The global financial collapse edges ever closer

breaking news from the financial times...

Moody's downgrades biggest global banks

Fifteen of the biggest global banks were downgraded by Moody’s Investors Service on Thursday, adding to pressure on their borrowing costs and triggering multi-billion dollar collateral calls.

Morgan Stanley, seen as the most vulnerable, escaped the three-notch downgrade that Moody’s had threatened but saw its rating cut from A2 to Baa1, three notches above “junk”.

Stock markets fell as anticipation of the downgrades, which came after US markets closed, added to fears over the global economy. Shares in Bank of America, Citigroup and RBS fell by more than 3 per cent by the closing bell. The S& P 500 closed down 2.2 per cent at 1,325.51.

bring it on... i've been praying for this absurd house of cards to fall for a very long time...

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Boo-freakin'-hoo

< sniff, sniff > 'scuse me, i'm tearing up... < sniff >

An alarmed banking industry looked for friends in Washington yesterday as it tried to head off severe congressional restrictions on compensation, fearful that a wave of popular anger about vast paydays will result in permanent damage to the industry.

After a week of unexpected setbacks for an industry accustomed to deference, bank executives said they were now racing to convince Congress and the Obama administration that imposing punitive taxes on bonuses would unfairly punish thousands of people for the sins of a few. Executives also argued that hitting banks would hurt the broader economy.

oh, puh-l-e-e-e-e-eze... i'm living on the tiniest FRACTION of what these people are boo-hooing about... gag me with a spoon...

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Stop mincing words... The U.S. is bankrupt and printing more worthless dollars ain't gonna fix it... Meanwhile, the WaPo stays context-free...

wake up and smell the coffee...

Deteriorating economic conditions will cause the federal deficit to soar past $1.8 trillion this year and leave the nation wallowing in a sea of red ink far deeper than the White House had previously estimated, congressional budget analysts said today.

[...]

And although Obama would come close to meeting his goal of cutting the deficit in half by the end of his first term, the CBO predicts that the nation's annual operating deficit would never drop below 4 percent of the overall economy over the next decade, a level administration officials have said is unsustainable because the national debt would grow too rapidly.

By the CBO's estimate, for example, the nation's debt would grow to 82 percent of the overall economy by 2019 under Obama's policies, compared with a pre-recession average of 40 percent.

what's wrong with this story...?

well, for starters, how about the total failure to mention the connection of the national debt to the failed federal reserve system which is the creditor to which the u.s. must pay the debt, the privately-owned money printing machine that holds us all in economic thrall...

oh, yeah, and, btw, there's also the matter of the REASON for the soaring national debt, namely, that the u.s. is borrowing all that money from the federal reserve in order to prop up the friggin' PRIVATE BANKING AND FINANCIAL INTERESTS that feed from the federal reserve trough... interestin', eh...?

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¡Que se vayan todos!

¡Que se vayan todos! (All of them must go!)

naomi klein opines that the disgust with capitalism that toppled four presidents in succession here in argentina may at last be spilling over to the rest of the world...

The stoic Icelandic matriarchs beating their pots flat even as their kids ransack the fridge for projectiles (eggs, sure, but yogurt?) echo the tactics made famous in Buenos Aires. So does the collective rage at elites who trashed a once thriving country and thought they could get away with it. As Gudrun Jonsdottir, a 36-year-old Icelandic office worker, put it: "I've just had enough of this whole thing. I don't trust the government, I don't trust the banks, I don't trust the political parties and I don't trust the IMF. We had a good country, and they ruined it."

[...]

Similar demands can be heard these days in Latvia, whose economy has contracted more sharply than any country in the EU, and where the government is teetering on the brink. For weeks the capital has been rocked by protests, including a full-blown, cobblestone-hurling riot on January 13. As in Iceland, Latvians are appalled by their leaders' refusal to take any responsibility for the mess. Asked by Bloomberg TV what caused the crisis, Latvia's finance minister shrugged: "Nothing special."

But Latvia's troubles are indeed special: the very policies that allowed the "Baltic Tiger" to grow at a rate of 12 percent in 2006 are also causing it to contract violently by a projected 10 percent this year: money, freed of all barriers, flows out as quickly as it flows in, with plenty being diverted to political pockets. (It is no coincidence that many of today's basket cases are yesterday's "miracles": Ireland, Estonia, Iceland, Latvia.)

Something else Argentina-esque is in the air. In 2001 Argentina's leaders responded to the crisis with a brutal International Monetary Fund-prescribed austerity package: $9 billion in spending cuts, much of it hitting health and education. This proved to be a fatal mistake. Unions staged a general strike, teachers moved their classes to the streets and the protests never stopped.

[...]

