Rubber stamp set to Cat 2!

Nope No Man.

"Nearly 100 federal banking regulators descended on Citigroup in New York on Wednesday morning. Dozens more fanned out through Bank of America, JPMorgan Chase and other big banks across the nation."

Sounds like a swat raid but it was more like this:

YouTube - Keystone Kops - Keystone Hotel

Nostrovia,

They are not expected to be made public for every institution.

JPMorgan: PASS
Wells Fargo: PASS
Goldman Sachs: PASS
Bank of America: results not public
Citigroup: results not public

Isn't February 9 when the last massive pump of bank shares occurred?

Why, yes, I believe it is.

Pure coincidence, of course.

Define "stress".

CR-
So another one of your thoughts has turned into action. Can you write that you want world peace too?

and then don't say anything about a few other banks (like Citi and BofA). ROFLOL. That is the same as making an announcement!

Bueller? Bueller?

perhaps my JPM 22.5 March puts will fight on!

I wonder what category the Federal Reserve will fall into.

Well, I guess world peace is a done deal now too!

On Citi- problem is what if Citi fails the test? As others have noted, do we want to "nationalize" an institution with branches in half of the countries in the world? What if we nationalize and their is a run on Citi's South American branches. Does the U.S. gov't stand behind them?

I don't think anyone has thought through what it means to nationalize it- or let it fail.

How awkward will the next NY Fed meeting be

EvilHenryPaulson | 02.12.09 - 12:44 am | #

Gotta be better than they've been...

YouTube - Monty Python - Bruce

They could make huge money by turning this into a nightly game show.

It's time for today's episode of...

GOOD BANK / BAD BANK !!

You could have people call in to vote banks off the island and stuff.

Dam

The 88 trillion pound gorilla.

1 currency almost [yogi] | 02.12.09 - 12:48 am | #

Yeah, but that's notional.  Take a conservative 10% of that figure and.... oh F#$#CK!!!!!!

Basel:

We're so far down the pike that I don't think that it matters.

And the situation with the new Treasury Secretary is doing wonders for morale as well.

I hope Vegas takes odds on this.

[OT] I seem to be getting a lot of traffic to my blog from Atlanta tonight. (Mostly referred from here.)

Poor FDIC employees spending Valentine's Day in Atlanta. Not that there's anything wrong with Atlanta.

The banks will probably fall into one of three categories: - CR

Sounds like battlefield triage... the M.A.S.H units of the banking world.

FT.com / Companies / Financial Services - China to stick with US bonds 

China to continue buying UST as only safe option.

Hoodathunk?

homedad43:

China to continue buying UST as only safe option.

Contrary indicator?

Just kidding. I love China's huffing and puffing, as if wasn't their choice to peg the currency and grow through exports.

DJ Ted Stevens Techno Remix: "A Series of Tubes"

YouTube - DJ Ted Stevens Techno Remix: "A Series of Tubes"

POiC (from last thread)

If SKF is using things based ultimately upon the stocks of companies/banks that are wiped out, doesn't that infer that the actual wipeout - not go to zero, just doesn't exist - also ruins the components?

I'm actually thinking of a Jenga tower with several of the blocks simultaneously ceasing to exist.

Does that make sense or am I getting it wrong?

Behold the panopticon.

Panopticon!

YOU ARE HERE

I hope those regulators don't eat in the bank's corporate cafeteria....

Query:

Really, it's rather frightening.

In the world prior to all of this mess, I made about 9% cumulative returns on funds across the board. No trading, just reading, following and shifting. But had a very few years with negative returns and always took the view that it'd come back.

Now I'm in late 40s and very aware that it ain't comin' back. Not in my financial lifetime.

Probably why I've gotten very purposeful about talking to the elder kids about money.

Anyone know if the bank CEO's at today's Congress hearing knew that the regulators were swarming their banks like fire ants?

POiC:

But ultimately, aren't the swaps based upon the stocks?

I do see the point that you're making as to going to zero and not a wipeout per se.

Have to think about that. But it still bothers me in that multiple bank stocks going to zero almost simultaneously are going to cause a tremendous ripple effect, possibly damaging some of the swap parties (counterparties?).

OT- Dryfly, not sure if you've seen this yet, but there's a short Fortune article you might be interested in on the troubles happening with Detroit's Suppliers. Seems some MSM might be getting a clue that the other shoe may not yet have dropped in the domestic auto saga.

"(Fortune) -- The Detroit automakers have to prove by next week that they can be financially viable, but they have another big problem that won't be addressed - the shattered relationship with their many suppliers. ..."
--Andrew | 02.12.09 - 1:10 am | #

It isn't just the 'relationships' that are shattered. That's kind of like killing your kids then worrying about the 'family relationships'.

Funny though that the MSM is just now catching up - they probably think their cars were made out back behind the dealership just like food 'grows' in plastic wrapped Styrofoam trays at the grocery store. They have no clue - worse than what little they understand about finance.

swaps,& rest of derivatives are good. It is us, people that get them wrong, underestimate risks and fail to learn from our mistakes.

