Large private banks no longer deserve public trust

more like this...

[L]arge-scale global banking cannot safely be entrusted to private banks. Their behavior yields socially unacceptable costs. They failed their fiduciary duties, betraying both public and private trust. Their continued existence imposes equally unacceptable risks. Modern societies do not leave military security to private armies, nor education to private schools, nor ports, harbors and transportation systems to private conveyors, nor control of the money supply to private banks. Governments, enterprises and households have now become dependent on credit in most advanced industrial economies. The extension of credit ought to be as equally socialised as dependence on credit has become.

when will the failures be prosecuted...?

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Fannie and Freddie now belong to US and WE will "provide as much capital as they need"

hold on to your wallets... here it comes... oh, and btw, check out where the new ceo of freddie hails from - the carlyle group... ain't THAT an interestin' coincidence...?!?!

The Treasury Department seized control of Fannie Mae and Freddie Mac, the nation’s giant quasi-public mortgage finance companies, and announced a four-part rescue plan that includes an open-ended guarantee from the Treasury Department to provide as much capital as they need to stave off insolvency.

At a news conference on Sunday morning, Treasury Secretary Henry M. Paulson Jr. also announced that he had dismissed the chief executives of both companies and replaced them with two long-time financial executives. Herbert M. Allison, currently chairman of TIAA-CREF, the huge pension fund for teachers, will take over Fannie Mae and replace the chief executive, Daniel Mudd. David M. Moffett, currently a senior adviser at the Carlyle Group, one of the country’s biggest private equity firms, will replace Richard Syron as chief executive of Freddie Mac.

“Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe,” Mr. Paulson said. “This turmoil would directly and negatively impact household wealth: from family budgets, to home values, to savings for college and retirement. A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance. And a failure would be harmful to economic growth and job creation.”

Mr. Paulson refused to say how much capital the government might eventually have to provide, or what the ultimate cost to taxpayers might be.

The companies are likely to need tens of billions of dollars over the next year, but the utlimate cost to taxpayers will largely depend on how and how fast the housing and mortgage markets recover from their current crisis.

of COURSE paulson refused to say how much the ultimate cost to the taxpayers might be... if he even hazarded an extremely conservative, low-end guess, american citizens would be out marching in the streets (which is what we SHOULD have been doing for the past two years)...

oh, yeah, and as of 10:30 a.m. pacific time this morning, fannie's website was still touting all the good stuff being worked on by the now-axed dan mudd...

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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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$100B USD = £50.4480B GBP

uh... i'm confoozed... here's a story from today about a £50B BofE bail-out...

Bank details £50bn lending boost

The Bank of England has announced details of a plan to help prevent the credit crisis causing more damage to the UK banking system and economy.

Banks will be able to swap potentially risky mortgage debts for £50bn of secure government bonds to enable them to operate during the credit squeeze.

The Bank's governor, Mervyn King, said the scheme aimed to improve liquidity in the banking system.

It should also increase confidence in financial markets, he added.

Under the scheme, banks will be allowed to swap their "high quality" mortgage debts for government securities.

The swap will be for a period of one year and may be renewed for a total of three years.

and here's a story i posted on saturday about a $100B BofE bank bailout...

The Bank of England is planning to provide around $100 billion of support to British banks and lending institutions.

The cash package is designed to help banks cope with the after effects of the subprime mortgage crisis in the United States.

Britain's banks have for years raised vital finance by selling tens of billions of pounds of mortgages to international investors.

But last August the market closed down which is why mortgages and other loans have become harder and more expensive to obtain.

The Bank of England plans to fill the breach, and next week it will announce a proposal to pump new money into the banking system for up to three years.

It will offcer to swap government bonds with a maturity of up to a year for the bank's unsellable mortgage assets.

i'm assuming it's the same story, only one is expressed in u.s. dollars and the other in british pounds... here's the conversion based on today's dollar/pound exchange rate...

from xe.com...

