Worldwide Banking Crisis Is Worst In 30 Years

[LaoPo]

Banks Face Biggest Crisis in 30 Years, Report Shows

By Edward Evans

April 1 (Bloomberg) -- Credit market turmoil poses the most severe crisis for banks in 30 years, surpassing Black Monday in 1987, the Asia currency crisis and the bursting of the dot-com bubble, Morgan Stanley and Oliver Wyman said in a joint report.

Revenue from investment banking may drop 20 percent in 2008, with credit businesses declining 60 percent, analysts led by Huw van Steenis said in a note to clients today. Six quarters of earnings will be erased by writedowns and falling revenue by this month, rivaling the collapse of the junk bond market at the end of the 1980s that put Drexel Burnham Lambert Inc. out of business, the report said.

``The industry is facing the most severe investment banking crisis in 30 years,'' the analysts wrote in the report. ``Global securities markets are in the midst of profound cyclical and structural change.''

UBS AG and Deutsche Bank AG, two of Europe's biggest banks, posted today a combined $23 billion of writedowns linked to the collapse of the subprime mortgage market. In all, investment banks may post $75 billion in markdowns in 2008, according to the report. Writedowns and losses on subprime-infected assets have already cost the world's biggest banks about $230 billion since the start of 2007.

Investment-banking revenue has also stalled as the pace of takeovers and initial public offerings declined in the first quarter of 2008. Mergers and acquisitions bankers suffered a 35 percent drop in fees during the first quarter as the value of announced takeovers fell to $656 billion from $971 billion a year earlier, according to data compiled by Bloomberg.

Crisis Duration

Banks' earnings have been hurt for the past three quarters by the turmoil in the credit markets. In total, the crisis may last for eight to 10 quarters, exceeding the six-quarter duration of the Asia crisis and bailout of LTCM in 1997-8, and the seven- quarter fallout from the bursting of the dot-com bubble, the report said. The 1987 stock market crash hurt earnings in just a single quarter, according to the report, entitled ``Outlook for Investment Banking and Capital Market Financials.''

Regulators will also push the industry to retain more capital as a cushion, hurting banks' return on equity in the long term, the group added. Treasury Secretary Henry Paulson proposed yesterday the biggest overhaul of U.S. financial rules since the Great Depression, saying the Federal Reserve should expand its oversight of financial services beyond banks.

Banks are also finding their cost of capital is increasing relative to other investment-grade companies. Traditional sources of money, like structured investment vehicles, are less available, the report said. Banks are struggling to offload loans, leaving leverage ratios high, it said.

Diversified Funding

``Firms with diverse sources of funding, with retail and commercial deposits clearly helping, and a diversified business will have a funding advantage over the coming years,'' the analysts wrote. ``This may lead to a material reassessment of business models over time.''

Zurich-based UBS today posted an additional $19 billion of writedowns and said it would seek $15.1 billion in a rights offering to replenish capital. Deutsche Bank, Germany's biggest bank, also said today it expects to book about 2.5 billion euros ($3.9 billion) in writedowns for the quarter.

Separately, Merrill Lynch & Co. and Citigroup Inc. had their first-quarter earnings estimates cut by Goldman Sachs Group Inc., which said the two banks may post $14 billion in writedowns on assets linked to collateralized debt obligations.

http://www.bloomberg.com/apps/news?pid=206...refer=worldwide

Billions and Billions of more write downs and losses and we don't know all of it yet.

LaoPo

[BEENTHEREDONETHAT]

Anymore it is a real challenge trying to figure out what to do with your money. The banks all look shaky, the stock market has no appeal and gold is bouncing all over. What did I forget? Oh property, got enough of that.

[LaoPo]

And.....isn't it funny...Financial News ?

US STOCKS-Indexes rally on optimism over financials

By Jennifer Coogan

NEW YORK, April 1 (Reuters) - U.S. stocks rallied on Tuesday as strong demand for a share offering by Lehman Brothers Holdings Inc helped restore confidence in financial sector stocks.

Lehman, which has been dogged by rumors that it lacked adequate capital, on Tuesday it said it raised $4 billion in an convertible preferred stock offering to bolster its balance sheet. The strength of the demand for Lehman shares calmed fears the bank was facing the same predicament as Bear Stearns , which nearly collapsed two weeks ago.

Also helping the financials was Swiss investment bank UBS AG , which wrote down an additional $19 billion on U.S. real estate and related assets and also announced a huge hike in capital. U.S.-listed shares of UBS surged nearly 9 percent to $31.25 on speculation that the bank was wiping its slate clean.

