Riverside Info Tag: finance

Riverside Info Tag: finance http://www.riversideinfo.org/forum/ Discussion Forum for Riverside Illinois en Fri, 10 Feb 2012 05:45:22 +0000 spatny on "We are about to witness a failure of epic proportions..." http://www.riversideinfo.org/forum/topic/we-are-about-to-witness-a-failure-of-epic-proportions/page/38#post-8491 Wed, 01 Apr 2009 16:28:36 +0000 spatny 8491@http://www.riversideinfo.org/forum/ From Bloomberg: Roubini Says Stocks Will Drop as Banks Go ‘Belly Up’ (Update2) Share | Email | Print | A A A By Michael Patterson and Maithreyi Seetharaman March 26 (Bloomberg) -- U.S. stocks will fall and the government will nationalize more banks as the economy contracts through the end of 2009, said Nouriel Roubini, the New York University professor who predicted last year’s economic crisis. “The stock market is a bit ahead of the real macroeconomic and financial news,” Roubini, a professor at NYU’s Stern School of Business and the chairman of consulting firm Roubini Global Economics, said in an interview with Bloomberg Television in London today. “We’ll have some major banks going belly up that will need to be taken over.” The global equity rebound in March that sent the Standard & Poor’s 500 Index to its best monthly advance in 17 years is a “bear-market rally” and U.S. Treasury yields will “remain relatively low” as investors flock to the safest assets, Roubini said. Treasury Secretary Timothy Geithner’s new plan to remove toxic debt from financial companies won’t be enough for insolvent banks, he said. Roubini’s outlook contrasts with predictions this week from Templeton Asset Management Ltd.’s Mark Mobius and Traxis Partners LLC’s Barton Biggs, who said that equities are poised to rally as government efforts to revive the economy and banking system begin to work. Investors are “way too optimistic” about the prospects for a recovery in the economy and earnings, Roubini said. Stress Tests The S&P 500 surged 7.1 percent on March 23 after Geithner unveiled a plan to finance as much as $1 trillion in purchases of illiquid real-estate assets, using $75 billion to $100 billion of the Treasury’s remaining bank-rescue funds. The government is conducting stress tests of banks to determine how much more capital each will need. Roubini, who predicts loan and securities losses in the U.S. will reach $3.6 trillion, said the stress tests will reveal that some banks need to be taken over and have their good and bad assets separated before being sold to the private sector. He didn’t name which companies he thought would need to be rescued. Futures on the S&P 500 expiring in June advanced 1.2 percent to 818 as of 8:30 a.m. in New York. Critics of Geithner’s plan including Nobel laureate Paul Krugman, a professor at Princeton University, say the government should take over banks loaded with devalued assets, remove their top management, and dispose of the toxic securities. Sweden adopted the temporary nationalization approach in the 1990s. ‘Deflationary Forces’ “Some banks are going to have to be nationalized,” said Roubini. “It’s going to be bumpy ahead of us.” Geithner and Federal Reserve Chairman Ben S. Bernanke this week called for new powers to take over and wind down failing financial companies. They said the U.S. also needs stronger regulation to constrain the risks taken by firms that could endanger the financial system. With “deflationary forces” lingering for as long as three years, Roubini said U.S. government bond yields will remain low and American house prices will fall as much as 20 percent in the next 18 months. While the dollar will initially benefit as investors seek a safe haven in the U.S., the currency will ultimately drop as the nation’s trade deficit shrinks, he said. Roubini dismissed China’s call for the creation of a new international reserve currency as a “pie in the sky idea” that’s unlikely to gain traction any time soon. Mobius, Biggs China’s central bank Governor Zhou Xiaochuan this week urged the International Monetary Fund to expand the use of so- called Special Drawing Rights and move toward a “super- sovereign reserve currency.” Geithner sent the dollar tumbling yesterday by saying he would consider China’s idea, only to drive it back up by affirming that the greenback should remain the world’s reserve currency. “This was a political call and in a nut shell - it ain’t going to happen any time soon,” Roubini said. Mobius, who helps oversee about $20 billion of emerging- market assets as executive chairman at San Mateo, California- based Templeton, said March 23 the next “bull-market” rally has begun. Biggs, the