Economics business.The Sub-prime Crisis. How bad is it?

[Michaelangelica]

I just did a little search on sub prime loans to see what my least favourite bank was up to -Citibank.

While I was doing that a dozen adds came up touting for sub-prime loan business.

Does this seem strange to you?

 

Citibank has a new CEO.

I wonder how much money the last one lost and how much his golden parachute will be?(Lost- $5.9 billion in the third quarter, and potentially $8 billion to $11 billion to come-NYT)

 

Citigroup: Bankrupting Democracy

 

http://www.nytimes.com/2007/11/05/business/05place.html

 

Citigroup Inc. News - The New York Times

 

Blacks dominate subprime loans | ajc.com

 

You would have thought that Citibank would have been 'out of the woods" after firing their CEO and re-positioning themselves last year.

See old post above.

Now we discover that a third of a trillion US$ is going NOW to bail them out!

 

US steps in to save Citigroup with $US300bn backing

Staff reporters, The Wall Street Journal | November 24, 2008

Article from: The Wall Street Journal

 

THE US Government has agreed to take unprecedented steps to stabilise Citigroup by guaranteeing close to $US300 billion ($475.3 billion) in troubled assets weighing on the bank's books, according to people familiar with details of the plan.

US steps in to save Citigroup with $US300bn backing | The Australian

This is the problem with estimating "how bad" this whole fiasco is.

Surprises (Massive ones) keep coming out of the wood work!

[LaurieAG]

You would have thought that Citibank would have been 'out of the woods" after firing their CEO and re-positioning themselves last year.

 

Hi Michaelangelica,

 

It's not surprising considering the latest deals they have been flooding the Australian cable networks etc with.

 

If Citibank charges you interest of 2.9% on balance transfers for 18 months or charges you 3.9% on balance transfers for the life of the transfer, and you already pay 18% on the balances you would transfer then how does Citibank make any money if you pay off your transferred balance?

 

Citibank effectively gives you 18-2.9 or 3.9 = 15 or 14 %, and if you are prudent they won't make a profit. Citibank can only make a profit on the deal if you spend extra or don't pay down the debt.

[Michaelangelica]

citibank charge me 19%

I have another name for them that rhymes with city, (merde in French)

 

a lot of oz companies are having trouble refinacing ongoing bank loans at the moment; especially resources/mining companies.

 

This is despite the 5 major banks having a huge inflow of funds due to the Government guaranteeing all their deposits.

Other mortgage/mutual? funds have frozen withdrawals although they are still paying dividends.

Next week all aged and invalid pensioners get $1,400 from Uncle Rudd to spend on Chinese-made Christmas presents . In this area that is nearly 50% of the population. (50% includes ex-Forces too-don't think they get the Chrissy Bonus.). Most pensioners are doing it tough with high dental and medicine costs.

 

The Fedral government is spending money like water to stimulate the economy and is expecting to go into deficit next year. (Good old Keynes-lets hope he is right this time round.)

House prices are falling; again huge government grants ($20,000+) for first time, new-home buyers; especially in Tasmania.

(-A great place to live, if you are self-employed. (The "Testicles of of Australia" according to R. Flannigan; injecting creativity into the rest of Oz.

- Very cold Mediterranean Climate- like the South of France)

Tassies Very P*ssed as they were left off the "Australia" movie promotional material.)

[Michaelangelica]

Arrogant banks should not keep investors in the dark

Ian Verrender

December 20, 2008

 

Page 1 of 2 Single page view

 

These are desperate times, and desperate times call for desperate measures. Australian taxpayers now underwrite the loans raised by our big banks, courtesy of the Federal Government guarantee on borrowings. The competition regulator has been warned off from stymieing the massive grab for market share now under way by our financial institutions. And in recent months, the green light has been given to our banks to gouge customers by charging an ever greater margin above official loan rates.

 

All has been done in the name of protecting our financial system, of ensuring we do not succumb to the forces ravaging global markets.

 

But those measures have the potential to incur great costs, and in ways that most of us will realise only when it is too late.

 

For much of this year, Australians believed that, once again, we were the lucky country. We had better regulations. We had more responsible banks. We had an export-driven economy based on the unassailable rise of the developing world on our doorstep.

Arrogant banks should not keep investors in the dark

 

The Australian Federal Government has guaranteed all bank deposits.

So there has been a rush of money/capital into the few Australian major banks' coffers.

