Thread: Bank failure(s)

Mortgages aren't funded by cash deposits, the period of a typical mortgage is between 5 and 10 years, and the relevant interest rates for mortgage financing is bank debt finance of this period. At the moment even the government-guaranteed GNSF mortgage bonds yield 3% more than straight treasuries, and banks would have to pay higher rates above this to finance. So somewhere between 5 and 10-year Treasuries plus, say, 5% is the financing cost. The bank then needs to make some (lots) of money on top of this.

Originally Posted by ccwilli3

executive pay possible solution: Make any compensation over $500K (or any other amount) not tax deductible and an executive would have to be pretty good to have the board and stock holders okay that. I think steve jobs would get it, others, hmm, not so much...

Hmm. I think he sucks.

Apple went to total hell when he left last time, which I think is failing at his fundamental task; make the biz sustainable for the future.

But maybe he's learned his lesson and it won't happen next time.

Interest rates down in the US, Hong Kong, Taiwan, China. Asian markets strong (HK up 10%, Japan 6%) but Europe, like the US, flat having discounted the news and waiting for interest rates moves in EU and UK. Japan announces $51bn fiscal package (1.2% of gdp).

Fed extends overseas dollar facilities to Mexico, Singapore, Brazil, Korea.

Japan put interest rates down 0.2% after their fiscal package announcement, but this apparently disappointed the market so the yen is up and the market is down 5%. Europe is flattish after Wall Street's up and down day yesterday. Companies continue slashing earnings forecasts. Markets expect 0.5% official interest rate easing from the UK and ECB next week. UK Consumer confidence is down to 1974 crisis levels. The Korean Won rose 11% on the Fed facility to Korea.

The Fed bought nearly $150bn of commercial paper in its first week of operating this policy. US Q3 gdp dropped 0.3%, slightly better than expected -0.5%, but non-durable spending fell 6.4%, the biggest quarterly fall since 1950. Nevada is the state with the highest foreclosure rate, 1 in 82 households v 1 in 178 in Florida in second place.

Originally Posted by oldfogey

Nevada is the state with the highest foreclosure rate, 1 in 82 households v 1 in 178 in Florida in second place.

Vegas baby, Vegas...

A bit of movement from the big emerging market economies of the East this weekend. China ends its quantitative controls over bank lending; India reduces its interest rates by another 0.5% (1.5% in a week) and reduces bank reserve ratios; and Korea announces a $11bn fiscal package, 1% of gdp.

Japan's market is closed today, but other markets are generally modestly better. European banks have started drawing on their respective government support packages (Lloyds TSB, HBOS, Commerzbank, Societe Generale) plus tapping the market for cash. Worries grow about Greece, with a current account deficit of 15% of gdp, large amounts of dollar debt and its main export earner the shipping industry in dire straits.

Australia cuts rates 0.75%, more than expected. Japan rallies 5%, having been closed yesterday, but otherwise market moves are small. That's notable in itself after the last few weeks: the markets need a short period of relative stability if they're going to recover.

I suppose people will start to focus on any management gap between the Bush administration and the incoming one, and who the next President appoints as Treasury Secretary to work with Paulson in the interim. Tim Geithner of the New York Fed, Larry Summers and Paul Volcker have been mentioned for Obama and offices readied for the interim. Any signs of decision-making weakness will affect these markets.

The US ISM Manufacturing Index fell to 38.9 in October, the lowest reading since September 1982. The report also shows a sizeable decline in input cost pressures, reinforcing belief that inflation will fall sharply.

US Auto sales fall to 10.8m in October, lowest since 1991 and apparently, population-adjusted, the worst since WWII. Expect GM and Chrysler to have another try for a big subsidy to merge from the incoming administration.

Asian markets up 3-5% after the US gains yesterday, but Europe weak in the morning awaiting possible interest rates cuts tomorrow. Toyota was up 10% and Honda 13%. More economic indicators show sharp downturn around the world, profit announcements disappoint and forecasts are cut. Steel inventory in China grows to worrying levels. Oil puts in 10% gain as Saudi Arabia implements production cuts.

I guess some disappointment might surface as the world awaits the financial team and economic policy announcements of the Obama presidency after recent decent rises from the market lows.

Originally Posted by oldfogey

I guess some disappointment might surface as the world awaits the financial team and economic policy announcements of the Obama presidency after recent decent rises from the market lows.

I am pretty sure any capitalist looking for Obama economic policy to bolster non-government business has a whole helluva lot of disappointment coming, but we'll see.

We're requisitioning your barn, Belding.

Markets greet the new President elect with a 5% decline in the US, 5-7% in Asia, 3% in Europe. Korean Won declines another 5%. Total Credit Swap Default (CDS) bill for the Icelandic banks to top $7bn.

GMAC hints its mortgage subsidiary RESCAP will not survive. GM halves its advertising spend. Lots of generally weak economic stats from around the world. Toyota forecasts drop of 68% in net income to $5.5bn. after hours, having declined 10% during the market opening.

Edit: Noon London time, UK interest rates reduced by 1.50%, extraordinary reduction. Swiss reduce rates by 0.5%, ECB expected to do the same shortly.
Edit2: Five pm London time, European markets end 6% down despite rate cuts. Markets see cuts as confirmation of economic weakness ahead. Oh, and the IMF confirms its $16.5bn loan to Ukraine, whose main export is steel.

