Joined: Mar 12, 2007 Posts: 890 Location: As close as I can get to the beginning of the pipe.
Posted: Wed Mar 19, 2008 10:54 pm Post subject: Re: Housing & Economic Collapse - In Progress
threadbear wrote:
Interesting article about why and who is responsible for the Spitzer affair
Add this one, about Cuomo taking over from Spitzer, and the Martin Act.
Quote:
" Mr. Spitzer used his enforcement powers under the Martin Act to take on big financial industry players, such as Merrill Lynch, to obtain eventual settlements because of their involvement with various securities frauds.[21] Some of the powers afforded to the AG under the Martin Act include authorizing the AG to commence an investigation on the basis of suspected "fraudulent practices" related to "the advertisement, investment advice, purchase or sale" of securities within New York state.[22] Moreover, the definition of "fraudulent practices" is much broader than the definition under federal securities laws[23]; the former definition encompasses, "devices, schemes, artifices, fictitious or pretended purchases or sales of securities or commodities, deceptions, misrepresentations, concealments, suppressions, frauds, false pretenses, false promises, practices, transactions and courses of business..."[24] ...
It is unclear whether the most recent subpoenas issued by the NY AG's office to several Wall Street firms relate to either criminal or civil matters.[29] Nevertheless, subpoenaed firms including Bear Stearns Cos., Deutsche Bank AG, Morgan Stanley, Merrill Lynch & Co., and Lehman Brothers[30], face an AG's office that is empowered under the Martin Act with strong investigative and evidentiary compulsion powers. For instance, in a procedure known as a "Martin Act hearing", the AG can "subpoena witnesses, examine them under oath, and compel the production of any relevant documents...[and] failure to comply with a Martin Act subpoena constitutes a misdemeanor."[31] Further, if for instance Merrill fails to comply with the subpoena, it "constitutes prima facie proof that the defendant has engaged in the suspected fraudulent activities and, standing alone, can provide the basis for a permanent injunction order."[32]
Wall Street doubtless knows the Martin Act practices and procedures all too well after seven years with Eliot Spitzer at the helm. More specifically, the Street firms are pointedly aware of the broad scope and investigative authority provided to the attorney general's office. However, with Spitzer now gone and a new high-profile controversy embroiling Wall Street (this time involving subprime debt collateralization), it will be interesting to see how NY Attorney General Cuomo uses his Martin Act powers to ferret out cases of securities fraud."
IBLJ-Release the Hounds _________________ "For my part, whatever anguish of spirit it may cost, I am willing to know the whole truth; to know the worst and provide for it." --Patrick Henry
Credit Suisse has said its 2007 profits were lower than first reported and said it is unlikely to be profitable in the first quarter of this financial year.
The Swiss bank partly blames its problems on "intentional misconduct" by some of its former traders. They are suspected of inflating the value of investments in products linked to the US sub-prime mortgage market.
_________________ We should teach our children the 4-Rs: Reduce, Reuse, Recycle and Rejoice.
Posted: Thu Mar 20, 2008 5:08 am Post subject: Re: Housing & Economic Collapse - In Progress
This is the easiest to understand summary I've found. From Ticker Forum:
Quote:
"I think it is helpful to distinguish financial activity and economic activity. The 2 are joined at the hip but can diverge.
Throughout history we have had many financial panics and many economic recessions. I contend the Great Depression was both a financial panic and economic recession. The simultaneous occurrence made the 'Great' adjective necessary.
Economic contraction without financial panic can be bad, but is typical. We are used to a slowing economy without financial panic. We recover from such relatively easily. Most economists continue to assume will recover quickly this time.
1987 was a financial panic without economic recession - again we recovered quickly.
After 1929 investors repeatedly fell for bear traps because they assumed the financial panic was over and the economy was not the issue.
In recent years we have seen the FED deal with economic events by deftly soothing any brewing financial panics. The downside to this is the Law of Unintended Consequences. By never allowing some financial panic to adjust risk premiums we created a massive financial bubble.
The Greenspan put has led to a false sense of perpetual calm that has led to insane financial speculation.
Since the summer, despite the System's best efforts, we have seen serious financial panic. Panic has not crashed the stock market only because the System has made equities - especially the Dow - the line that panic must not cross. The System believes the Fubared response to 1929 is what caused the economic problems that followed, so the system focuses on stocks.
By intervening to support equities, capital flows are diverted from the credit markets. However, the gummed up credit markets need money to flow OUT of equities.
The economy grows on the back of credit. Credit has dried up. Every time precious capital chases the Dow higher the credit markets get a bit more parched.
