If someone doesn't visit the confessional, it's not because they don't have anything to confess. It's because they can't acquire the Level 1 capital required to cover their adequacy requirements if they do.
I have the impression -- and it is only an impression -- that Deutsche Bank is more likely to be, uhh, less that forthcoming than other banks. After all, it is 'Deutsche Bank', the bank in Deutschland, and is both arrogant and nervous about its position at the same time. It would be difficult for them to admit the kind of mistake that large writedowns would imply. Remember UBS is being investigated for not marking to market, probably for somewhat the same reason: not wanting to look bad in the eyes of its many high worth clients, who I imagine pay premium fees.
Wow! A payday loan,...just when I needed it. What a wonderful valuable service. Now I can afford to get one of those fake paystubs to open an account with Wachovia to deal with that LivelyMoney guy. And when I'm rolling in wealth I'm going to give it to Tennis_8 to funnel it to K Fisher or maybe buy into Cereberus.
This for sure is valuable service for readers of this blog. My credit score dropped, no worries, go get internet loan from Europe, byu condo in Florida and flip it back to Europeans.
RE appreciation is X%, dollar appreciation against euro is Y%, payday loan is Z%. As long as X+Y>Z you'll make money. Wait a minute, X and Y are negative...
Which means they will get their bonuses this year.
You need to fire top management to encourage them to come clean. I'm sure C and MER would have booked the national debt if they could have gotten it from the SWF's.
Coulda sworn DB had at least a few billion sunk into MortgageIT. It must also have significant buyback liability for all of the 3rd party origination in its securitization pools.
one of DB's top traders was very very bearish on sub-prime and shorted the sh*t out of it and encouraged senior management to scale back the CDO business. so i suspect this is why DB got off lightly...
Lawrence Summers-interesting read, potential for prolonged recession.
"On the correct response: The United States is at the root of the current market problems, and it should be at the center of the solution. I would like to see U.S. officials engaged in efforts to strengthen and enhance fiscal confidence and stability in the short and medium term. For starters, we could use more accurate pricing of assets. You've got bonds that are priced one way in one American bank, and another way in another American bank, and a third way in a European bank, and a fourth way in a hedge fund. We need greater transparency. There should also be further steps to avoid excess mortgage foreclosures in the United States. Mainly, that would include more provisions for writing down the value of mortgagesnot just the interest, but the total value. This would help the innocent victims."
"Morgan Stanley Cries Mommy, SEC Comes Running: Jonathan Weil
excerpt from Bloomberg: [worth reading]
"The SEC's Conrad Hewitt got things rolling with a Jan. 8 letter, blessing an industry plan to keep problem subprime mortgages off lenders' balance sheets while freezing their interest rates. Hewitt's letter came in response to requests by the Treasury Department and a group called the American Securitization Forum, whose accounting committee is led by a Morgan Stanley managing director, Esther Mills.
By any objective reading, Hewitt's letter offered an accounting exemption that would let banks avoid unwelcome hits to their capital ratios. Yet at the time, nobody at the Financial Accounting Standards Board would say so publicly.
Now three FASB members have gone on record characterizing Hewitt's letter as an exemption to the standard known as FASB Statement 140. This highlights another problem. Unlike the SEC, Hewitt, as chief accountant, has no authority to issue exemptions from the FASB's standards. "
Lawrence Summers: "There should also be further steps to avoid excess mortgage foreclosures in the United States. Mainly, that would include more provisions for writing down the value of mortgagesnot just the interest, but the total value. This would help the innocent victims."
What an ass.
...and this is, was, and will be the quality of America's leadership.
Gold, anyone? IMO, all that's worth buying are gold, soft commodities, and assets that will rise when the USD sinks.
Lawrence Summers... rewarding avarice and greed, ignorance and want.
The readership here desires to point its prosecutorial guns at the Tan Man and his ilk leaders who led and fed from this economic debauchery...and Lawrence Summers wants to support the moral turpitude of the FB swindlers, greedy self-servers, and ignorants who bought the houses so they too could feast at the bubble trough.
Summers, it's you are reckless. it's you who have moral turpitude. Its you who should be prosecuted.
Look Gaudia, I'll agree that some of the comments coming out of academics and regulators are questionable, but, what is truly needed is for the regulators to finally address the real problem and that is rampant speculation in the commodity space.
The fundamentals have not supported the prices for so very long, yet they allow these complete assholes the ability to run these prices.
You have people losing their houses and per Walmart this moring using freakin gift cards to buy $%%### food and these assholes continue to run the commodity space, that is a #$$%^ shame.