former chief global strategist for Morgan Stanley who now runs New York-based hedge fund Traxis Partners, predicted the same day the S&P 500 may jump between 30 percent and 50 percent. The benchmark index for U.S. equities has surged 11 percent in March, poised for its biggest monthly gain since 1991. The MSCI Emerging Markets Index of equities in 23 developing nations is headed for the steepest monthly advance on record after rising 20 percent in March. To contact the reporters on this story: Michael Patterson in London at <a href="mailto:mpatterson10@bloomberg.net;">mpatterson10@bloomberg.net;</a> Maithreyi Seetharaman in London at <a href="mailto:mseetharaman@bloomberg.net">mseetharaman@bloomberg.net</a> spatny on "We are about to witness a failure of epic proportions..." http://www.riversideinfo.org/forum/topic/we-are-about-to-witness-a-failure-of-epic-proportions/page/38#post-8468 Tue, 31 Mar 2009 18:02:59 +0000 spatny 8468@http://www.riversideinfo.org/forum/ Something heard on NPR today: Barney Frank and Ted Koppel talking, and Koppel reminded everyone about what a trillion is: If you had opened a business on the day Christ was born, and religiously (my pun!) lost a million dollars every day, you would need to stay open for a thousand more years before you lost a trillion. There was also a lot of interesting stuff about how Bush was the first President to ever fight a war (Iraq will cost a trillion by the time we finish) without putting it on the budget and raising taxes to pay for it, and other little thngs that people tend to forget, if they ever knew it. Regarding Social Security, Koppel pointed out that the contract people feel they have with the government to receive that is no stronger than the one the AIG Execs have/had, and that the actuarial tables show that when the Baby Boomers start getting their benefits the ratio of earners/workers to receivers will get to 1.8 to 1. Everyone agreed that is not sustainable. Koppel said he thinks people here are really going to have to make a lifestyle adjustment. spatny on "We are about to witness a failure of epic proportions..." http://www.riversideinfo.org/forum/topic/we-are-about-to-witness-a-failure-of-epic-proportions/page/38#post-8445 Mon, 30 Mar 2009 11:09:59 +0000 spatny 8445@http://www.riversideinfo.org/forum/ From RGE Monitor - on the auto industry. <blockquote>The Detroit Three: GM's Wagoner Resigns as CEO in Order for GM to Get More Federal Funding Print Mar 30: The Obama administration pushed out the chairman of GM and instructed Chrysler to form a partnership with the Italian automaker Fiat within 30 days as conditions for receiving another much-needed round of government aid cont: The decision to ask GM’s CEO and Chairman, Rick Wagoner, to resign caught many by surprise, and it underscored the Obama administration’s determination to keep a tight rein on the companies it is bailing out — a level of government involvement in business perhaps not seen since the Great Depression. Details of the bailout will be announced by the President later today Mr. Obama’s auto industry task force, in a report released Sunday night assessing the viability of both companies and detailing the administration’s new plans for them, concluded that Chrysler could not survive as a stand-alone company (NYTimes) Mar 26: 7,500 of GM's UAW workers signed up for buyouts the company needs as part of cuts to keep $13.4bl in U.S. aid. The retirements and buyouts of 12% of GM’s union workforce open slots for the automaker to hire replacement workers for half the current union rate. Under the federal loans, labor costs must match those of Japanese automakers in the U.S. The company has trimmed about 60,500 jobs in three buyouts since 2005. The latest reduction may save GM about $948ml annually (Bloomberg) Mar 25: Nardelli --> This is a moment in time when I think we all have to face the reality that the system is broken, that we better all come to the party in a cooperative manner and get on with developing a solution. Because if we are not successful, the result could be cataclysmic. If Chrysler doesn't survive, I'm not sure there isn't a domino effect that will plague the entire country (BW) Mar 20: Rattner -->GM and Chrysler may need “considerably” more government aid than their request for as much as $21.6bl. U.S. aid sought could rise to $30bl or $40bl (Bloomberg) Mar 19: The U.S. government moved to stabilize the auto industry by creating a $5bl fund to support troubled parts suppliers. The program would guarantee payments to suppliers for products shipped to ailing car companies. The supplier fund