"There's been such negative sentiment on the brokers. Everyone is searching for what is going to be the bottom. Each additional card that's played leads one step closer," said Mark Schlarbaum, a trader at Global Capital Management in Conshohocken, Pennsylvania. "Financials are cheap right now, and if investors can get comfortable that they are near or at a bottom, they can start putting money to work in the sector."

The Dow Jones industrial average .DJI was up 247.52 points, or 2.02 percent, at 12,510.41. The Standard & Poor's 500 Index .SPX was up 25.44 points, or 1.92 percent, at 1,348.14. The Nasdaq Composite Index .IXIC was up 46.82 points, or 2.05 percent, at 2,325.92.

Shares of Lehman jumped 10 percent to $41.70. Other major gainers were Citigroup, up 7.3 percent to $22.98 and Merrill Lyn, up 6.3 percent to $43.34.

The market got a further boost after the Institute for Supply Management said its manufacturing index for March was stronger than forecast. The gauge rose to 48.6 in March from 48.3 in February and was closer than expected to the 50 mark, above which signals expansion.

Semiconductors were also helping the market. The Philadelphia Stock Exchange semiconductor index was up 2.7 percent. Among the best performing shares were SanDisk Corp's (SNDK.O: Quote, Profile, Research), up 6.9 percent to $24.14 on the Nasdaq.

http://www.reuters.com/article/etfNews/idUSN0120354820080401

LaoPo

[siamamerican]

And.....isn't it funny...Financial News ?

US STOCKS-Indexes rally on optimism over financials

By Jennifer Coogan

NEW YORK, April 1 (Reuters) - U.S. stocks rallied on Tuesday as strong demand for a share offering by Lehman Brothers Holdings Inc helped restore confidence in financial sector stocks.

Lehman, which has been dogged by rumors that it lacked adequate capital, on Tuesday it said it raised $4 billion in an convertible preferred stock offering to bolster its balance sheet. The strength of the demand for Lehman shares calmed fears the bank was facing the same predicament as Bear Stearns , which nearly collapsed two weeks ago.

Also helping the financials was Swiss investment bank UBS AG , which wrote down an additional $19 billion on U.S. real estate and related assets and also announced a huge hike in capital. U.S.-listed shares of UBS surged nearly 9 percent to $31.25 on speculation that the bank was wiping its slate clean.

"There's been such negative sentiment on the brokers. Everyone is searching for what is going to be the bottom. Each additional card that's played leads one step closer," said Mark Schlarbaum, a trader at Global Capital Management in Conshohocken, Pennsylvania. "Financials are cheap right now, and if investors can get comfortable that they are near or at a bottom, they can start putting money to work in the sector."

The Dow Jones industrial average .DJI was up 247.52 points, or 2.02 percent, at 12,510.41. The Standard & Poor's 500 Index .SPX was up 25.44 points, or 1.92 percent, at 1,348.14. The Nasdaq Composite Index .IXIC was up 46.82 points, or 2.05 percent, at 2,325.92.

Shares of Lehman jumped 10 percent to $41.70. Other major gainers were Citigroup, up 7.3 percent to $22.98 and Merrill Lyn, up 6.3 percent to $43.34.

The market got a further boost after the Institute for Supply Management said its manufacturing index for March was stronger than forecast. The gauge rose to 48.6 in March from 48.3 in February and was closer than expected to the 50 mark, above which signals expansion.

Semiconductors were also helping the market. The Philadelphia Stock Exchange semiconductor index was up 2.7 percent. Among the best performing shares were SanDisk Corp's (SNDK.O: Quote, Profile, Research), up 6.9 percent to $24.14 on the Nasdaq.

http://www.reuters.com/article/etfNews/idUSN0120354820080401

LaoPo

The markets are forward looking and when the panic has reached a crescendo, it is great time to get in. That is what I’ve been doing the last 60 days. Don’t have the guts to jump into US financials at this point.

I’m optimistic the markets will be up at least 15% two years out. The only way to make money, unless you are shorting the market, is get in the game and you don’t have to pick the absolute bottom.

[LaoPo]

UBS plans $19 bln write-down, capital injection

Chairman Ospel to resign; first-quarter loss seen around $12 billion

By Simon Kennedy, MarketWatch

Last update: 11:41 a.m. EDT April 1, 2008

LONDON (MarketWatch) -- Swiss banking giant UBS on Tuesday revealed a further $19 billion hit from the credit crisis, doubling its write-downs so far, and said it will have to issue around 15 billion Swiss francs ($15.1 billion) in new shares to shore up its capital base.

