Banks and the Temple of Mammon

[Fruitcake]

So the temple of Mammon starts to unwind.

It’s all looking pretty dire with Bear Stearns sold for $2 a share today (from $170 last year and 93% down on Friday close). Now the whispers are that none other than Lehman Brothers are in meltdown, Lehman's stock dropped 15% on Friday and around 20% Monday, even after Moody's Investors Service affirmed its credit ratings and said its financial position is strong (yeah right, they will keep talking these stocks up even as the ship sinks beneath the waves.)

It is most satisfying to see the greed of these banks finally being brought to a reckoning. In the UK, only the Northern rock has gone so far, my money is on one of the majors hitting choppy waters very soon.

They have no one to blame but themselves...whatever possessed them to put people on one year bonuses for selling products that would have impacts for over a quarter of a century...natural human greed would always get the better of the staff, but the so called leaders were in on the big cash so they turned a blind eye, hoping that something would always turn up…they will never learn.

It has always been an unsettling thought to me that senior people within the banking system could drift from one position of fiscal sovereignty to another without so much as a stain on their character, when things went ‘pear shaped’. Many of those who presided over the Barings crash all those years ago, now hold senior positions once again!!

Jeeze, in my Company, if a senior Manager screwed up big time and brought me to the edge (it could not happen, I am too much of a control freak for that), he could expect these words as a reference “If he has applied for a job with you guys, do yourselves a favour, bin that CV”

It should be fascinating to see how many more of these stupid institutions manage to stay afloat. The central Banks are in a vicious circle, and the money will have to run out some time. Still they prattle on about the bottom being reached…once again my money is that there is still a long way to go. We will see.

[Minister Masket]

Wavelength! I just started a thread about the same subject.

[Fruitcake]

Mods, any chance of a merger....lol

[Dancing Mustard]

Jeeze, in my Company, if a senior Manager screwed up big time and brought me to the edge (it could not happen, I am too much of a control freak for that), he could expect these words as a reference “If he has applied for a job with you guys, do yourselves a favour, bin that CV”

He'd proably sue you for negligence and try to reap loss of future earnings from you...

Fucking liberty I know, but that's the joy of UK tort law for you.

[Fruitcake]

Jeeze, in my Company, if a senior Manager screwed up big time and brought me to the edge (it could not happen, I am too much of a control freak for that), he could expect these words as a reference “If he has applied for a job with you guys, do yourselves a favour, bin that CV”

He'd proably sue you for negligence and try to reap loss of future earnings from you...

Fucking liberty I know, but that's the joy of UK tort law for you.

LOL..I love your style DM, very nice.

[Dancing Mustard]

Jeeze, in my Company, if a senior Manager screwed up big time and brought me to the edge (it could not happen, I am too much of a control freak for that), he could expect these words as a reference “If he has applied for a job with you guys, do yourselves a favour, bin that CV”

He'd proably sue you for negligence and try to reap loss of future earnings from you...

Fucking liberty I know, but that's the joy of UK tort law for you.

LOL..I love your style DM, very nice.

Heh, I only wish I was joking.

But seriously, that's a sustainable cause of action these days.

[Fruitcake]

Jeeze, in my Company, if a senior Manager screwed up big time and brought me to the edge (it could not happen, I am too much of a control freak for that), he could expect these words as a reference “If he has applied for a job with you guys, do yourselves a favour, bin that CV”

He'd proably sue you for negligence and try to reap loss of future earnings from you...

Fucking liberty I know, but that's the joy of UK tort law for you.

LOL..I love your style DM, very nice.

Heh, I only wish I was joking.

But seriously, that's a sustainable cause of action these days.

As I always say...come on then if you think you're 'ard enuff'
(and I have been pretty litigious in my time, lost a few, won more, thank goodness)

Back to these banks, the figures are getting pretty mind numbing. With UK personal debt topping one trillion, thats £1,000,000,000,000 !!! Things are looking pretty dire all round. Gold is going through the roof, Diamonds (always a fav of mine) are heading north, stocks are looking like an out of control sled on the Cresta run, house prices are also heading down...and you know what I saw at Liverpool street the other day on the news sreeen....a ticker tape saying house prices were stabilising!!! where do they get this crap from???