is the first direct action taken by the special auto task force to prop up the auto industry. Altogether, the suppliers employ 500,000 workers in the U.S. (NYTimes) Mar 16: Nardelli -->I hope I’m wrong, but I don’t have a lot of confidence in today’s environment that we can emerge from bankruptcy. I just don’t see how it could be seen as a benefit to anyone. You’re talking about people putting down money for the second-biggest purchase they ever make and wondering if you’re going to be around (NYTimes) Mar 09: Union workers at Ford have agreed to sweeping cost-cutting changes in their labor contract. Although the concessions were substantial, the margin for contract ratification wasn't especially close. According to the UAW, 59% of production workers and 58% of skilled-trades workers voted for the agreement (WSJ) Mar 03: U.S. auto sales fell to 9.1 million in February 2009 (lowest rate since December 1981) from 15.4 million a year ago. GM and Ford reported sharp declines in light-vehicle sales as consumers with record-low confidence remained out of showrooms, extending a sales plunge that began in September 2008 and threatens the viability of multiple automakers. GM's sales fell 53%, Ford's sales dropped 48% Ford, which has so far sidestepped the need for federal assistance, also said Q2 NA production will be 38% below 2008 levels, reflecting efforts to pare inventory and keep output in line with the sales slump. The company's U.S. inventories are down 32% in light of the production cuts which have already taken place(WSJ) Feb 26: GM reported a $30.9bl annual loss, the second-biggest in its 100-year history. GM’s cumulative deficit ballooned to $82bl since the end of 2004, when it last had an annual profit. Full year sales fell 17%. Cash and cash equivalents totaled $14bl at the end of 2008, down from $27.3bl at the end of 2007. The company needs $11bl on hand to pay bills (Bloomberg) </blockquote> spatny on "We are about to witness a failure of epic proportions..." http://www.riversideinfo.org/forum/topic/we-are-about-to-witness-a-failure-of-epic-proportions/page/38#post-8444 Mon, 30 Mar 2009 11:03:19 +0000 spatny 8444@http://www.riversideinfo.org/forum/ An important interview with Nouriel Roubini - from Bloomberg <a href="http://www.bloomberg.com/avp/avp.htm?N=av&T=Roubini%20Says%20Geithner%20Plan%20Won%27t%20Stop%20Nationalizations&clipSRC=mms://media2.bloomberg.com/cache/v1pgho8sGPuU.asf" rel="nofollow">http://www.bloomberg.com/avp/avp.htm?N=av&T=Roubini%20Says%20Geithner%20Plan%20Won%27t%20Stop%20Nationalizations&clipSRC=mms://media2.bloomberg.com/cache/v1pgho8sGPuU.asf</a> idic5 on "We are about to witness a failure of epic proportions..." http://www.riversideinfo.org/forum/topic/we-are-about-to-witness-a-failure-of-epic-proportions/page/37#post-8252 Wed, 25 Mar 2009 16:40:38 +0000 idic5 8252@http://www.riversideinfo.org/forum/ Dark Knight and Joker view of The Bailout I . <a href="http://www.youtube.com/watch?v=R1X6RQLZtoA&feature=related" rel="nofollow">http://www.youtube.com/watch?v=R1X6RQLZtoA&feature=related</a> spatny on "We are about to witness a failure of epic proportions..." http://www.riversideinfo.org/forum/topic/we-are-about-to-witness-a-failure-of-epic-proportions/page/37#post-8225 Wed, 25 Mar 2009 10:28:43 +0000 spatny 8225@http://www.riversideinfo.org/forum/ From Roubini today... (RGE MONITOR) < Go To Nouriel Roubini's Global EconoMonitor Main Page It is time for a special insolvency regime for systemically important financial institutions (non-bank financial firms and bank holding companies) Nouriel Roubini | Mar 25, 2009 <blockquote>Finally after a year of delays Geithner and Bernanke have come to agree about the need for a new insolvency regime for systemically important financial institutions (bank holding companies and non bank financial institutions). This new insolvency regime will allow to take over in orderly way - rather than a disorderly bankruptcy like in the case of Lehman – insolvent systemically important financial institutions. Let me explain next why we need this special insolvency regime in order to orderly nationalize/takeover insolvent financial institutions and banks… This new conservatorship/receivership regime of insolvency could be similar to the one used to manage the orderly takeover of Fannie and Freddie. While banks have a receivership regime based on the FDIC taking over insolvent banks and working them out in a orderly way bank holding companies and non bank financial institutions do not have such conservatorship/receivership regime outside of Chapter 11 or Chapter 7 bankruptcy. That is why the