Master Dead Pool or PPT?
We've Nattered about our Dead Pool or institutions most likely to fail and or take major hits.
We've also Nattered about the off book Enron like accounting entities (SIV's or structured investment vehicles) in the ABCP debt market solvency crisis here, here, here, here and here.
Citi down... Citigroup Q3 profit fell 57% as losses mounted from subprime and leveraged loans.
The profit decline reflected $6.5 billion of pre tax losses and writedowns.
Write downs & losees included $1.35 billion for leveraged loans, $1.56 billion for subprime mortgages, and $636 million from fixed income trading.
A $2.98 billion increase in credit costs, including a $780 million increase in net credit losses and a $2.2 billion charge to boost reserves for bad loans.
Corporate and investment banking profit sank 74%. Delinquencies on second mortgages increased 50%.
Citigroup faces $10 billion of mortgages whose rates will reset by the end of 2008.
In Close Encounters of the Ponzi Kind we Nattered about the musical chairs...
or how the 10% or $30 Billion of the "hung paper" clogging the markets, really wasn't sold at anyone at all...
i.e. more Wall Street smoke & mirrors chicanery, the banks involved bought it from themselves.
If that wasn't enough, we have more "good news" to cheer your day and "aleve" the solvency crisis...
Don't worry, Be Happy... the Master Deal Pool or PPT has officially formed.
Since hitting an alltime peak of $1.183 trillion in early August, the asset backed commercial paper market has shrunk by 25% during an unprecedented nine consecutive weeks of contraction.
Citigroup , Bank of America Corp. and JPMorgan Chase & Co. said on Monday they were pooling $80 Billion to prevent (their own)investment funds (SIV's) from having to dump assets into the market.
SIVs bought assets like mortgage securities from banks, and financed their purchases using medium term notes and short term debt known as commercial paper.
The SIVs have at least $320 Billion in assets comprised of 41% financial sector debt, 22% prime residential mortgage securities, 12% collateralized debt obligations.
Commercial mortgage backed securities and non mortgage asset backed bonds each account for another 8% of holdings.
The size of the pool, known as the master liquidity enhancement conduit or M-LEC, and the way it is put together are still being worked out.
The pool (formed by the banks with the SIV's) will agree to buy qualifying assets from the SIVs (back from themselves!!),
and will then issue short term credit instruments (loans to themselves) to help finance the purchases (from themselves). Does it get any better?
Christian Stracke at CreditSights Inc:
"The banks were going to need to inject more liquidity into the SIVs anyway, so the public co-operation just makes the bail-outs of SIVs seem more orderly."
Seems orderly to me, if you subscribe to the theory that: incest is best, but only if you keep it in the family...
Sung to Aerosmiths Dude (Looks Like A Lady)...
Do the Hanky Skanky... close your eyes, click your heels three times and repeat the mantra, there is no spillover... Janet L. Yellen, SF Fed Head, Oct. 9 in Los Angeles:
"A big issue is whether developments in the relatively small housing sector will spread to the large consumption sector,
perhaps through declines in house prices. Should the decline in house prices occur in the context of rising unemployment, the risks could be significant."
Since 2001, housing is directly and responsible for 60% of all new job growth, and indirectly responsible for another 20% of job growth, thats 80% last I checked.
Newsflash... the housing and consumer segments constitute better than 75% of U.S. gross domestic product. Relatively small eh??
CEO of Microchip Technology: "I'm disappointed that conditions in the U.S. housing market have continued to deteriorate, and some of the effects of the credit crunch seem to have filtered into our consumer segment outside of housing."
CEO of Ryder System: "Economic conditions have softened considerably in more industries beyond those related to housing and construction."
Repeat Benny & The Inkjets mantra... no spillover into other economic sectors, nor the banking system, nor the economy.
Now, do the math... and fund the gap. Our "shrinking" budget deficit and lower tax receipts are about to become a major problem. How?
Sales of Treasuries may increase for the first time since 2004 as the U.S. federal budget deficit expands, jeopardizing the biggest bond rally in five years.
Government auctions of bills, notes and bonds in the fiscal year that started this month may rise more than 50% to $220 billion.
The first decline in corporate tax revenue since 2003 increased the budget shortfall by 12% to $162.8 billion for from $144.8 billion.
Companies paid $92.7 billion in income tax during Q3, 11.3% less than in the same quarter of 2006, when they had a temporary incentive to declare overseas profits.
William O'Donnell, head of U.S. government bond strategy at UBS: "Unless the economy turns on a dime and starts to show strength again...
we're going to be looking at increased Treasury issuance beginning with bills later this year and spreading out across all Treasuries beginning in the first quarter."
Michael Pond at Barclays: "All else being equal, greater supply should lead to higher yields."
Higher supply, lower prices, higher yields, higher interest rates. What would that do for real estate values and business?? As always a hat tip to Bloomberg & MSN...
