| Re: The Dynamics of the 8/9/07 Stock Market Panic ...|
Bro Jeff you wrote;
"The world hates us for what is happening in the Middle East. And now our corrupt financial system has infected the entire world with our ever increasing debt. "
--- Just got this today from my SafeWealth Report (Swiss) ... News we don't hear about in the U.S. unless one watches the BBC, or recieves foriegn reports ---
[b][color=0033FF]German Banks Succumb to Temptation[/color][/b]
[color=0033FF]Just what did a small, state-owned bank in Saxony think it was doing by investing billions in the risky American subprime market? German commentators on Monday say managers were looking for an easy buck at the taxpayers' expense.
The German bank Sachsen LB is in trouble. On Friday, it announced that a group of publicly owned banks was bailing it out (more...) to the tune of 17.3 billion ($23.3 billion) after it proved unable to provide the credit it had pledged. The guilty party turned out to be an affiliate in Ireland called Ormond Quay. The affiliate, known in the finance world as a conduit, did not appear on Sachsen LB's balance sheet and specialized in issuing short-term debts backed up by securities. Ormond Quay, it turned out, was heavily exposed on the US sub-prime mortgage market and nervous investors had turned away from the credits it offered. The result? Serious liquidity problems.
The announcement came just days after German banks had reassured the public that they weren't overly affected by the problems in the US mortgage market. And it was the second such liquidity crisis to hit a bank in Germany in weeks. Is the German banking sector facing a crisis (more...)? Commentators on Monday take a closer look.
Financial daily Handelsblatt on Monday writes:
"The German banking industry finds itself in a dramatic crisis, and one hardly wants to think of its possible escalation. But that is exactly what needs to happen: All bank boards, all controllers, auditors, analysts and control committees have to finally take a close look at the true state of risk in all their divisions and come up with a concrete plan of action. The time of minimizing the dangers and sitting around doing nothing has to come to an end."
"Risk management is the core duty of every banker. Traditionally, banks earn their money by evaluating risk. In recent years, many German bankers have taken unusually high risks because in times of low interest rates, they could hardly survive on the interest differentials between outlay and income, and between short and long-term investments. Those elevated risks included loans to finance investors and hedge funds, that promise unusually high returns... . There is hardly a bank in Germany that hasn't succumbed to the temptation of improving its bottom line through such investments. Which is why all of them need to examine just how deeply they are involved."
The left-leaning paper Die Tageszeitung writes:
"Too big to fail. German banks apparently rely completely on this status. Higher profits are possible with risky speculations than with classic bank deals and conservative investments. But so too are much larger losses. But who cares? When something goes wrong, the state and the other banks will jump in to help. Their interest in avoiding a financial crisis that will harm everyone is much too great. Such is the logic -- and it is a way of thinking which results in the general public being taken hostage by the gambling bankers."
"The state would be well advised to think long and hard about how to rein in the apparently out-of-control financial institutions so that their losses aren't one day so large that the public hand won't be able to ward off a financial crisis."
Center-left Süddeutsche Zeitung likewise takes a closer look at the issue:
"Of course one has to ask the question as to why a relatively small state bank like Sachsen LB, generally considered a financial weakling, is apparently heavily involved in the US and invested multi-billion euros in real-estate financing. Such deals surely don't belong to the core competency of a state-owned bank, even if they aren't explicitly forbidden. The bank -- owned by the state of Saxony -- should really concern itself more with the region and the local, publicly owned banks."
"Structural problems are the trigger for the worrisome difficulties Sachsen LB has run into. The standard business deals entered into by state banks are no longer profitable enough. ... Many institutions now attempt to improve their bottom lines with very risky deals that, if they succeed, also promise high profits. Their desperation apparently leads them to take such irresponsibly high risks that a worldwide credit crisis -- as we are now seeing -- can break their necks."
"One worries that more crises loom. Action must be taken. Those institutions that are completely or partly state owned should be privatized. It is irresponsible when the taxpayer has to vouch for the overly risky business practices followed by individual banks."