The pattern is clear: governments that respond to a crisis created by free-market ideology with an acceleration of that same discredited agenda will not survive to tell the tale. As Italy's students have taken to shouting in the streets: "We won't pay for your crisis!"

unfortunately, argentina's outburst only produced a temporary stay of execution... today, you can find the same elites, dressed in their faux populist finery, still lining their pockets and feeding from every available trough... the good news is that it's happening without imf and world bank debt... the bad news is that the poor are still poor and getting massively poorer by the day...

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B.O.H.I.C.A. - the bailout continues as the financial meltdown shows no signs of abating

b.o.h.i.c.a. = bend over, here it comes again...

bank of america is the latest financial vampire to sink its teeth into the already-dessicated american taxpayer...

[T]he government agreed early Friday to provide an additional $20 billion infusion of capital into the bank and to cover the bulk of up to $118 billion in losses, largely arising from the bank’s Merrill acquisition.

Overall for 2008, Bank of America posted a net profit of $4.01 billion compared with net income of $14.98 billion a year earlier.

It said earnings were driven reflected “the deepening economic recession and extremely challenging financial environment, both of which significantly intensified in the last three months of 2008.”

but, wait...! there's MORE...! hold on to your wallets... citi is probably next in line...

Citigroup capped a devastating 2008 by announcing Friday that it would split into two entities and that it had posted an $8.29 billion loss for the fourth quarter.

When John A. Thain, left, of Merrill Lynch and Kenneth D. Lewis of Bank of America announced their companies’ merger in September, it looked as if Mr. Lewis had scored a coup. But now Bank of America is in need of more federal money to deal with Merrill’s losses.

Citigroup’s rival, Bank of America, also posted a loss, just hours after receiving a new infusion of government support.

Underlining the depth of the problems that have emerged from its acquisition of Merrill Lynch, Bank of America said Merrill had a fourth-quarter net loss of $15.31 billion, or $9.62 per diluted share, “driven by severe capital markets dislocations,” before the acquisition was completed.

Even as Bank of America was coping with the challenge of absorbing Merrill, Citigroup was announcing the latest steps in dismantling its own financial supermarket.

Citigroup confirmed that it would divide, for management purposes, into two separate businesses — Citicorp and Citi Holdings.

and, if you think things are slowing down in the financial meltdown department, check this out...

Last fall, as Federal Reserve and Treasury Department officials rode to the rescue of one financial institution after another, they took great pains to avoid doing anything that smacked of nationalizing banks.

They may no longer have that luxury. With two of the nation’s largest banks buckling under yet another round of huge losses, the incoming administration of Barack Obama and the Federal Reserve are suddenly dealing with banks that are “too big to fail” and yet unable to function as the sinking economy erodes their capital.

Particularly in the case of Citigroup, the losses have become so large that they make it almost mathematically impossible for the government to inject enough capital without taking a majority stake or at least squeezing out existing shareholders.

nationalized banks... cool...! it will be the absolute death knell for the capitalist, free-market, "invisible hand" quasi-religious ideology... and about goddam time, too...! < /snark >

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What's this crap about "taking an ownership stake"...? It's nationalization, fercryinoutloud...

no matter how much you polish a turd (see previous post)...

The Treasury Department is dramatically expanding the scope of its bailout of the financial system with a plan to take ownership stakes in the nation's insurance companies, signaling new concerns about a sector of the economy whose troubles until now have been overshadowed by the banking industry, government and industry sources said.

Insurers, including The Hartford, Prudential and MetLife, have pushed the Bush administration to include them in the plan. Many firms have taken losses from mortgage-related securities and other investments and are struggling to replenish their coffers.

Government officials worry that the collapse of a major insurer could further destabilize the financial system because of the crucial role the companies play in backstopping a wide range of financial transactions, although the direct impact on holders of car, life and other insurance policies would be modest, industry officials said.

The new initiative underscores the growing range of problems that Treasury is scrambling to address with the $700 billion allocated by Congress this month. The shape of the plan has changed repeatedly since Treasury Secretary Henry M. Paulson Jr. introduced it last month as an effort to rescue banks by buying their troubled mortgage-related assets. That original mandate has now been pushed aside by a plan to take equity stakes in banks and insurance companies, and other businesses are lobbying to be included.

The government has been forced to expand the plan partly because the federal guarantees previously given some institutions, such as banks, have put other companies and financial sectors at a disadvantage, making them less attractive to uneasy investors.