government had to bail out the creditors of Bear Stearns and AIG and that is why the collapse of Lehman was disorderly; we need an orderly system to wind down systemically important financial institutions and bank holding companies as many assets and CDS and bonds of banks are at the holding company level rather than the bank level. Suppose the government were planning to nationalize a large bank -say for the sake of example Citigroup - that was to be deemed insolvent after the appropriate stress test. While the FDIC could then take over the bank the relevant bank holding company would not be under the FDIC receivership; it will instead go into a Chapter 11 or Chapter 7 bankruptcy; and the other non bank components of such large financial institutions – its broker dealer, insurance companies, etc. – would also end up into Chapter 11 bankruptcy. As we know Chapter 11 or 7 bankruptcy for systemically important non-banks and bank holding companies would be a mess: many of the assets and liabilities of a bank – say its CDS and unsecured debt – may be at the bank holding company level or in its non-bank broker dealer or insurance arm or other non-bank arms. And a Chapter 11 or 7 bankruptcy solution for the bank holding companies and the non-bank financial arms of the bank holding company would be a disorderly mess like the one experienced by Lehman. So in order to orderly take over large systemically important banks the FDIC receivership model works only for the bank leg of the bank; it does not work for the bank holding company or for its non-bank financial arms. And certainly FDIC receivership does not apply to independent broker dealers and other non-bank financial institutions for which a disorderly in court bankruptcy is the only option. An orderly wind-down of Bears Stearns or Lehman or AIG would have required a special receivership/conservatorship as Chapter 11 or 7 would have pushed into automatic default unsecured debt of these institutions and triggered a mess with the CDS of these institutions. That is why – to avoid a disorderly in court bankruptcy – the government decided to bail out - at a huge cost to the taxpayers - the creditors/counterparties Bear Stearns and AIG; and when it decided not to bail out the creditors of Lehman a global financial meltdown followed the bankruptcy of Lehman. This is also the reason why the government has been so far wary of nationalizing large systemically important banks: the bank arm of a large complex banking institution could be orderly worked out in a FDIC receivership but its bank holding company and its non-bank financial arms would end up into formal Chapter 7 or 11 bankruptcy and would cause – like in the Lehman case – a disorderly workout where all the unsecured debt ends up into automatic default and the ability to work out orderly CDS and other derivative instruments held by the bank holding company and the non-bank financial arms of the bank holding companies is compromised. A special insolvency regime – instead – allows to have the time to figure out whether the unsecured debt of the institutions should be worked out and how it should be worked out; it also allows a more orderly workout of CDS and other credit derivatives issued by the financial institution. Thus, the signal given yesterday by Bernanke and Geithner – of support of a special insolvency regime for systemically important non-bank financial institutions – is very important as it will allow the orderly takeover/nationalization of large banks and the same orderly takeover of non-bank financial institutions. Thus it is high time to pass legislation allowing this special insolvency regime to allow an orderly nationalization of large insolvent banks and the orderly wind-down of insolvent financial institution. If such insolvency regime had been in place a year ago the expensive bailout of the creditors/counterparties of Bear Stearns and AIG could have been avoided and the disorderly collapse of Lehman would have also been prevented. Similarly today – as soon as the stress test are done – some large and systemically important banks (and their holding companies and non-bank financial arms) will have to be taken over. To do it orderly we absolutely need a special insolvency regime like the one we have for the bank arms of bank holding companies and like the one we had for Fannie and Freddie. So to orderly nationalize/takeover large insolvent banks and minimize the fiscal costs and financial collateral damage and systemic risk of this takeover we need to pass such legislation now. The time for Congress to act is now</blockquote> Did anyone