"The potential £28 billion loss"

Well at least they have London property to fall back on...oh wait...

Nostrovia,

Yes, I think the pound is goin' dound.

Eric,

"that's the kitchen sink?"

Nope. Bathroom. They're test marketing the whole "sink" thing.

Nostrovia,

Nope. Bathroom. They're test marketing the whole "sink" thing.
Comrade Misean is Dope | Homepage | 01.19.09 - 9:26 am | #

I would guess with all the Lowes and Home Depots about to go under, you could pick up sinks for cheap, if you liked throwing them out every quarter.

I don't think I've seen containment spread so quickly before...

Anybody here expect the euro to disappear? Seems to me Germany would be better off with its own currency.

Did England have a huge housing bubble, too? If not, than what are these massive losses attributed to?
Doofus | 01.19.09 - 9:27 am | #

They had a housing bubble so big it made its way to Spain.

Plus it has massive CRE problems and excessive reliance on FIRE industries.

Hardly even trying. You don't make front page for under 50 bil these days...

Come back next quarter RBS.

If you can.

C

"There's a chance the Pound could go Krona on us. "

Cheap Prem tickets! But I fear we're all Krona now.

el lurko,

"But I fear we're all Krona now."

Naw! Iceland's Bjorked.

Nostrovia,

...what did WE (Nevadans) do to warrant your displeasure? Take too much of your paycheck thru our Las Vegas branch?
Black Star Ranch | 01.19.09 - 9:50 am | #

Downwind from California is reason enough.  Oh, and when California legalizes gambling outright you might as well turn out the lights in Vegas. 

Still a little hope left out there. BAC is up 0.15 in Frankfurt today. C only down 0.04.

Whocudanode?

"Downwind from California is reason enough. Oh, and when California legalizes gambling outright you might as well turn out the lights in Vegas."

Hurry. Please, make it quick. I'd love to see Vegas as a 21st Century ghost town. We Nevadans only show you the glitzy/sleezy front door - hopefully then you won't venture too much farther into our lovely state, turn around and go back home. [grin]

There's never been a better time to buy and sell Kaka.

Hurry. Please, make it quick. I'd love to see Vegas as a 21st Century ghost town. We Nevadans only show you the glitzy/sleezy front door - hopefully then you won't venture too much farther into our lovely state, turn around and go back home. [grin]
\t Black Star Ranch | \t \t \t \t01.19.09 - 10:05 am | #
Black Star Ranch | 01.19.09 - 10:05 am | #

I thought that gambling and legalized prostitution was just entertainment for those passing time waiting for a quiclie divorce? No?

Elvis writes:
I think this means that the free set of bagpipes when you open a checking account promotion will be discontinued.

LOL +1
Doc at the Radar Station | 01.19.09 - 10:10 am | #

I thought they threatened you with bagpipes if you didn't open an account.

What most Americans don't understand is that
the NFL has nothing on the EPL as far as importance
to their fans.

excellent article by Felix Salmon on why nationalizing the banks makes sense. very clear prose and sharp argument. Page Not Found - Portfolio.com? tid=true

"Essentially, any government purchase of toxic assets can be split into two components: the market price, and a subsidy. If the subsidy is greater than half the market capitalization of the bank, and the government doesn't end up controlling the bank, then there's something very fishy going on indeed."

I wouldn't be surprised if the gov't shouldn't have owned BofA outright after last week's "injection," given this criterion.

The LEH outcry about how it "caused" the credit crisis is a rallying crying for those who want to protect bondholders. Felix hits on the key point in this absurdity - that bondholders bought a risk free investment. This entire bailout scheme is about protecting bondholders using every agrument in the book. The solution is rather simple: liquidate the bad banks. If the governement is so worried about having private capitl involved, why not a simulataneous nationalization spin? Nationalize citi and reap a good bank immediately and spin it...the gov owns the bad bank and equity in the new bank to be sold down in an alloted timeframe. Existing bank shareholders will get to have a second life..

S,
Government has never been about doing the correct thing, or right solution. At least not right now.

Let's get Sully to fly our economy in for a water-landing...