$100B USD = £50.4480B GBP

United States Dollars United Kingdom Pounds
$1 USD = £0.504480 GBP £1 GBP = $1.98224 USD

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Spiegel: The Madness of Ben Bernanke

as usual, you have to read the foreign press to get any semblance of truth about what's happening in our own country... (and ya gotta love spiegel's headline...)

The dollar is in a tailspin, the trade deficit is growing and a recession is on the horizon. The American way of life is in serious danger. But the head of the Federal Reserve keeps on pumping easy credit into the system -- a crazy policy that will worsen the crisis.


Ben Bernanke at the G7 meeting
of central bank governors over
the weekend.

Alan Greenspan and Ben Bernanke have more in common with the big cat entertainers Siegfried & Roy than any of us can be comfortable with.

The Las Vegas magicians call themselves "Masters of the Impossible" and have been fascinating audiences for decades by getting snow-white tigers to leap through burning rings.

The legendary Federal Reserve Chairman and his successor were equally adept at fascinating their audiences -- with a policy of miraculous monetary growth that gave America one of the longest periods of economic expansion in modern times. Many saw them as "Masters of the Universe." It seemed as if the central bankers had tamed predatory capitalism with their constant interest rate cuts.

[...]

The credit-financed consumer boom of recent years is coming to a painful end. Today's American Way of Life has no chance of surviving the coming years undamaged. The virus will continue to ravage its way through the financial system.

The property crisis is likely to spread to credit card providers soon and will then probably infect car manufacturers, furniture makers and all the other firms that owe their sales increases to the growth in credit finance. "The virus will keep on infecting the system," one management board member from a large bank said, requesting anonymity in return for the candour of his analysis.

His argument is that banks that grant mortgages to home buyers virtually unable to pay their bills are unlikely to be especially scrutinizing when it comes to lending cash to the buyers of fridges, cars and furniture. Indeed, a furniture store in Miami recently tried to lure consumers with the following offer: buy now, pay your first credit installment in three years, and no need for a down-payment.

The credit-financed way of life is typical of the US these days. Many people resort to credit to plug the gap between the lifestyle they have become accustomed to and their declining wages.

The borrowed cash is like an anaesthetic against the painful impact of globalisation. Private household debt has been growing by $4 billion each business day for years.

yeah, well, ok, but what spiegel fails to point out is that the financial and credit markets ain't going to hell just in the u.s... it's all well and good to point a finger at the unbelievable mess that the so-called "leaders" of the u.s. corporatocracy have created, but that conveniently ignores the complicity of europe, japan, australia, and the rest of the industrialized world... today's globally-interconnected financial markets have all been operating on an ethos of unrestrained greed and the collapse is happening world-wide, not just in the u.s., even though the u.s. has certainly been a leading role model...

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$15B, £7.6B, €35B, -20% - dumping the increasingly disastrous financial news over the weekend

yep... keep leakin' it out, folks, in time-tested, bush administration fashion, over the weekend, when people aren't paying attention... (pssssst... people ain't really payin' any attention anyway...)

CITIGROUP and Merrill Lynch will heap further pain on Wall Street this week as they reveal additional sub-prime write-downs totalling $15 billion (£7.6 billion) or more.

In another sign of the intense pressure on leading banks, Deutsche Bank is attempting to offload some of its €35 billion (£28 billion) of toxic debt to a consortium of private-equity firms.

Huge exposure to American mortgages is expected to result in Citi taking a $10 billion hit to its accounts, dragging the bank to a first-quarter loss of almost $3 billion. Some analysts believe Citi’s write-downs could stretch to as much as $12 billion.

Merrill will suffer $5 billion of write-downs, analysts say, which would push the bank $2.7 billion into the red.

It is expected to knock a further 20% from the value of its sub-prime holdings, in spite of the fact that it announced $18 billion of write-downs only three months ago.

The new rash of Wall Street losses and write-downs come in addition to the billions that have already been recorded.

does ANYBODY, ANYWHERE have ANY IDEA of just how bad this is...? talk about whistling past the graveyard...!

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Q1 UBS loss at $12B - the global financial meltdown chugs merrily along

actually, "chugs merrily along" is an understatement... it's really on an accelerating downhill luge run...