The latest hit means UBS will report a net loss of around 12 billion francs for the first quarter and marks the end of the road for beleaguered Chairman Marcel Ospel, who will step down later in April.

Shares in UBS, however, jumped 11% in U.S. trading as the group attracted an upgrade from Deutsche Bank and analysts said the move appears to be a concerted effort to draw a line under the firm's mortgage woes.

Analysts also said that Ospel's departure would likely be welcomed by shareholders. The stock had already fallen more than 60% from its 2007 high as further big write-downs were seen as inevitable.

"The write-downs are very large and unprecedented, they are also necessary for us to turn the page," said CEO Marcel Rohner on a conference call with analysts.

UBS has been the worst-hit European firm in the credit crisis. It previously raised around $13 billion from the government of Singapore and a Middle East investor after reporting a loss of 12.5 billion francs for the fourth quarter of 2007. Rohner added Tuesday there has been no renegotiation of terms with Singapore.

Mortgage exposure reduced

When it reported its fourth-quarter loss, UBS revealed remaining subprime exposure of $27.6 billion as well as a similar amount of exposure to so-called Alt-A mortgages -- which sit between subprime and prime in terms of risk. The report left analysts expecting further write-downs. See archived story.

On Tuesday UBS said it had substantially reduced its real-estate-related positions through valuation adjustments and disposals in the quarter and will create a new unit to hold its remaining illiquid U.S. real-estate assets.

The news came as German rival Deutsche Bank said it will take a first-quarter write-down of around $3.9 billion on its U.S. mortgage exposure and the shuttered leveraged-loan market.

Deutsche Bank analyst Matt Spick upgraded UBS to buy from hold, saying that despite the headline bad news, it's the first time the firm's total risk exposure has actually declined.

Kian Abouhossein, an analyst at J.P. Morgan, said the share issue and new write-downs could push UBS to a loss of 2.5 francs to 3.5 francs a share for 2008. He had previously been forecasting profit of 4.6 francs a share.

But he added that the announcement paves the way for the market to refocus on UBS' long-term private banking prospects, rather than its capital worries.

"We expect risk-exposed banking peers will follow, leading to a potential clearing price environment for the structured-credit assets," Abouhossein said.

"We forecast no further markdowns for UBS going forward," he added.

The latest write-down came in at the top end of expectations and exceeded the $18.4 billion UBS took for the whole of 2007.

Most of the remaining risky assets will be transferred to a new entity, initially wholly owned and financed by UBS.

Rohner said the group intends to reduce its holding in the vehicle over time, further cutting its exposure to risky assets.

"These measures enable UBS to remain strongly capitalized and focused on client needs," said Rohner in a statement.

http://www.marketwatch.com/news/story/ubs-...5A0942D12C21%7D

Note:

Unbelievable how the shareholders keep silent over this man...Mr. Marcel Osper, responsible for a total loss (so far known....!) of $ 30 Billion, in less than two years....

I don't know of ANY industry in the world where the losses have been so big and the CEO's can walk away with a bag full of money...money from their clients and shareholders.

Unheard

LaoPo

[Bisto]

quote

Note:

Unbelievable how the shareholders keep silent over this man...Mr. Marcel Osper, responsible for a total loss (so far known....!) of $ 30 Billion, in less than two years.... dry.gif

I don't know of ANY industry in the world where the losses have been so big and the CEO's can walk away with a bag full of money...money from their clients and shareholders.

Unheard

LaoPo

DID YOU not go to the meeting GREED IS GOOD, GREED IS GOOD

[Penkoprod]

Note:

Unbelievable how the shareholders keep silent over this man...Mr. Marcel Osper, responsible for a total loss (so far known....!) of $ 30 Billion, in less than two years....

I don't know of ANY industry in the world where the losses have been so big and the CEO's can walk away with a bag full of money...money from their clients and shareholders.

Unheard

LaoPo

A quote that will explain all............

"Give me control of a countries money supply and i care not WHO makes it's rules"

Amschel Mayer Rothschild

In other words, its not the likes of elected politicians that are running the countries..........Bush, Blair, Brown, Merkel, Sarkozy etc, etc, but the bankers of the world, who, over the years have taken on an almost fireproof, Godlike persona

Penkoprod

[david96]

"I am still buying stock" A statement by Albert B. Sloan. The quote first appeared in "Time"magazine.