see FRONTLINE last night? What did you think? spatny on "We are about to witness a failure of epic proportions..." http://www.riversideinfo.org/forum/topic/we-are-about-to-witness-a-failure-of-epic-proportions/page/37#post-8207 Tue, 24 Mar 2009 19:56:11 +0000 spatny 8207@http://www.riversideinfo.org/forum/ As stated above, I just put this here so those interested/effected can read it. I'm not selling anything - just offering the insights of the guy that has been right so far... From RGE MOnitor. New York Times Deal Book: Dr. Doom Finds Promise in Obama’s Toxic-Asset Plan PrintShare Nouriel Roubini | Mar 24, 2009 From the New York Times Deal Book: Dr. Doom Finds Promise in Obama’s Toxic-Asset Plan March 24, 2009, 6:23 pm “Nouriel Roubini, a/k/a “Dr. Doom,” is giving the Obama administration’s new plan to buy toxic assets the thumbs up” That may be surprising given how critical Mr. Roubini, the bearish economics professor at New York University, has been in the past regarding various government plans to fix the economy. But Mr. Roubini seems to have seen something he liked for a change. “My take is generally positive, with a couple of caveats,” Mr. Roubini told DealBook about the new plan. He said he liked that the government was finally stepping up to clear the toxic assets off the bank’s balance sheet and that private capital would come in to make a market for it. “Having five people bid on a toxic asset, rather than a clueless government, will ensure that the government doesn’t overpay,” Mr. Roubini said in a telephone interview. “People say, ‘the government is putting in 95 cents on the dollar, so why not put 100,’ to do it all by itself. It’s because private-sector participants have the incentive to get the best price.” It wasn’t all positive: Mr. Roubini said he did not like that banks have the option not to sell an asset after the auction concludes, as this would create confusion and frustration on the part of the buyers. He also believes the government should use its leverage over the banks to force them to participate, whether they want to or not. In an opinion piece scheduled to be published Wednesday in The Daily News of New York, Mr. Roubini and a fellow N.Y.U. professor, Matthew Richardson, argued that “the reason that financial institutions should be “pressured” into participating is because that “they are the cause of the financial crisis.” “They took advantage of loopholes to avoid regulatory requirements, taking a huge bet on securities they were never meant to hold in the first place,” the two professors wrote. But unlike many critics of the plan, like Paul Krugman, a Princeton economic professor and columnist for The New York Times, who prefers full nationalization of the banks now, Mr. Roubini believes that the Treasury’s plan does not preclude nationalization at all. Rather, he said, it will help to clear the way to full government takeover some troubled institutions. “I see the option of nationalization” and the one presented by the Obama administration “as being complementary,” Mr. Roubini said. He believes that the stress tests the government plans on conducting on the banks will reveal which are solvent and which are insolvent. In his view, those banks that are deemed insolvent will not participate in the toxic-asset plan and will be taken over by the government. Banks deemed solvent will be the ones that get to participate. Nationalization “is fully on the table for banks that are insolvent,” Mr. Roubini said. He cited Tuesday’s Congressional testimony by the Federal Reserve chairman, Ben S. Bernanke, and Treasury Secretary Timothy F. Geithner. “The most important thing is what Bernanke and Geithner said today about the need for an insolvency regime for systemically important institutions,” Mr. Roubini said. “You are going to need that not just for the A.I.G.’s of the world, but also the bank holding companies as they go into Chapter 11.” He added, “You are going to need that in shutting down, potentially, a bank like Citigroup.” –Cyrus Sanati So to clarify my view point: I see the Geithner plan as being relevant to banks that are solvent. For those that are found - after stress tests - to be insolvent I see as the proper solution to nationalize them and clean them up to prepare them for reprivatization. The stress test should do a triage between banks that are illiquid and undercapitalized but solvent given the provision of capital and liquidity and those that, under a reasonable stress scenario are effectively insolvent. Those that are insolvent should be nationalized. Those that are solvent will still have many toxic