Swiss bank UBS AG says it expects to post first quarter net losses of $12 billion and to seek $15 billion in new capital.

Switzerland's largest bank also said in a statement Tuesday that it sees losses and writedowns of approximately $19 billion on U.S. real estate and related credit positions. Its chairman Marcel Ospel will step down, to be succeeded by Peter Kurer.

aw, c'mon... fercryinoutloud, let's stop this slo-mo collapse... let's speed it up and get it the hell over with, and let the chips fall where they may... "where they may" will undoubtedly include the fall of a number of criminal governments, and that of the united states is at the top of the list...

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Lest we forget, the economic collapse is affecting REAL PEOPLE

i've read a number of blog posts and commenters' remarks talking about how people stupid enough to drive up their debt to the point where they can no longer keep up, who signed on to mortgages that, no matter how attractive the initial terms, were beyond their means, shouldn't expect a bailout... what this perspective conveniently ignores is that the entire system has been wired for people to easily fall prey to such schemes... our entire society has been structured around a "get while the gettin's good," "i'll take mine and the devil can have the rest" mentality... when all that's ever dangled before our faces are the obscenely rich getting obscenely richer and the american dream portrayed as "whoever has the most toys, wins," what are people supposed to do...? the answer is clear - pull out those credit cards, buy that new car, sign that mortgage, and keep on buyin'... now that the bottom is falling out, it's the poor slobs who believed that bullshit propaganda who are getting hurt, not those who perpetrated it for their own benefit...

ah, america...! what a great country...!



and, naturally, it takes the foreign media (the bbc) to show us our own dark side...

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Bear Stearns sale price as stated in previous post - $20/share; now, $2/share

OMFG... (see yesterday's post...)

JPMorgan is paying just $2 a share for Bear, or a total of $236 million, although the bank put a total $6 billion price tag on the deal including litigation and severance costs.

Still, the per-share payout is just one-fifteenth of Bear's stock price on Friday and miles off its record share price of $172.61 last year.

That means Bear's shareholders, including British billionaire Joseph Lewis and Bear Stearns' Chairman Jimmy Cayne, will have their holdings wiped out by the deal.

"It's scary for what it says about the value of financial assets, if a company is worth only a small percentage of book value," said Emanuel Weintraub, managing director of Integre Advisors, a New York-based money management firm.

oh, and btw, < wipes away alligator tears >, no golden parachutes for bear execs...

The plunging shares, plus a lack of the normal payout expected when a company is taken over, known as 'golden parachutes', delivers a serious blow to the bankers, traders and other executives worldwide at a firm that has long encouraged its above-average levels of inside ownership.

"The current stock ownership by executive officers reflects a significant personal investment in the company by those who are most responsible for the company's future success," the bank said in a proxy statement.

Employees own around 30 percent of the bank.

two dollars a share...!?!?! absolutely unbelievable... everybody better buckle in, this is going to be one HELL of a week... (remember, i'm writing this at 7 a.m. u.s. eastern time, and the markets haven't even OPENED yet...)

(thanks for the $2/share tip from commenter johann...)

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More on Bear Stearns - Step 9 of the financial meltdown

nouriel roubini's 9th step of the financial meltdown...

Step 9 of the Financial Meltdown: "one or two large and systemically important broker dealers" will "go belly up"

more roubini...

Let us be clear: given its massive exposure to toxic MBS and ABS product Bear Stearns is insolvent; the decision by the NY Fed to try to bail out Bear Stearns would make sense if this firm was only illiquid; the trouble that it is insolvent and thus such attempted bailout is altogether inappropriate. It is true that Bear is a large broker dealer; but its systemic importance is much smaller than that of much larger institutions. The world and financial market can survive if Bear disappears.

So the only possible justification for such Fed action is to engineer an orderly rather than a disorderly shutdown of this institution. But unfortunately the Fed is behaving as if Bear Stearns is illiquid but solvent. That is delusional and the official sector support of an otherwise insolvent institution will end up - like many other recent Fed actions - being paid for by the US tax-payer.