Perhaps it would be in our best interest to jettison California, Nevada, and Arizona from the union.

California would do much better without the rest of the nation dragging it down. Throw in Oregon and Washington and it's a screaming deal.

"Man Utd's shirt sponsor is AIG."

It wouldn't surprise me to learn AIG crafted derivatives based on United's performance. Watch, we'll get an "unexpected and unusually large losses" driven bailout if United's title run tanks.

And now that I think about it, a portion of our tax dollars is now paying Ronaldo's salary. That, my friends, is the ultimate outrage.

Still, if it's not Scottish, it's CRAP!

I knew it was a mistake when they made Groundskeeper Willie their Chief Risk Officer.

This is ONLY Half of What Cal. is in for....
IWannaknow | 01.19.09 - 10:23 am | #

California is doig suprisingly well considering.  House prices are way off the peak, unemployment is still single digits, captial, business and middle class flight has been orderly.  Crime is only up a bit and even the government is becomng resigned to the need for structural changes.  

Willy hears ya, Willy don't care!

I am trying to decide what kind of society I want to belong to:

i) hunter gatherer
or
ii) agrarian

I'm thinkin' hunter-gather. Scavenging is the 21st century's new black.

If the government announced a nationalization program, wouldn't the bondholders rush to liquidate their holdings to avoid the inevitable haircut? Maybe that is what they are fearing, not nationalization per se.
Doc at the Radar Station | 01.19.09 - 10:21 am | #

Yep.

That's why I've begun wondering this weekend if the whole "bad bank" conversation is a giant head fake.

The govt simply can't say, "hey, let's nationalize the banks..." with any kind of advance notice. It's a wholesale panic run by both the bondholders to dump their bonds AND the depositors to remove their savings.

Yeah, we can talk FDIC 'til we're blue in the face but the average joe is going to simply panic. And that leads to a question that I've had: are we talking a nationalization of the entire system or just individual banks? If the former, any advance notice simply leads to wholesale panic.

Just a few comments from an ordinary Edinburgh, Scotland resident about my wonderful local bank (which I don't use by the way).

In terms of net assets RBS is the world's largest company. They have £1.9 trillion of book assets, with liabilities to match of course.

They claim to have made profit across the UK (let alone Scotland) in 2008. - word is 90% of the losses are in the US dollar and Euro areas, and balance in the Far East.

What I'm trying to get my head around is whether it really in the UK tax payer interest to pick up these liabilities, rather than just let this bank fail.

I guess the argument is the credibility of the entire UK financial system is at stake and this outweighs the UK taxpayer potential hit. I believe 2 other UK banks are in the top 5 of world companies by book assets (Barclays and HSBC).

What a trade off!

Front page article in the local rag this morning. Good to see people who made mistakes during the bubble have learned

Rent-to-own home leases becoming more popular

Rent now, buy later - Sun Sentinel

Way more leisure time in hunter and gather societies! But the population has to be very small for it to work, let's hope it doesn't come to that.

Agrarian is just work, work, work and tends not produce enough for all, so watch out for the nasty feudal lord and serf dynamic but there would be room for more of us.

If the Yellowstone caldera goes, we'll be lucky to come out with h/g!

RBS should have taken the high road.

...

Just waking up now. Something in the news about Spain?

durn. got rid of faz too soon.
anonymous | 01.19.09 - 10:49 am | #

Heh.... market doesn't even open for 28+ hours.

"Scotty, I need £30 billion in two days or we're all dead!"

"Cap'n, the CDOs are buckling! I canna change the laws of finance!"

I'm telling her to hold on for 6-12 months, wait for a change in BK law that will allow her to walk away from all debts instead of repaying. Is this sound reasoning?

The primary change will be lien-stripping; she'll never be able to discharge all of her debts, especially if she's above the means-testing.

Nemo,

""Scotty, I need £30 billion in two days or we're all dead!""

Aye Cap'n. I'll just hook the warp drive into the transporters and plug it into this $100 bill.

Nostrovia,

In normal times, ¡El Downgradio! would be big news.

joe,

"Agreed that nationalization, if done, must be done right"

And of course the entity to get it JUST RIGHT is the gov't.