The games will always be played. They won't be stopped. We're human; that's what we do. Ammana Iowa and every cockamamey scheme to do it differently has been tried, and they all fail. We're greedy and self-serving.
What's been obvious is that there's a need to recognize the dialectic, and, as difficult as it seems, to create a faster, more responsive managerial "system" to head off excess.
While I'm a true blue American, I watch the Chinese manage their dramatic economic expansion and say to myself, at least they're trying.
Here, we have Paulson (honestly the biggest joke I've seen played on the American economic public) and bleeding hearts who reject the reality of greed by the lower class and by all above them too.
Where the leadership is incompetent, and where competent, lies for short term political gain, the outcome portends socio-economic failure. IMO.
Hence, as store of value is store of value, money outside of leadership's control will flee to assets perceived as supra-national, to get away from Soddom. So, what does one expect except a massive rise in the price of precious metals? And, now, soft commodities?
But to cut Lawrence Summers slack I believe itself is immoral and worse, acts like acid burning the rope of society.
The problem is eternal. Laissez Faire and the unseen hand are terrific ideas as they recognize and capitalize on greed.
The problem is obvious. We all recognize that free markets "kill". Yet, we want the markets to remain free.
There's a new problem, previously unthought, attached at the hip to "free markets", and that's the regulators themselves. Both intelligence and intellectual honesty are not givens.
I don't think there's a person here who wishes that were the case. However, the Bush Administration has most recently proffered a surprising quantity of intellectual incompetence, irrespective of their best intentions.
And the outcome is debacle.
The humorous response to this debacle is now intellectually disingenuous positions, like Summers'.
Rational risk takers have no choice, for the short term, but to flee from this Cuckoo's Nest. Hence, PM's up.
(Soft's are rising for their own reasons; so they're reflecting PM security for the nonce.)
It's so bad, this is the first year I've refused to vote. I'm interested solely in protecting and accreting my store of value; I will remain intellecually honest, and I don't like the conclusion even one bit.
What smeagle said. Plus DB is a different story from the public landesbanken (regional banks) like SachsenLB, WestLB, etc. which have been lured into teritory they were ill equipped for.
GaudiaRay, do you actually have a useful suggestion to make?
In other news, DR Horton continues to crap the bed (from Bloomberg):
Customers canceled 44 percent of orders in the first quarter, down from 48 percent in the previous three months. Net sales orders slumped 52 percent to 4,245. Their value fell 60 percent to $926 million.
The order backlog, or homes under contract that have yet to be sold, plummeted 57 percent to $2.01 billion from a year earlier. Sales completed dropped 36 percent to 6,549 homes.
"...Deutsche Bank AG Chief Executive Officer Josef Ackermann said rating downgrades for bond insurers pose risks that could match the U.S. subprime market collapse...It could be a tsunami-like event comparable to subprime,'' Ackermann said in a Bloomberg Television interview in Frankfurt today. Deutsche Bank, Germany's biggest bank, iswell positioned'' on its risk from bond insurers, he said."
DB bought MortgageIT for about 400+Mill and was very proactive in scaling back the product guidelines in March 07. The MortgageIT origination platform has been virtually disabled. I've got to imagine their buyback liabilities for 3rd party originations are substantial. For instance they were a big buyer of AHL's loans (Fixed POAs).
I must admit that this was so far the best call i´ve heard from an investment bank during the past 6 month.
Even when i think their guidance is nonsense and there will be more write downs in the leverage loan portfolia.
But at least they are not in danger of doing a fire sale like most of their peer group.
The biggest risk is indeed their counterparty risk. they have almost no net exposure on the troubled segments and monolines.
What i find interesting was the comment that it was always a Deutsche Bank policy to take 10 percent of lets say CLO etc onto their own books to show that their underwriting was sound.
DB doesn't "own" those foreclosures or half of cleveland. They are simply acting as trustee for the MBS. so those foreclosures don't impact DB at all because the only losers are the mbs investors.
As I recall, the total price tag for MortgageIT was closer to a billion, not counting the multi-billion repurchase facility that DB extended as part of the deal. Presumably some piece of the credit was syndicated, but it wouldn't surprise me to see some sort of DB guarantee or repurchase obligation supporting the syndication.
Whatever the number, the cash poured into MortgageIT beginning in the summer of 2006 through whenever the boys in der bund pulled the plug is a dead loss.
DB's repurchase exposure has to be among the biggest on the Street, largely because prior to the MortgageIT acquisition, it was securitizing exclusively with other peoples' originations.