In the USA the biggest threat is $53 trillion, that's $53,000,000,000,000 in government debts and liabilities that start to come due in four years when baby boomers begin to retire.

A USA TODAY analysis found that the nation's hidden debt — Americans' obligation today as taxpayers — is more than five times the $9.5 trillion (I wont do the zeros again, otherwise ones mind starts to numb) they owe on mortgages, car loans, credit cards and other personal debt.

This hidden debt equals $473,456 per household, dwarfing the $84,454 each household owes in personal debt.

The $53 trillion is what federal, state and local governments need immediately — stashed away, earning interest, beyond the $3 trillion in taxes collected last year — to repay debts and honor future benefits promised under Medicare, Social Security and government pensions. And like an unpaid credit card balance accumulating interest, the problem grows by more than $1 trillion every year that action to pay down the debt is delayed.

There's plenty more rubbish to be jettisoned, mark my words.

[Fruitcake]

Once again...any chance of a 'merger' between these two threads mods? It would cut costs, save time and resources and the shareholders would all be happy...just like they are in Bear Stearns

[got tonkaed]

admittedly im a little too intoxicated to understand where im going to go with this but....

fruitcake....what kind of impact does the cheap buyout have on shareholders? Also one of the strategies i heard about earlier today was to allow some of the non-performing loans to stay on the books a little longer, though i understand how this can help, is it really a systemic type of change or just a stop gap measure?

[DaGip]

They told me on CNN that we should pull our money out of CDs and Savings as the interest there is only 2% right now, compared to 4% Inflation. So, in essence, you would be losing money keeping it in there.

[greenoaks]

They told me on CNN that we should pull our money out of CDs and Savings as the interest there is only 2% right now, compared to 4% Inflation. So, in essence, you would be losing money keeping it in there.

ahh, but if you spent it on consumables you would lose it even faster.

[Fruitcake]

admittedly im a little too intoxicated to understand where im going to go with this but....

fruitcake....what kind of impact does the cheap buyout have on shareholders? Also one of the strategies i heard about earlier today was to allow some of the non-performing loans to stay on the books a little longer, though i understand how this can help, is it really a systemic type of change or just a stop gap measure?

Depends which shareholders you are referring to got tonkaed. If you were a Bear Stearns shareholder, having been clever enough to buy in last August, I would imagine you are waking up this Tuesday wondering which truck it was that hit you, worse if you are pensioner who placed a great deal of savings into those shares because this was a ‘blue chip’ investment (always staggers me how these so called blue chip investments are run, but there you go, people have said I was a party pooper for the last 3 years).

If you are a Lehman Brothers shareholder, I would imagine you would be heading for the exit as fast as you could, sure in the knowledge that those on the ‘inside’ i.e. the investment operations, banks etc, had already exited before you, the audience, knew what was happening!

If you were a JP Morgan Chase shareholder, I would imagine you would be quietly sidling up the wall while the show was still on, trying to stealthily head for the exit, problem being, you keep bumping into others surreptitiously trying to do the same!! I would be wondering what the assets are now worth that this operation has on its balance sheet, after all, they were valued last December, before the real meltdown began.

Moving on, re the non-performing loans, I think the answer is in the title of the loans. Only a self important, self satisfied, smug bunch of complete hypocrites could look at NON PERFORMING loans, and say to each other…”oh, tell you what, let’s keep them on the books for now, that way the balance sheet will be shorn up (this way we still get to stick our greedy self interested fat snouts in the trough a little while longer, and screw the shareholders and everyone else, the party’s over anyway)” Staggering.