Charles Hawley, 3:00 p.m. CET [/color]
--- Blessings in the Hills from which cometh our help! ... Pss.121 ---
| 2007/8/31 14:18||Profile|
| 2007/9/18 11:59||Profile|
| 2007/10/2 17:57||Profile|
| Re: The Dynamics of the 8/9/07 Stock Market Panic ... continue ...|
Quote:This was a quote from one of the last "npr" news briefs from the first post. I remember reading in David Wilkerson's book the vision stating that the President was going to make a couple of speeches to reassure people that all is well, but people were not going to believe it. (The Vision ch.1)
As prices slid, President Bush tried to reassure investors. At a news conference, he said the U.S. economy remained fundamentally sound and could ride out any liquidity problems. But investors seemed unconvinced and prices continued to decline.
| 2007/10/2 21:57|
| An Amazing Tight Rope Walking Juggling Act ...|
The following is a pretty good commentary on what has transpired since the August convulsion in the market ...
[b]The Continuing Crisis: It's Not Over Yet[/b]
Amazing how the sub-prime mortgage investment packages are blowing up all around the world and have affected the top tier of the banking industry, Citi-Group (US largest bank) and UBS (large overseas bank) have had to borrow $7.5 billion from Dubai, and $10 billion from Singapore consecutively @ around an 11% interest rate ...
The Fed's latest cut of .25 points in the interest rate did nothing for the market in the way of the financials, leading to a huge sell off of their stocks, which further adds to their misery after having to shelf billions of dollars worth of investment instruments they can no longer sell because the people have become afraid of them and won't buy anymore, so their kinda left on their own at this point ... It's like The Fed played it right down the middle throwing but a scrap of credit enabling to the now credit ravenous financial institutions and the stock market, while holding at bay any deeper lessening of the dollars value ... The .25 point cut only made gold prices rise an additional $7. and ounce, in comparrison to when they lowered the interest rate by .50 points, sharply depressing the dollars value, and gold rose an additional $35. per ounce ...
i'm amazed at how well The Fed, and equivalent institutions around the world, are managing to juggle so many balls while keeping them up in the air and walking such a fine line of this tightrope they (especially America) now find themselves on ...
Blessings in Christ our Lord! ---
| 2007/12/13 8:59||Profile|
IN HEAVENLY PLACES WITH JESUS
| Re: An Amazing Tight Rope Walking Juggling Act ...about to get knocked over...|
Greetings in Jesus' Name by Whose Blood we are Saved.AMEN.
that was a most interesting article bro R, i read a bit more on msn and the move to fix this situation is nothing more than a case of same stuff different day. i had no idea so many lending companies had gone under...i wonder why that isn't in the news...
the sham won't be kept in the dark too much longer, the year's end is only 3 wks away...
Grace and Peace are ours in Jesus.AMEN.
| 2007/12/13 23:52||Profile|
Really poor folks don't have to worry about all of this stuff. :-D
But here's some more for the watchers...
[url=http://www.telegraph.co.uk/money/main.jhtml;?xml=%2Fmoney/exclusions/hubpages/outlook2008/outlook2008.xml&_requestid=529790]The Predictions for 2008[/url]
| 2007/12/26 3:19|
| Re: 9th January 2008 - weak US dollar|
Early this morning, Marks & Spencer announced slightly reduced takings over Christmas compared to last year, which led to a run, in which one company had a third of its value wiped off. M & S began to improve towards the end of the day, but the UK is watching the US mortgage market with interest.
In the following link, there are at least ten US dollar articles which might interest Americans.
[url=http://news.bbc.co.uk/1/hi/business/7179298.stm]BBC Business News page with series of stories on the US dollar[/url]
The pound has yet again reached a fresh 26-year high against the US dollar, boosted by higher UK interest rates and weakness in the US housing market.
It makes a big difference to anyone involved with changing money between currencies.
[url=http://news.bbc.co.uk/1/hi/business/6567821.stm]Strong GBP - So who are the big winners and losers?[/url]
| 2008/1/9 14:42|
As Wall Street begs for cheap money, and main street seeks to bail out those who sought easy money...we are beginning to see how foolish man is...
