Thursday, January 29, 2009

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.

[Bad Company]

> 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
3Q08 Geographic Exposures on the Street

> 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......

[Review & Outlook]

Fan and Fred's Lunch Tab

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.............

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Wednesday, January 28, 2009

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.

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Sunday, January 25, 2009

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
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.....

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Friday, January 23, 2009

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 )

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Wednesday, January 21, 2009

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.


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

Financial Sector Wages Relative to Other Industries

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......

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Tuesday, January 20, 2009

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

A Tumbling Currency

> 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...... :-)

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Monday, January 19, 2009

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

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Friday, January 16, 2009

Ken Lewis / CEO Bank Of America "Banker Of The Year 2008"

Almost as good as the Satyam Award ( see Satyam Computer Services Ltd has won the coveted Golden Peacock Global Award for Excellence in Corporate Governance for 2008 ).......This guy makes the CEO of Deutsche Bank Jo Ackermann quite a likable & competent person.... Compare the quotes with todays news $ 138 Billion Bailout Needed To Save Bank Of America / Merrill Lynch............

Dieser Preis ist fast so aberwitzig wie der von Satyam für erstklassige Corporate Governance ( siehe Satyam Computer Services Ltd has won the coveted Golden Peacock Global Award for Excellence in Corporate Governance for 2008 ).....Verglichen mit diesem Typ wirkt sogar Ackermann von der Deutschen Bank sympatisch & kompetent....... Knapp 3 Monate später benötigt dieser Clown einen $ 138 Billion Bailout .........

FT Alphaville ( Thanks / Danke )!
"We’re good at this".…losing money, that is. Not due diligence or canny dealmaking.

Selected excepts from Ken Lewis (Banker of the Year) on the Bank of America/Merrill Lynch conference call, September 15th, 2008.


…we could have rolled the dice and possibly could have got it at a cheaper price. We thought the long-term benefits were so overwhelming, it was such a strategic opportunity that we elected not to roll the dice and to go ahead and do it at this time.
Question: can you provide a little more colour on some of the due diligence that was done?

Well, Joe, you want to go over it again in terms of- and the JC Flowers piece is key because they were renewing something- an effort that had already gone on and been very, very extensive.

Clearly we had a tremendous amount of historical knowledge both as a competitor with Merrill Lynch and reviewed and analyze the company over the years.

Mr Lewis, have you ever visited the planet earth?

…it’s not as if we don’t have a very significant knowledge of the markets around the asset classes that are most problematic. In addition, as you would expect, we deployed the team that we would ordinarily deploy in these types of situations, which had well over 45 people from our team on site as well as others offsite outside counsel and the like.

Well over45 people!

We’re good at this.

> That they can get away with such generous bailout terms tells you all you need to know..... The comparable Commerzbank/Dresdner Bailout ( see Biggest German Bailout Stands Now At € 18.3 Billion & Counting..... ) terms for honoring such misjudgement looks almost "draconian".....

> Das so ein massives Fehlversagen auch noch mit absolut geschenkten Bailoutkondidionen "belohnt" wird sagt eigentlich alles..... Dagegen sehen die Konditionen bei dem vergleichbaren Commerzbank / Dresner Bailout drakonisch aus

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Thursday, January 15, 2009

Start The Bailout Game..........

With the bailout structures getting more and more reckless ( see US Negotiating to Backstop BofA Purchase of Merrill & Time to Fire Ken Lewis of Bank of America or for the German equivalent see Biggest German Bailout Stands Now At € 18.3 Billion & Counting..... ) the following link is a must see. No better way than humor to withstand the daily insanity..... HT FT Alphaville

Nachdem die Bailouts bzw deren Form immer unverantwortlicher werden ( siehe heutiges Beispiel US Negotiating to Backstop BofA Purchase of Merrill & Time to Fire Ken Lewis of Bank of America . Deutschland ist da leider kein Stück besser.... siehe Biggest German Bailout Stands Now At € 18.3 Billion & Counting..... ) kommt der nachfolge Link zur genau rechten Zeit. Ohne Humor wäre das Drama wirklich kaum noch zu ertragen. Dank an FT Alphaville

Start Bailout Game

It takes a few seconds to start but it´s a must see.....