People need to say "screw stocks" not "stocks are the place to put my money".
We are facing another Great Depression because we are reaping a long delayed panic that may collapse an already slowing economy. "
Even a newb like me can understand that! _________________ Local fix-it guy..
Joined: Oct 23, 2004 Posts: 5515 Location: New Jersey
Posted: Thu Mar 20, 2008 7:50 am Post subject: Re: Housing & Economic Collapse - In Progress
Europe continues to help bail out the US credit collapse:
Quote:
European Central Banks Pump Funds Into Money Markets
By JOELLEN PERRY
March 20, 2008 7:39 a.m.
FRANKFURT -- European central banks flooded the financial system with extra funds in response to proliferating signs of uneasiness in the markets as Germany's early credit-market casualty IKB Deutsche Industriebank received yet another shot of capital.
With rumors about banks' creditworthiness proliferating amid nervous markets and banks hoarding cash ahead of the long holiday weekend and the coming end of the quarter, the European Central Bank pumped an extra €15 billion in five-day funds into euro-zone money markets to tide financial institutions over until Tuesday. Today's sum comes atop the extra €25 billion in weekly loans the ECB offered earlier this week.
The Bank of England, meanwhile, extended the extra £5 billion it loaned to U.K. financial institutions Monday, saying the extra funds would stay on offer until April 9, the day before the central bank's next interest-rate decision.
Joined: Oct 23, 2004 Posts: 5515 Location: New Jersey
Posted: Thu Mar 20, 2008 8:54 am Post subject: Re: Housing & Economic Collapse - In Progress
I predicted the fall of Thornburg but it appears that it will be temporarily saved by issuing lots of stock for as low as 75 cents a share.
Quote:
Thornburg: $1B Or Bust
Carl Gutierrez, 03.19.08, 8:15 PM ET
Brother, can you spare 9,480,000,000 dimes? Thornburg Mortgage is looking for nearly $1 billion to stay in business.
On Wednesday, shares of Thornburg dropped 49.7%, or $1.48, to close at $1.50, after the mortgage company announced it needed to raise a minimum of $948 million in new capital over the next week in order to alter terms of reverse repurchase agreements with five lenders. Essentially, the company is trying to keep its creditors at bay and keep itself out of bankruptcy.
The capital, to be raised via a convertible bond issue, would lead to investors in those securities owning 27% of the company, a serious level of dilution for existing shareholders who have seen most of their holdings evaporate. Last year, the stock traded above $27 before the subprime mortgage crisis began affecting it.
Posted: Thu Mar 20, 2008 11:16 am Post subject: Re: Housing & Economic Collapse - In Progress
Eli,
Oh, I've been out of anything paper since last July, except for cash. What I'm wondering is, how long does it take to trickle down to local banks being hurt, depending on their exposure, of course?
Two weeks ago, our household bank changed it's name, then last week their website quit working for a couple days. All fine when I cashed a check a couple days later, though. But SOMETHING was rotten there! My guess is, they did a quiet merger with somebody to save their bacon. Don't have much in banks, just operating money, but I think I'll trim that to the bone now.
Take the excess and go get more grain storage barrels, welding gas, grease, oil, toilet paper, beans and bacon. _________________ Local fix-it guy..
Posted: Thu Mar 20, 2008 11:26 am Post subject: Re: Housing & Economic Collapse - In Progress
threadbear wrote:
Quote:
Interesting article about why and who is responsible for the Spitzer affair
There is more to this than meets the eye. Who would care if Spitzer is banging some little honey on the side? With JP6 having a memory retention span (thanks to mass media effects) of about 12 minutes, or less, everyone would forget this little affair in about two days. They have got something much, much bigger than this hanging over his head. Say, like a 10,000 lb safe!
Yeah Eli,
This is what's called having the wheels come off, roll down the street ahead of you, smash into a house and cut the gas line, burn the house down, which starts the whole block on fire.
Quote:
shares and bonds plunged after the largest independent U.S. commercial finance company fell victim to the freeze in short-term debt markets.
The company drew on its $7.3 billion of emergency credit lines today after credit-rating downgrades left it unable to finance itself with commercial paper, or debt due in nine months or less. _________________ Quis custodiet ipsos custodes.
Posted: Thu Mar 20, 2008 1:51 pm Post subject: Re: Housing & Economic Collapse - In Progress
Meanwhile in the UK the smaller mortgage companies (building societies) are getting swamped with requests for new loans, leading to some greater restricts on borrowing. (See BBC report)
Quote:
"The smaller building societies which have a very prudent business model and which are not raising money from the wholesale markets can find a load of business suddenly coming their way at an hour's notice."
