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The Fed sent an e-mail to me requesting more information.
For what it’s worth, I complied with their request.
There are two observations I can make:
First, it makes no sense to me that LBHI was ever attacked for the Repo facility they established and used as over the past decade the same Repo market grew to over $2.5T.
Second, the CTs had corporate guarantees in the case of BK; if the Street doesn’t pay for this guarantee, what guarantee will they pay for in the future?
Last, Dimon’s First Republic deal is on hold with an insolvency estimate of $10B after a $50B infusion?
Could they benefit from NOLs? And then we wait out the commercial real estate market?
Oh boy . . .
mojo9
The AT-1 bonds have a clause they are written down in insolvency.
https://www.msn.com/en-us/news/other/stanchart-ceo-says-at1-bond-wipeout-has-profound-impact/ar-AA190MCZ?ocid=msedgntp&cvid=aea80dd9c64a4b09bc18c88b538c30d8&ei=61
Not only are the CTs a hybrid, they are guaranteed in bankruptcy after a 5-year deferment period and, in this case, have a buffer of the NOLs.
Am I wrong?
mojo9
I posted, "The AT-1 bonds of CS that UBS wrote down to 0.00 have nothing to do with the CTs."
The UBS-CS deal isn't going well for the same reason failure to re-instate the LBHI CTs is a problem since Dodd-Frank.
Tepper has it right: https://www.msn.com/en-us/money/markets/contracts-are-made-to-be-honored-billionaire-investor-david-tepper-lashes-out-against-credit-suisse-bond-writedown/ar-AA18Z8sL?ocid=msedgntp&cvid=42f33c84a6ff4a63a427c794c5d5e202&ei=69
mojo9
FYI:
The AT-1 bonds of CS that UBS wrote down to 0.00 have nothing to do with the CTs.
By the way, that deal is not going well.
mojo9
" IE Creating contracts without consent is totaly unreasonable and unfair. "
That is when a regulator should object.
In the case of SVB, the CEO was on the SF Fed Board, didn't have risk management and mismatched treasury maturities.
It should have been detected and objected to by the SF FED Head (Daley) who directed a staff supervising bank activities.
In the LBHI CT case, they had Tier-1 capital with guarantees that were deferred, kept them trading on the market and haven't reinstituted them.
Some say it is fraud.
mojo9
s,
I agree. SVB may be irredeemable but I don't really know.
I thought LBHI was redeemable but it is not resolved after 15 years.
A WFC Exec is going to prison: https://www.msn.com/en-us/money/companies/former-wells-fargo-executive-headed-to-prison/ar-AA18IBOm?ocid=msedgntp&cvid=caf1e48d70804ce4be8ac3498a2fe26a&ei=24
Maybe there will be more.
I thought LBHI was one of the best IBs on Wall Street and the CTs were a Tier-1 product with guarantees. I hope they can stay out of jail.
Why LBHI was villified for years and denied recourse after providing products most all other Wall Street IBs provided remains a mystery to me.
Your guess is as good as mine.
mojo9
s,
Newsom not only has deposits at the bank he wants to bailout, he used SVB to buy wineries he kept open during Covid while telling everyone else to shut down!
What is he going to do next? Hit himself in the head with a hammer?
mojo9
NADA mooch?
SI Market Cap = $67.4M; Assets = $11.4B
SIVB Market Cap = $6.27B; Assets = $211.7B
SBNY Market Cap = $4.41B; Assets = $111B
FRC Market Cap = $6.4B; Assets = $212.6B
CS Market Cap = $9.65B; Assets = $531B
Probably not SI & CS. Maybe the deals get better if they wait on SIVB, SBNY & FRC.
mojo9
It looks like the FEDs have guaranteed the face value of all the treasuries SVB used to secure their balance sheet.
This might help guarantee SVB depositor amounts of $250k+.
Closed bank asset amounts:
Si - $11B
SIVB - $210B
SBNY - $110B
Outside of the treasuries, there are asset valuation problems for the above banks as well as their loan books.
What does this mean for resolving LBHI?
mojo9
Maybe the silo issue is one of the things left to restructure between LBHI & BNYM.
How much time do they need?
We have billions in deals lined up. They should resolve it into a new entity with the LBHI charter and move on!
mojo9
stox,
"There is a clear case to sue BNY Mellon here."
There are better outcomes for CT holders than to sue the Trustee, IMO, including for BNYM to cure what is remaining in the LBHI BK in a new BNYM-backed Wealth Management IB and Trust business as well as deal with whatever are the remaining possibilities with BCS.
NYC benefits, too, with all the employment and taxes staying in NY.
Could I be wrong again? Yes, but it is BNYM that has to make the decision on what they are to do next with their capital and personnel.
BNYM operators on this message board may post more on this thread soon; so, we will see.
Good luck.
mojo9
Where did you get this, cotton?
I think treble damages is 6% max.
How am I wrong?
mojo9
Enough of this "Debt as a Weapon" POR!
They know they could have kept assets to pay off debt carrying costs and stay in business but they BOAST the Seniors wanted to all be paid first.
That's all!
mojo9
You need to charge your battery, swiss.
Docket #, cotton?
Duke University Professor says the security remains a problem:
In other words, indepth05, I think all the claims of security in digital coins and distributed ledgers is proved false in all the digital coin cases we see today.
mojo9
Thanks, indepth05.
I think the information you have provided about Mr. Addiss and his conference is interesting.
I am thinking about it but it seems too much control for a central bank as opposed to giving banks a role that expands the money supply.
Additionally, there is too much fraud in existing coins that use too much energy with too much volatility, IMO.
Good luck.
mojo9
The SEC is coming for me?
Might as well!