As discussed months ago in this column non-banks institutions don't have access - based on the Federal Reserve Act - to the lender of last resort support of the Fed unless a very special and unusual procedure and vote is taken. So for the first time in decades - possibly since the Great Depression - the Fed had to rely on this exceptional rule to bail out a non-bank financial institution. So what is next? Bailing out hedge funds, bailing out money market funds, bailing out SIVs? When is enough enough? This when the Fed has already committed this week to swap 60% ($ 400 bn) of its balance sheet of Treasuries for mortgage backed securities of dubious quality and value.

And Bear is only the first broker dealer to go belly up.

and now...?

JPMorgan Chase & Co is close to rescuing the fifth-largest U.S. investment bank, Bear Stearns Cos Inc, a person familiar with the matter said on Sunday, in a deal that could be announced in the next few hours.

The Wall Street Journal said on Sunday that Bear Stearns could sell itself for around $2.2 billion, or less than $20 a share.

The low sale price, equal to about two-thirds the company's $30.85 closing share price on Friday, signals just how dire the situation is for the 85-year-old investment bank.

The deal with JPMorgan Chase has not been signed yet, said the person Reuters spoke with on condition of anonymity.

Bear Stearns' cash reserves were drained by fleeing customers on Thursday, and on Friday the bank secured emergency funding from the Federal Reserve, extended through JPMorgan Chase.

The Fed is widely seen as having provided the financing to prevent Bear Stearns from toppling, and potentially bringing other banks down with it.

things are getting pretty wild...

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Now, it's Goldman Sachs - still MORE evidence the financial markets are collapsing

yep... it's a train wreck in slo-mo, for sure...

Investment bank Goldman Sachs will announce asset writedowns of $3 billion when it posts earnings on Tuesday, Britain's Sunday Telegraph newspaper reported, without naming sources.

The company will report a fall of about 50 percent in first-quarter earnings, the newspaper said.

Goldman Sachs was not immediately available for comment.

Goldman will take a hit of around $1.6 billion in its leveraged loan business, $1.1 billion in connection with assets owned by its private equity arm and will have to writedown the value of its stake in Industrial & Commercial Bank of China, the story said.

Shares in ICBC have fallen around 14 percent in the last two months.

Goldman will point out that its exposure to the sub-prime mortgage market remains minimal, the paper said, according to unnamed people close to the bank.

goldman pointing out that it ISN'T the sub-prime mortgage market that's causing a $3 BILLION writedown is somehow supposed to be COMFORTING...? all THAT tells me is that the financial and investment markets are going directly to hell...

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Let's talk about the pending financial collapse and what - lord help us - is up next

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bloomberg...

Bernanke Discards Monetary History With Bear Stearns Bailout

Federal Reserve Chairman Ben S. Bernanke is being forced to throw out four decades of monetary history by a financial system choking on miscalculated risks and a deepening recession.

Bernanke and the four Fed governors voted yesterday to become creditors to Bear Stearns Cos., a securities firm that isn't a bank, by invoking a law that hasn't been used since the 1960s. Three days earlier, the Fed said it would swap Treasury notes on its balance sheet for privately issued mortgage-backed securities held by Wall Street firms.

"It's a re-drawing of the relationship of the Federal Reserve with the rest of the financial system," said Vincent Reinhart, former director of the Division of Monetary Affairs at the Board. Risks of so-called moral hazard, where firms will now come to count on bailouts by a federal agency, "are considerable," he said.

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nyt...

Fed Chief Shifts Path, Inventing Policy in Crisis

As chairman of the Federal Reserve, Ben S. Bernanke has long argued that a central bank should base its policies as much as possible on consistent principles rather than seat-of-the-pants judgment.

But now, as the meltdown in credit markets threatens major institutions on Wall Street and a recession appears inevitable, Mr. Bernanke is inventing policy on the fly.

“Modern monetary policy-making puts a lot of weight on rules, but there is no rule book for an economic crisis,” said Douglas W. Elmendorf, a senior fellow at the Brookings Institution and a former Fed economist.

