Credit Crisis Cost Tops $1 Trillion

Dec. 17 (Bloomberg) -- Losses and write downs from the credit crisis surpassed $1 trillion today, and show little sign of ending, as Morgan Stanley marked down the value of mortgages and leveraged loans.

Morgan Stanley and Goldman Sachs Group Inc.’s markdowns this week bring losses by financial firms in the U.S. to $678 billion since last year, while European banks and insurers have written down a further $300 billion, according to data compiled by Bloomberg. Firms have raised about $928 billion to replenish capital, and cut about 239,000 jobs across the industry.

The losses have caused bank failures from the U.S. and the U.K. to Germany and Iceland, forcing governments to increase borrowing and buy stakes in financial companies. The U.S. alone is spending $700 billion, almost half of which will go directly into banks and insurers, in what has become the worst financial crisis since the Great Depression.

“You’re up to $1 trillion now and this is still going to run for some time,” said Charles R. Morris, a former banker and software company executive whose book “The Trillion Dollar Meltdown” was published in March. In Sept. 2007 “the first back-of-the-envelope calculation I did came up with $1.1 trillion and this was using really low-default estimates.”

Morgan Stanley today reported fourth-quarter mortgage related losses of $1.2 billion, which were more than offset by net revenue of $2.7 billion from the widening of Morgan Stanley’s credit spreads. The firm had mark-to-market losses of $1.7 billion on leveraged loans and leveraged-loan commitments, and write downs of $800 million on securities in the firm’s subsidiary banks. Those losses were offset by gains of $1.1 billion related to debt hedges.

Goldman Sachs, Wachovia

Goldman Sachs had $1.3 billion of writedowns on leveraged loans, or $1 billion including the effect of hedges, in the fiscal fourth quarter that ended Nov. 28, the New York-based bank said yesterday. The company also took $700 million of losses on commercial mortgage loans and securities.

Wachovia Corp., the bank that came within hours of collapse before agreeing to a takeover by Wells Fargo & Co., leads the losses having written down $96.5 billion, the data show. Citigroup Inc., the second-biggest U.S. bank by assets, posted writedowns of $67 billion, while UBS AG, with $48.6 billion of markdowns, is the European bank with the biggest losses.

The $1 trillion of charges reflect writedowns of mortgage assets that aren’t subprime, as well as losses taken on leveraged-loan commitments.

Governments are introducing measures to spur growth now that the U.S. and Eurozone countries are in recession and others on the brink. Meanwhile, central banks have cut interest rates to the lowest levels on record.

Back to Basics

The U.S. Federal Reserve yesterday cut interest rates to as low as zero, the lowest ever, while the Bank of England on Dec. 4 reduced rates to 2 percent, the lowest since 1951, citing “extremely difficult” conditions.

The banking industry needs to return to basics, including careful investigation of borrowers’ creditworthiness and less reliance on statistical calculations, Morris said.

“Banking should be dull, banking should be about credit and it should not be about financial engineers,” he said. “Only do loans you can get repaid for.”

Full story

the sad part is the worse it yet to come... folks were only 1/3 the way into the housing meltdown, once ARM's and ALT A loans reset next year we'll see another bigger round of defaulted loans most experts think could amount to three times the losses we've seen thus far

LOL... Solution:

Banks complain that the "mortgage crisis" is making them tank.... defaults, etc.

Banks complain they have no money to lend .. even though they are taking billions from the fed.

We have mortgages.... 6% .... 11%... whatever.

We already pay these mortgages to a bank.... the same banks that are taking billions of "loans" (cough) because they can't make it.

We take a Direct Mortgage loan from the fed at 0.5%... The pay-off money goes to the bank.... now times this by millions of mortgages... the banks are now flooded with money (NOTE: Fed has already planned 7.4 Trillion Bailout, why not have it benefit us?)

Fed pledges to top $7.4 trn to ease frozen credit mkts
www.nypost.com...

in.news.yahoo.com...

So, instead of printing / creating 7.4 trillion for the banks to pay back at 0-0.25%, Why not have us borrow directly from the fed to pay "EXISTING" Mortgages which goes to the BANK in the form of a Mortgage payoff. The Bank gets the money they claim they need... the fed gets an extra 0.25 to 0.50 extra from us and We lower our mortgage monthly payment by almost 50 freekin percent.

OK, This plan provides the same result as this BS bailout except "we the people" also benefit. So does government as tax revenue and economic growth will happen as that extra personal wealth is invested, spent, etc.