Es dauert einige Sekunden bis das Spiel startet. Die Zeit ist allerdings mehr als gut investiert......

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Monday, January 12, 2009

So Begin The (Serious) Sovereign Downgrades…?

A possible downgrade of Spain.......Shocking..... But i doubt we will see some serious action to under AA- ( besides minor countries ) on this front ( just watch the table with regulatory risk weitghtings & the impact on bank´s balance sheets) UPDATE: S&P lowers Greece rating to A- & an excellent Interactive graphic: Europe on credit alert ...... Why numerous countries are still able to get away with an AAA rating is beyond me. Main reason in my mind is the political pressure ( especially when it comes to the US )..... Too bad that countries like Greece, Italy and Spain cannot stimulate their economy with a weak currency like in the past before they joined the €.... It´s a safe bet that the Euro in the current form won´t last ( see also from the FT Could the eurozone actually split up? )? No wonder Gold in € is hitting new highs almost on a daily basis ( see Daily gold price in a range of currencies since January 2000 ) ?

Ein mögliches Downgrade von Spanien.....Schockierend.....Aber ich denke das wir von dieser Seite nichts richtig drastisches auf unter AA- ( abgesehen von einigen unbedeutenden Ländern ) sehen werden ( man braucht dazu nur einen Blick auf die Übersicht mit den risikowichteten Bilanzpositionen zu werfen um zu erkennen welch desaströse Auswirkungen das auf Bankbilanzen hätte ) UPDATE : S&P lowers Greece rating to A- & sowie eine erstklassige Karte der FT Interactive graphic: Europe on credit alert ..... Man muß sich ernsthaft fragen ob die Ratingagenturen überhaupt was aus dem kollosalen Versagen während des Kreditbonanzas gelernt haben..... Wie anders ist es zu erklären das noch etliche Staaten mit AAA bewertet werden? Schon bald peinlich wie noch immer behauptet wird das Ihre "Bewertungen" jenseits von politischen Einflüssen erfolgen ( ist besonders auf die Boni der USA gemünzt )..... Habe noch gut das Hohelied der "Unabhängigkeit" bei den Bewertungspraktiken der implodierten strukturierten Produkten in den Ohren ...... Für Staaten wie Griechenland, Italien, Irland und Spanien ist es natürlich nicht gerade hifreich das Sie sich nicht wie in der Vergangenheit über die Währung etwas Linderung verschaffen können. Ich denke die Aussage das dem € noch turbulente Zeiten ins Haus stehen dürfte untertrieben sein ( siehe auch aus der FT Could the eurozone actually split up? )...... Sicher kein Zufall das Gold in € momentan nahe der historischen Hochs notiert ( siehe Daily gold price in a range of currencies since January 2000 ) .

So begin the (serious) sovereign downgrades…? FT Alphaville

Not just developing world sovereigns either. From S&P today (emphasis ours):

Jan 12 - Standard & Poor’s Ratings Services today said it had placed its ‘AAA’ long-term foreign and local currency sovereign credit ratings on the Kingdom of Spain on CreditWatch with negative implications. A CreditWatch listing signals a potential but not inevitable change in a rating over the short term.

The ‘A-1+’ short-term ratings were affirmed.

“The CreditWatch placement reflects our view of the significant challenges facing the Spanish economy as it traverses a period of very weak growth, and a sustained period of deleveraging, which we expect to lead to a rebalancing toward traded sectors requiring real exchange rate depreciation,” Standard & Poor’s credit analyst Trevor Cullinan said.

In our opinion, the credit-driven nature of Spain’s strong growth performance in recent years has led to a build-up in imbalances, as evidenced by the sizeable current account deficit (around 10% of GDP in 2008).

> For more insights read Why Spain’s Economic Crisis Is Something More Than A “Housing Slump” from A Fistful Of Euros / Edward Hugh. Cleary worth a AAA rating.......

> Deutlich mehr Details bitte Why Spain’s Economic Crisis Is Something More Than A “Housing Slump” von A Fistful Of Euros / Edward Hugh lesen. Klarer AAA Kandidat.......