DB (and lots of other sponsors) were floating securitizations filled with crap from lots of fly-by-night originators. They counted on being able to force those orignators to buy back anything the sponsors had to repurchase out of a pool due to breached reps. Now those originators are long gone, but the sponsors are still on the hook for the reps it made into the pools.
It's only a matter of time before bondholders get wise and start agitating for trustees to start looking closely at bad loans for excuses to put them back to the MBS sponsor. When that happens, a lot of sponsors will be in a world of hurt!
If someone doesn't visit the confessional, it's not because they don't have anything to confess. It's because they can't acquire the Level 1 capital required to cover their adequacy requirements if they do.
I have the impression -- and it is only an impression -- that Deutsche Bank is more likely to be, uhh, less that forthcoming than other banks. After all, it is 'Deutsche Bank', the bank in Deutschland, and is both arrogant and nervous about its position at the same time. It would be difficult for them to admit the kind of mistake that large writedowns would imply. Remember UBS is being investigated for not marking to market, probably for somewhat the same reason: not wanting to look bad in the eyes of its many high worth clients, who I imagine pay premium fees.
Do they own chunks of WestLB & Sachsenbank?
Hmmm. Random, or EUR trigger?
Wow! A payday loan,...just when I needed it. What a wonderful valuable service. Now I can afford to get one of those fake paystubs to open an account with Wachovia to deal with that LivelyMoney guy. And when I'm rolling in wealth I'm going to give it to Tennis_8 to funnel it to K Fisher or maybe buy into Cereberus.
This for sure is valuable service for readers of this blog. My credit score dropped, no worries, go get internet loan from Europe, byu condo in Florida and flip it back to Europeans.
RE appreciation is X%, dollar appreciation against euro is Y%, payday loan is Z%. As long as X+Y>Z you'll make money. Wait a minute, X and Y are negative...
Which means they will get their bonuses this year.
You need to fire top management to encourage them to come clean. I'm sure C and MER would have booked the national debt if they could have gotten it from the SWF's.
Rumors that RBS is looking for emergency cash from BoE and/or ECB
Yal:
Where are you picking up that rumor from?
Yal: Make It Happen!
I do!
Coulda sworn DB had at least a few billion sunk into MortgageIT. It must also have significant buyback liability for all of the 3rd party origination in its securitization pools.
one of DB's top traders was very very bearish on sub-prime and shorted the sh*t out of it and encouraged senior management to scale back the CDO business. so i suspect this is why DB got off lightly...
Moin from Germany,
the surprising part is that despite that there are no writedown the stock is only up 1.5 percent to 76.5
Low was 67 high 120......
Their presentation for the call in a few hours is giving almost no disclosure on their positions.....
Lawrence Summers-interesting read, potential for prolonged recession.
"On the correct response: The United States is at the root of the current market problems, and it should be at the center of the solution. I would like to see U.S. officials engaged in efforts to strengthen and enhance fiscal confidence and stability in the short and medium term. For starters, we could use more accurate pricing of assets. You've got bonds that are priced one way in one American bank, and another way in another American bank, and a third way in a European bank, and a fourth way in a hedge fund. We need greater transparency. There should also be further steps to avoid excess mortgage foreclosures in the United States. Mainly, that would include more provisions for writing down the value of mortgagesnot just the interest, but the total value. This would help the innocent victims."
Goodbye to the Bulls? | Print Article | Newsweek.com
NO exposure, I don't believe them and here's why.
"Morgan Stanley Cries Mommy, SEC Comes Running: Jonathan Weil
excerpt from Bloomberg: [worth reading]
"The SEC's Conrad Hewitt got things rolling with a Jan. 8 letter, blessing an industry plan to keep problem subprime mortgages off lenders' balance sheets while freezing their interest rates. Hewitt's letter came in response to requests by the Treasury Department and a group called the American Securitization Forum, whose accounting committee is led by a Morgan Stanley managing director, Esther Mills.
By any objective reading, Hewitt's letter offered an accounting exemption that would let banks avoid unwelcome hits to their capital ratios. Yet at the time, nobody at the Financial Accounting Standards Board would say so publicly.
Now three FASB members have gone on record characterizing Hewitt's letter as an exemption to the standard known as FASB Statement 140. This highlights another problem. Unlike the SEC, Hewitt, as chief accountant, has no authority to issue exemptions from the FASB's standards. "
Just like Enron.
Interesting...