Biden sent a Navy frogmen group to knock out assets on another balance sheet.
This is just too good!
mojo9
goodietime,
"What you get, what you did with it. Leading to.... only being ALLOWED to do with it what they approve of."
Let me ask again, goodietime.
What is the incentive for the US to offer a CBDC? What will they approve their CBDC to do that is not being done already or can be done better in a distributed ledger system? Why?
Thanks. mojo9
indepth05,
Thanks for your post.
How does it reconcile with your thought on a CBDC and LBHI?
And, two, why would the US back a CBDC? What is their incentive?
Thanks.
mojo9
LBI closure was 9/28/2022.
They were probably trying to get all related claims in for processing.
4am alarm in a 4 level?
Just be thankful you're not in Turkey or Syria! They are -35,000+ now with a lot of rocks to look through.
Thanks, jersey.
mojo9
Sorry you're bored, jersey.
A couple months ago, an explosion in the Baltic blew up an EM oil & gas investment I made years ago.
Last week, Pulitzer Prize Winner Hersh thought he could conclude it was the Biden Administration that gave the Seals the go ahead.
Biden has denied it.
Are we having fun yet?
mojo9
"What makes something ephemeral?
Something that is fleeting or short-lived is ephemeral, like a fly that lives for one day or text messages flitting from cellphone to cellphone. Ephemeral (?-FEM-?r-?l) was originally a medical term with the specific meaning "lasting only one day," as a fever or sickness (Hemera means "day" in Greek.)"
FTX is ephemeral because it was a coin exchange that borrowed against BTC holdings and, apparently, never proposed additional equity. If FTX did make money as a coin exchange, it was not making enough to cover the amount FTX borrowed to build it when the price of BTC dropped.
Rubenstein's suggestion, "We are inflating our way out of debt" addresses the problem of buying assets that generate no income and whose value is derived solely from the amount paid by the last purchaser.
BTC value only 'inflates' or 'appreciates' because of the number of buyers willing to pay in an easy transaction not because BTC generates income. As the number of BTC buyers decreased at the higher prices, the value of BTC dropped similar to the value of shares in a company if the income of a company falls.
The coin model I drafted this week is based on parameters that generate income, trades a market value and increases the money supply at a controlled rate.
If it does this for the US Treasury & FED, why wouldn't they use it? What percentage of the shares should be traded and what should the FED keep to back the CBDC?
At half, it seems the number of coins would be such the FED could always buy them back. So, why do it unless the amount of money the FED could create in the market and make as an investment was more significant than other available methods?
mojo9
At what point is regulation required?
If you do too much, they scream.
Too little, they scream.
Can we do it 'just right', momma bear?
mojo9
Last point for now.
Implied in the CBDC LBHI use case is that unpaid LBHI debt & equity instruments can serve as a CBDC basis because of the role Paulson and Bernanke had in driving LBHI to bankruptcy, a course many feel was not necessary and one Fuld was actively negotiating to avoid.
Otherwise, what reason is there for a CBDC to use LBHI instruments for LBHI creditors?
Good luck!
mojo9
I am all for keeping things as simple as possible, stox.
But, LBHI continues to be complicated.
I model scenarios to try to understand problems, parameters and scope.
It leads to thinking and discussion that is more clear.
The CTs are not closed yet and this is troubling.
mojo9
If I get a response I can share with the Board, I will post it.
Thank you.
mojo9
It is not a share for share exchange. It is a $1 for $1 CBDC share valuation to capitalize the CBDC in US currency.
It would include cumulative amounts, penalties and incentive fees. Same for all the sub debt in the sub debt case. Yes, I could add a case for all LBHI equity with common at $1 or so.
Then, the market takes over based on valuation metrics, underwriting standards and profitability.
This is much better than BTC that values the coin based on what was last paid and frequency of trades and no income statement.
Is there an incentive structure or amount the FED would require to support it and keep it stable?
Why should this amount be traded?
Thanks. mojo9
It would be easy to use DCF. In fact, borrowers would probably be more interested using WACC while investors would be using DCF. The FED or Treasury might be more interested in money creation.
I am working on the model and updating it. I am using it as a case for CTs alone and with all the sub debt for BNYM as Trustee.
To be clear, it is a $1 for $1 exchange for the CT not a share for share. What is becoming clear is the frequency of use impacts the valuation as well as the PE or market acceptance. This model shows cycling through the different Tiers of rates from 20x - 4x or 20x - 1x on an annual basis; this could actually be much higher meaning more frequently and more fees depending on the application. As the money is returned in the lower Tiers, the upper Tiers release funds at higher rates to the lower Tiers.
The question becomes, "Is the valuation the market cap AND the amount of money to available to borrow? What type of money creation is this?" You can see the model is creating money.
Is there a problem generating a valuation and amount of money to borrow that becomes less than the amount actually borrowed? Is a possible protection taking a percentage of the market cap valuation, like a DSC of 1.2 or 1.15? What would this do to the rates and rate stability?"
While the Trustee is sent a copy, it is a model for discussion. I think there may be applications to it on the short term market but offer it to all the Money Centers.
Good luck.
mojo9
Looking at it.
What do you want me to see?
I see LBF but I think the Chp 7 LBI liquidation should have some resolution cited if it was completed last September.
Non-GAAP statements for the Courts while WGM/LBHI continue operations they want to disclose.
The problem is our guarantees are not assumed by Barclays yet as noted in their purchase agreement.
They are claiming that additional claims can be paid.
So, pay them.
mojo9
Yes.
Why did you post it?
What is the relevance?
Explain.
mojo9
Non controlled affiliates, Swiss?
What does that mean to you?
mojo9
Right.
It should be a listed sub.
Same with LBT.
They hide them.
Why?
mojo9