Due to the need for the private sector to restructure and deleverage balance sheets, we believe that the unwinding of the deficit increases the probability of a protracted economic slowdown… Despite a relatively strong starting position, we expect the Kingdom’s public finances to deteriorate markedly, with the general government deficit rising well above 3% of GDP until 2011, and peaking above 6% in 2009.

Now this is only a ratings watch action. No downgrade is necessarily forthcoming. It’s just a distinct possibility.

The spectre of which might go some way as to suggesting why CDS on a triple-A-rated sovereign should be a possibility. Something which has been discussed on FT Alphaville before.

Downgraded securities carry more onerous regulatory risk weightings under the Basel II ratings-based approach:

… unless you have a hedge in place. Such as a sovereign CDS.

That might go some way towards explaining why CDS contracts on Spain are some of the most heavily traded - and have the highest net notional levels - $13,489,091,873 according to the latest DTCC data.

Also up there with Spain: Italy. $158,198,385,126bn gross, $18,283,028,951 net.

If there are downgrades in the Eurozone, there could be some other rather nasty effects.

Country Default Risk Rises Across the Board Bespoke

Ireland, Austria, Greece, and the UK have seen default risk rise the most over the last month. All have risen close to or more than 100%. US default risk has risen the 8th most at 68%.


> Compare the table above from November 2008 with the latest news from last Friday and it looks like the "market" is once more way ahead of the agencies.....

> Vergleicht man die obrige Tabelle für den November 2008 mit der aktuellen Meldung von letztem Freitag sieht es ganz so aus als wenn die Märkte einen deutlich besseren Indikator als die Ratingagenturen abgeben..... Mal abwarten wann auch hier das Shorting verboten wird........:-)

FT Alphaville

On Friday, Greece and Ireland were also warned by the agency that their ratings could be downgraded as economic conditions worsen

> More evidence example that the market has lost total confidence in the rating agencies....

> Hier ein weiterer Beleg das der Markt zum Glück einiges an Vertrauen in die Methodik der ratingagneturen verloren hat

Credit-Default Swaps on Ireland, Spain Surge on Ratings Threat Bloomberg

Yields on the bonds of smaller European economies, such as Spain, Italy and Greece, have risen to the highest relative to German bunds since before the ECB was established a decade ago. Spanish 10-year notes yield 99 basis points more than bunds, up from 17 basis points one year ago. For Italian notes, the gap almost quadrupled to 141 basis points from 36 basis points.

> Needless to say that the US is of course a rock solid AAA..... For more AAA facts & charts read Deficits, Debt and Looming Disaster: Reform of Entitlement Programs May Be the Only Hope from the St. Louis Fed. I´m with Bill Gross ( see Ponzi meets treasuries bubble ) but am not willing to bet against bonds yet . Here is another very good summary on this topic ( On return-free risk and the bond bubble )It will be fascinating to see what happend to the bondmarket & the $ if the foreigners are finally waking up ( see Who Will Be Left To Buy US Treasuries...... ) I´m still fascinated how the US has manage to finance this ponzi game for years ( NO SARCASM!)....... UPDATE: Another must read via The Mess That Greenspan Made A deflationary spiral?? Not likely in the U.S

> Wie man bei den nachfolgenden Aussichten längerfristig ein AAA der USA rechtfertigen will wissen wohl nur die Ratingagenturen...... Für mehr AAA würdige Fakten und Charts bitte Deficits, Debt and Looming Disaster: Reform of Entitlement Programs May Be the Only Hope der St. Louis Fed lesen. Bin hier klar der Meinung von Bill Gross ( siehe Ponzi meets treasuries bubble ) traue mich aber noch nicht schon jetzt gegen die Bonds zu setzen. Hier kommt eine weiter sehr gute Zusammenfassung zum "Sratus" der US Staatsanleihen (On return-free risk and the bond bubble ) Ein Katalysator für den Shorteinstieg könnte sein wenn die Ausländer die ja den Großteil finanzieren sich aus den Auktionen zurückziehen oder was ja anscheinend keiner auch nur auf dem Radar hat aktiv anfangen Positionen zuverkaufen.Denke dann werden alle von einem "Black Swan" sprechen.( siehe Who Will Be Left To Buy US Treasuries.......) Bis dahin muß man den USA ehrlich Respekt dafür zollen das Sie es bisher geschafft haben Ihre Defizite zu diesen fast beispiellos günstigen Konditionen zu finanzieren. Das meine ich ausnahmsweise mal nicht sarkastisch. UPDATE: Hier noch ein echtes Sahnestück via The Mess That Greenspan Made A deflationary spiral?? Not likely in the U.S