Alistair Darling looks to offer lift to ailing home loan market - Times Online
UK government considering setting itself up as a ratings agency.
next development: AAA rating to be enforced by the SAS.
Lawrence Summers: "There should also be further steps to avoid excess mortgage foreclosures in the United States. Mainly, that would include more provisions for writing down the value of mortgagesnot just the interest, but the total value. This would help the innocent victims."
What an ass.
...and this is, was, and will be the quality of America's leadership.
Gold, anyone? IMO, all that's worth buying are gold, soft commodities, and assets that will rise when the USD sinks.
Lawrence Summers... rewarding avarice and greed, ignorance and want.
The readership here desires to point its prosecutorial guns at the Tan Man and his ilk leaders who led and fed from this economic debauchery...and Lawrence Summers wants to support the moral turpitude of the FB swindlers, greedy self-servers, and ignorants who bought the houses so they too could feast at the bubble trough.
Summers, it's you are reckless. it's you who have moral turpitude. Its you who should be prosecuted.
Interest rate cut in GB only 25 basis points. FTSE thoroughly unimpressed, looks like they were hoping against hope for a 50 points cut.
Fun and games.
Look Gaudia, I'll agree that some of the comments coming out of academics and regulators are questionable, but, what is truly needed is for the regulators to finally address the real problem and that is rampant speculation in the commodity space.
The fundamentals have not supported the prices for so very long, yet they allow these complete assholes the ability to run these prices.
You have people losing their houses and per Walmart this moring using freakin gift cards to buy $%%### food and these assholes continue to run the commodity space, that is a #$$%^ shame.
Risk Capital,
The games will always be played. They won't be stopped. We're human; that's what we do. Ammana Iowa and every cockamamey scheme to do it differently has been tried, and they all fail. We're greedy and self-serving.
What's been obvious is that there's a need to recognize the dialectic, and, as difficult as it seems, to create a faster, more responsive managerial "system" to head off excess.
While I'm a true blue American, I watch the Chinese manage their dramatic economic expansion and say to myself, at least they're trying.
Here, we have Paulson (honestly the biggest joke I've seen played on the American economic public) and bleeding hearts who reject the reality of greed by the lower class and by all above them too.
Where the leadership is incompetent, and where competent, lies for short term political gain, the outcome portends socio-economic failure. IMO.
Hence, as store of value is store of value, money outside of leadership's control will flee to assets perceived as supra-national, to get away from Soddom. So, what does one expect except a massive rise in the price of precious metals? And, now, soft commodities?
But to cut Lawrence Summers slack I believe itself is immoral and worse, acts like acid burning the rope of society.
Nothing to confess, yet it is selling at a PE of 5? Come on.
OT - CRE goes thud across the pond . . .
British Land loses £1.4bn in property slump - Times Online
Risk Capital,
The problem is eternal. Laissez Faire and the unseen hand are terrific ideas as they recognize and capitalize on greed.
The problem is obvious. We all recognize that free markets "kill". Yet, we want the markets to remain free.
There's a new problem, previously unthought, attached at the hip to "free markets", and that's the regulators themselves. Both intelligence and intellectual honesty are not givens.
I don't think there's a person here who wishes that were the case. However, the Bush Administration has most recently proffered a surprising quantity of intellectual incompetence, irrespective of their best intentions.
And the outcome is debacle.
The humorous response to this debacle is now intellectually disingenuous positions, like Summers'.
Rational risk takers have no choice, for the short term, but to flee from this Cuckoo's Nest. Hence, PM's up.
(Soft's are rising for their own reasons; so they're reflecting PM security for the nonce.)
It's so bad, this is the first year I've refused to vote. I'm interested solely in protecting and accreting my store of value; I will remain intellecually honest, and I don't like the conclusion even one bit.
A stupid German bank avoiding crummy US mortgage paper? How can that possibly be true? Do I sense some envy here?
Here is the conference call:
Error
What smeagle said. Plus DB is a different story from the public landesbanken (regional banks) like SachsenLB, WestLB, etc. which have been lured into teritory they were ill equipped for.
as risk capital brought up:
walmart released it's earnings... same store sales up only 0.5% (they themselves projected a +2% rise)
the reasoning:
the weather in the midwest (always the weeather)
and
customers "hoarding" their gift cards, and using them for food as opposed to discretionary spending.
that's terrifying. the consumer must be crying in pain if they're hoarding walmart giftcards for future FOOD purchases...
Felix writes:
A stupid German bank avoiding crummy US mortgage paper? How can that possibly be true? Do I sense some envy here?