One of the biggest beneficiaries is the CBA (Commonwealth (sic) Bank of Australia)

Recently the Australian Stock Exchange asked them why they had not declared their bad debts.

"O, we didn't think it was relevant" was the ingenuous, dissembling reply.

[LaurieAG]

The Australian Federal Government has guaranteed all bank deposits.

 

Hi MA, Merry Xmas,

 

The Australian has revealed that the banks raked in 22.5 billion in fees and charges up to July this year. When I was studying Maths of Finance in 1991 fees and charges were just starting to be introduced. It has taken just 17 years before this parallel compounding financial leech has grown fat and bloated off our societies basic needs.

 

Where's a left wing govt when you need it, like the USA's, not one that gives with one hand and gouges multiple times with the other.

[Michaelangelica]

Not many of us lefties left.:)

25% Union Membership!

No one remembers their history.

 

The bare-faced brazenness of the CBA was breathtaking!

I have yet to have a pleasant experience with that bank.

[Michaelangelica]

[freeztar]

How much longer can the USA continue printing paepr money?

 

As long as Canada keeps sending us pulp?

[Michaelangelica]

Australian dollar higher at noon after Wall Street gains

 

AAP

 

January 16, 2009 12:28pm

 

 

* Share

 

THE dollar was firmer at noon as a late rebound on Wall Street boosted Asian equity markets, helping high-yielding currencies.

 

But the local currency was expected to come under pressure this afternoon if regional share markets lost momentum.

 

At 12.00pm (AEDT), the dollar was trading at $US0.6663/67, up 1 per cent from yesterday's close of $US0.6597/02.

 

The dollar stood at $US0.6666 when it opened at 07.00am AEDT, with a late turnaround on Wall Street helping risk appetite.

 

After a session of heavy losses, New York's Dow Jones industrial average index finished up 0.15 per cent to 8212.49, as investors reacted to news the US Congress had passed a $US825 billion ($A1.25 trillion) economic stimulus plan.

 

The dollar then fell to a daily low of $US0.6624 within the first two hours of local trade before rising to high of 0.6691 one hour later as Asian share markets rallied.

 

Easy Forex senior dealer Francisco Solar said a 1 per cent rally on Japan's Nikkei index this morning helped high-yielding currencies such as the Australian dollar.

 

"It does add to the sentiment, which does help high yielders like the Aussie and Kiwi (dollars) pare back losses of late,'' he said.

 

Mr Solar said the dollar was in danger of falling back to $US0.6600 this afternoon if a late turnaround in Asian share markets pulled down the currency.

 

With commodity prices falling and investors worried about the US banking sector, based on speculation Citigroup may have to be nationalised, the fundamentals for risk appetite are shaky.

 

"It looks like the markets are reverting back to fundamentals and the fundamentals aren't positive,'' Mr Solar said, adding a global economic recovery may not begin until 2010.

Australian dollar higher at noon after Wall Street gains | Markets | News.com.au

[Michaelangelica]

"When stands the Banks of England,

England stands.

When falls the Banks of England,

England falls."

 

 

"It's my tuppence"

 

From "Mary Poppins" the film

 

:confused:

[Michaelangelica]

Stay Put

"Stay Put" and When the Sheriff Comes, Tell Him to "Show Me the Paper." [Video]

 

There are a lot of houses inforeclosure where: 1. The paperwork can't be found 2. No one is able to figure out who actually owns the loan because it's been sold, resold, packaged and repackaged so often. [Oooops!]

Stay Put

Video

CITI'S SKY-HIGH ARROGANCE

Just weeks after Citigroup averted total collapse with a $45 billion shot in the arm of taxpayer cash, the bank jetted its former CEO and his family on one of its corporate jets to a posh Mexican resort for New Year's, The Post has learned.

 

Sandy Weill, 75, hopped aboard the tanking bank's Bombardier BD 700 Global Express on Dec. 26 with his wife, Joan, daughter Jessica, her husband and their children. They flew from Westchester County Airport to the Los Cabos shore region in sunny Baja, according to aviation records and sources familiar with the trip.

 

The holiday jaunt came the same week that Citigroup - which lost $28.2 billion over the last five quarters and cut 75,000 jobs globally in 2008 - agreed to curtail runaway corporate expenses as part of a deal to get the massive influx of federal money.