assets that need to be disposed of; and the Geithner plan provides a way to properly dispose of the toxic assets of solvent banks. So my partial support of the Geithner plan - with all the appropriate caveats - is consistent with the complementary idea of nationalizing the insolvent financial institutions. The bad assets of insolvent banks that are nationalized could be separated from the good assets and then worked out by the government; or they could be sold to private investors through an auction mechanism along the lines of the Geithner plan; or they could be sold - together with the good assets - to the investors purchasing a privatized bank that was temporarily privatized (along the lines of the Indy Mac deal where the investors purchasing the bank received a government guarantee on the bad assets after a first loss). idic5 on "We are about to witness a failure of epic proportions..." http://www.riversideinfo.org/forum/topic/we-are-about-to-witness-a-failure-of-epic-proportions/page/37#post-8198 Tue, 24 Mar 2009 13:18:48 +0000 idic5 8198@http://www.riversideinfo.org/forum/ I saw this in the Sunday suntimes - just getting around to it - and Mr Roeder puts the AIG debacle into some prospective. One point of this insight is an attempt to answer why and how the masses of people can be ...hoodwinked, or as I put it in another post in this same thread, 'asleep'+; almost like a magician and sleight of hand, we ('masses') look at one place on the stage while the trick , or in this case, the *bigger* crime, is occurring. The bigger crime is not just giving bounuses...but... (see this whole blanking thread). <a href="http://www.suntimes.com/business/roeder/1488870,CST-FIN-curious22.article" rel="nofollow">http://www.suntimes.com/business/roeder/1488870,CST-FIN-curious22.article</a> <blockquote>Wall Street wins, grins THE CURIOUS INVESTOR | AIG bonus fiasco pales in comparison to Goldman, Fannie March 22, 2009 BY DAVID ROEDER Sun-Times Columnist And the Wall Street plot thickens . . . Last week, Americans were treated to the colorful but meaningless spectacle of Congress fulminating over executive bonuses at American International Group (AIG). It was a perfect Washington scandal, focusing anger on a tiny issue and letting Congress vow solemnly to get that $165 million back, all the while distracting attention from the greater larceny in how the $182 billion in AIG bailouts was doled out. The top recipient? Goldman Sachs Group (GS), cradle of Henry Paulson, the former Treasury secretary who conceived the big-bank handouts. It received $12.9 billion for its AIG exposure, which is in addition to the $10 billion it already was allotted under Paulson's Troubled Assets Relief Program. That $10 billion was money Goldman said in February it wanted to return. No wonder. It was getting federal cash via AIG that it didn't need. Goldman's chief financial officer said so Friday. David Viniar said Goldman was "fully hedged" in its contracts with AIG and would not have sustained a loss even if the insurance giant failed. So confident was Goldman of its position that it rejected AIG's offer of a partial settlement, Viniar said. But it's not rejecting that $12.9 billion from you and me. » Click to enlarge image David Roeder If it's bonuses that upset you, consider that Fannie Mae's chief executive wants so much to hand out $1 million bonuses to select executives that he warned that congressional interference in the matter would undermine the housing market. Yes, these executives' loyalty must be bought so they can unwind the mess they helped create. These bonuses ought to be described as extortion. Does anyone else get the feeling that not only is the treasury being ripped off, but the thieves are laughing at us? ... </blockquote> . . . + <a href="http://www.riversideinfo.org/forum/topic/we-are-about-to-witness-a-failure-of-epic-proportions/page/34#post-7973" rel="nofollow">http://www.riversideinfo.org/forum/topic/we-are-about-to-witness-a-failure-of-epic-proportions/page/34#post-7973</a> spatny on "We are about to witness a failure of epic proportions..." http://www.riversideinfo.org/forum/topic/we-are-about-to-witness-a-failure-of-epic-proportions/page/37#post-8194 Mon, 23 Mar 2009 17:00:04 +0000 spatny 8194@http://www.riversideinfo.org/forum/ No point - just information. Fred on "We are about to witness a failure of epic proportions..." http://www.riversideinfo.org/forum/topic/we-are-about-to-witness-a-failure-of-epic-proportions/page/37#post-8192 Mon, 23 Mar 2009 15:45:11 +0000 Fred 8192@http://www.riversideinfo.org/forum/ Other than schadenfreude, what's your point?