THE FINANCIAL TSUNAMI
Part 1: Deutsche Bank's Painful Lesson
by F. William Engdahl
November 24, 2007
Even experienced banker friends tell me that they think the worst of the US banking troubles are over and that things are slowly getting back to normal. What is lacking in their rosy optimism is the realization of the scale of the ongoing deterioration in credit markets globally, centered in the American asset-backed securities market, and especially in the market for CDOsCollateralized Debt Obligations and CMOsCollateralized Mortgage Obligations. By now every serious reader has heard the term Its a crisis in Sub-Prime US home mortgage debt. What almost no one I know understands is that the Sub-Prime problem is but the tip of a colossal iceberg that is in a slow meltdown. I offer one recent example to illustrate my point that the Financial Tsunami is only beginning.
Deutsche Bank got a hard shock a few days ago when a judge in the state of Ohio in the USA made a ruling that the bank had no legal right to foreclose on 14 homes whose owners had failed to keep current in their monthly mortgage payments. Now this might sound like small beer for Deutsche Bank, one of the worlds largest banks with over 1.1 trillion (Billionen) in assets worldwide. As Hilmar Kopper used to say, peanuts. Its not at all peanuts, however, for the Anglo-Saxon banking world and its European allies like Deutsche Bank, BNP Paribas, Barclays Bank, HSBC or others. Why?
A US Federal Judge, C.A. Boyko in Federal District Court in Cleveland, Ohio ruled to dismiss a claim by Deutsche Bank National Trust Company. DBs US subsidiary was seeking to take possession of 14 homes from Cleveland residents living in them, in order to claim the assets.
Here comes the hair in the soup. The Judge asked DB to show documents proving legal title to the 14 homes. DB could not. All DB attorneys could show was a document showing only an intent to convey the rights in the mortgages. They could not produce the actual mortgage, the heart of Western property rights since the Magna Charta of not longer.
Again why could Deutsche Bank not show the 14 mortgages on the 14 homes? Because they live in the exotic new world of global securitization, where banks like DB or Citigroup buy tens of thousands of mortgages from small local lending banks, bundle them into Jumbo new securities which then are rated by Moodys or Standard & Poors or Fitch, and sell them as bonds to pension funds or other banks or private investors who naively believed they were buying bonds rated AAA, the highest, and never realized that their bundle of say 1,000 different home mortgages, contained maybe 20% or 200 mortgages rated sub-prime, i.e. of dubious credit quality.
Indeed the profits being earned in the past seven years by the worlds largest financial players from Goldman Sachs to Morgan Stanley to HSBC, Chase, and yes, Deutsche Bank, were so staggering, few bothered to open the risk models used by the professionals who bundled the mortgages. Certainly not the Big Three rating companies who had a criminal conflict of interest in giving top debt ratings. That changed abruptly last August and since then the major banks have issued one after another report of disastrous sub-prime losses.
A new unexpected factor
The Ohio ruling that dismissed DBs claim to foreclose and take back the 14 homes for non-payment, is far more than bad luck for the bank of Josef Ackermann. It is an earth-shaking precedent for all banks holding what they had thought were collateral in form of real estate property.
How this? Because of the complex structure of asset-backed securities and the widely dispersed ownership of mortgage securities (not actual mortgages but the securities based on same) no one is yet able to identify who precisely holds the physical mortgage document. Oops! A tiny legal detail our Wall Street Rocket Scientist derivatives experts ignored when they were bundling and issuing hundreds of billions of dollars worth of CMOs in the past six or seven years. As of January 2007 some $6.5 trillion of securitized mortgage debt was outstanding in the United States. Thats a lot by any measure!
In the Ohio case Deutsche Bank is acting as Trustee for securitization pools or groups of disparate investors who may reside anywhere. But the Trustee never got the legal document known as the mortgage. Judge Boyko ordered DB to prove they were the owners of the mortgages or notes and they could not. DB could only argue that the banks had foreclosed on such cases for years without challenge. The Judge then declared that the banks seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance. Finally put to the test, the Judge concluded, their weak legal arguments compel the court to stop them at the gate. Deutsche Bank has refused comment.
As news of this legal precedent spreads across the USA like a California brushfire, hundreds of thousands of struggling homeowners who took the bait in times of historically low interest rates to buy a home with often, no money paid down, and the first 2 years with extremely low interest rate in what are known as interest only Adjustable Rate Mortgages (ARMs), now face exploding mortgage monthly payments at just the point the US economy is sinking into severe recession. (I regret the plethora of abbreviations used here but it is the fault of Wall Street bankers not this author).