On Friday, the Federal Reserve seemed to toss out the rule book altogether when it assumed the role of white knight, temporarily bailing out Bear Stearns, one of Wall Street’s biggest firms, with a short-term loan to help avoid a collapse that might send other dominoes falling.

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times of london...

Which bank is going to follow the Bear?

So who is next? As advisers to Bear Stearns struggle to find a buyer or funding in the next 28 days, Wall Street, the City and the financial district in Tokyo were scrabbling to find out who is the most exposed to Bear Stearns, either through loans or trading positions.

Traders in all three centres were panicking even for those banks not directly exposed to Bear. They feared that the problems experienced at the stricken bank signalled that the credit crisis has deteriorated to a new level.

Yesterday, traders began to look anxiously at the robustness of Lehman Brothers, which, although bigger than Bear, is small compared with JPMorgan Chase, Morgan Stanley and Citigroup.

Shares in Lehman dropped 11 per cent yesterday, a far bigger fall than its other rivals, which saw their stock decline by about 3 per cent.

and, finally, news about a meeting tomorrow that is the surest sign yet that things are headed south at an extremely high rate of speed...

reuters...

UPDATE 2-Bush to meet with U.S. financial policymakers

President George W. Bush plans to meet on Monday with top U.S. financial policymakers, the White House said, at a time of increased strains in credit markets and fears of a recession.

The White House said on Saturday Bush will meet members of the President's Working Group on Financial Markets, and a spokeswoman said Bush will get a status report on the markets.

[...]

In his Saturday radio address, Bush addressed the economy for the second straight day, after remarks on Friday in New York City acknowledging that times were tough.

note that monday's meeting is not being referred to as an "emergency meeting"... don't want to panic the great unwashed dontcha know, but you gotta believe that's exactly what it is... as further evidence, bush, the perennial liar, talked about the troubled economy for - OMG - TWO DAYS IN A ROW, instead of shoveling the usual shit about how rosy everything is... even the hard-of-hearing are starting to take notice of that "giant sucking sound"...

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"Bank run" - the NYT headline that tells it like it is

i haven't seen another headline referencing the bear stearns collapse that comes right out and says it... the others are more like this...

wapo...

Fed Comes To Rescue As Wall St. Giant Slips

la times...

Bear Stearns gets emergency loan from Fed

ah, but the nyt... now, HERE'S a headline with stones...

Run on Big Wall St. Bank Spurs Rescue Backed by U.S.

Just three days ago, the head of Bear Stearns, the beleaguered investment bank, sought to assure Wall Street that his firm was safe.

But those assurances were blown away in what amounted to a bank run at Bear Stearns, prompting JPMorgan Chase and the Federal Reserve Bank of New York to step in on Friday with a financial rescue package intended to keep the firm afloat.

The move underscores the extreme stresses that the credit crisis has imposed on the financial system and raises the once-unthinkable prospect that major Wall Street firms might fail.

The developments may only postpone the eventual sale of all or part of Bear Stearns, which has had crippling losses on mortgage-linked investments. To keep the 85-year-old firm solvent, JPMorgan, backed by the New York Fed, extended a secured line of credit that gives Bear Stearns at least 28 days to shore up its finances or, more likely, to find a buyer.

News of the bailout ignited fears that other big banks remain vulnerable to the continuing credit crisis, and stocks tumbled in another rocky day for the markets. Financial shares led the way, with shares of Bear Stearns plunging 47 percent. Hours after the rescue was announced, another Wall Street firm, Lehman Brothers, said it had secured a three-year credit line from banks. Its stock fell 15 percent.

i posted on thursday about carlyle capital and the rumors swirling around bear stearns... i'm absolutely convinced we haven't seen nothin' yet...

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The imminent collapse of the financial markets

yeah, i say "imminent" but it's really like watching a giant train wreck in slo-mo... i suppose there are a lot of other relevant analogies that could be visualized in slo-mo, my recent fave being the house of cards, but i guess we're only limited by our imaginations...