Let’s get this right….this is a system that has got so rich and powerful over the last 30 to 50 years, that it has forgotten the basics. It is a system that has become so involved with its own incredible greed that it has stopped looking out at the world. It is a system that has become so far up its own derrière; it has stopped doing all the basics anymore.

Retail banking: When I opened my first account, I had to sit in front of the Manager, explain what I was going to do, build a relationship with the bank over some period and generally behave myself. Now you walk in, the Computer decides while some moronic mediocre middle manager (ahem) does not care if you live or die! So you have no loyalty in return, your whole attitude is one of ‘screw em’. I almost fell off my chair a couple of years ago when listening to a senior banking guy being interviewed on a money program we have over here…he said (get this) “Young people today are far better equipped to understand the rigours of using the Bank system than ever before” I was staggered…WRONG!!!! The young people of today are no different to how they were in my day, as venal, self interested, selfish and daft as they ever were!!! (And rightly so, enough shit will hit them as they get older) So what do the Banks do…oh yes…they throw debt at them like it’s the last thing they are going to have in their lives!!!

You are Mr and Mrs below average, you have a record of debt problems, your income is low and you are generally the first casualty in any slowdown…what do the Banks do??? Oh yes, open you an account, and then offer you money!!!!!!!!!! And this is where the banks greed becomes just too much to bear…

Because they don’t actually want to dirty their hands with their own money, they sell your debt to them on to another (along with a bunch of other debts), skimming a small percent off the top for themselves, now they then take this income money and do the whole process all over again!!! The next in line thinks...hmmm...lets pass the parcel, so they sell it on at more discount to yet another, who may well be a non bank. Now everything is fine, but they also pass on a load of shit (as we now know)

Now, your Mr and Mrs below average hit some problems…because the banks have been ramming debt down your willing throats they hit problems. The ultimate owners of the debts start saying WTF!!! This isn’t what we bought is it??? The banks say yes, so the others turn round and say, well screw you, we ain’t doing business with you anymore. One by one, you all stand in a circle shouting, until someone turns round and says…oh dear, my income is now drying up to the point at which I can no longer pay my own debts! (Having borrowed £/$97 for every £/$3 you stumped up!) Who do you owe this 97 to…oh yes, the very same people who are screaming in the circle!!!!!!!!!

IT HAD TO END!!!!!!!!

Everything was slowly but inexorably winding itself tighter and tighter because of one simple thing, greed born of laziness.

Moving on….CNN may tell you to do that, they would be right. However…a 25% return on an investment that fails is a piss poor record against 2% on an investment that succeeds. I always say, screw ‘em all, spend the cash on your own family, best investment there is. My sons already give their Mother an allowance ( and rightly so, she put up with their shit for years) they are steadily moving up in the world and will always be there for her…I invested heavily in them, this is our payback. (As my Dad did me, etc etc)

Hope that helps…some rants, but I tried to pain the picture so it was understandable.

[greenoaks]

yes i know about Lehmann Brothers but Citigroup is the one we are hearing might be in trouble next.

[Fruitcake]

yes i know about Lehmann Brothers but Citigroup is the one we are hearing might be in trouble next.

From the Herald Tribune 17 March:
The home mortgage division of Citigroup Inc. said Monday it is laying off 185 employees who worked in its home equity business, saying those types of loans are not salable in today's troubled home loan market.

CitiMortgage spokesman Mark Rodgers said the layoffs in the Des Moines area follow the company's recent announcement that it plans to better allocate its capital. (the tears of laughter run down my cheeks)

"Supporting that goal, CitiMortgage recently announced it will reduce its overall balance sheet and the percentage of first mortgage originations held in portfolio by focusing more on salable product," he said in a statement. "Because home equity products are not salable in the current market, or likely to be in the foreseeable future, we are curtailing proactive marketing efforts that drive home equity loan volume."

He said the company is not exiting the home equity business but will focus more on supporting existing Citibank, corporate and Smith Barney customers.

(Bit like closing the stable door after the horse has bolted the first furlong!)

