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Multiple sources for this story - this is not a tin oil hat sort of story. Anyone who thinks this is "innocent" should ask why Bank of America (BAC) and Citigroup (C) were not buying these securities 3 months ago? or 6 months ago? Welcome to corporate socialism 101 and the unintended consequences - aggressively buy securities that the taxpayer is going to subsidize hedge funds and private investors to buy in a few weeks/months - you never lose in reverse Robin Hood America. Watch for the new HGTV show: Flip that MBS (Mortgage Backed Security)!
The U.S. banking industry had its first loss in derivatives trading last year, driven by a fourth- quarter $9 billion rout in credit markets.
U.S. commercial banks lost $836 million in 2008 from trading over-the-counter cash and derivatives contracts, compared with a $5.5 billion gain in 2007, the Office for the Comptroller of the Currency said in a report released today. Among the five largest banks trading derivatives, only Goldman Sachs Group Inc.’s bank unit reported a revenue gain in the fourth quarter.
“The poor results in 2008 reflect continued turmoil in financial markets, particularly from credit instruments,” according to the report.
Banks lost $9.2 billion in the fourth quarter, with $9 billion stemming from credit market losses. Foreign exchange generated $4.1 billion in gains, with commodity trading producing $338 million in revenue. Interest-rate trading declined $3.4 billion, with equities losing $1.2 billion, OCC said.
“In the fourth quarter, government support for the banking industry resulted in lower bank credit spreads,” according to the report.
Because of government intervention, the value of what banks had to pay to trading partners increased, causing losses to mount, according to the report.
The amount the banks would be owed if all derivatives contracts were liquidated, known as the net current credit exposure, soared 84 percent from the third quarter to a record $800 billion, largely because of a drop in interest rates that increased the value of swaps protecting against rate fluctuations. Interest rate derivatives make up 82 percent of all contracts.
Converted to Banks
The notional amount of derivatives rose 14 percent to $24.5 trillion as Goldman Sachs and Morgan Stanley, both of New York, were included in the report for the first time after converting to banks in September.
The top five banks were New York’s JPMorgan Chase & Co.; Bank of America Corp. of Charlotte, North Carolina; New York- based Citigroup Inc., Goldman Sachs, and London-based HSBC Corp. Wachovia Corp. of Charlotte, was pushed out of the top five by Goldman Sachs.
The five banks accounted for 96 percent of the $200 trillion in derivatives contracts held by U.S. banks, according to the OCC report.
Goldman Sachs had revenue of $40 million in the fourth quarter from cash and derivative trading, OCC said. That compares to a $1.79 billion loss at JPMorgan, a $2 billion decline at Bank of America and Citibank’s $4.49 billion shortfall. HSBC lost $1.46 billion in the quarter.
JPMorgan remained the largest user of derivatives among its competitors, with $87.4 trillion in notional value, more than Bank of America and Citibank combined. Goldman Sachs held $30.2 trillion in derivatives at the end of the fourth quarter, OCC said.
More at Link...
Regulator "blessed" backdating at OTS: official
WASHINGTON (Reuters) - An independent investigating arm of the Treasury Department found a "handful" of cases in which a bank regulator ignored questionable backdating of capital injections, an official said on Friday.
The Treasury said it was investigating certain actions by U.S. thrift regulators involving backdating of capital placement at some institutions.
"There were a handful of instances of it. We are going over this now and we hope to have a report out later in the spring," said Rich Delmar, counsel to Treasury's inspector general.
A Treasury spokesperson said the department would make a determination later if any further action may be warranted after news on Thursday that the acting director of the Office of Thrift Supervision was placed on leave.
An OTS spokesperson declined to comment.
...Hell none of them will probley publish any reports...
UPDATE 1-JPMorgan not sure will disclose stress test results
WASHINGTON, March 27 (Reuters) - JPMorgan (JPM.N) Chief Executive Jamie Dimon said on Friday the company is "thinking about what we want to do" about releasing the results of a government stress test on the company.
Dimon said the company already conducts stress tests on its performance and makes regular disclosures, but would not say that JPMorgan will make public the results of the regulators' test.
