes time. The company have not promised the turnaround simply based on the expo happening, just some posters dreamed of it.
Good luck and lots of patience
Cal
Woogies 81 mil not eaten up yet lol
When do you start dumping your shares today? lol
---> Yeah.. might see a serial of 9M blocks dumped on the bid.