Global stock markets may have cheered the US Federal Reserve yesterday, but on Wall Street the Fed's unprecedented move to pump $280 billion (£140 billion) into global markets was seen as a sure sign that at least one financial institution was struggling to survive.

The name on most people's lips was Bear Stearns. Although the Fed billed the co-ordinated rescue as a way of improving liquidity across financial markets, economists and analysts said that the decision appeared to be driven by an urgent need to stave off the collapse of an American bank.

“The only reason the Fed would do this is if they knew one or more of their primary dealers actually wasn't flush with cash and needed funds in a hurry,” Simon Maughan, an analyst with MF Global in London, said.

Mr Maughan said that the most likely victim was Bear Stearns, the first bank to run into trouble in the sub-prime crisis and the one that, among all wholesale and investment banks, is most reliant upon the use of mortgage securities for raising funds in the money markets.

“The average financial institution was up 7.5 per cent yesterday after the Fed's actions, but Bear Stearns rose just 1 per cent on massive trading volume,” Mr Maughan said. “The market is telling you it's Bear Stearns.” [emphasis and italics added]

ya gotta love that phrase, "primary dealer"... it kinda has the same ring to as "my main man" and i can't help but picture a drug kingpin in a dusty, abandoned warehouse, doing a deal...

bonddad at daily kos notes the above and adds in carlyle capital to come up with this prognosis...

Simply put, folks, things are getting incredibly nasty. And there isn't much of a respite in sight.

if the fed would simply stop creating worthless money out of thin air and throwing it at the problem, hoping against hope it will go away, we'd see a very rapid collapse... but they'll keep on doing it as long as they think they can stave off the ultimate fate of their clients, the super-rich elites, and continue to do it on the backs of us campesinos...

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Carlyle Capital bites the dust

one of the bigger cards in the increasingly unstable and in-danger-of-falling, global financial house of cards falls flat...

A publicly traded affiliate of the Carlyle Group said yesterday that lenders were seizing its assets, sending the fund, Carlyle Capital, into insolvency.

The collapse of Carlyle Capital is the first time a Carlyle Group fund has failed and is a stinging embarrassment for the District private-equity powerhouse, which has built an international reputation with a client list that reaches around the world.

The high-profile downfall, part of the broad turmoil in credit markets worldwide, followed a week of frantic negotiations between the Carlyle Group and a number of lenders. Carlyle Group's three founders as recently as Monday were considering injecting cash into the fund as a way to usher it through the credit crisis.

By yesterday the fund had defaulted on $16.6 billion of debt and said it expected to default soon on its remaining debt. The fund's $21.7 billion in assets were exclusively in AAA mortgage-backed securities issued by Fannie Mae and Freddie Mac, traditionally considered secure and conservative investments, which it was using as collateral against its loans.

In a statement, Carlyle Capital said that it had been unable to meet margin calls in excess of $400 million over the past week and that it expected its lenders to take control of its remaining assets.

this is only the beginning, but a very portentous one... carlyle is totally a creature of the super-rich, powerful elites, the very ones who have been holding the better part of the world in thrall... stay tuned...

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Employers dumping employees at a record rate - 63K jobs cut in Feb - and FRB considers a FULL POINT rate cut

oopsies... atrios wins again...

The economy unexpectedly shed 63,000 jobs in February, the government said on Friday, fueling fears of a recession as manufacturers and construction companies cut their work forces amid the continuing housing crisis.

It was the fastest fall-off in the labor market in five years, and the report raised anticipation on Wall Street that the Federal Reserve will lower interest rates again later this month. Some investors are now predicting a more drastic cut of a full percentage point.

[...]

The private sector lost 101,000 jobs last month, the biggest drop-off in five years. Retail, construction and factory jobs were hit hardest.

if the fed cuts interest rates by a full point, it will be a sign to everyone that we are in ever so much more serious shit than we are being told, which, of course, anybody paying the slightest bit of attention has already figured out...

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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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The Bush economic policy - delusion, denial, and outright lies (but everybody's STILL out shopping)

from the la times...

It's the holidays. You do what you have to do.