Rob...

;P

Nostrovia,

I believe preparations for a possible nationalization will begin on January 20, at least as a contingency plan.

Any nationalization has to be done through Congress. There simply is no statutory provision in the banking laws for nationalization of the banks, just receivership and conservatorship. You could stretch the definition of conservatorship to operating the bank as a going concern, but it's still not nationalization.

But I don't think the government has been preparing for this at all.
-joe schmoe

That makes sense. It has probably been off the table, verbotten, do not work on anything related to that... They have been very retroactive and they have dealt with problems one at a time and at the last minute.

I have a feeling boys that within a year or two, my ex-president(Putin) will start sniffing the European leaders' asses.

each savings account will just disappear up the swanny.
Nervous English Rose

A couple of days ago you guys were looking for the Brit. equivalent of "this sucker's going down" ?

You just found it.

re: "why should the UK taxpayer be on the hook for RBS ?"

Yeah, that's what I thought when I saw the difficulties of Kauphthing, Landsbanksi, Glitnir as I nervously held on to my Iceland krona despite the S&P downgrade. Luckily, Everbank, with whom I had my Icelandic Krona CD enraged me by not passing on the high interest rates that were on offer - so I pulled out of the krona last May/June for a small loss.

Little did I know !

Anyway, IRS and terrorist-money/drug money monitoring / reporting trails be damned, I'm certainly planning a quick trip back to the UK now to get out of the undeclared UK Pounds that I still have in a bank over there and buy physical gold - there's a really nasty feeling to all this.

-K

Thread Music

"Would you buy a car that exploded every 1000 km?"

You running Microsoft too Lucifer?

Comrade Peronista,

I am a regular here.. I was being sarcastic to drive home the least discussed point- namely that their actions suggest that they are worse than incompetent and therefore should not be allowed to exist in their current form.

We are essentially making Dr. Mengele (of auswitsch fame) the director of a jewish children hospital. We are rewarding the worst excesses, greed and incompetence with more power and money. This has to stop!

I think I picked a bad season to re-read "Fight Club".

"So, if the government owns your bank, does that then allow them to rummage through your safe deposit boxes?"

You could always take your schematics and gold trinkets to another bank, Misean.

homedad,

why would avers lose anything in a bnk nationalization? It is the bondholders that stand o get clipped and that is the third rail. Gov't should delare a ring fence around deposits and clean out bondholders. Their's is NOT a risk free investment - at least the debt not now backed by the FDIC/gov't. Also the race to extend the window to issue beyond july is all about avoiding the haircut. The sinsiter scheme by the gov't to get the debt gov't backed is in effect providing an insurance backstop to bondholders in banks against a nationalization. Exactly the opposite of what should happen. The entire plan by the governmint to steal your money is for your own good.

...Kitchen plot gardens are some of the world's most fantastically produtive enterprises."
........absolutely correct. There are a number of small growers here (less than 5-acres) that sell out every harvest twice yearly (outdoors) and year round (indoors) at top dollar to any LV hotels. Most with no inorganic pesticides.

"Givin' thanks to the forefathers.
Givin' thanks to the Funk creators."

I couldn't give a rat's ass about this or any country's forefather's...the rich that write the history books are a scam....

I give thanks to the millions of nameless poor that went through the meat-grinder...they are the only reason we have anything.

So, if the government owns your bank, does that then allow them to rummage through your safe deposit boxes?  Gotta be some clause of the Patriot Act that would apply, wouldn't you think?
Comrade Bear (tj & the bear) | 01.19.09 - 11:06 am | #

We wuz jus' countin' it fer ya.  We were gonna put it all back.  Honest. 

citizen energyecon @11:12 am - yes, this is what Interfax reported - no intermediaries

I see, TJ & Bear.

I always assumed most SDBs are just full of guns "with bodies on them", bricks of cocaine, and bearer bonds.

Eric writes:
If you're Bill Gross, you're made whole.

When Bill Gross losses his first big bet, then I will believe in change.