Quote of the Day: S&P is Cool with U.S. Debt HT Infectious Greed

Quote of the day goes to S&P credit analysts for this comment while keeping U.S. credit at a “AAA” rating:

The rating (for the U.S.) was affirmed despite our judgment that fiscal risk has noticeably increased as we expect that the fiscal deterioration will be temporary.

Words to remember

Update / Hat Tip Credit Writedowns

New Zealand’s AA+ Credit Rating May Be Cut, S&P Says - (The article sys “nations that have been downgraded from AAA previously include Japan, Sweden, Finland and Denmark. The rating company today affirmed Australia’s AAA rating.”)

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Thursday, January 08, 2009

Biggest German Bailout Stands Now At € 18.3 Billion & Counting.....

What a difference 4 month makes...... The two pictures are telling the story.......Too bad that the politicians, CEO´s, regulators can´t blame the shorts this time ..... Wouldn´t surprise me if the German version of the original "TARP"( buying toxic assets ) a "Bad Bank" will be in place during 2009.......

Vier Monate scheinen ne lange Zeit zu sein...... Denke das skandalös noch untertrieben ist. Die Prüfung der Bücher muß ja wirklich ganz genau betreiben worden sein. Zudem vermute ich das die erneuten Risikien nur zum Teil bei der Dresdner aufgetaucht sind ( besonders wenn man bedenkt das die Allianz erneut einige Mrd in Ihre eigenen Bücher hat nehmen müssen). Ich vermute vielmehr das die Cobank dank Ihrer "überragenden" Stellung im gewerblichen Immobereich sowie der Staatsfinanzierung ( fragt mal bei der HRE nach ) einen nicht geringen Teil der erneut aufgetauchten Risiken selbst zu verantworten hat. Ich muß gestehen das ich bei meinem ersten Blogeintrag im July 2006 "Wort zum Sonntag" als ich mir meinen Frust von der Seel geschrieben habe ( zugegeben noch recht naiv ) nicht im Traum daran gedacht hätte das sich Deutsche Banken gleichschlecht wie US Institute schlagen könnten...... Sieht ganz so aus als wenn die "bösen Shorties" wohl doch nicht ganz unrecht hatten..... Denke aber das sich diese Erkenntnis bei der Bafin und den populistischen Politikern ( haben wir überhaupt noch andere...) nicht durchsetzen wird...... Die Idee einer "Bad Bank" bei denen die Banken Ihren wertlosen Schrott auf Kosten der Steuerzahler abladen dürfen wird mit jeder Meldung nicht gerade unwahrscheilicher.... Ich kann Ackermann schon förmlich hören......

September 1, 2008 Commerzbank acquires Dresdner Bank / Presentation Subtext ""Seizing the unique consolidation oportunity"

"Risk clearly identified and deemed manageble"

"With it´s risk know how and track record, Commerzbank is well prepared for the acquisition"

1. September 2008 Commerzbank übernimmt Dresdner Bank / Präsentation mit dem Untertitel "Wir ergreifen eine einmalige Chance"

"Die Risiken sind identifiziert und werden als steuerbar angesehen"

"Mit Ihrer Expertise und dem Track Record im Risikomanagement ist die Commerzbank für die Übername gut vorbereitet"

"Der Kauf der Dresdner Bank schafft erheblichen Mehrwert für die Aktionäre"

120 days & € 18.3 Billion taxpayer bailout later ( not including the € 15 billion state guarantee........) ..... In September they were fantasazing about "potential stock buybacks" to optimize their capital structure.......

