Warning: Mega-banks Could Fail Despite Federal Bailouts

Martin Weiss writes: The time has come to issue one of my sternest warnings to date: Bank of America and Citigroup could fail despite the most radical government rescues of all time.

Right now, after recent close calls with instant death, these two megabanks are on life support, receiving massive transfusions of government capital. But they're still hemorrhaging, and no one in Washington has found a cure.

Already, they have received capital injections of $90 billion ($45 billion each).

Already, this bailout is larger than the total combined capital of PNC Bank, Suntrust Bank and State Street Bank — all among America's ten largest.

Yet, ironically, that $90 billion is still a drop in the ocean compared to their massive exposure to risky assets.

The shocking facts revealed in the banks' own balance sheets and in the OCC's Quarterly Report demonstrate the enormity of problem:
Massive Risks at America's Megabanks
(bill. of dollars)

B of A

Citi

B of A + Citi

JPM
9/30/2008
Total assets
1,831 -------- thats 1.831 TRILLION. keep that in mind when looking at the numbers below.......

2,050

3,881

2,251
All derivatives
38,186

39,979

78,165

91,339
Credit default swaps
3,291

2,467

5,758

9,250
Exposure to defaults by trading partners
177.6%

259.5%


400.2%

Fact #1. Too big to save. Bank of America Corp. and Citigroup, Inc. have combined assets of $3.9 trillion, or 43 times the size of the Treasury bailout funds they've received to date.

Fact #2. Bigger losses ahead. Even before any further declines in the economy, an unusually large portion of their assets are already in grave jeopardy — commercial real estate loans going sour, credit cards loans tanking, auto loans sinking, and residential mortgages turning to dust. Now, as the economy continues to tumble, avoiding much larger losses will be almost impossible.
… read the rest here..

-- http://www.marketoracle.co.uk/Article8504.html

MUST... GIVE THEM... MORE.... MONEY...



:popcorn:

Agree with this assessment.

I had stopped my direct deposits during the 'Republic Windows and Doors' shit they pulled, but hadn't gone in to pull out my money. Yesterday was the last straw. Fuck 'em.

Enough of this shit. Give me the fucking money and to hell with the mega-banks!

:D

And there'd be at least one homeowner who would benefit.

the money I'd buy the car I need. Maybe a really nice one instead of the Civic I'm planning if we ever get to the point where I don't worry about my job every day and the governor isn't threatening lay-offs (is this the way to restore confidence?) That would help an industry.

They are going to fail anyway---

I paid off my B of A c card after they raised rate for no reason but I hope they go into bankruptcy and all their remaining credit card holder go scott free on paying them.

Use the stimulus money to help their employees get other jobs and tide them over until they do.

Imagine a country without B of A and Citibank

Why are we going into debt due to recovery plans cooked up by Larry Summers and Rubin.

These people are leading us into the arms of the IMF

the safest bet and may also be the cheapest in the long run.

http://www.gold-eagle.com/editorials_00/ci091500pv.html


"...Chillin Wit Shady G...We've caught our fearless Fed leader in too many a rap proclaiming that derivatives have helped "raise the standard of living" in the US and globally. Possibly Greenspan means that mankind is supplying credit where no credit has ever been supplied before. If derivatives usage is so wonderful, according to Greenspan, then why has the Fed fought tooth and nail to keep the facts a secret? The Fed has ignored/turned down requests by the FASB for both disclosure and mark to market mandates. The Fed has actively lobbied to keep the derivatives market unregulated. This in spite of the fact that widespread and broad usage of derivatives barely has ten years of history in our and the global financial system. Completely untested in any scenario that could even remotely be characterized as discontinuous.

Greenspan isn't stupid. He knows that credit can only proliferate with the supposed safety valve underpinning of the derivatives market. It's simply how the current game is played. At this point, the financial markets and the real economy must have a steady diet of new credit to function. It's a cycle that if interrupted significantly would cause the economy and the financial markets to come to a screeching halt. In the greater "circle" of interrelationships we discussed last week, the continued expansion of the derivatives market tangentially underpins the US dollar and the stock market itself vis-à-vis the credit creation mechanism in this country. Will the real Shady G please stand up? (We doubt it seriously - he's already had far too many chances and passed.)

At The Wire...After the close, it was announced that the Board's of Chase and JP Morgan "are talking" (about a potential merger). Looking at the 2Q derivatives report, our humble and meek response is HOLY GOD! These are clearly the two largest players in the derivatives market among the banks. Put them together and the single entity alone would account for over 50% of all US banking system derivatives exposure. The combined Chase/JPM would be exposed to over $20 trillion in notional derivatives securities/contracts. (Once again an unfair comparison, but a notional value greater than the entire value of the US equity market.) Remember, these are the two entities with outsized reliance on trading and the greatest derivatives credit exposure as a percentage of risk based capital. We truly live in remarkable times. We guess it is a new era after all."


Contrary Investor
http://www.contraryinvestor.com

September 15, 2000

and all we here is that nobody saw this coming!!! look at JP MorganChase now!! they have over 91 TRILLION in derivatives on their books! thats almost one and a half times the GDP of the entire PLANET!!! whats wrong with this picture??