Y'know POiC, as I think about it now, somebody wrote last night about the prospect of driving things towards a nationalization.

If folks just say eff it, I'm leaving the party for better pastures, it drives the suspect banks down and ultimately makes it cheaper for nationalization. Sell the funds, sell the etfs, sell the stocks.

Wow, they're slick...that makes sense in a twisted conniving way.

This is a change from the last 8 years.Effective or not I would bet there are a lot of people at regulatory agencies and DOJ who are real tired of not being able to do their jobs.Economists do not need gold butt plugs,they have heads.

So I've got to put everything into SKF, watch it pop and take the megadividend, then roll it into EEV as the emerging markets die in the subsequent collapse, then roll it into TBT for the money shot.

Yeah, that's a plan.

G'night folks.

And then I'll have a cigarette.

G;night for real.

NOT Irving Fisher --

Maybe Maxine Waters?

She is the biggest idiot in Congress, and that is some serious competition.

dryfly, where has your broker been the last three months?
otishertz | 02.12.09 - 1:51 am | #

In denial.

his losses must be huge, dryfly.

denial is expensive for a broker.

Not Irving Fisher, I'm betting it's a variation on some 007 one-liner...

why no big brouhaha about the method of transport for bank execs on their visits to D.C.? We forgot the auto execs dog and pony show.

from 30 to 3.5 and from 45 to 5 is a pretty good description of decimation.

the mood seems to have shifted...toward nationalization being inevitable. it will be a while, but the question becomes, 'after nationalization then what?'

wait for the stim package to kick in. yeah, like watchin' paint dry.

The phrase that keeps coming to mind is: "there are certain formalities that must be observed". It's gotta be a quote from somewhere, but I can't remember where.
EEngineer | 02.12.09 - 2:17 am

The English pledge of allegiance?

The phrase that keeps coming to mind is: "there are certain formalities that must be observed". It's gotta be a quote from somewhere, but I can't remember where.
EEngineer | 02.12.09 - 2:17 am | #

I'd guess it's too common to pop up as a quote, but it does sound like a perfect Bond villian's line.

So I've been at work all night, what did I miss?

Squillion is a squirrel followed by 600 zeroes, as someone posted the other day.
Feckless Ness | 02.12.09 - 3:34 am | #

Honestly, as bad as a depression might be, I still don't think six hundred of us are going to be chasing one squirrel. 

How many regulators can dance on the head of a Glass Steagall Pen?

Time for a new era of Economicism to reconcile the Free Market and Regulation.

Or we could just pass them all! Look, instantly all solvent banks... silly bears. No bank left behind!
briwerk | Homepage | 02.12.09 - 12:42 am | #

Silly bulls, market will never go up with you carrying all those anchors and anvils.

The NY Times article suggests that the results will not be made public for every institution

What's the problem with some sunshine, Barry? Oh yeah, like you said, "lack of political will".

We're gonna go down to the Augean stables, work til everyone's had a good puke, then tromp back, take a bath, and celebrate a victory by presidential decree.

And just like Japan, everyone will know it was a whitewash because nobody will send their golf cronies to jail. But we'll give some banks another hundred or so billion dollars out of the taxpayer's wallet.

"You have to understand, it was necessary to save Western civilization to give BAC enough money for three Nimitzes and associated air wings. No, you can't see the details, it's too embarassing, Howie here would be motified, and I've known him since I was an undergrad."

Dickeylee(Unrated) writes:
China manipulates its currency, and then when that doesn't work, it uses it tax and tariff to prop up its own industry(s).
China will destroy us, in good time.

You have the TARP. That's your nation's state industry, office droids. They work at paper-pushing banks making heaps of bets they can't cover and borrowing against their winnings in advance to capitalize their betting strategies.

It's definitely operating on government sufferance at this time.

What's the diff? trust me, getting stuck with 5x more textile mills than you realistically need is not "better" than having insolvent banks.

China and America are the yin and yang of the greatest economic bubble the world has ever known. Not that they will not do it out of emotion, short-sightedness or sense of imperative, but destroying us is sheerest self-destruction for the Chinese. They are in no way capable of replacing us.

Here is a simple stress test I did at the time Warren Buffet was buying into Goldman Sachs.

Here is GS balance sheet. (scroll down)
GS balance sheet

Assets 1,081,773.00
Liabilities 1,036,174.00
Equity 45,599.00

of shares 395.44

i.e. Book value /per share = 45,999/395.0 = 115.00
Thats the price WB bought at.

We know that level 3 assets are 70 billion
i.e. 7% of assets (70,000/1,081,773)

Does not sound a big deal, right ?

Say now your Level 3 assets are over valued.
Value need to be reduced by 30%, i.e approx 20 billion (30% =20 billion/70 billion).
30% haircut on Level 3 assets is very optimistic, more likely 80% right now.

You equity is now 45,599.00 - 20,000 = 25,599
i.e. Book value /per share = 25,999/395.0 = 65.00

And thats still optimistic. If its 80% GS is insolvent. !!

Nemo writes:
They are not expected to be made public for every institution.