And check this from January:

US banking giant Citigroup has reported a $9.83bn (£5bn) net loss for the last three months of 2007.
Chief executive Vikram Pandit said the loss had been caused by a $18.1bn exposure to bad mortgage debt and was "clearly unacceptable" (he's havin' a larf isn't he!).

The company, the largest banking group in the US, said revenues during the fourth quarter fell 70% from a year earlier to $7.2bn.

Mr Pandit has pledged to turn around Citigroup's fortunes. (yawn)

'Tight control'

It was also announced that Citigroup is going to get a cash injection of $6.88bn from Singapore government investment agency GIC, while the Kuwait Investment Authority said it had bought a $3bn stake in the firm, as well as a $2bn holding in Merrill Lynch.

(One wonders whether those who made these investments are now asking serious questions.)

[MeDeFe]

Once again...any chance of a 'merger' between these two threads mods? It would cut costs, save time and resources and the shareholders would all be happy...just like they are in Bear Stearns

A merger might not be in the best interest of the shareholders in this case, seeing how this thread is rather technical in nature and content, focusing on current developments in the realm of financial markets and their underlying mechanics. While the other thread deals with the political ramifications of the general situation on the secret rule of our reptilian overlords and the racism of some guy named Hal. While the topics might not be mutually exclusive, I feel that the chemistry is not going to work out to everyone's contentment, not even to the contentment of a sizeable minority.

[Fruitcake]

Once again...any chance of a 'merger' between these two threads mods? It would cut costs, save time and resources and the shareholders would all be happy...just like they are in Bear Stearns

A merger might not be in the best interest of the shareholders in this case, seeing how this thread is rather technical in nature and content, focusing on current developments in the realm of financial markets and their underlying mechanics. While the other thread deals with the political ramifications of the general situation on the secret rule of our reptilian overlords and the racism of some guy named Hal. While the topics might not be mutually exclusive, I feel that the chemistry is not going to work out to everyone's contentment, not even to the contentment of a sizeable minority.

Actually I mean this thread and the thread titled 'Nightmare on Wall Street'

[Audax]

You are a right Ba***rd fruit

I have it from an impeccable source you went short on Bear Stearns big time.

Respect

(you could have let me in on the action)

[MeDeFe]

Once again...any chance of a 'merger' between these two threads mods? It would cut costs, save time and resources and the shareholders would all be happy...just like they are in Bear Stearns

A merger might not be in the best interest of the shareholders in this case, seeing how this thread is rather technical in nature and content, focusing on current developments in the realm of financial markets and their underlying mechanics. While the other thread deals with the political ramifications of the general situation on the secret rule of our reptilian overlords and the racism of some guy named Hal. While the topics might not be mutually exclusive, I feel that the chemistry is not going to work out to everyone's contentment, not even to the contentment of a sizeable minority.

Actually I mean this thread and the thread titled 'Nightmare on Wall Street'

Really? Then we have three threads initiated by this topic.

[khazalid]

got a cracker for you guys:

In thee have they taken gifts to shed blood; thou hast taken interest and increase, and thou hast greedily gained of thy neighbours by oppression, and hast forgotten Me, saith the Lord GOD. (Ezekiel 22:12)

[Fruitcake]

got a cracker for you guys:

In thee have they taken gifts to shed blood; thou hast taken interest and increase, and thou hast greedily gained of thy neighbours by oppression, and hast forgotten Me, saith the Lord GOD. (Ezekiel 22:12)

A sobering statement indeed khazalid.

Interestingly, I have just popped this together from various sources and my own thoughts for those interested:

Credit default swaps (CDS) costs are now starting to head north, following the trend of reduction of asset prices across the board.

CDSs are derivative instruments based on underlying fixed income securities such as corporate and government bonds. Swaps are privately negotiated contracts traded on over-the-counter markets.

