Bond Guarantor Failure Means Bank Failure
Eroding margins... Costco met the number, but profit margins eroded.
The Ted spread... , a measure of interbank lending costs, at a seven year high.
So much for confidence in yesterdays announcement by the Fed and 4 other central banks, in effect creating the worlds largest pawn shop.
LIBOR failed to fall from 4.95. The spread between ECB funds and LIBOR at 95 bps vs 57bps 30 days ago, vs 25 bps, 1st half 07. The TED spread at 2.21 vs 1.57 in Sept.
The Tax Man Needeth... H&R Block Inc said on Thursday its borrowing capacity may not be sufficient...
to meet its financing requirements and it may have to issue additional debt or equity.
Lehman Lame... #4 US Investment bank, Lehman Brothers reported that quarterly earnings fell 11%.
Revenue for fixed-income sales and trading dropped 60% on $830 million of net writedowns.
Guarantor going down? ... #2 bond insurer Ambac Financial took out insurance on $29 billion in securities it guarantees...
to avoid the loss of its AAA credit rating and the $556 billion of securities that it guarantees.
Ambac insures $8.8 billion of securities backed by subprime mortgages and $29.2 billion of CDO collateralized debt obligations.
Guarantors go down, so do the banks... Credit downgrades for guarantors may force banks to move $60 billion in CDO losses onto their books.
ACA Financial Guaranty Corp. insures $3.47 billion, or 33%, of the CDO collateralized debt obligations that Canadian Imperial Bank of Commerce holds.
CIBC said the hedged CDOs were worth just $1.76 billion at Oct. 31, down almost 50% from their face amount.
ACA Capital has a shareholder deficit of $883.3 million at Sept. 30, meaning the liabilities on its balance sheet exceeded its assets.
ACA has $425.5 million of statutory capital and $1.1 billion of claims paying resources to back all of its guarantees, for all of its customers.
This would not cover the CIBC CDO's alone. If ACA loses its A rating, CIBC loses its hedge on these derivative contracts and would have to recognize the loss.
A $1.71 billion pretax writedown would have wiped out the #5 Canadian lenders $937.5 million of net income for Q4.
CIBC said it finished last quarter with $9.86 billion of hedged CDOs tied to U.S. subprime mortgages.
The bank finished the year with $9 billion of tangible common shareholder equity. Hattip to Bloomberg.
On a lighter note, absolutely hillarious, must read from Mark Gilbert at Bloomberg Hedge-Fund Guy Is Up SIV Creek Without a Paddle.
"Our off-balance sheet conduits have maxed out their MasterCards and every time we try to value them, we are reminded that some things in life really are priceless."
The Ted spread... , a measure of interbank lending costs, at a seven year high.
So much for confidence in yesterdays announcement by the Fed and 4 other central banks, in effect creating the worlds largest pawn shop.
LIBOR failed to fall from 4.95. The spread between ECB funds and LIBOR at 95 bps vs 57bps 30 days ago, vs 25 bps, 1st half 07. The TED spread at 2.21 vs 1.57 in Sept.
The Tax Man Needeth... H&R Block Inc said on Thursday its borrowing capacity may not be sufficient...
to meet its financing requirements and it may have to issue additional debt or equity.
Lehman Lame... #4 US Investment bank, Lehman Brothers reported that quarterly earnings fell 11%.
Revenue for fixed-income sales and trading dropped 60% on $830 million of net writedowns.
Guarantor going down? ... #2 bond insurer Ambac Financial took out insurance on $29 billion in securities it guarantees...
to avoid the loss of its AAA credit rating and the $556 billion of securities that it guarantees.
Ambac insures $8.8 billion of securities backed by subprime mortgages and $29.2 billion of CDO collateralized debt obligations.
Guarantors go down, so do the banks... Credit downgrades for guarantors may force banks to move $60 billion in CDO losses onto their books.
ACA Financial Guaranty Corp. insures $3.47 billion, or 33%, of the CDO collateralized debt obligations that Canadian Imperial Bank of Commerce holds.
CIBC said the hedged CDOs were worth just $1.76 billion at Oct. 31, down almost 50% from their face amount.
ACA Capital has a shareholder deficit of $883.3 million at Sept. 30, meaning the liabilities on its balance sheet exceeded its assets.
ACA has $425.5 million of statutory capital and $1.1 billion of claims paying resources to back all of its guarantees, for all of its customers.
This would not cover the CIBC CDO's alone. If ACA loses its A rating, CIBC loses its hedge on these derivative contracts and would have to recognize the loss.
A $1.71 billion pretax writedown would have wiped out the #5 Canadian lenders $937.5 million of net income for Q4.
CIBC said it finished last quarter with $9.86 billion of hedged CDOs tied to U.S. subprime mortgages.
The bank finished the year with $9 billion of tangible common shareholder equity. Hattip to Bloomberg.
On a lighter note, absolutely hillarious, must read from Mark Gilbert at Bloomberg Hedge-Fund Guy Is Up SIV Creek Without a Paddle.
"Our off-balance sheet conduits have maxed out their MasterCards and every time we try to value them, we are reminded that some things in life really are priceless."
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