120 Tage und 18,3 Mrd € an Steuergeldern später ( nicht miteinberechnet die aktuelle Staatsgarantie von 15 Mrd € ........) ...... Noch im September hat der CEO Blessing von möglichen Aktienrückkäufen geschwafelt ( um die Kapitalstruktur zu optimieren ).... Ein echt vertrauenwürdiges Management mit Weitsicht......... Schön zu sehen das der noch immer in Amt und Würden ist....... Gilt ebenso für weite Teile des Aufschtsrates ( denke da besonders an die Ikone "MÜLLER".......) Würde sich evtl. lohnen eine Aktie zu erwerben um sich die HV anzutun...... Denke dort wird ne Menge Unterhaltung geboten.......

Berlin steps in to rescue Dresdner takeover FT

Commerzbank Gets Fresh Bailout as Germany Takes Stake Bloomberg

Germany takes 25 pct stake in Commerzbank for cash Reuters

Rettung kommt Commerzbank teuer FT Deutschland

Commerzbank - Die Staatsbank Kommentar FT Deutschland

Staatsbank in Gelb Kommentar FAZ

Es lebe die Soziale Marktwirtschaft! Weissgarnix

Needless to say that the Commerzbank & Dresdner never made enough money even in the good (fantasy) times to pay the 9 percent coupon ( i.e. 9% coupon, additional 0.01% interest payment for each EUR 4.4 million dividend paid, perpetual, junior to existing hybrids and future and existing Tier II instruments and other debt, pari passu with future hybrids) on the bailout money from their ongoing business ( see P&L Commarzbank / Dresdner wasn´t profitable the past few years ). How they will be able to do this in the coming "normal"years and even pay the money back with a conservative aprroach is beyond me..... I see a massive dillution coming and i assume that the 25,1% percent government stake will spike in the coming years...... I also don´t buy the aspect that the new hole is solely realated to Dresdner ( especially when you consider that Allianz is taking also billions onto their own books) . I assume Commerzbank ( one of the biggest CRE players ) is using this "event"to cover up & spin massive write downs hiding on thier own balance sheet......

Denke es erübrigt sich darauf hinzuweisen das die Cobank & die Dresdner es selbst in den guten ( verrückten ) Jahren kaum geschafft haben die für die mrdschweren "stillen" Einlagen des Bundes notwendigen Zinszahlungen (9%) zu erwirtschaften ( siehe G+V Cobank / Dresdner war die letzten Jahr nicht profitabel) . Wie das in den Folgejahren in einem sicher mehr "normalisierten" Umfeld bei einen konservativen Ansatz machbar sein soll ist mir schleierhaft. Ganz davon zu schweigen wie aus dem normalen Geschäft genügend Mittel generiert werden können um diese Einlagen in absehbarer Zeit zurückzubezahlen..... Nur gut das anscheinend die politische "Elite" und besonders Münte mehr wissen.....


Vertreter der Bundesregierung lobten den Einstieg des Bundes und bemühten sich, den staatlichen Einfluss kleinzureden. Die Beteiligung des Bundes sei "keine Teilverstaatlichung, sondern Wahrnehmung unserer Verantwortung für einen der großen deutschen Akteure am Finanzmarkt", sagte Ministeriumsprecher Albig.

Ähntlich äußerte sich SPD-Chef Franz Müntefering in einem Interview mit dem ZDF-"Heute-Journal": "Das, was jetzt bei der Commerzbank passiert, ist ja keine Teilverstaatlichung. Der Staat tritt auf Zeit ein, aber er wird sich auch in einem baldigen und vernünftigen Augenblick wieder lösen.

Auch FDP-Chef Westerwelle wollte nicht von Verstaatlichung reden. "Das hört sich so sehr nach Enteignung an", sagte er der "Fuldaer Zeitung".

Wem ist noch schlecht geworden........?

Ich vermute das es die nächsten Jahre eine massive Verwässserung durch Kapitalerhöhungen geben wird und der Staatsanteil dann deutlich ansteigen wird.......