Originally Posted by oldfogey

Markets greet the new President elect with a 5% decline in the US, 5-7% in Asia, 3% in Europe. Korean Won declines another 5%. Total Credit Swap Default (CDS) bill for the Icelandic banks to top $7bn....

“You cannot strengthen the weak by weakening the strong. You cannot help the poor by destroying the rich. You cannot help men permanently by doing for them what they could and should do for themselves.” - Ronald Reagan

Fantastic signature OF!

So, the market greeting to the President elect has taken it down 10% in two days in the US. Asia is mixed, Japan down another 3% with Toyota falling another 10%, Hong Kong up 3%, but most emerging markets and commodities are down. Europe is holding higher in the morning after yesterday's rate cuts.

Korea dropped interest rates another 0.25%, making it 1.25% in a month. One Chinese steelmaker, about to be "rescued" by another, is expected to fire a third of its 10,000 workforce. The Chinese Finance minister flies home from a conference in Peru to attend to pressing problems at home. Japan and the Philippines ease banking rules to encourage lending.

New Zealand has an election tomorrow when polls indicate the ruling Labour party is likely to be ousted by the National party. Market look to see who Obama appoints in his financial team.

Edit: US jobless rate rose to 6.5% in October and Ford announced 2,260 workers in its North American plants would lose their jobs - 10% of its North American salaried work force of 22,600.

China announces a big economic support package, nearly $600bn, with infrastructure investment at its core and also officially moves its monetary stance to moderately easy. Later clarification, about one quarter of this is true "additional government spending" but they are in effect bringing forward five years' planned spending into the next two years.

Asian markets are up around 6%, helped by the US ending stronger on Friday. Europe is up 3% in the morning, in line with the US move since it closed on Friday.

Latvia's second-biggest bank is rescued by the government and credit ratings are reduced on several European emerging markets. Japan may be intervening to keep the yen down ahead of the G20 meeting and boosting domestic money supply. John Key of the National Party is New Zealand's new prime minister.

After Friday's hope that Obama would move quickly to choose a Treasury Secretary, the weekend seems to have moved to the political opposition to either Summers or Geithner or both. This is a key market-sensitive issue and an interesting test of Obama's priorities in his first days as President elect.

Yep, it's the one thing I read each morning.

Thanks, gents: I'm happy to keep it going while the crisis is on, though as the bishop said to the actress, I can't keep it going for ever...

Originally Posted by slickwill

Yep, it's the one thing I read each morning.

+1

Analyst estimates GM's share value as $0.00:

GM shares plunge after analyst sees them hitting zero - Yahoo! News

Originally Posted by luvtolean

Analyst estimates GM's share value as $0.00:

GM shares plunge after analyst sees them hitting zero - Yahoo! News

Another fine job by Union Workers.


Way to go asshats

Originally Posted by Hammer

Another fine job by Union Workers.


Way to go asshats

This is one case where I not only blame overpaid union workers but also piss-poor management.

Originally Posted by seamus

This is one case where I not only blame overpaid union workers but also piss-poor management.

True, but when the union has such a stronghold on a company it can no longer even discipline employees for fucking off on the job. I place more blame on the Union

Weak Asian markets as more company earnings and economic bad news continues to emerge.

The US announced Amex would be allowed to become a bank holding company with greater access to the Fed and a new financing package for AIG, giving them a five-year loan and preference shares in place of a two-year loan which takes the total support up to $150bn from $123bn. A further $100bn package is expected for Fannie Mae. The government of Kazakhstan injects $3.5bn into its top four banks. In Sweden Carnegie Bank, an investment bank, is taken into public ownership.

In the UK house prices fall for the 13th consecutive month and volume of transactions falls to the lowest since stats were started in 1978. Australian business confidence indicator falls to its lowest since records began in 1989.

Obama's team seem to be engaging with the domestic car company lobby while also working on plans for domestic infrastructure spending (roads and bridges?).

A quiet day so far. After the weakness in the US, Asia is down modestly overnight and Europe up this morning. Commentary about the US car makers and likely Democrat support for a package, about the coming weekend's G20 meeting. There's a steady stream of poor economic indicators and profit downgrades now.

After Wall Street's 5% fall, testing the October lows again, Asia follows suit but Europe is flat despite Germany announcing it's in recession with a 0.5% fall in gdp in Q3 after -0.4% in Q2. Tokyo announces it may lend the IMF up to $100bn to finance its emergency country loan programme. The IMF refuses Iceland's first proposal for its loan, requires tougher action. Paulson says the $700bn TARP will be used to finance financial institutions rather than buy their bad debts.

GE obtains $139bn in FDIC insurance for the loans of its financial subsidiaries. Political discussion continues over US car company loans.

October US house foreclosures rise 5% over September despite an 18% fall in Californian foreclosures due to a new law that requires negotiation before foreclosure.

After the sharp rally during the day yesterday in the US, which ended up 6.5%, Asia and Europe are up around 3%.

It's the G20 meeting over the weekend, so the markets will be looking for coordinated policy statements and actions. There will undoubtedly be moves to greater global regulation in financial matters. Kuwait stops trading on its stock exchange. Latvia accepts it will need external help.

US jobless claims rose to a similar % of workforce as in 2001. There are rumours of trade dislocations as ships stand idle in dock without insurance or finance. European trade insurers stop covering GM, Chrysler and Ford for component exports. The US trade deficit rose to a record $200bn in October.

Goldman Sachs CEO, six leaders give up 2008 bonuses - Yahoo! News