I thought DB owns a good chunk of the Cleveland(?) RRE now due to defaults:
BBC NEWS | Business | Foreclosure wave sweeps America
Expects 2008 to be "Challenging"
Good. That builds character.
NO exposure, I don't believe them and here's why.
It's probably net no exposure. Which means that the only thing they have to worry about is counterparty risk. Snicker.
MGIC guideline changes:
http://www.mgic.com/pdfs/Customer_Letter_02-06-08.pdf
Thanks, Bacon Dreamz, I was trying to get my hands on that yesterday afternoon.
A top
GaudiaRay, do you actually have a useful suggestion to make?
In other news, DR Horton continues to crap the bed (from Bloomberg):
Customers canceled 44 percent of orders in the first quarter, down from 48 percent in the previous three months. Net sales orders slumped 52 percent to 4,245. Their value fell 60 percent to $926 million.
The order backlog, or homes under contract that have yet to be sold, plummeted 57 percent to $2.01 billion from a year earlier. Sales completed dropped 36 percent to 6,549 homes.
From Bloomberg:
"...Deutsche Bank AG Chief Executive Officer Josef Ackermann said rating downgrades for bond insurers pose risks that could match the U.S. subprime market collapse...It could be a tsunami-like event comparable to subprime,'' Ackermann said in a Bloomberg Television interview in Frankfurt today. Deutsche Bank, Germany's biggest bank, iswell positioned'' on its risk from bond insurers, he said."
Why do these guys remind me of Goldman?
DB bought MortgageIT for about 400+Mill and was very proactive in scaling back the product guidelines in March 07. The MortgageIT origination platform has been virtually disabled. I've got to imagine their buyback liabilities for 3rd party originations are substantial. For instance they were a big buyer of AHL's loans (Fixed POAs).
Gary, "No."
Exploding option arms hinders Bernache's ability to calm credit markets.
http://www.bloomberg.com/index_eu.html
Moin from Germany,
i have just listened to the call.
I must admit that this was so far the best call i´ve heard from an investment bank during the past 6 month.
Even when i think their guidance is nonsense and there will be more write downs in the leverage loan portfolia.
But at least they are not in danger of doing a fire sale like most of their peer group.
The biggest risk is indeed their counterparty risk. they have almost no net exposure on the troubled segments and monolines.
What i find interesting was the comment that it was always a Deutsche Bank policy to take 10 percent of lets say CLO etc onto their own books to show that their underwriting was sound.
Palm Beach County Foreclosure Sale Report 2/4. The following is out of 37 sales.
Deutsche Bank - 5
Wells Fargo - 4
Bank of NY - 4
Countrywide - 1
Deutsche bank lead the list. Somebody is not running to the confessional? And to think the reported on Ash Wednesday?
http://www.pbcountyclerk.com/courtservices/tdfc/fsr/fsr.pdf
Just trying to follow things here. It seems to me Deutsche Bank was following to some degree the old German accounting practice of "hidden reserves."
I have no inside knowledge to back this up, just a hunch based on some years spent there.
Heh.
Look at Ackermann's slide 10:
http://www.deutsche-bank.de/ir/de/download/Ackermann_FY2007_Analysts_Final.pdf
5-year senior CDS in bps show, which financials have been most affected at this moment: Lehman, Merrill, Morgan Stanley and even Goldman Sachs...
DB doesn't "own" those foreclosures or half of cleveland. They are simply acting as trustee for the MBS. so those foreclosures don't impact DB at all because the only losers are the mbs investors.
Racer,
As I recall, the total price tag for MortgageIT was closer to a billion, not counting the multi-billion repurchase facility that DB extended as part of the deal. Presumably some piece of the credit was syndicated, but it wouldn't surprise me to see some sort of DB guarantee or repurchase obligation supporting the syndication.
Whatever the number, the cash poured into MortgageIT beginning in the summer of 2006 through whenever the boys in der bund pulled the plug is a dead loss.
DB's repurchase exposure has to be among the biggest on the Street, largely because prior to the MortgageIT acquisition, it was securitizing exclusively with other peoples' originations.
DB (and lots of other sponsors) were floating securitizations filled with crap from lots of fly-by-night originators. They counted on being able to force those orignators to buy back anything the sponsors had to repurchase out of a pool due to breached reps. Now those originators are long gone, but the sponsors are still on the hook for the reps it made into the pools.
It's only a matter of time before bondholders get wise and start agitating for trustees to start looking closely at bad loans for excuses to put them back to the MBS sponsor. When that happens, a lot of sponsors will be in a world of hurt!