The U.S. government is testing 19 of the largest U.S. banks to see how they would perform under more adverse economic conditions than they are expected to face. Officials have said the tests are not pass/fail, and are instead designed to determine the amount of capital they might need if conditions further deteriorate.
The government has until the end of April to complete the tests.
Dimon, speaking after a meeting with President Barack Obama and other top bank CEOs, also said that "we don't need the money, we don't need the capital" when asked if JPMorgan planned to participate in the government's toxic asset plan.
The U.S. Treasury Department on Monday provided more details on a government plan to cleanse banks' balance sheets of up to $1 trillion in distressed assets.
Further, Dimon said the mark-to-market accounting guidance that the Financial Accounting Standards Board (FASB) has proposed will "mean almost nothing to us" but might help some other banks.
FASB plans to vote next week on the guidance, which would give banks more leeway to interpret how they should apply mark-to-market accounting standards.
Mark-to-market accounting is aimed at giving investors an accurate view of financial companies' books, but some banks and lawmakers have blamed the rules for accelerating the financial crisis.
By Theophilos Argitis and Greg Quinn March 27 (Bloomberg) -- Group of 20 officials will recommend that leaders meeting in London next week agree to regulate hedge funds and other non-banking pools of capital that pose “systemic” risks to financial systems.
The officials were mandated by G-20 leaders in November to propose changes to global financial regulations. In addition to regulating some hedge funds, they will also recommend rules that would encourage financial institutions to build up capital buffers during good economic times, according to the working group’s final report, which was distributed in Ottawa today.
The report may signal a compromise has been reached within the G-20 on how much more regulation is needed to avoid future financial crises. European governments have called for more active regulation of financial markets and institutions, while countries such as the U.S. and Canada have been concerned about overregulation.
The report of G-20 finance ministry and central bank officials recommends the private pools of capital “register with financial authorities and disclose appropriate information.”
“There was common ground that authorities required information to assess the risks they pose and the need to regulate them if they are systemic,” according to the document.
Commercial Real Estate: The Outlook Is Frightening
It looks like commercial real estate may crash harder than a lot of people thought it would. The WSJ is out with some rather frightening numbers.
The Journal notes that the delinquency rate on securitized commercial real estate loans has doubled since September and now stands at 1.8%. While that number indicates the problems that owners are encountering in servicing their debt, it is only a small part of the larger issue.
According to the Real Estate Roundtable there is about $6.5 trillion of commercial real estate in the U.S. which is financed with $3.1 trillion of debt. Deutsche Bank estimates that commercial property of all types have declined by from 35% to 45% from their peak 2007 highs. Do the math and with a 35% decline in value you end up with $4.2 trillion of assets and $3.1 trillion of debt.
The problem then becomes one of rolling over existing debt on a severely depleted asset base.
Between now and 2012 $154 billion of securitized loans will need to be refinanced and $524 billion of whole loans held by banks will have to be rolled. Estimates are that two thirds of the securitized loans and half the whole loans wouldn’t qualify for refinancing.
The seriousness of the problem is reflected in the Fed’s actions to assist the market. TALF has been expanded to include CMBS and the PPIP also proposes purchases of both whole loans and securities. Whether either will be able to materially alter the dynamics is problematic at best.
Compounding the program is the fact that commercial real estate exposure is spread over a wide swath of the commercial banking sector and the evidence is that most banks are under reserved based on the current data. Estimates are that the banks are carrying their holdings at somewhere in the range of 90% to 95% of original value (link).
A reviving economy could blunt some pain but not all of it. Like residential real estate, commercial underwriting standards became too loose in the bubble which contributed to over valuations. With tighter standards even rising occupancy rates and rents are not going to be enough to save all of the bad investments. There will be blood, it’s just unclear right now how much.
Component Changes Made to the Global Dow
NEW YORK, Mar 27, 2009 (GlobeNewswire via COMTEX) -- Dow Jones Indexes, a leading global index provider, today announced component changes in The Global Dow. Component changes to The Global Dow are decided by editors of The Wall Street Journal.