We've also Nattered about the off book Enron like accounting entities (SIV's or structured investment vehicles) in the ABCP debt market solvency crisis here, here, here, here and here.
Citi down... Citigroup Q3 profit fell 57% as losses mounted from subprime and leveraged loans.
The profit decline reflected $6.5 billion of pre tax losses and writedowns.
Write downs & losees included $1.35 billion for leveraged loans, $1.56 billion for subprime mortgages, and $636 million from fixed income trading.
A $2.98 billion increase in credit costs, including a $780 million increase in net credit losses and a $2.2 billion charge to boost reserves for bad loans.
Corporate and investment banking profit sank 74%. Delinquencies on second mortgages increased 50%.
Citigroup faces $10 billion of mortgages whose rates will reset by the end of 2008.
In Close Encounters of the Ponzi Kind we Nattered about the musical chairs...
or how the 10% or $30 Billion of the "hung paper" clogging the markets, really wasn't sold at anyone at all...
i.e. more Wall Street smoke & mirrors chicanery, the banks involved bought it from themselves.
If that wasn't enough, we have more "good news" to cheer your day and "aleve" the solvency crisis...
Don't worry, Be Happy... the Master Deal Pool or PPT has officially formed.
Since hitting an alltime peak of $1.183 trillion in early August, the asset backed commercial paper market has shrunk by 25% during an unprecedented nine consecutive weeks of contraction.
Citigroup , Bank of America Corp. and JPMorgan Chase & Co. said on Monday they were pooling $80 Billion to prevent (their own)investment funds (SIV's) from having to dump assets into the market.
SIVs bought assets like mortgage securities from banks, and financed their purchases using medium term notes and short term debt known as commercial paper.
The SIVs have at least $320 Billion in assets comprised of 41% financial sector debt, 22% prime residential mortgage securities, 12% collateralized debt obligations.
Commercial mortgage backed securities and non mortgage asset backed bonds each account for another 8% of holdings.
The size of the pool, known as the master liquidity enhancement conduit or M-LEC, and the way it is put together are still being worked out.
The pool (formed by the banks with the SIV's) will agree to buy qualifying assets from the SIVs (back from themselves!!),
and will then issue short term credit instruments (loans to themselves) to help finance the purchases (from themselves). Does it get any better?
Christian Stracke at CreditSights Inc:
"The banks were going to need to inject more liquidity into the SIVs anyway, so the public co-operation just makes the bail-outs of SIVs seem more orderly."
Seems orderly to me, if you subscribe to the theory that: incest is best, but only if you keep it in the family...
Sung to Aerosmiths Dude (Looks Like A Lady)...
Do the Hanky Skanky... close your eyes, click your heels three times and repeat the mantra, there is no spillover... Janet L. Yellen, SF Fed Head, Oct. 9 in Los Angeles:
"A big issue is whether developments in the relatively small housing sector will spread to the large consumption sector,
perhaps through declines in house prices. Should the decline in house prices occur in the context of rising unemployment, the risks could be significant."
Since 2001, housing is directly and responsible for 60% of all new job growth, and indirectly responsible for another 20% of job growth, thats 80% last I checked.
Newsflash... the housing and consumer segments constitute better than 75% of U.S. gross domestic product. Relatively small eh??
CEO of Microchip Technology: "I'm disappointed that conditions in the U.S. housing market have continued to deteriorate, and some of the effects of the credit crunch seem to have filtered into our consumer segment outside of housing."
CEO of Ryder System: "Economic conditions have softened considerably in more industries beyond those related to housing and construction."
Repeat Benny & The Inkjets mantra... no spillover into other economic sectors, nor the banking system, nor the economy.
Now, do the math... and fund the gap. Our "shrinking" budget deficit and lower tax receipts are about to become a major problem. How?
Sales of Treasuries may increase for the first time since 2004 as the U.S. federal budget deficit expands, jeopardizing the biggest bond rally in five years.
Government auctions of bills, notes and bonds in the fiscal year that started this month may rise more than 50% to $220 billion.
The first decline in corporate tax revenue since 2003 increased the budget shortfall by 12% to $162.8 billion for from $144.8 billion.
Companies paid $92.7 billion in income tax during Q3, 11.3% less than in the same quarter of 2006, when they had a temporary incentive to declare overseas profits.
William O'Donnell, head of U.S. government bond strategy at UBS: "Unless the economy turns on a dime and starts to show strength again...
we're going to be looking at increased Treasury issuance beginning with bills later this year and spreading out across all Treasuries beginning in the first quarter."
Michael Pond at Barclays: "All else being equal, greater supply should lead to higher yields."
Higher supply, lower prices, higher yields, higher interest rates. What would that do for real estate values and business?? As always a hat tip to Bloomberg & MSN...
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