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You could almost run that old Lone Ranger theme -- the famous William Tell Overture -- as the soundtrack to the local news stories I watched here in Boston on Thanksgiving day featuring perky local news "correspondents" stirring a buying frenzy with upbeat reports on manic consumers racing into malls for "midnight madness" sales.

[...]

[O]ur media is deeply complicit in promoting and encouraging mindless consumerism through newspapers, commercials and newscasts. This is a well-practiced formula mirroring TV's promotion of the war in Iraq, as the line between selling and telling disappears. Media outlets are amply rewarded with endless ad revenues hyping all the discounted goodies you can get, with the Boston Globe packing no less than 43 advertising-sales supplements (down from 47 a year ago) into a paper that had wall-to-wall Macys ads, including some offering $10 coupons to bribe you the stores.

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I’ve been visiting some of the people who have been most affected by the subprime mortgage debacle. It’s a largely bewildered, frightened group that includes people like Dorothy Levey, a 79-year-old widow who sits alone inside the small house she has lived in for 41 years, afraid to answer the telephone or the door.

She has every reason to be worried. The monthly note on her house in the city of Markham, just outside Chicago, is approximately 100 percent of her meager monthly income. Broke and behind in her payments, Ms. Levey expects a foreclosure notice to show up any day, followed by a visit from “the sheriff, or whoever they send to tell you to get out of your own home.”

While the media coverage has focused on the high rollers who created the subprime frenzy (“If you can breathe, we’ll give you a loan”), the hapless victims have remained in the shadows, condemned to economic ruin.

After faithfully making mortgage payments for decades, Ms. Levey and her husband, Dan, were persuaded to take out a new loan, ostensibly for debt consolidation, in 2002. It was like plunging into quicksand. Dan was seriously ill at the time and he died two years later.

To this day Ms. Levey does not understand what she and her husband of more than half a century had agreed to. The terms might as well have been written in Sanskrit.

But she kept trying to meet her obligation. She exhausted her savings. She lost her car. She stopped buying clothes and cut back on food. But there was no way to keep up with the payments.

“I had to go to the state and tell them I was hungry,” she said.

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We are a country obsessed with consumption, which would be fine if we seemed to be fulfilled getting bigger TVs but having less time to watch them. But, in the aggregate, that's not the case. "The things that we get used to most easily and then take for granted are our material possessions -- our car, our house," writes Layard. "But there is lots of evidence that people underestimate the process of habituation." The amount of happiness we think we'll get from a new house, and the amount of happiness we actually get from a new house, are not the same.

So why the ceaseless search for stuff? In a word, competition. It's worth it to stay ahead in the rat race. Researchers have asked people which they'd prefer: a world in which they made $50,000 but everyone else made half that; or one in which they made $100,000 and everyone else made twice that (prices are the same in both worlds). The majority preferred the first world. They would happily make less money, as long as everyone else made even less money.

yeah, yeah, yeah... so, what time did YOU have to get up yesterday to be among the first in line at the store...?


Sitting on the hard asphalt since 3:30 a.m.,
Lidia Marin of Santa Ana checks in with relatives
in front of Fry's Electronics in Fountain Valley [CA]

but at least SOME of the headlines strike a cautious note...

Crowds pack stores, but will the buying continue?

The Holiday's Shopping Season Can't Stop the Coming 'Severe Recession'

Lost in a Flood of Debt

Despite economy, malls and stores jammed

odd as it may seem, not a single one of those articles mentioned the collapse of the dollar... not one... for THAT story, you have to read the foreign press, such as this from süddeutsche zeitung via spiegel...

[T]he fall of the US currency has political and economic implications far beyond the present financial market crisis. Until recently, American politicians could nod along with Nixon-era Treasury Secretary John Connally, who said 'The dollar is our currency, but your problem.' ... This summer, that changed. Many investors fear a recession in America, and, even more importantly, they doubt their money is really well taken care of in the hands of the world's superpower.

meanwhile, back in california...

"I really can't afford this TV -- I'll be making monthly payments on my credit card until this time next year," the 19-year-old Laguna Niguel resident said. "But it's the holidays. You do what you have to do."

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