CITI'S SKY-HIGH ARROGANCE - New York Post

[Michaelangelica]

In finance, leverage (or gearing) is borrowing money to supplement existing funds for investment in such a way that the potential positive or negative outcome is magnified and/or enhanced

-Wiki

 

The way i see it Man A has a mortgage with Company B

Company B leverages this asset maybe 6-20 times and buys shares and makes money

Company B sells man A and a few others mortgage assets to Company C they leverage this 6-20 times and then sell on the mortgage packet to company D and so on ad infinitum to thousands, millions of banks, mutual funds and Australian Local Councils (who should be spending the money not investing it)

So on it goes, though the alphabet to Z or Zee if you are Yank.

Everyone is very happy. The market seems to be heading for the stratosphere and why wouldn't it as everyone is buying stock with money they don't have-- leveraged against an asset that they have since sold

This works wonderfully

Corporations, shareholders make heaps of money and reward their CEOs with obscenely high saalries and perks.

China can't keep up the demand for consumer goods for Wal Mart et al.

Australia can't ship 'dug-up-stuff' fast enough to get it to China

 

Then the market falls.

No problem, the stock market, brokers banks say your shares aren't worth as much now I need you to give us more money, this happens #1 everyone is still happy.

Then the market falls again.

the stock market, brokers banks say your shares aren't worth as much now I need you to give us more money, this happens #2 everyone is still happy

Then the market falls.

The stock market, brokers banks say your shares aren't worth as much now I need you to give us more money, this happens #3 but a few small companies go broke everyone is still happy

Then the market falls.

The stock market, brokers banks say your shares aren't worth as much now I need you to give us more money, this happens #4 a lot more companies go broke everyone is still happy but a little nervous

Then the market falls-again

brokers banks say your shares aren't worth as much now I need you to give us more money, this happens #5 a couple of big banks and corporations are in trouble the government bails them out a few CEOs fall on their swords/golden parachutes, everyone is relieved if not overly happy.

 

Reporting season comes. A lot of companies have a lot of bad debts and are in a lot of trouble. Government bailouts happen across the globe. Sane Governments like the Brits nationalise (get something for their money) This can't happen in the protestant USA as socialism =evil, will sapping, anti-Christian, COMMUNISM.

The stock market starts a steady slide, brokers banks say your shares aren't worth as much now I need you to give us more money, no money left.

 

The stock market really stars a free fall there is panic, brokers banks say your shares aren't worth as much now I need you to give us more money, lots of people go broke. The banks grab all the money they can and lock it up. Very few people are happy. The banks won't lend; In fact the banking system is broken.

 

Now if you reflect on this, the $54BILLION (over 4% of Aust.'s GDP in a good year) lost by the Scottish Bank, this was leveraged about 18 times. So these 'masters of capitalism' had actually created lots, and lots, and lots, of money based on nothing, except perhaps misplaced trust and belief in the system, -with a good dolop of the 'Old Boys Club" or 'Old School Tie' or in London the amorphous unnamed "The City".

You would think people would have learned from Bond's collapse when The City in London decided this upstart house-painter from the colonies could not join their club. What Bond did, the The world's best banks have been doing in spades for years. Bond went to jail. Will they?

No one has enough money to do all the "bailing out" necessary.

That amount of money does not exist. It is an illusion , paper

As Rudd said some Banks will have to be let fail. Yes they will. We should know in about 4-6 months how bad this is (yes we are no where near the bottom yet-- still a lot of company reports to come in). fortunately the States has all its debts in its own $s so it can just print more paper. So far China has not stopped buying this paper (You and I would call it a loan, based on the mutual trust and co-dependence of two friends or a married couple.)??

 

Now, assume, I have just invented a solar panel that costs me a $1 to make. It produces 1,000 Kws of energy. Delighted I go to the bank to set up a factory to make and business to sell these . I can employ millions as demand for my product will be limitless. The bank says "No way Hose".

"We have it all locked up we can't trust anyone these days. Our CEO- Scrooge Mac Duck- is using it as swimming pool."

 

More unemployment less spending fear happens. The banking system just collapses. The Reserve/Federal banks reduces the cost of money to help them along ( 3.5% in Oz; 0.25% in Japan) but the Banks lend it at 7- 9-12-19%. "We have to have money for our shareholders1", they say. "We have so many bad debts as no-one is buying anything, so we have to foreclose on all these businesses!"