The Banks get their bailout, The Fed gets the money back at even greater interest, the people get a nice interest reduction. Banks now have money to lend at their normal rates going forward.

It is the same thing as we have now except FED creates 7.4 trillion and Lends to Banks (whoever), Bank refuses to provide credit to business forcing additional bailouts, banks raise credit card interest rates and WE are still left holding the bill..... ????? ...... ?????? .... ?????? And Government wants to print more money for a "stimulus check" or "tax rebate" check.. whatever to float the economy a few more months (How the hell is that a better plan?)

Now stop, regulation needed asap before doing this to PREVENT our current situation from happening again... 20% down, Credit worthiness, no loopholes for predatory lending, etc.

Put the two plans side by side... I think you would print / create a hell of a lot LESS money to devalue our currency with our plan and pull ourselves away from the cliff of economic meltdown.


They are going to print / create this money anyway so make it work for us!

reply to post by DaddyBare




Wow the mind-washing ignorance machine is working so well - most have no idea it had even influenced them.

You! (and many others, dont feel lonely) believe that this is topping out at 1 trillion dollars. How could you NOT know that, bloomberg said it!!!! You guys always seem to be so upset about how much the bailout has cost, and Americans love to squabble about insignificant things, how do I know? ATS has been discussing this propaganda bailout since its inception.

If 1 trillion dollars shocks your booties off your feet, lets look at some other figures.

On September 10th, 2001, Donald Rumsfeld held a press conference announcing that DOD could not account for 2.3 Trillion in spending. That was for fiscal year 1999

THANK GOD! For the next day, when a something smashed into the budget office erasing 38 budget employees from earth. Talk about timing!

Fiscal year 2000, a loss of 1.1 trillion, all unaccounted for.

Also worth noting, in the ONE week following the bailout, the FED loaned out an additional 1.5 trillion, inflating the money supply and taxing the people.

So that brings our total to 4.9 trillion, on just a couple subjects.

Since we're bloomberg fans, lets take at another article. PLEASE NOTE, I SAVED THIS ARTICLE TO MY COMPUTER, AND NO LONGER HAVE THE LINK! IT IS REAL, I JUST CANT FIND THE ARTICLE ANYMORE.

The U.S. government is prepared to provide more than $7.7 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt Sunday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago.

The unprecedented pledge of funds includes $3.2 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.

When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. Now, as regulators commit far more money while refusing to disclose loan recipients or reveal the collateral they are taking in return, some members of Congress are calling for the Fed to be reined in.

"Whether it’s lending or spending, it’s tax dollars that are going out the window and we end up holding collateral we don’t know anything about," said Congressman Scott Garrett, a New Jersey Republican who serves on the House Financial Services Committee. "The time has come that we consider what sort of limitations we should be placing on the Fed so that authority returns to elected officials as opposed to appointed ones."

Bloomberg News tabulated data from the Fed, Treasury and Federal Deposit Insurance Corp. and interviewed regulatory officials, economists and academic researchers to gauge the full extent of the government’s rescue effort.

The bailout includes a Fed program to buy as much as $2.4 trillion in short-term notes, called commercial paper, that companies use to pay bills, begun Oct. 27, and $1.4 trillion from the FDIC to guarantee bank-to-bank loans, started Oct. 14.

William Poole, former president of the Federal Reserve Bank of St. Louis, said the two programs are unlikely to lose money. The bigger risk comes from rescuing companies perceived as "too big to fail," he said.

The article continues much farther in depth.


BOTTOM LINE: The bailout has cost TRILLIONS not just ONE.


[edit on 18-12-2008 by king9072]

reply to post by king9072


Actually your not right also we are talking 8.5 trillion as pointed out it my thread here.

www.abovetopsecret.com...

I even broke down where the $8.5 trillion is going. Enjoy.

Originally posted by mybigunit
reply to post by king9072

 

Actually your not right also we are talking 8.5 trillion as pointed out it my thread here.

www.abovetopsecret.com...

I even broke down where the $8.5 trillion is going. Enjoy.

NICE, Point is its not a trillion. I can't stand when people are tricked into believing were only bailing out 'so much' when in reality the real figures stagger those that we are told about.

I never said this was a total cost... this is just a first batch of reported numbers... nothing more...what ever the final cost is we most likely wont know for years and well after this is all just an unpleasant story we all tell our grandchildren

[edit on 18-12-2008 by DaddyBare]