JPMorgan: PASS
Wells Fargo: PASS
Goldman Sachs: PASS
Bank of America: results not public
Citigroup: results not public

well said. JPM and WFC have been the biggest PR jobs in history. This is ministry of truth stuff. JPM dferivatives book is the ultimate smart bomb.

China and America are the yin and yang of the greatest economic bubble the world has ever known.

One card is holding up the other.

OT-Stocks signal lower open as investors worry about latest economic readings, asses stimulus
Now there's a Headline that ought to be on Leno.  ROFLMAO!

ice Hussman link anon.

"Don't you think the stock market is already telling us which banks will have to be nationalized?"

Nope, it's telling us which ones are BK.

Nostrovia,

Just a general thought - the conversion of the US investment banks into commercial banks and the (maybe) more strict regulation of commercial banks means, among other things, that the total amount credit, worldwide, must decrease. The reason is that the leverage ratios change very significantly. Up to 2/3 of what was held by those banks will disappear. It also seems unlikely that this would be picked up by anyone else. This means also that available 'alpha' must decrease. There will just not be the same levels of profitability, worldwide, that were seen in 2002-2007.
Against this we have the efforts of countries worldwide to 'stimulate' and to 'restore'.
Something has to give.

Irving Fisher was right

http://www.nakedcapitalism.com/2...ion- theory.html
Anonymous | 02.12.09 - 8:29 am | #

Nice link.  I think one of the most important observations can be paraphrased as "don't throw the baby out with the bathwater".

Is this whole thing about providing the political cover for nationalizing?

Looks like it to me.
wally | 02.12.09 - 8:31 am | #

I think some of the "song and dance" from the politicos is just that, assuming that you define "nationalization" as having the FDIC go in an shut down the insolvent banks, pay off depositors as needed, and redistributing the business and remaining assets amongst other stronger banks.

Retail sails off more than expected. I think...stretching...bloom news no linkage. Just Betty Boop....

Nostrovia,

Misean,

From last thread. Glad you are enjoying it. Another you may enjoy

YouTube - The Black Keys- thickfreakness (Live TV) 

Black Keys thickfreakness

homedad43

Re:SKF. The funds get exposure through daily swaps that have a notional value 2x greater than the funds assets. The fund most likely holds mostly cash and cash equivalents like treasuries as collateral against the swaps. At the end of each day the fund either pays or receives money based on the swap terms. If that many banks went to zero simultaneously it's possible that their swap counterparties may not make good on their swap agreement. In this case the fund would lose out on that days performance and may be unable to find another swap counterparty willing to enter into the trade the next day. What would happen at this point I could only guess at - a liquidation would result in the shareholders at that point receiving the value of what the fund held - which is likely mostly cash or cash equivalents.

Go to the proshares website and look under daily holdings and you'll see what I described above.

Security Description Notional Value Market Value Shares/ Contracts
DJUSFN SWAPS (1,277,139,020.64) - (8,023,021.85)
Net Other Assets / Cash - 639,816,713.48 639,816,713.48

Those swaps require cash flow at days ends - in if the index drops or out if it goes up.

this is just propaganda beacuse any good risk manager at a bank would already be performing such a stress test. likewise

Stress tests are a farce. They are based on past data. And when they use non-past data to stress the model, they just can't seem to stress it enough.

Anway all the current stress test models permitted them to acquire the crap still on their books. If they adapt the stress test to this new environement , I'm sure it will tell 99.9% of them that they are out of business unless government gives them performing assets from a defunct firm.

It does take much guess work to know the categories. I'm away much of the time now. My 29 year old daughter and only child, Angela, is in ICU after an emergency hysterectomy with serious complications including DIC. Here is a link to DIC I had never heard of. It's scary. Take care and God bless everyone. Hug your kid(s).

Disseminated Intravascular Coagulation (DIC): Bleeding and Clotting Disorders: Merck Manual Home Edition 

It would be better to announce the category of all 18+ banks at the same time (in 30 days or so).

I don't think they can do that until they know the results. Depending on how big the category 3 problem is, they may need to look for buyers and if the idea is to get the highest possible price, publicity could push prices up or down depending on the size of the problem.

The regulators likely already know the condition of the banks in question and the stress test is only an attempt to assess the banks on a "next better case" scenario to reduce the size of the problem (hence the 2-year horizon instead of one - the two-year will likely include a lot of recovery assumptions).

Beaming all my best wishes and healing thoughts for you and yours FFDIC. I have a one and only most precious daughter too.

It does take much guess work to know the categories. I'm away much of the time now. My 29 year old daughter and only child, Angela, is in ICU after an emergency hysterectomy with serious complications including DIC. Here is a link to DIC I had never heard of. It's scary. Take care and God bless everyone. Hug your kid(s).

http://www.merck.com/mmhe/sec14/...173/ ch173h.html
FFDIC | 02.12.09 - 10:13 am | #

Sorry to hear about this.  IIRC, "DIC" is the generic ailment that is referred to when someone dies after surgery "due to complications".  The fact that she's alive should be cause for thankfulness. Good luck to you and her.