The government's power to choose winners and losers in the crisis was illustrated yesterday when the Cleveland-based bank National City was forced to sell itself when regulators turned down its request for a Treasury investment after deciding the firm was too weak to save, according to people familiar with the matter. Instead, the Treasury gave $7.7 billion to PNC Financial Services Group to help buy National City. It did not require that the money be used for new lending, the stated purpose of the government plan. PNC, which has a major presence in the Washington region, would become the fifth-largest bank in the country by deposits.

the size of the bailout seems to grow exponentially minute-by-minute... pretty soon, pharmacy chains are going to be included because people are cutting down on refilling their prescriptions...

With the economy in crisis, people are cutting back on their prescriptions because they can't afford them.

A recent study says the number of prescriptions filled through August of this year is down compared to the same time period last year.

and then we'll bail out the restaurants because people can't afford to eat out as much...

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37 bank failures since 2000, 24 since 2003, 9 in 2008

from the federal deposit insurance corporation via atrios...

[B]anks which have failed since October 1, 2000

Bank Name Closing Date Updated Date The Columbian Bank and Trust, Topeka, KS August 22, 2008 August 22, 2008 First Priority Bank, Bradenton, FL August 1, 2008 August 1, 2008 First Heritage Bank, NA, Newport Beach, CA July 25, 2008 July 25, 2008 First National Bank of Nevada, Reno, NV July 25, 2008 July 25, 2008 IndyMac Bank, Pasadena, CA July 11, 2008 July 11, 2008 First Integrity Bank, NA, Staples, MN May 30, 2008 July 25, 2008 ANB Financial, NA, Bentonville, AR May 9, 2008 July 25, 2008 Hume Bank, Hume, MO March 7, 2008 July 25, 2008 Douglass National Bank, Kansas City, MO January 25, 2008 July 25, 2008 Miami Valley Bank, Lakeview, OH October 4, 2007 July 25, 2008 NetBank, Alpharetta, GA September 28, 2007 July 25, 2008 Metropolitan Savings Bank, Pittsburgh, PA February 2, 2007 July 25, 2008 Bank of Ephraim, Ephraim, UT June 25, 2004 April 9, 2008 Reliance Bank, White Plains, NY March 19, 2004 April 9, 2008 Guaranty National Bank of Tallahassee, Tallahassee, FL March 12, 2004 July 25, 2008 Dollar Savings Bank, Newark, NJ February 14, 2004 April 9, 2008 Pulaski Savings Bank, Philadelphia, PA November 14, 2003 July 22, 2005 The First National Bank of Blanchardville, Blanchardville, WI May 9, 2003 July 25, 2008 Southern Pacific Bank, Torrance, CA February 7, 2003 July 25, 2008 The Farmers Bank of Cheneyville, Cheneyville, LA December 17, 2002 October 20, 2004 The Bank of Alamo, Alamo, TN November 8, 2002 March 18, 2005 AmTrade International Bank of Georgia, Atlanta, GA September 30, 2002 September 11, 2006 AmTrade International Bank of Georgia, Atlanta, GA Spanish Version September 30, 2002 September 11, 2006 Universal Federal Savings Bank, Chicago, IL June 27, 2002 April 9, 2008 Connecticut Bank of Commerce, Stamford, CT June 26, 2002 July 25, 2008 New Century Bank, Shelby Township, MI March 28, 2002 March 18, 2005 Net 1st National Bank, Boca Raton, FL March 1, 2002 April 9, 2008 NextBank, N.A., Phoenix, AZ February 7, 2002 July 25, 2008 Oakwood Deposit Bank Company, Oakwood, OH February 1, 2002 July 25, 2008 Bank of Sierra Blanca, Sierra Blanca, TX January 18, 2002 November 6, 2003 Hamilton Bank, N.A., Miami, FL Spanish Version January 11, 2002 July 25, 2008 Sinclair National Bank, Gravette, AR September 7, 2001 February 10, 2004 Superior Bank, FSB, Hinsdale, IL July 27, 2001 July 25, 2008 The Malta National Bank, Malta, OH May 3, 2001 November 18, 2002 First Alliance Bank & Trust Company, Manchester, NH February 2, 2001 February 18, 2003 National State Bank of Metropolis, Metropolis, IL December 14, 2000 March 17, 2005 Bank of Honolulu, Honolulu, HI October 13, 2000 March 17, 2005

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Add this story to the three in the previous post - somethin's goin' on, I tell ya...

so, here we have a big bank on the brink of failure...

National City Corp, a large U.S. Midwest regional bank, has entered into a memorandum of understanding with federal regulators, effectively putting the bank on probation, the Wall Street Journal said on Friday, without saying where it got the information.

Terms of the confidential agreement with the Office of the Comptroller of the Currency are not known, the newspaper said. The agreement was entered into over the past month or so, the newspaper said.

Neither Cleveland-based National City nor the OCC immediately returned calls seeking comment.

The agreement reflects the growing regulatory pressure that financial institutions face, as they struggle with the fallout from the credit market turmoil.