The peak period of the US real estate bubble which began in about 2002 when Alan Greenspan began the most aggressive series of rate cuts in Federal Reserve history was 2005-2006. Greenspans intent, as he admitted at the time, was to replace the Dot.com internet stock bubble with a real estate home investment and lending bubble. He argued that was the only way to keep the US economy from deep recession. In retrospect a recession in 2002 would have been far milder and less damaging than what we now face.
Of course, Greenspan has since safely retired, written his memoirs and handed the control (and blame) of the mess over to a young ex-Princeton professor, Ben Bernanke. As a Princeton graduate, I can say I would never trust monetary policy for the worlds most powerful central bank in the hands of a Princeton economics professor. Keep them in their ivy-covered towers.
Now the last phase of every speculative bubble is the one where the animal juices get the most excited. This has been the case with every major speculative bubble since the Holland Tulip speculation of the 1630s to the South Sea Bubble of 1720 to the 1929 Wall Street crash. It was true as well with the US 2002-2007 Real Estate bubble. In the last two years of the boom in selling real estate loans, banks were convinced they could resell the mortgage loans to a Wall Street financial house who would bundle it with thousands of good better and worse quality mortgage loans and resell them as Collateralized Mortgage Obligation bonds. In the flush of greed, banks became increasingly reckless of the credit worthiness of the prospective home owners. In many cases they did not even bother to check if the person was employed. Who cares? It will be resold and securitized and the risk of mortgage default was historically low.
That was in 2005. The most Sub-prime mortgages written with Adjustable Rate Mortgage contracts were written between 2005-2006, the last and most furious phase of the US bubble. Now a whole new wave of mortgage defaults is about to explode onto the scene beginning January 2008. Between December 2007 and July 1, 2008 more than $690 Billion in mortgages will face an interest rate jump according to the contract terms of the ARMs written two years before. That means market interest rates for those mortgages will explode monthly payments just as recession drives incomes down. Hundreds of thousands of homeowners will be forced to do the last resort of any homeowner: stop monthly mortgage payments.
Here is where the Ohio court decision guarantees that the next phase of the US mortgage crisis will assume Tsunami dimension. If the Ohio Deutsche Bank precedent holds in the appeal to the Supreme Court, millions of homes will be in default but the banks prevented from seizing them as collateral assets to resell. Robert Shiller of Yale, the controversial and often correct author of the book, Irrational Exuberance, predicting the 2001-2 Dot.com stock crash, estimates US housing prices could fall as much as 50% in some areas given how home prices have diverged relative to rents.
The $690 billion worth of interest only ARMs due for interest rate hike between now and July 2008 are by and large not Sub-prime but a little higher quality, but only just. There are a total of $1.4 trillion in interest only ARMs according to the US research firm, First American Loan Performance. A recent study calculates that, as these ARMs face staggering higher interest costs in the next 9 months, more than $325 billion of the loans will default leaving 1 million property owners in technical mortgage default. But if banks are unable to reclaim the homes as assets to offset the non-performing mortgages, the US banking system and a chunk of the global banking system faces a financial gridlock that will make events to date truly peanuts by comparison. We will discuss the global geo-political implications of this in our next report, The Financial Tsunami: Part 2.
(end of article)
The leaders of the financial world don't trust one another because they know the system is corrupt. Banks can't foreclose on mortgages because they don't own the mortgage. They own CMOs. That is why people are looking to the Federal Reserve to print money and expecting the Bush Administration to go further into debt. Why? Because no one knows who owns the property. The financial industry needs someone to continue paying monthly payments otherwise the CMOs that they own are worth alot less than they bought them for.
Do you see how foolish men are in this generation.
| 2008/1/18 14:42||Profile|
[url=http://news.bbc.co.uk/1/hi/business/7079520.stm]UK 'faces more financial shocks'[/url]
The governor of the Bank of England, Mervyn King, has warned that the US sub-prime mortgages crisis poses more risks for the UK's financial system.
Excerpt from File on Four (a radio programme)
[url=http://www.bbc.co.uk/mediaselector/check/player/nol/newsid_7080000/newsid_7084000?redirect=7084065.stm&news=1&nbwm=1&bbwm=1&nbram=1&bbram=1&asb=1]Listen: rare interview by Robert Peston of Bank of England boss[/url]
| 2008/1/28 15:14|