Nur gut das man aufgrund der fehlenden Gewinne auf Sicht kein KGV errechnen kann....... :-)

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Tuesday, January 06, 2009

2009 Starts With A New Record......Largest & Fasted LBO Bankruptcy Filing......

At least to my knowledge.....Barely one year after buying the US chemical company Lyondell for $ 19 billion the 3rd. largest chemical company is filing for bankruptcy for 79 of its global affiliates Details via FT Alphaville. According to Breaking News ( no link ) the deal was financed with $ 13 billion of new debt. The major piece was a $ 8 billion bridge loan with a coupon of 9,5 percent...... After the refinancing collapsed ( what a surprise ) the rate jumped to 12 percent..... And some still think the prices for the leveraged loan market are not reflecting the real market prices ( have heard many conference calls from banks that still refuse to mark to market their leveraged loan book "our loan is different...") See update at the end of the post...... This is indeed a perfet example of how much excess has fueled that LBO & Private Equity markets until 2007..... Maybe the CEO from Dow Chemical should read the bankruptcy filing very closely...... The following chart is a good guide that more Chapter 11 filings are on the way and this record won´t last for long............

Zumindest meinem Kenntnisstand nach......Knapp ein Jahr nach der Übernahme des US Chemieunternehmens Lyondell für satte 19 Mrd $ hat das in Rekordzeit zum drittgrößte "hochgezüchtete" Chemieunternehmen LyondellBasell für 79 Tochterunternehmen ( siehe Details via FT Alphaville ) Insolvenz angemelden müssen. Nach Angaben von Breaking News (kein Link) ist die Übernahme seinerzeit mit 13 Mrd $ an neuen Verbindlichkeiten gestemmt worden. Davon satte 8 Mrd $ mittels einer Brückenfinanzierung die zügig refinanziert werden sollte. Wie wir alle wissen ist den Kreditmärkten nach jahrelangem Tiefschlaf ein Licht aufgegangen und die Banken blieben auf Ihren Krediten sitzen. Der Zinssatz dieser Finanzierung ist von seinerzeit 8% auf nun 12% gestiegen. Schon lustig wenn immer noch einige denken das die gehandelten Preise für diese Leverage Loans als übertrieben niedrig betrachtet werden und die Weigerung nach "Mark-to-Markt" zu bilanzieren ständig erneuert werden. Verweise hier auf das Update am Ende...... Bin mal gespannt ob Ackermann & Co ( "Unsere Leveraged Loans sind anders"....sprich besser als der breite Index ) bei der nächsten Präsentation der Abschreibungsrunde in Ihren Kommentaren etwas demütiger werden...... Dieses Beispiel zeigt mehr als eindrucksvoll wie vollkommen irre die Exzesse bis zum Jahr 2007 im Bereich LBO und Private Equity gewesen sind...... Ich hoffe der CEO von Dow Chemical der ja momentan drauf und dran ist einen vergelichbaren Fehler zu wiederholen liest sich das Filing ganz genau durch. Hätte Familie Schaeffer beim Contideal auch gut zu Gesicht gestanden..... Der nachfolgende Chart dürfte einen Vorgeschmack darauf geben was uns an Problemfällen nich erwartet...... Tippe mal das dieser Rekord von LyondellBasell noch in diesem Jahr gebrochen wird..... FAZ Auf die Gläubiger kommen hohe Verluste zu & FT Deutschland Großaktionär flüchtet aus Air Berlin Da benötigt aber einer dringend Kohle um bei Lyondell zu "verbilligen".......

The Boom Went Bust

This chart illustrates further that Private Equity wasn´t the only one that fell in love with debt.... Several listed and former sound companies will pay a very high price for their way to often megalomaniac takeovers and mergers. Just ask Rio Tinto.... They bought Alcan with close to $ 40 billion of new debt just to fend off the BHP Billiton approach ( see Debt Details via FT Alphaville ) A poison pill indeed....... :-)

Diese Übersicht belegt eindeutig das nicht alleine Private Equity dem Wahn des billigen Geldes und unsolider Übernahmen erlegen ist..... Unglücklicherweise wird es auch viele ehemals solide Unternehmen erwischen die Ihre oft wahnwitzigen Megadeals in Cash also neuen Krediten finanziert haben. Fragt mal bei Rio Tinto nach...... Die haben einzig und alleine um die Übernahme durch BHP Billion zu verhindern mal eben für knapp 40 Mrd $ Alcan erworben..... Selbstredend fast ausschließlich durch die Aufnahme neuer Schulden ( Deteils der Verschuldung ...... Das nenne ich mal ne echte Giftpille.......