Memoranda of understanding allow banks to work with federal regulators to address financial problems, without necessarily triggering alarm among depositors. Regulators have been pushing lenders to raise more capital and cut lending risk.

Banking experts estimate that a handful of medium-sized banks have recently entered memoranda of understanding, the newspaper said.

but, wait just a cotton-pickin' minute...

national city has been on the brink of failure for ALMOST A MONTH and they've been COVERING IT UP...!?!?!

and that ain't all...

there's ALSO "a handful of medium-sized banks" poised on the brink of default...?!?!?!?

somethin' big is goin' on... i can smell it...

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"The U.S. banking sector is headed for a credit downturn that will be 'the worst in generations'"

all it's going to take is the failure of one major bank and all hell is going to break loose...

The U.S. banking sector is headed for a credit downturn that will be "the worst in generations," featuring widespread defaults on a range of debts and a national housing price slide not seen since the Great Depression, one of the most influential analysts on Wall Street says.

The banks face massive loan losses -- "far more dramatic" than most bank executives and ratings agencies have forecast -- as the next chapter in financial-sector turmoil unfolds, said Meredith Whitney, an analyst with Oppenheimer &Co. Inc.

"We believe loss rates will exceed the highest levels since 1990 by a significant margin," she said in a note Monday.

"Bank losses will be the highest in the past 20-plus years as a result of greater numbers of individual defaulting on mortgages and/or other loans and from [loan balances that] are far higher than they were in the last housing cycle."

Whitney -- who is also a panelist for Fox News and the No. 2-ranked analyst on a Forbes list of top stock pickers for 2007 -- shot to global infamy last year after her gloomy, but accurate, predictions about the scale of subprime problems facing Citigroup Inc. led to a worldwide sell-off of banking stocks.

In Monday's note, the Oppenheimer analyst slashed her already-depressed forecasts of what large U.S. banks will earn in 2008 by 29 per cent and by 13 per cent for 2009, citing concerns about mortgages, credit-card balances and other loans.

bring it on... let's get this collapse underway and stop kidding ourselves that everything is going to turn out just peachy-keen...

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When the first one falls, stand back...!

bank failures are comin'... bet on it...

from the wsj...

The Federal Deposit Insurance Corp. is taking steps to brace for an increase in failed financial institutions as the nation's housing and credit markets continue to worsen.

The FDIC is looking to bring back 25 retirees from its division of resolutions and receiverships. Many of these agency veterans likely worked for the FDIC during the late 1980s and early 1990s, when more than 1,000 financial institutions failed amid the savings-and-loan crisis.

[...]

"Regulators are bracing for well over 100 bank failures in the next 12 to 24 months, with concentrations in Rust Belt states like Michigan and Ohio, and the states that are suffering severe housing-market problems like California, Florida, and Georgia," said Jaret Seiberg, Washington policy analyst for financial-services firm Stanford Group.

(thanks to calculated risk via atrios...)

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Holy crap! The UK is nationalising the Northern Rock bank!

for the UK to be making a move like this, things have GOT to be EVER SO MUCH WORSE than advertised...

The Treasury today announced that the beleaguered bank Northern Rock will be nationalised.

In a statement, the chancellor, Alistair Darling, said that "under the current market conditions" neither of the two last-minute bids - submitted by Richard Branson's Virgin consortium and the Northern Rock management team - delivered "sufficient value for money to the taxpayer".

It marks the failure of the government to reach a deal with the private sector over the future of the bank. Emergency legislation will now be rushed through parliament.

Mr Darling said the move met "our objective of protecting taxpayers' interests".

every time i hear a phrase like "protecting taxpayers' interests," my hand immediately grabs for my wallet...

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$100 a barrel oil

WOW...! only 1 1/2 days into the new year... THAT sure didn't take long...

Oil prices soared to $100 a barrel Wednesday for the first time ever, reaching that milestone amid an unshakeable view that global demand for oil and petroleum products will continue to outstrip supplies.

on another, not-unrelated subject, i wonder when we're going to see bank defaults...?

Superpower America is a ship of fools in denial of their plight. While offshoring kills American economic prospects, “free market economists” sing its praises. While war imposes enormous costs on a bankrupt country, neoconservatives call for more war, and Republicans and Democrats appropriate war funds which can only be obtained by borrowing abroad.

By focusing America on war in the Middle East, the purpose of which is to guarantee Israel’s territorial expansion, the executive and legislative branches, along with the media, have let slip the last opportunities the US had to put its financial house in order. We have arrived at the point where it is no longer bold to say that nothing now can be done. Unless the rest of the world decides to underwrite our economic rescue, the chips will fall where they may.

it's always darkest before the dawn...

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