For those of you who do not know this gentleman he was the General Manager of General Motors, and he made this public statement at the height of the 1929 stockmarket crash. He had "confidence"in the financial markets of the time.

"All we need is confidence and a square deal" F D R.

The same applies today.

[BigSnake]

Way things of shaping up it may get even worst in the months to come.

[PhilHarries]

Note:

Unbelievable how the shareholders keep silent over this man...Mr. Marcel Osper, responsible for a total loss (so far known....!) of $ 30 Billion, in less than two years....

I don't know of ANY industry in the world where the losses have been so big and the CEO's can walk away with a bag full of money...money from their clients and shareholders.

Unheard

LaoPo

A quote that will explain all............

"Give me control of a countries money supply and i care not WHO makes it's rules"

Amschel Mayer Rothschild

In other words, its not the likes of elected politicians that are running the countries..........Bush, Blair, Brown, Merkel, Sarkozy etc, etc, but the bankers of the world, who, over the years have taken on an almost fireproof, Godlike persona

Penkoprod

Yes and it's amazing how many people rant and rail at the politicians for the mess we're in when those politicians are little more than puppets. But it's not just bankers, it is also oil, arms, pharmaceutical corporations etc that pull the strings. Why do you think so many of them take up very lucrative board positions in major corporations when they quit the political circus?

[LaoPo]

"I am still buying stock" A statement by Albert B. Sloan. The quote first appeared in "Time"magazine.

For those of you who do not know this gentleman he was the General Manager of General Motors, and he made this public statement at the height of the 1929 stockmarket crash. He had "confidence"in the financial markets of the time.

"All we need is confidence and a square deal" F D R.

The same applies today.

I'll be honest and never heard of the man "Albert P. Sloan" (not B.).

But, if I read some info about him I can understand that he said, back than "I am still buying stock", learning that:

"The total assets of the Sloan Foundation have a market value of about $1.5 billion. Financial statements can be found in the Foundation's on-line Annual Report." Pretty updated website.

and:

"The Alfred P. Sloan Foundation, a philanthropic nonprofit institution, was established in 1934 by Alfred Pritchard Sloan, Jr., then President and Chief Executive Officer of the General Motors Corporation."

It's easy to say that if you have a few bucks left "at the height of the 1929 stock market crash" Most people didn't have a dime, back than.......

http://www.sloan.org/main.shtml

LaoPo

[LaoPo]

SEC says did not foresee Bear cash crisis

Thu Apr 3, 2008 6:54am EDT

WASHINGTON (Reuters) - Failed Wall Street giant Bear Stearns had enough capital reserves to meet a key international soundness test but the company's liquidity crisis was not foreseen, the head of the U.S. Securities and Exchange Commission told lawmakers on Thursday.

"Up to and including the time of its agreement to be acquired by JPMorgan Chase, Bear Stearns had a capital cushion well above what is required to meet the Basel standards," Chairman Christopher Cox said in prepared remarks to the Senate Banking Committee.

http://www.reuters.com/article/ousiv/idUSN0240168120080403

OK, so: WHEN exactly did they 'see' Bear Stearns was going under....?

LaoPo

[lannarebirth]

SEC says did not foresee Bear cash crisis

Thu Apr 3, 2008 6:54am EDT

WASHINGTON (Reuters) - Failed Wall Street giant Bear Stearns had enough capital reserves to meet a key international soundness test but the company's liquidity crisis was not foreseen, the head of the U.S. Securities and Exchange Commission told lawmakers on Thursday.

"Up to and including the time of its agreement to be acquired by JPMorgan Chase, Bear Stearns had a capital cushion well above what is required to meet the Basel standards," Chairman Christopher Cox said in prepared remarks to the Senate Banking Committee.

http://www.reuters.com/article/ousiv/idUSN0240168120080403

OK, so: WHEN exactly did they 'see' Bear Stearns was going under....?

LaoPo

http://online.wsj.com/article/SB1207162964...p_us_whats_news

[LaoPo]

SEC says did not foresee Bear cash crisis

Thu Apr 3, 2008 6:54am EDT

WASHINGTON (Reuters) - Failed Wall Street giant Bear Stearns had enough capital reserves to meet a key international soundness test but the company's liquidity crisis was not foreseen, the head of the U.S. Securities and Exchange Commission told lawmakers on Thursday.

"Up to and including the time of its agreement to be acquired by JPMorgan Chase, Bear Stearns had a capital cushion well above what is required to meet the Basel standards," Chairman Christopher Cox said in prepared remarks to the Senate Banking Committee.

http://www.reuters.com/article/ousiv/idUSN0240168120080403

OK, so: WHEN exactly did they 'see' Bear Stearns was going under....?

