Late in the day we heard from an ECB central banker, that the ECB may have to cut interest rates to zero. The Italian member of the ECB Smaghi commented:
Please note that JPMorgan fell to 15.00$ at one point. It closed down .67 cents to 15.93. Goldman Sachs fell 6.07 to 75.65. The street is getting very nervous of hidden derivative losses at both of these entities.
Late Friday night: this came over Bloomberg and it portends hugh losses on Monday; Lloyds is being taken over by the Government to the tune of 75% ownership:
By Andrew MacAskill and Jon Menon
March 7 (Bloomberg) -- Lloyds Banking Group Plc, Britain’s biggest mortgage lender, will cede control to Prime Minister Gordon Brown’s government in return for state guarantees covering 260 billion pounds ($367 billion) of risky assets.
The government’s stake will rise to as much as 75 percent, making Lloyds the fourth U.K. bank to slip into state control since the run on Northern Rock Plc in September 2007. Brown is using that leverage to force banks to increaselending to homeowners and businesses and spur an economy that is facing its worst recession since World War II.
“In order to get British banks lending again the government needed to take them over,” said Simon Willis, an analyst at NCB Stockbrokers Ltd. in London, who has a “sell” rating on Lloyds stock. “It is likely to be at least three of four years before the banks return to the private sector.”
Lloyds will pay more for asset protection than Royal Bank of Scotland Plc, the first lender to enter the program, because of the deteriorating quality of loans acquired when it bought HBOS Plc in a government-brokered deal. London-based Lloyds will pay 15.6 billion pounds, or 5.2 percent of the insured assets, in the form of non-voting shares, the bank said in a statement. RBS last month paid 2 percent.
About 83 percent of the assets Lloyds is insuring came from HBOS, the bank said.
The HBOS loan book “is more toxic than anyone ever dreamed,” said Alan Beaney, who helps manage $2 billion, including Lloyds stock, at Principal Investment Management in Sevenoaks, England. “As a Lloyds shareholder you are very annoyed because you had a bank that did not need the government very much and now you have inherited a rubbish bank.”
In September, Lloyds agreed to buy HBOS for about 7.7 billion pounds as the government sought to prevent HBOS from collapsing after credit markets froze.
Last month, HBOS posted a pretax loss of 7.5 billion pounds, bigger than Lloyds anticipated at the time of the takeover, and Chief Executive Officer Eric Daniels said he would have liked more time to examine HBOS’s accounts before the purchase. Lloyds wouldn’t have needed taxpayers’ money if it hadn’t made the acquisition, he said.
Some shareholders are pressuring Daniels to resign because of the HBOS deal, Beaney said. Daniels, who joined Lloyds in 2001, will receive a 3 million-pound pension, the London-based Times reported today, without saying where it got the information. The 58-year-old CEO will be entitled to payments of 150,000 pounds a year when he turns 60, the newspaper said.
Before today, the government had invested 17 billion pounds in Lloyds and HBOS, giving the Treasury a 43 percent stake when the banks combined. In January, Lloyds said it would resist any attempt to increase state ownership.
That position changed as the economy worsened, spokesman Shane O’Riordain said in an interview today.
“Banks across the world are facing unprecedented market conditions right now,” he said. “Our first objective is ensure that we have a very strong balance sheet given the downturn.” end
Bloomberg also reported that French bank BNParibas has bought from the country Belgium ownership of Forits with guarantees to the French bank of any losses:
By John Martens and Fred Pals
March 7 (Bloomberg) -- BNP Paribas SA, France’s biggest bank, agreed to acquire Fortis’s former banking units in Belgium and Luxembourg and take a stake in the insurance business after obtaining state guarantees on potential losses.
BNP Paribas will buy 75 percent of state-owned Fortis Bank NV and gain control of the Luxembourg banking unit for 2.88 billion euros ($3.64 billion) in stock, the Belgian government said today in a statement. Fortis Bank will then pay 1.38 billion euros in cash for 25 percent of Fortis Insurance Belgium SA.
The French bank will become the biggest by deposits in Belgium and Luxembourg, two of Europe’s wealthiest nations, if it wins over Fortis investors. Belgium is seeking to sell the Fortis banking operations after the September collapse of Lehman Brothers Holdings Inc. and the freezing of credit markets triggered state bailouts of Fortis and Dexia SA.
“Given the situation, this is probably as good as it gets,” Albert Ploegh, an analyst at ING Wholesale Banking in Amsterdam, said today by telephone. “I don’t think there’s a much better deal to be expected.”
Under the new agreement, the Belgian government will provide 740 million euros of equity funding to a company created to split off 11.4 billion euros ofrisky assets into a separate entity. BNP Paribas will contribute 200 million euros to the risky-asset entity and Fortis will provide 760 million euros.