"I don't understand all that financial stuff" and continues to bury their heads, we will remain slaves to the rich and powerful.


http://www.contraryinvestor.com/2008archives/moapril08.htm

"...Alright, fine, so how does the credit default swap market relate to equity market sector volatility of the moment? It is absolutely clear that the "acquisition" of Bear avoided triggering Bear Stearns related credit default swaps and swaps against CDO, SIV, etc. positions they may have held (assuming a potential Bear BK would have forced a mark to market event), which would indeed have happened had Bear formally entered bankruptcy and their bonds/debt became potentially very meaningfully impaired. There is simply no question whatsoever in our minds that this was the key reason a theoretical acquisition of Bear HAD to happen..."

the more disgusting.

But it doesn't.

People need to get over expecting that. They were fraudulent in their creation, and don't deserve paying off anyway. They were a speculation, and it lost. Period. End of story.

That ain't never gonna happen, no matter what else does happen. They have zero value.

Where are you supposed to keep your cash? Under your mattress?

use Treasury direct, no middle man.

It's good to have multiple accounts to spread your money around, just in case. And if the FDIC goes bust, the credit union insurance will be next in line. There will be enough time to get your money and find a mattress!

When it does:

1) Declare credit-default swaps invalid. These can't be paid off by anyone, which is the whole problem. (Mandate refunds on half the price paid by the buyers.) Most types of derivatives need to be banned (equities are already derivative enough!).

2) Take over deposits up to FDIC limit.

3) Fuck them otherwise. They belong to history now. One can only hope the associated robber barons are also ruined, though this happy outcome is unlikely. Yeah, it will be hard times for all. Even harder if the bailout deception continues and people who still have jobs and pay taxes are forever worked as blood donors to doomed vampires (stakes already in their hearts).

4) Establish a national bank in the ruins of the Ponzi financial sector. Encourage localities to issue community currencies backed by work-hour standards.

5) Require the Communist Manifesto as school reading from the fifth grade forward.

Okay, #5 is a little joke.

Sixth grade, of course.

PS - NY Mets to play next year at Taxpayer Field.

good luck with that!! even at 10 cents on the dollar you are likely talking trillions! total notional value of derivatives worldwide is in the neighborhood of 500 trillion ( depending on whos numbers you use ) other than that... I like you attitude!!!

was paid in real cash, right? They pay like 1 or 2 percent of the total value a year, right? So this cash having been paid exists somewhere... unlike the strictly nominal, in fact totally fantasty value of the actual derivatives. So I'm just thinking, the buyers are being punished for betting right (i.e., for knowing that everything would fail), and... and...

Never mind! Now I'm thinking that I'm thinking too much! Too bad for all those who took out fire insurance policies on other peoples' houses. CDS-type derivatives are the last megabank obligation that needs to be covered from whatever the liquidation brings.

Unfortunately, that's not how it will work. The first Fed strategy will be to pony up another few trillion backed by nothing, and these will be used to cover derivatives payoffs, before the inevitable happens anyway.

Sigh.

beautifully said, especially regarding community currency. Ithaca NY established its own currency years ago (called Ithaca Hours) and it's worked very well.

:applause: :applause:

;)

I'll try and understand it properly later....lol.

a few paragraphs.

"Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted."

I was just so shocked by what I saw I rushed to spread the word... I hope I dont get in any trouble!!!

They've upped the interest from about 14% to about 20%. And I have excellent credit, I could easily get a card now for about half of the 14% rate!

Called them up yesterday to cancel it, an easy decision since I had a zero balance. Why would they try to piss off someone that they don't too often get a lot of interest from, anyway?

My credit score is well over 800. Obviously I told them to stuff it.

because the banking vultures are always looking for a way to screw anybody over. But in my case, I had never defaulted on them or any other creditor!

Good for you for telling them to stuff it!

For me personally the rate increases were meaningless. I have never carried a balance and have never paid interest. I've been fortunate in that back in the dark ages of mail in a check the post office never once wandered off with it. My payments have always been early and for the full balance due.

However, according the credit card rules - and this is for all mega-banks and most smaller banks - "default" means if any of your creditors reports to any credit bureau that you have ever been even one day late then the credit card company has you nailed with the default rate. You do not have to be late with your credit card payment.

That's right. You can consistently pay your credit card 2 weeks early but if you cancel your monthly autobilled gym membership and they screw it up and report you as even 1 day overdue to Equifax then every credit card company declares you in "universal default" and smacks you with the highest rate they can dream up.

I know someone who was a saver but after a serious car accident was out of work for 16 months and ran through savings and started having to put medical care costs on the credit cards. It did not take long to max out 4 cards with a total of $36 grand balance due. Her sister was kind enough to make the minimum payments until she could get back on her feet. She got back to work, paid her own minimums, paid back her sister, and started putting everything she could toward the credit cards. She had her car payment on auto bill on an account specifically set up for that. The car was paid off but the next month the bank "accidentally" ran the auto bill and, of course, it NSF'd. They reported to Trans Union and within a week she had letters from ALL FOUR credit cards that she was in universal default and the new rate on her nearly $36 grand was 27-36% (all 4 cards jacked up in that range) when her previous ranges were 6.9% to 9.9% - she was basically forced into bankruptcy because not a chance in hell she could afford the new minimums.

Just a friendly reminder to all who read this, don't carry a balance, and if you are - do everything you can think of to throw money at the balance due. Even if it means taking in boarders or moving into Aunt Josie's basement to have the money to do so. These banks have no heart and no shame.

with A LOT more regulation governing services and size.

home/car loans, checking/debit/savings accounts and a national credit card.

all interest rates on all functions is 4%.

start there.