The following nine companies will be removed from The Global Dow: AXA S.A. (France, Insurance, CS.FR), Cemex S.A.B. de C.V. Series CPO (Mexico, Construction & Materials, CEMEX.MX), Citigroup Inc. (United States, Banks, C), Deutsche Post AG (Germany, Industrial Goods & Services, DPW.XE), Gamesa Corporacion Tecnologica S.A. (Spain, Oil & Gas, GAM.MC), General Motors Corp. (United States, Automobiles & Parts, GM), ING Groep N.V. (Netherlands, Insurance, INGA.AE), National Bank of Greece S.A. (Greece, Banks, ETE.AT) and Royal Bank of Scotland Group PLC (United Kingdom, Banks, RBS.LN).
Companies added to The Global Dow are: Amgen Inc. (United States, Health Care, AMGN), Anheuser-Busch InBev N.V. (Belgium, Food & Beverage, ABI.BT), Bridgestone Corp. (Japan, Automobiles & Parts, 5108.TO), Canon Inc. (Japan, Technology, 7751.TO), CLP Holdings Ltd. (Hong Kong, Utilities, 0002.HK), Esprit Holdings Ltd. (Hong Kong, Retail, 0330.HK), Medco Health Solutions Inc. (United States, Health Care, MHS), NASDAQ OMX Group Inc. (United States, Financial Services, NDAQ), and Travelers Cos. Inc. (United States, Insurance, TRV).
"These changes in The Global Dow are off-schedule, but we felt they were necessary because of the extraordinary market conditions worldwide since the index was launched last November 11," said John A. Prestbo, editor and executive director, Dow Jones Indexes. "We will conduct the regular annual review of The Global Dow's components in September."
The changes in The Global Dow will be effective before the open of trading on Wednesday, April 1, 2009.
The float-adjusted market capitalization of the reconstituted Global Dow increased to US$6.748 trillion from US$6.646 trillion.
The Global Dow measures the performance of 150 stocks of companies that are established global leaders as well as those poised for future global leadership. The Global Dow is a blue-chip representation of the world's leading companies as selected by editors of Dow Jones & Company. Stocks in The Global Dow are equally weighted and are rebalanced annually in September.
For more information on The Global Dow, please visit www.globaldow.com
Company additions to and deletions from The Global Dow do not in any way reflect an opinion on the investment merits of the company.
More at Link...
Despite FOIA Victory, FBN Finds Government Holds Back
For a government that espouses greater transparency, the Obama Administration’s definition of the term can seem rather opaque.
The overwhelming majority of some 10,000 pages released to the FOX Business Network in the cable channel’s successful Freedom of Information Act lawsuit against the Department of the Treasury seeking documents related to the Troubled Asset Recovery Program were redacted.
That left thousands of blank documents, whited-out sentences and page after page of little more than lists of email recipients, senders and subject lines.
FOIA experts say FOX Business’s situation -- and frustration -- is hardly unusual.
“This is part of the inherent limitation of FOIA,” said Rick Blum, coordinator of the Sunshine in Government Initiative, a nonprofit coalition of media groups. “FOIA is a very powerful tool that allows the public to obtain documents it should get from the government. But there are a lot of problems with it.”
For instance, a tactic often employed by the government to stall release of a given document is to cite a deep backlog of requests and then delay until interest in that document wanes. Another tactic for withholding information is to cite one of several legal exemptions that allow for redactions, and then black out much of the information released.
Recent reforms to FOIA now require the government to explain why certain information has been redacted, and that’s an improvement, said Blum.
“They need to very clearly give you the statutory basis for the blackout, so if you want to fight it, at least you know what you’re fighting,” he said.
More at Link...
FTSE 100 and Dow Jones predicted to tumble 28pc
Tim Howkins said he expects there to be further gloomy economic news around the world, causing the blue-chip index to fall to as low as 2,800 and Wall Street's leading index to crash to 5,700. The FTSE 100 is now at 3898.8 and the Dow Jones is at 7810.2
"Those falls would be pretty apocalyptic from where the markets are now," he said. "But the world is getting worse rather than better. There is still a lot of bad news to come from the global economy.
Originally posted by Hx3_1963
Regulator "blessed" backdating at OTS: official
"A Treasury spokesperson said the department would make a determination later if any further action may be warranted after news on Thursday that the acting director of the Office of Thrift Supervision was placed on leave.'"
]Dude you posted this scrambled egg nonsense. Can you make it right?