The sinsiter scheme by the gov't to get the debt gov't backed is in effect providing an insurance backstop to bondholders in banks against a nationalization.
-S

Will the new administration remove the insurance backstop?

Amazing how fast our sense of scale changes. Back in August RBS lost one billion pounds as a result of the credit crisis. Royal Bank of Scotland poised for biggest loss in UK banking history - Times Online

"THE Royal Bank of Scotland is poised to unveil the biggest loss in UK banking history after taking a hit of almost £6 billion from the credit crisis.

Britain’s second-largest bank is this week expected to reveal a pre-tax loss of at least £1 billion for the first six months of the year, with analysts warning it could slide to as much as £1.7 billion in the red.

The loss would be roughly five times higher than the deficit racked up by Barclays in 1992 at the height of the last recession."

In the derivation of Black-Scholes, the authors took the bondholders as the true "owners" of a company, and treated the equity holders as holders of an "option" for residual value after all other claims are paid.

I used to think that a strange inversion, but seeing how well bondholders have been protected in the bailout process, while equity holders have been squeezed to nearly nothing, it sure looks that way in practice. Thus, it's only when the true "owners" (the bondholders) get their high-and-tight that we'll know the process is getting serious at allocating pain.

In the event of nationalization, the job of the IRS will be made much easier and the black market will increase in scope hundredfold.

The UK long bond tumbled today.

Bloomberg.com:
Government Bonds

...after we replace these shiny metals with nice green paper.
Comrade Bear (tj & the bear) | 01.19.09 - 11:21 am | #

$20 Double Eagles swapped out at face value for crisp new Andy Jacksons. 

Lucifer, I know.
Anyway, Obama's advisors have told him that people want more credit and that we have a liquidity problem.

....The Newest Type of Private Bank:

Private Vaults! No ID required. The concept already been run thru the US courts - ruled no IRS access. Talked to the originator (a physician)in Texas. Quite remarkable.

24-7 Private Vaults - We draw the line for your peace of mind!

The Littlest Mandarin

I agree with your response.
I will only add that I have no illusions.

All history is indeed a lie...but it is one that the big wigs attempt to narrate.

force = mass x acceleration

And everyone applies their own leverage.

I will not charge my benefits on the backs of others. (as much as I can help that)

Private Vaults! No ID required. The concept already been run thru the US courts - ruled no IRS access. Talked to the originator (a physician)in Texas. Quite remarkable.
Black Star Ranch | 01.19.09 - 11:33 am | #

What's the big deal?  My last bank in NJ let me keep both keys.

It's not like they can't block off the building and drill them anyways.

"why should the UK taxpayer be on the hook for RBS ?"

As a British acquaintance put it: they've got their devolution, and we've still got a Jock running our government (Brown). What do we need this crap for?

Jan. 19 ( Bloomberg) -- A rally that sent U.S. Treasuries to their best year since 1995 is coming to an end, South Korea’s National Pension Service, the country’s biggest investor, said.
U.S. government efforts to combat the recession will prompt the Federal Reserve to raise interest rates this year, said Kim Heeseok, who oversees $160 billion as head of global investments for the service in Seoul. The decline would snap a surge that sent the securities up 14 percent last year, according to Merrill Lynch & Co.’s U.S. Treasury Master index, as investors sought the relative safety of debt.

“It’s time to sell U.S. Treasuries,” said Kim, who took over as head of investments at the start of the year. “The stimulus plan may cause inflation. The U.S. will raise the benchmark interest rate.”

Wow.

I'm a little surprised at all this talk about nationalizing banks in the U.S. It's not something I would have predicted. The alternatives, though, don't seem to offer much.

If in fact the Obama Administration is going to do this (and I have no way of knowing whether that is likely), I don't see it happening in the next two to four weeks. On the contrary, they would just cut off government subsidies for a while, leaving them 'twisting in the wind' as it were.

Only when the situation was dire in the eyes of ordinary folks would the concept of nationalization be put out there by the government. At that point the howls from the allegedly loyal opposition would be deafening.

What I would look for now are two things: (1) the second half of TARP going not to banks but elsewhere; and (2) some leaning on the recent BAC 'deal' that is currently having its details established.