Jan. 7 (Bloomberg) -- LyondellBasell Industries AF SCA’s Lyondell Chemical unit and some other U.S. affiliates, citing waning demand for their products, filed for bankruptcy in New York.

Lyondell Chemical, based in Houston, has assets of $27.1 billion, debt of more than $19.4 billion and more than 25,000 creditors, according to a petition filed yesterday in U.S. Bankruptcy Court in Manhattan. Seventy-nine of the company’s affiliates also will file for court protection, including Basell Finance USA Inc., according to the filing. ( see Text via FT Alphaville )

LyondellBasell, one of the world’s largest closely held chemical producers, said it sought protection for its U.S. business because of a “dramatic softening in demand” during the past six months as well as “unprecedented volatility in raw materials costs.” The company said in a statement that it expects a recovery during 2009.

> No word about the massive leverage....... If their recovery plan is based on the assumption that there will be a rebound in 2009 that will last i think it is a safe bet that they are still smoking some of the funny stuff.....

> Schon peinlich wie der Hautgrund, die extrem hohe Verschuldung, nicht erwähnt wird...... Fast genauso peinlich ist die Annahme das sich bereits im Jahr 2009 alles wieder nachhaltig zum besseren wenden wird......

Biggest Creditor
Lyondell’s largest unsecured creditor is the Bank of New York Mellon Corp., as trustee for $615 million in unsecured notes, as well as $241.4 million in unsecured notes in affiliate Millennium America Inc., according to the court filing. LyondellBasell is saddled with $26 billion in debt. Its largest lenders include Merrill Lynch & Co., Goldman Sachs Group Inc. and Citigroup Inc.

Standard & Poor’s predicted “substantial principal losses for some creditors” of LyondellBasell, analysts led by Frankfurt-based Tobias Mock wrote in a Dec. 30 report.

Petroleos De Venezuela, the Venezuelan state-owned oil company was listed as a third-largest unsecured creditor, with $233.6 million in trade debt.

Lyondell’s Houston Refining unit imported an average of 198,000 barrels a day of crude oil from Venezuela in the first nine months of last year, according to U.S. Energy Department data. The refinery has a contract to buy 230,000 barrels a day of oil from Petroleos de Venezuela, according to a Nov. 13 securities filing. PDVSA, as the company is known, didn’t return a call seeking comment yesterday.

BASF Claim
BASF Corp., based in Florham Park, New Jersey, may have a claim worth $206.4 million under a judgment against the company which is “contingent and disputed,” according to court documents. The company is a unit of BASF SE, the world’s largest chemical producer, based in Ludwigshafen, Germany.

Apollo Management LP, the private-equity firm led by Leon Black, is among Lyondell Chemical’s largest creditors, according to a person with direct knowledge of the matter.

Apollo, based in New York, is a member of a lending group providing so-called debtor-in-possession financing to fund Lyondell’s operations, according to the person, who asked not to be identified because Apollo’s stake hasn’t been disclosed. Steven Anreder, a spokesman for Apollo, declined to comment. Lyondell spokeswoman Susan Moore didn’t return phone calls seeking comment.

Access Industries ( which owns LyondellBasell ) agreed to provide $750 million of the $3.25 billion in loans to fund Lyondell Chemical’s operations during bankruptcy, Access said in a statement distributed by PR Newswire.

Goldman Sachs, Merrill, Citigroup and other banks arranged the financing, which includes $12.5 billion of first-lien bank loans, $5.5 billion of second-lien notes and loans and $2.5 billion of third-lien notes and loans, according to S&P.

> This "so-called debtor-in-possession financing" from Apollo & Co is more like a doubling down......