...
The Council of Mortgage Lenders has already warned that the "mortgage tap" could be turned off this year.
...
The economics consultancy Capital Economics - which has long argued that the housing market in the UK was a bubble waiting to burst - warned that the drying up of funds might lead to a downward spiral of falling house prices this year.
_________________ We should teach our children the 4-Rs: Reduce, Reuse, Recycle and Rejoice.
Posted: Thu Mar 20, 2008 3:20 pm Post subject: Re: Housing & Economic Collapse - In Progress
Article copied from TF on CIT.
Quote:
"CIT Group Squashed
Posted by David Gaffen
CIT_art_200_20080320111851.jpg
CIT Group shares have tumbled.
Each day, another company is getting kicked around by investors. Today’s victim is CIT Group, where shares are down 24% in the wake of a pair of downgrades from the major credit rating agencies. It’s the same old song, too — concerns about the company’s funding costs, and moreover, ability to continue to fund itself.
CIT is a commercial financing company but does not have a capital base as banks do, so it depends on ongoing borrowings to finance its lending activities. Recent turmoil in the credit markets has impacted the firm’s ability to borrow unsecured debt — it instead has had to start borrowing more secured debt, that is, debt backed by company collateral, which constrains the company’s ability to lend money, and increases borrowing costs.
“CIT’s reliance on confidence-sensitive wholesale funding, primarily institutional unsecured debt, is a principal constraint to its credit profile,” wrote analysts at Vontobel Credit Research, in an overnight commentary. Moody’s Investors Service and Standard & Poor’s have both recently downgraded shares, and Fitch is considering a downgrade as well.
Other analysts stressed a similar point as Vontobel — the confidence issue. In large part, lack of confidence brought down Bear Stearns, and has been at the forefront of the massive retreat from financial institutions by shareholders and lenders. Lehman Brothers analysts peg this week’s selling to “fear and selling begetting more selling,” and says “longer term funding abilities will depend on the confidence in the credit markets as we suspect will the performance of CIT’s stock.”
Bond investors are certainly betting as if there’s something to be concerned about. The company’s credit-default swaps, which measure the cost of insurance against default, were costing $2.45 million (along with another 5%, or $500,000, annually) to insure $10 million of bonds against default for five years. That’s up from $1.75 million at the beginning of the day.
Joined: Oct 23, 2004 Posts: 5515 Location: New Jersey
Posted: Thu Mar 20, 2008 3:37 pm Post subject: Re: Housing & Economic Collapse - In Progress
patience wrote:
Looks like they are toast. Trading their shares was halted today.
CIT has $30 billion in derivatives and in addition a balance sheet of $68 billion. If it fails it won't take down the system. Neither will Security Capital or Thornburg Mortgage.
I don't think at this point the financial system could handle the failure of something bigger, like Countrywide Mortgage, since a failure there would collapse the Federal Home Loan Bank system.
But I expect one or more of these smaller firms to blow up one day, probably in the next few months or so as the economy is slapped in the face by the housing market decline and higher energy prices.
On another subject, the Fed lent $60 billion over the last week under various lending programs but 'sterilized' the impact of that by selling an equal amount of Treasury bills. I other words the Fed is replacing its assets of mostly Treasury bills with direct loans. [The $30 billion guarantee of Bear is not counted here].
The total lent out so far is $120 billion out of its total assets of $920 billion. This is not as expansionary as most think, as the Fed appears to be moving fairly cautiously.
Any thoughts that the Fed's actions to date will lift the economy out of recession are truly mistaken.
Last edited by DantesPeak on Thu Mar 20, 2008 4:22 pm; edited 2 times in total
Investors borrow 28.8 bln usd from Fed's new primary dealer credit facility
- WASHINGTON (Thomson Financial) - The Federal Reserve's opening of the discount window to investment houses produced massive borrowing totaling 28.8 bln usd as of Wednesday.
The primary dealer credit facility, which offers discount window loans to investors, was one of two categories added to the Fed's weekly release.
The second additional category, listed as 'other credit extensions,' includes a portion of the Fed's 30 bln usd offer to facilitate the buyout of Bear Stearns by JP Morgan Chase. The balance for this category totaled 5.529 bln usd in the week ending Wednesday.
_________________ Joe P. United Political Debate
"Only when the last tree is cut; only when the last river is polluted; only when the last fish is caught; only then will they realize that you cannot eat money." - Cree Indian Proverb
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