California is doig suprisingly well considering. House prices are way off the peak, unemployment is still single digits

Not in my little piece of Central Valley Paradise. Last I heard Fresno County was 12%+

anonymous writes:
Makes you wonder if the Fed is now the only purchaser of the long bond (and perhaps the banks as part of sub rosa TARP agreements) because the Asian countries are definitely vacating that space.

We will know the answer in the next 2-3 weeks.

Urkaine-Russia sub-topic - Ukraine Bonds Flag Default as Russia Has ‘Upper Hand’ (Update2) - Bloomberg.com

I am sure Obama reads Calculated Risk.
Quincy k | 01.19.09 - 12:14 pm | #

I think Conjure is the new Obama puppy.

Trust in the US banking system is all but dead.
km4

As is the US consumer. You take these two out of the GDP and what do you have?

Comrade Bear (tj & the bear) writes:
So, if the government owns your bank, does that then allow them to rummage through your safe deposit boxes? Gotta be some clause of the Patriot Act that would apply, wouldn't you think?

Well, when FDR seized Gold you weren't allowed to open your safe deposit box without an agent of the IRS present. Couple that with many states recently moving up the deadline for declaring property in safety deposit boxes "abandoned" and you have the makings of a nice "heads I win, tails you lose" scenario.

How long before UK becomes a bust nation ?
Frued | 01.19.09 - 12:22 pm | #

Can clocks show negative time?

Your tunnel vision does not serve you well.
citizen energyecon | Homepage | 01.19.09 - 12:19 pm | #

OT- Maybe Werner can expound on the special plan God has for us, which he mentioned on Friday.

The bondholders...

That'd be the pension funds for the most part, wouldn't it?

Ho hum.

-- w

Credit enema...there ya go again! Only Faux meme for now.

I think that nationalization, this week, is the way to go. It's a bold stroke. It gives us a new start and a way out of this mess.

You mean, like, get ahead of the problem? I doubt it will happen that soon. Conjure's clock will likely strike midnight first - creating a situation which, as sportsfan notes, is "dire in the eyes of ordinary folks"

Third Bank of the United States clock:

11:54:35

Anybody here expect the euro to disappear?
Mel | 01.19.09 - 9:32 am | #

I do.

....If the banks are nationalized, it'll be like waiting in line at the DMV, only worse - probably like the numbered ticket bit in Beetlejuice.

BTW, I thought IRS agents needed to be present at a Bank Deposit Box opening for probate and other deaths anyway.

I believe Logsdon, of The Contrary Farmer, claims that an 8' x 8' plot is all that is necessary---I do think his theory involves chickens though (for fertilization and all that)--- so check your zoning….
TC | 01.19.09 - 12:36 pm | #

8X8 won't do it unless all you want are a few veggies and herbs to add a little flavor & nutrition to the sacks of rice & beans you buy.

Or unless you grow an illegal herb and sell it for food - then 8X8 might get you by.

There are no mistakes in the general theory, although some people got sacrificed and that was probably not in the prospectus. It's merely asymmetric policy. Bankers, government policymakers and the general populace all have a different set of victory conditions.
The_Littlest_Mandarin | 01.19.09 - 11:20 am | #

Generic name for this is "Bust-out Capitalism".

I suppose Rubin stashed away a lot of money before running away from Citigroup just before Obama became Pres.

In the derivation of Black-Scholes, the authors took the bondholders as the true "owners" of a company, and treated the equity holders as holders of an "option" for residual value after all other claims are paid.
DCRogers | 01.19.09 - 11:23 am | #

That is what they taught us in MBA finance classes in 1979.

They also taught us that securitization was the next big money thing.

"The plane crash into the Hudson just won't leave my thinking. The parallels between the crash and our sinking economy/nation are striking."

You'll notice that the pilot admitted reality: he had no power. He didn't try to pretend to keep the plane in the air, he tried to set down with minimal loss.
When that is the best you can do, you try to do it well. He did.

.....currently minting "BSR Bucks"...

Get in on the ground floor. 2 for a dollar!