Fortis Bank will contribute the remaining 9.7 billion euros in debt funding, backed by a 4.36 billion-euro guarantee from Belgium. The structured-credit investments have been marked down to about 58 percent of par value, Belgian central bank Deputy Governor Luc Coene told reporters in Brussels.
BNP Paribas also obtained a 1.5 billion-euro state guarantee on losses exceeding 3.5 billion euros on the structured-credit holdings that remain within Fortis Bank. Once Belgium’s largest financial-services company, Fortis will emerge from the state- organized breakup as an insurer with the right to potential gains on Belgium’s stake in BNP Paribas.
“This solution guarantees the bank’s safety and future,” BNP Paribas Chief Executive Officer Baudouin Prot told reporters in Brussels. “And I think this is very important for the Belgian economy at a time when its banking industry is going through a difficult period.”
Fortis shareholders blocked an earlier agreement to sell units to BNP Paribas on Feb. 11. Mischael Modrikamen, a lawyer representing about 2,000 Fortis investors who won a Dec. 12 court injunction on the previous deal pending the shareholder vote, said there isn’t “any objective reason to call on shareholders to vote ‘yes’ on this” new agreement. end
It is Saturday and we now get our weekly bank failure. Today, it is Freedom bank of Commerce, Georgia being taken over by the FDIC. Here is todays press release:
By Margaret Chadbourn and Ari Levy
March 7 (Bloomberg) -- Freedom Bank of Georgia was seized by regulators, the 17th bank closed this year, as the recession persists and a jump in unemployment pushed more borrowers behind on home loan payments.
Freedom Bank, in Commerce, Georgia, with $173 million in assets and $161 million in deposits, was shut by the state’s Department of Banking and Finance and the Federal Deposit Insurance Corp. was named receiver. Northeast Georgia Bank of Lavonia, Georgia, will assume deposits, the FDIC said.
“Customers of both banks should continue to use their existing branches until Northeast Georgia Bank can fully integrate the deposit records of Freedom Bank of Georgia,” the FDIC said.
The U.S. economy is in the second year of a recession caused partly by a collapse of the housing market and losses in the financial system linked to mortgage securities. The U.S. unemployment rate reached 8.1 percent, the highest level in more than a quarter century, and employers shed 650,000 jobs last month, the Labor Department said.
Closely held Northeast Georgia Bank will buy about $167 million in assets at a discount of $13.7 million and the bank agreed to share with the FDIC in any losses on about $96.5 million in assets. The FDIC estimates the transaction will cost the deposit insurance fund, supported by fees on insured banks, about $36.2 million.
FDIC-insured banks lost $26.2 billion in the fourth quarter, the first loss for a three-month period since 1990. U.S. banks and other financial companies have reported about $800 billion in writedowns and credit losses since 2007 in the worst financial crisis since the Great Depression.
“There is no question that this is one of the most difficult periods we have encountered during the FDIC’s 75 years of operation,” FDIC Chairman Sheila Bair said at a news conference on Feb. 26 after the industry report was released.
The FDIC predicted that bank failures will cost the fund $65 billion through 2013, up from the $40 billion estimated in October. The fund, drained by 25 bank shutdowns last year, dropped 45 percent to $18.9 billion in the fourth quarter from $34.6 billion in the preceding three-month period.
The Washington-based agency classified 252 banks as “problem” in the fourth quarter, a 47 percent jump from the third quarter. It doesn’t name the “problem” banks.
‘Not in Favor’
“Compared to the previous deal, there is absolutely nothing favorable for shareholders” of Fortis, Modrikamen told Belgian broadcaster RTBF today. The new arrangement includes “some elements” of the earlier plan, “but they have been adapted for the benefit of BNP Paribas and not in favor of Fortis Bank.”
Fortis’s largest shareholder, Chinese insurer Ping An Insurance (Group) Co., is “studying the situation,” L’Echo newspaper reported, citing a Ping An lawyer it didn’t identify.
Fortis Chairman Jozef De Mey said executives “feel relatively comfortable that we will get a positive vote” from shareholders on the new agreement. “We can definitely show that compared to the deal presented to shareholders in February, this one is better,” De Mey said on a conference call today. Meetings may be scheduled on April 8 in Brussels and the following day in the Dutch city of Utrecht, he told reporters. END
Early Friday morning, Wells Fargo cut their dividend by 85% to 5 cents to save 5 billion dollars. They are racking up losses on its home loans. In Canada they are what we call second mortgages.
In conclusion, the debt spiral facing the usa and the globe has been immense. Credit has been non existent as seen by Libor and the contraction of commercial paper.
However Governments continue to print money as foreign governments refuse to buy our paper. This can only lead to an hpyerinflationary depression. Have we ever experienced anything like this in our history? No. Is there anything like this anywhere? yes, Zimbabwe.
Have a great day and weekend