> Dieses sogenannte "debtor-in-possession financing" von Apollo & Co. ist in Wirklichkeit ein verzweifelter Versuch vom vorherigen Investment überhaupt noch was zu retten......


Apollo, TPG Inc. and Blackstone Group LP’s GSO Capital Partners were among buyout firms that bought high-yield, high- risk debt last year at discounted prices. The average high-yield loan price fell 28 cents on the dollar last year to 66.6 cents, according to Standard & Poor’s LCD, as Wall Street firms whittled down $230 billion of loans they’d promised to private-equity firms to fund takeovers before credit markets seized up.

“Apollo may be trying to protect an earlier error in judgment with Lyondell,” said Jonathan Macey, a law professor at Yale University. He said Apollo may be trying to avoid deeper losses by providing bankruptcy financing.

Apollo bought Lyondell bank loans from Citigroup in April, bankers familiar with the sale said at the time. Citigroup sold about $1.9 billion of the debt, about a fifth of a $9.45 billion term loan, according to a CreditSights Inc. report on April 29. Goldman Sachs Group Inc., Merrill Lynch & Co. and the other banks that held the loans offered to sell the debt above 90 cents on the dollar in May, according to a Standard & Poor’s LCD report that month.

> On top of this it wouldn´t surprise me if any of the loans Citi managed to unload are heavily financed through Citi aka the taxpayer..... Wouldn´t be the first time.... ( see UFOs (or Unidentified Financing Objects) & No Kidding.... More Off Balance Sheet Vehicles For Citigroup , & Banks use discounts to tempt ‘vulture funds’ )...... I think this quote “Most of the leverage being provided by banks is only being provided if you buy their loans” sums it up......

> Darüberhinaus würde es mich nicht wundern wenn von den Krediten die losgeschlagen werden konnten die Finanzierung vom selben Haus ( also in diesem Fall Citi oder besser dem US Steuerzahler) bereitgestellt worden ist..... Wäre ja nichts neues.... ( siehe UFOs (or Unidentified Financing Objects) & No Kidding.... More Off Balance Sheet Vehicles For Citigroup & Banks use discounts to tempt ‘vulture funds’ ) ....... Ich denke dieses Zitat “Most of the leverage being provided by banks is only being provided if you buy their loans” spricht Bände.....

$12.7 Billion Merger
LyondellBasell said Dec. 31 that it was considering alternatives, including a Chapter 11 filing, to restructure debt that financed its $12.7 billion merger a year ago.

Lyondell Chemical Worldwide’s 10.25 percent notes due 2010 most recently traded at 16 cents on the dollar yesterday, according to Trace. The Lyondell Chemical unit’s 9.8 percent notes due 2020 traded at 22 cents on the dollar. No quote was available for the 8.375 percent notes due 2015.

Blavatnik’s Stake
Lyondell Chemical is partly owned by Access Industries Holdings LLC in New York, founded by billionaire Len Blavatnik.

LyondellBasell was created in December 2007 by the $12.7 billion acquisition of Lyondell Chemical and affiliate Equistar Chemicals LP by Dutch chemicals company Basell AF SCA. The combination created one of the world’s largest independent chemical producers with 16,000 employees and pro-forma sales of $54.6 billion in the year through September, according to its Web site.

UPDATE on "Mark-To-Market" from leveraged loans.....

Citigroup Cites $2 Billion in Exposure to Lyondell

The exposure, as of Dec. 31, is primarily in Citi's institutional-clients group. The exposure consists of three loans having an original value exceeding $2 billion. Citigroup sold a chunk of the loans last year to private-equity firm Apollo anagement LP and recorded write-downs on the value of the remainder over the course of 2008. That left Citigroup with a marked-down exposure of $2 billion.

Citigroup now is taking a conservative approach by adding $1.4 billion to its loan-loss reserves. That amount assumes Citigroup won't recover any of the loans as LyondellBasell's bankruptcy proceeds.

> Needless to say that i think this kind of high marks on troubled loans is not only common from our old frined Citi.....

> Überflüssig zu erwähnen das ich annehme das diese Art der Kreditbewertung eher die Regel als die Ausnahme ist......

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