LaoPo

http://online.wsj.com/article/SB1207162964...p_us_whats_news

Yes, I read the same news, elsewhere.

Do you think it will help ? (I don't) Can you imagine...those heavy paid flamboyant Wall Street Blues Boys and a low-paid 'FED guard' watching over their shoulders.....?...

They're 10 years late, but, I know, better late than sorry....

Note:

I forgot: what about internal secret info, from within those companies, and slipped through -by the 'guards'- to the FED (and it's shareholders....) ?

Weird and unworkable.

LaoPo

Edited April 3, 2008 by LaoPo

[lannarebirth]

SEC says did not foresee Bear cash crisis

Thu Apr 3, 2008 6:54am EDT

WASHINGTON (Reuters) - Failed Wall Street giant Bear Stearns had enough capital reserves to meet a key international soundness test but the company's liquidity crisis was not foreseen, the head of the U.S. Securities and Exchange Commission told lawmakers on Thursday.

"Up to and including the time of its agreement to be acquired by JPMorgan Chase, Bear Stearns had a capital cushion well above what is required to meet the Basel standards," Chairman Christopher Cox said in prepared remarks to the Senate Banking Committee.

http://www.reuters.com/article/ousiv/idUSN0240168120080403

OK, so: WHEN exactly did they 'see' Bear Stearns was going under....?

LaoPo

http://online.wsj.com/article/SB1207162964...p_us_whats_news

Yes, I read the same news, elsewhere.

Do you think it will help ? (I don't) Can you imagine...those heavy paid flamboyant Wall Street Blues Boys and a low-paid 'FED guard' watching over their shoulders.....?...

They're 10 years late, but, I know, better late than sorry....

LaoPo

I think there is a lot of "off balance sheet" shenanigans going on at many of these firms. I think the Fed is freaked out about that, and who wouldn't be? They will wield a very heavy club if need be. I do agree with the rest of your sentiments.

[LaoPo]

I think there is a lot of "off balance sheet" shenanigans going on at many of these firms. I think the Fed is freaked out about that, and who wouldn't be? They will wield a very heavy club if need be. I do agree with the rest of your sentiments.

Please explain; I'm afraid I don't fully understand.

LaoPo

[lannarebirth]

I think there is a lot of "off balance sheet" shenanigans going on at many of these firms. I think the Fed is freaked out about that, and who wouldn't be? They will wield a very heavy club if need be. I do agree with the rest of your sentiments.

Please explain; I'm afraid I don't fully understand.

LaoPo

In other words, bad accounting:

http://www.iht.com/articles/2008/02/28/business/norris29.php

[LaoPo]

I think there is a lot of "off balance sheet" shenanigans going on at many of these firms. I think the Fed is freaked out about that, and who wouldn't be? They will wield a very heavy club if need be. I do agree with the rest of your sentiments.

Please explain; I'm afraid I don't fully understand.

LaoPo

In other words, bad accounting:

http://www.iht.com/articles/2008/02/28/business/norris29.php

OK, thanks.

..bad accounting....the CEO's of many banks would call it "creative banking":

From your link:

"At the end of last year, State Street (a Boston Bank, LP) estimates that market value was about $850 million below face value. Had it been forced to consolidate the conduits, that loss would have been posted, leaving a write-down of about $530 million after taxes. About 40 percent of the bank's 2007 profits would have vanished."

That's either bad or creative banking; -Bad- for the shareholders -creative- for the bankers, sitting on red pluche, accounting how much their bonuses will be with Xmas...

Everything is in the (wishful) eye of the beholder(s) BUT: "Banks are legalized Mafia" as a Banker once told me himself...he was right.

LaoPo

[Pakboong]

Note:

Unbelievable how the shareholders keep silent over this man...Mr. Marcel Osper, responsible for a total loss (so far known....!) of $ 30 Billion, in less than two years....

I don't know of ANY industry in the world where the losses have been so big and the CEO's can walk away with a bag full of money...money from their clients and shareholders.

Unheard

LaoPo

A quote that will explain all............

"Give me control of a countries money supply and i care not WHO makes it's rules"

Amschel Mayer Rothschild

In other words, its not the likes of elected politicians that are running the countries..........Bush, Blair, Brown, Merkel, Sarkozy etc, etc, but the bankers of the world, who, over the years have taken on an almost fireproof, Godlike persona

Penkoprod

Among my favorite quotes. True then and true now. The primary argument to eliminate the Fed. The Rothchild family still controls most of the banks in Europe as well as many others in the world. This relationship has existed for centuries and will continue for centuries. The family changed its name from Bauer in the 18th century.

