12 replies to this topic

[Bob-C]

Hi everyone, according to an article from www.nytimes.com by Eric Dash entitled, "Banks May Pool Billions to Stop Securities Sell-Off":

Several of the world's biggest banks are in talks to put up about $75 billion in a backup fund that could be used to buy risky mortgage securities and other assets, a move designed to ease pressure on a crucial part of the credit markets that threatens the broader economy.

Citigroup, Bank of America and JPMorgan Chase, along with several other financial institutions, have been meeting to come up with a plan to create a fund that could prevent a sharp sell-off in securities owned by bank-affiliated investment vehicles. The meetings, which began three weeks ago, have been orchestrated by senior officials at the Treasury Department, and the discussions have intensified in the last few days.

A broad framework for an agreement could be reached as early as tomorrow, according to people with knowledge of the discussions, but many important details still need to be hammered out. Another round of discussions is taking place this weekend, and it is still possible that the parties will not reach an agreement.

"Treasury is very serious about getting some solution in place to take away the fear hanging over the markets," said Alex Roever, a credit analyst at JPMorgan Chase who has been following the discussions but is not involved in them. "It is a very challenging thing to do. There are so many parties involved and they all don't agree.

The proposal echoes the 1998 bailout of the hedge fund Long Term Capital Management, when a group of big banks came together to prevent the fund from collapsing after it made a series of bad bets. And the current round of crisis-driven collaboration illustrates the heightened level of concern among both government and financial players.

While there are signs that the broader credit markets have begun to stabilize after the Federal Reserve lowered interest rates last month, a pocket of the commercial paper market remains under siege: structured investment vehicles, known as SIVs. The fear is that problems with these vehicles could infect the broader economy.

Cheers,

Bob-C

[pdx5]

The secretive, dreaded, conspiratory, all powerful PPT at work? Whatever happened to free markets? Or are the incumbents behind this? Queen of England? Rothschild? The skull & bones society? Who who who.....

Edited by pdx5, 14 October 2007 - 01:40 AM.

[Bob-C]

The secretive, dreaded, conspiratory, all powerful PPT at work?

Whatever happened to free markets?

Or are the incumbents behind this?

Queen of England?

Rothschild?

The skull & bones society?

Who who who.....

Hi pdx5, thanks very much for your comments and insights. IMHO, the timing of the news release after the market close on Friday near the market high for most of the key indices and before C's earnings on Monday raises questions of serious concern. It also begs the question, what are the rest of the financial problems associated with the SIVs, MBSs, and CDOs that are yet to be revealed?

Best,

Bob

[Bob-C]

Hi everyone, according to an article from www.nytimes.com by Eric Dash entitled, "Banks May Pool Billions to Stop Securities Sell-Off":

Several of the world's biggest banks are in talks to put up about $75 billion in a backup fund that could be used to buy risky mortgage securities and other assets, a move designed to ease pressure on a crucial part of the credit markets that threatens the broader economy.

Citigroup, Bank of America and JPMorgan Chase, along with several other financial institutions, have been meeting to come up with a plan to create a fund that could prevent a sharp sell-off in securities owned by bank-affiliated investment vehicles. The meetings, which began three weeks ago, have been orchestrated by senior officials at the Treasury Department, and the discussions have intensified in the last few days.

A broad framework for an agreement could be reached as early as tomorrow, according to people with knowledge of the discussions, but many important details still need to be hammered out. Another round of discussions is taking place this weekend, and it is still possible that the parties will not reach an agreement.

"Treasury is very serious about getting some solution in place to take away the fear hanging over the markets," said Alex Roever, a credit analyst at JPMorgan Chase who has been following the discussions but is not involved in them. "It is a very challenging thing to do. There are so many parties involved and they all don't agree.

The proposal echoes the 1998 bailout of the hedge fund Long Term Capital Management, when a group of big banks came together to prevent the fund from collapsing after it made a series of bad bets. And the current round of crisis-driven collaboration illustrates the heightened level of concern among both government and financial players.

While there are signs that the broader credit markets have begun to stabilize after the Federal Reserve lowered interest rates last month, a pocket of the commercial paper market remains under siege: structured investment vehicles, known as SIVs. The fear is that problems with these vehicles could infect the broader economy.

Cheers,

Bob-C

Hi everyone, see the following article from en.wikipedia.org for more information about SIVS and the potential serious risks associated with SIVs The article also discusses the structure of SIVS and descrbes the sponsors of SIVs.

Cheers,

Bob-C

[cafeflorida]

So what is $80 Bil up against $20 Trillion?
I'd say they're undercapitalized by a few Trillion.


"..There still is a firestorm out there and as long
as it can be kept behind the curtain of public view
the longer the timeline the central bankers have to
pray it will go away. The problem is the gigantic
mountain of credit and default derivatives. What is
incredible is the total size of the derivative mountain
wherein notional value becomes real value when these
derivatives are called upon to perform and performance
is nowhere to be found..."

"the central bankers are doing everything in their power to
hold the curtain shut so you cannot see what is really causing
havoc with financial institutions."

http://www.jsmineset...1...lion&UArts=

"...The problem is over the counter derivatives, but no
one has yet told you how big. It is at least a $20 trillion
dollar problem. There are no tools anywhere to fix this
one other than working overtime to hide what it really is.."

http://www.jsmineset...1...lion&UArts=

[...]