The buyer of a credit default swap pays a premium to the seller to assume the risk of the issuer of the underlying security defaulting on the coupon or interest payment. Credit default swaps are used for hedging as they enable investors to insure their bond holdings against the risk of default.

CDSs on LloydsTSB in the UK are priced at about 1.33%, or 133 basis points. That means anyone with £10m of Lloyds TSB bonds could insure against it defaulting for £133,000 a year. These prices move constantly because there is a market in CDS contracts, so watching the figures gives an idea of just how risky the market thinks a bank or any other company is. Simply put, the higher the figure, the higher the risk.

Lloyds TSB has low exposure to US mortgage market toxicity and its 133-point figure is one of the lowest among banks. Most are in the same ballpark. Barclays is at about 170 basis points and HSBC 145.

To get a sense of what is a bad figure the CDS cost for Bear Stearns in the days and hours before the crisis hit topped out at 720 points. The message being sent out by the credit markets was clear - the bank's debt was very high risk, I would say toxic at those prices.

So what are the other interesting figures? In the UK it is worth noting HBoS. Its CDS price was about 235 points last week, a long way from seriously worrying but markedly higher than most other British banks, with little moves today, as most traders focussed back on the FTSE.
However, this reflects its high mortgage exposure in the UK, its relatively high exposure to certain types of near-prime mortgages in the US and its slightly higher dependence on financial markets to fund lending. More risky is Alliance and Leicester whose price was about 342 points last week, again reflecting its high dependence on wholesale financial markets, which have become frozen in recent months.

But the real horrors are in Iceland of all places!!!

Credit insurance for debts at Iceland's biggest bank, Landsbanki, is priced at 610 points while that for Kaupthing is priced at a hair-raising 856 (UK money afficianados will perhaps recognise the Singer & Friedlander brand it owns). Given that these two have taken billions in UK retail deposits, it may be a sobering thought for savers to consider where they are putting their cash. These banks are now seen as the most unsafe in the developed world.

I loved the comment by Mark Sismey-Durrant, managing director at Icesave, (the internet account run by Landsbanki) he says: 'Our credit rating is similar to or better than many UK banks, including Alliance & Leicester.' (The markets think otherwise it would seem.)

I watch these markets as a guide to sentiment, and sometimes trade in them. Overall CDS costs are edging higher almost daily and in some cases hourly…

The figures on credit default swaps show clearly where investment professionals think the big risks are.

You have been warned.

[Fruitcake]

You are a right Ba***rd fruit

I have it from an impeccable source you went short on Bear Stearns big time.

Respect

(you could have let me in on the action)

No worries bro, all good things come to those with patience

[khazalid]

interesting post fc. the markets are beautiful things in a lot of ways but i'd never be able to wear it like you do. all great Neptune's ocean wash these hands &c. you never wake up with a sense of profound remorse?

[Fruitcake]

interesting post fc. the markets are beautiful things in a lot of ways but i'd never be able to wear it like you do. all great Neptune's ocean wash these hands &c. you never wake up with a sense of profound remorse?

I assume a question.

I never feel remorse. I never screw those who don't deserve a red hot poker up their derrier. I spread the good fortune around, I always take the bad fortune on the chin when it happens. I offer help for no reward, I just try to keep a balanced view of the world and all it offers.

I try to build where I can, and maximise for the gain of everyone where I cannot,

I cannot abide the naked greed for personal gain I have seen in the Financial community since I became a 'player', their self indulgence sickens me and I abhor the disgraceful and immoral attitudes they display with vulgar conceit.

In short, I always try to put back in what I take out, so I sleep soundly at night.

On the other hand, I take great delight seeing these self important, egotistical types, with delusions of their own real self worth, get it big time.

[khazalid]

a broker with a heart? now i've seen everything! well kudos to you i guess

[Fruitcake]

a broker with a heart? now i've seen everything! well kudos to you i guess

Well, heart maybe a bit rich, but I like to think of myself as basically honest. About as much as anyone can aspire to really.

BTW, not a broker, just made money and now work from my study.