 

Keynesian stimulus packets are tried, but have limited success, even the best governments haven't got THAT much money.

 

The banking and financial systems and Economics are broken. Can they be fixed?

 

Surviving

make a garden, If you have money buy a gold brick or a silver ingot and bury it in the garden, barter and swap. Don't take crap from bankers lawyers or the sheriff.

 

Global World Economic Crisis Study Guide 101.

by MA

[REASON]

Here's a link to a new report called Sold Out: How Wall Street And Washington Betrayed America

 

It's an indepth investigative report into the financial crisis we are currently experiencing that looks back over the past decade and beyond at the efforts of giant Wall Street firms to press for the deregulation of key financial markets through lobbying practices and campaign contributions of lawmakers.

 

Here is the Table of Contents to wet your appetite for information:

 

Table of Contents

Introduction: A Call to Arms, by Harvey Rosenfield ..……………. 6

Executive Summary ………………………………………………... 14

Part I: 12 Deregulatory Steps to Financial Meltdown ....................... 21

1. Repeal of the Glass-Steagall Act and the Rise of the Culture of ………….. 22

Recklessness

2. Hiding Liabilities: Off-Balance Sheet Accounting ………………………… 33

3. The Executive Branch Rejects Financial Derivative Regulation ………….. 39

4. Congress Blocks Financial Derivative Regulation ………………………… 47

5. The SEC’s Voluntary Regulation Regime for Investment Banks …………. 50

6. Bank Self-Regulation Goes Global: Preparing to Repeat the Meltdown? … 54

7. Failure to Prevent Predatory Lending ……………………………………… 58

8. Federal Preemption of State Consumer Protection Laws ………………….. 67

9. Escaping Accountability: Assignee Liability ……………………………… 73

10. Fannie and Freddie Enter the Subprime Market …………………………… 80

11. Merger Mania ……………………………………………………………… 87

12. Rampant Conflicts of Interest: Credit Ratings Firms’ Failure …………….. 93

Part II: Wall Street’s Washington Investment ..……………………. 98

Conclusion and Recommendations:

Principles for a New Financial Regulatory Architecture ..……... 109

Appendix: Leading Financial Firm Profiles of Campaign

Contributions and Lobbying Expenditures ...…………………… 115

 

 

To me, this is the type of non-partisan report, with it's references, recommendations, and appendices, we should be looking to as we try and understand what has brought about the economic conditions we are facing. Unless we are able to properly understand them, we will continue to be unable to avoid these problems over future generations.

[Michaelangelica]

The final word?

 

[LaurieAG]

I'm glad that the US govt intends to seriously regulate derivatives.

 

Especially since todays paper said there were hundreds of trillions of them on the global financial system.

[Michaelangelica]

I'm glad that the US govt intends to seriously regulate derivatives.

 

Especially since todays paper said there were hundreds of trillions of them on the global financial system.

just as well they can just keep the printing presses going

can you buy shares in the paper Company that supplies the USA treasury?

Another final word?

 

[LaurieAG]

Hi Michaelangelic,

 

When they regulate them they'll find out that much of it is a gimme that can be manipulated to minimise the 'risk' (by corrupting the system). There will be a big fight, we probably won't be aware of it, about whether to put these sick little puppys to sleep for their (and ours and the systems) own good or whether the terrible forces generated (greed probably the largest) can be harnessed for the greater good (by those with a vested interest).

 

Unfortunately LTCM and the investment backs that bailed it out are all gone now, in just ten years their puppies turned into much larger monsters, the next time we won't be so lucky, if we ever let this logical progression continue any further.

 

I read last week that US economists predict that things will start getting better around August. When the dot com bubble burst they were just deciding that two consecutive quarters of negative growth don't define a recession. I also read that tent citys are starting to form outside US cities. The tent cities will be a good benchmark for the problem at hand although further socialist interventions may modify these observations.

 

The Australian banking solution should also be seen for what it is before global politicians become desperate for a real solution. Allowing userous fees and charges (their profits are very similar to what they rake in out of our pockets regardless of interest) to forestall the inevitable would surely guarantee that a much more global socialistic system would have to be adopted to compensate for the human misery generated.

 

You too can live in a world like mine where the state politicians are going to remove our 8.5 cent per liter petrol subsidy. Brilliant, we'll only be paying 8.5 cents per liter more than every other Australian pays for theirs.