Say, Bob, you seem to be a nice guy, but why do you see any problem with banks trying to work out their grossly mistaken and probably fraudulent securitizations? Sure, there are tens of billions of dollars worth of liar loans to be eaten, but nobody knows exactly where they are in the grand scheme of bogus "AAA" paper and, in any case, the losses are widely disbursed and a huge fraction is held outside the U.S. Yeah, some U.S. lenders will take a hit. So what? The market has already discounted most of that. This is the sort of junk which has nothing to do with technical analysis and is more appropriate to Capital Poo and people who spend a lot of time hiding under their beds waiting for the world to end.

[Bob-C]

So what is $80 Bil up against $20 Trillion?
I'd say they're undercapitalized by a few Trillion.


"..There still is a firestorm out there and as long
as it can be kept behind the curtain of public view
the longer the timeline the central bankers have to
pray it will go away. The problem is the gigantic
mountain of credit and default derivatives. What is
incredible is the total size of the derivative mountain
wherein notional value becomes real value when these
derivatives are called upon to perform and performance
is nowhere to be found..."

"the central bankers are doing everything in their power to
hold the curtain shut so you cannot see what is really causing
havoc with financial institutions."

http://www.jsmineset...1...lion&UArts=

"...The problem is over the counter derivatives, but no
one has yet told you how big. It is at least a $20 trillion
dollar problem. There are no tools anywhere to fix this
one other than working overtime to hide what it really is.."

http://www.jsmineset...1...lion&UArts=

Hi cafeflorida, good to hear from you, thanks for your insights and for the cogent informative articles. In the first article that you posted from www.jsmineset.com by Jim Sinclair entitled, "Prayers Are All That Keep The OTC Firestorm From exploding Into The Limelight" Jim points out:

At the center of the Earth there is a molten ball of magma that always seeks fissures through which to escape. When it escapes it blows the hell out of everything. It is then witnessed as an erupting volcano. This is what we are dealing with here. The molten ball is an unimaginable heap of unfinanced, non transparent, unregulated paper called over the counter derivatives. The fissures you have been seeing are the CDOs, mortgages (forget the spin title subprime), brokerage house tittering even among the halls of Wall Street Ivy, the collapse of so many so called but clearly not hedged hedge funds, the demise of major real estate lending banks and rollovers called takeovers of Internet financial entities. As long as you do not recognize these are united in the magma of over the counter derivatives and it all can be blamed on the peskiest bad mortgages made to under financed people, the longer the central bankers can pray for a miracle. Prayers is a great tool, but not for those who know what they were doing. The shock of Greenspan's book, which I believe discredits him, is that he always knew the destruction that his acts would visit upon the world. Of all the disgusting things, the worst as I see it is his persisting support of no regulation for over the counter derivative and his pronouncements that these weapons of massive financial destruction act to spread the risk from the few to the many. What happened is over the counter derivative spread the risk from the few to the fewer who proliferated the world with offsetting paper and sucked the money out.

As I said above in my reply to pdx5, "It also begs the question, what are the rest of the financial problems associated with SIVs, MBSs, and CDOs that are yet to be revealed?" IMHO, current efforts to obtain the answer to that key question is being hindered by obfuscation and equivocation.

Best,

Bob-C

[pdx5]

Hi Bob-C... Please keep posting even if they don't directly relate to TA. I always like to remind muself that the really successful investors such as Buffet did not get there on TA alone. Best regards, Roberto

[Bob-C]

Hi Bob-C...

Please keep posting even if they don't directly relate to TA.
I always like to remind muself that the really successful investors
such as Buffet did not get there on TA alone.

Best regards,

Roberto

Hi Roberto, I appreciate and agree with your comments, thanks very much for your support and encouragement.

Best regards,

Bob

[snorkels4]

http://blogs.wsj.com...-for-citigroup/


October 14, 2007, 11:02 pm
A Bailout for Citigroup?
By Dennis K. Berman
Wall Street Journal Online

When does an “improvement in liquidity” represent a “bailout”?

We'll be studying the details of the new “superconduit” when they're expected to be released on Monday.

But in the meantime it's hard not to look at the current details ­ ably scooped by Journal colleagues Carrick Mollenkamp, Deborah Solomon and Robin Sidel ­ as a big Treasury-blessed assist for Citigroup.

Consider that an estimated 25% of the total $400 billion SIV universe comes from Citigroup-affiliated SIV funds. And that Citigroup-affiliated funds have already sold $20 billion in assets.

At its most simple, the superconduit is a means by which a large collection of banks can keep “reasonable” pricing on some of their affiliated securities. And it is this pricing that is the key to the whole operation.

It's obvious they won't be priced at market rates because there's not much of a market to begin with (and why the superconduit exists in the first place).

But where exactly do they get priced? To whose benefit? And by which standard?

Even without specifics, it's clear that Citigroup has the most to gain from this operation. And it's clearly bad if the balance sheet of the country's largest bank were frozen for months on end as it poured money into contractual unwindings of SIV positions.

Liquidity syndicates were what helped save the day during the Panic of 1907. Given the partial return of investors to the LBO credit markets, there is plenty of reason to hope that investors will once again be buying SIV-related paper in the months ahead.

But until that time, four main points still remain oustanding:

* How much pricing confidence can be created in a market when banks are in essence buying paper from themselves?

* Might the mere existence of the superconduit create more doubts about the financial sector, stoking even more panic than the amount it was meant to quell?

* How will the banks structure their public relations to answer the simple question: Are they throwing good money after bad?

* What responsibility will be taken by the bank CEOs who blessed the rush into these structures in the first place? In other words, how will Citigroup CEO Chuck Prince explain this on Monday morning?