[LaoPo]

Soros Sees Additional Market Declines After Temporary Reprieve

By Katherine Burton

April 3 (Bloomberg) -- Billionaire George Soros called the current financial crisis the worst since the Great Depression and said markets will fall more this year after a brief rebound.

``We had a good bottom,'' Soros said yesterday in an interview in New York, referring to the rally in stocks and the dollar after JPMorgan Chase & Co. agreed to buy Bear Stearns Cos. on March 17. ``This will probably not prove to be the final bottom,'' he said, adding the rebound may last six weeks to three months as the U.S. moves closer to a recession.

Last summer, worried about market disruptions that started with rising subprime-mortgage defaults, Soros, 77, returned to a more active role in managing the $17 billion Quantum Endowment Fund, whose profits pay for his philanthropic projects. Quantum returned an average of 30 percent a year before Soros started using outside managers in 2000 for much of his money.

He also decided to write a book, his 10th, ``The New Paradigm for Financial Markets''** (Public Affairs, 2008). Released today online, the book explains the causes of the current meltdown, a crisis he says has been in the making since 1980, and the trades he put in place this year to protect his wealth, much of it in Quantum.

Soros has bet on declines in the dollar, 10-year Treasuries and U.S. and European stocks. He expected foreign currencies to rise, as well as Chinese and Indian equities. The latter bet helped Quantum return 32 percent in 2007. Quantum's returns this year have ranged from up 3 percent to down 3 percent.

`Heightened Uncertainty'

The euro has climbed 7.5 percent against the dollar this year and the Japanese yen has gained 9.1 percent. These and other currencies may continue to strengthen, he said.

``There is an increasing unwillingness to hold dollars, though there's a lack of suitable alternatives,'' he said. ``It's a period of heightened uncertainty.''

Federal Reserve officials dropped their benchmark interest rate 2 percentage points this year to 2.25 percent, and Soros doesn't see that they can lower the rate much further, given the weak dollar.

``We are close to the limit,'' he said.

As for his wagers on developing markets, Soros hasn't abandoned his holdings in India, even with the 22 percent drop in the benchmark Indian index this year.

``The fundamentals remain good,'' he said. He is less certain about what will happen to Chinese H shares, which trade in Hong Kong.

Credit-Default Swaps

>>>>>: Credit default swaps -- a way to bet on the creditworthiness of a company -- may be the next crisis area because the market is unregulated, and it's impossible to know whether counterparties can meet their obligations in the event of a bond default. The market has a notional value of about $45 trillion -- or about half the total wealth of U.S. households.

Soros recommends the creation of an exchange with a sound capital structure and strict margin requirements, where current and future contracts could be traded.

The cause of the current troubles dates back to 1980, when U.S. President Ronald Reagan and U.K. Prime Minister Margaret Thatcher came to power, Soros said. It was during this time that borrowing ballooned and regulation of banks and financial markets became less stringent. These leaders, Soros said, believed that markets are self-correcting, meaning that if prices get out of whack, they will eventually revert to historical norms. Instead, this laissez-faire attitude created the current housing bubble, which in turn led to the seizing up of credit markets and the demise of Bear Stearns, Soros said.

To avoid a super-bubble in the future, Soros said banks must control their own borrowing. They must also curtail lending to clients such as hedge funds by demanding greater collateral and margin requirements on loans.

Asked if such moves would make it impossible to achieve returns like those of his pre-2000 days, Soros laughed.

``Since I'm designing these regulations, they would not hurt me,'' he said. ``We made direction bets but we haven't used leverage'' like the $25-to-$1 borrowing that brought down John Meriwether's Long-Term Capital Management LLC in 1998.

** http://www.georgesoros.com/creditcrisis08

http://www.bloomberg.com/apps/news?pid=206...&refer=news

LaoPo

[Pakboong]

Soros Sees Additional Market Declines After Temporary Reprieve

By Katherine Burton

April 3 (Bloomberg) -- Billionaire George Soros called the current financial crisis the worst since the Great Depression and said markets will fall more this year after a brief rebound.

``We had a good bottom,'' Soros said yesterday in an interview in New York, referring to the rally in stocks and the dollar after JPMorgan Chase & Co. agreed to buy Bear Stearns Cos. on March 17. ``This will probably not prove to be the final bottom,'' he said, adding the rebound may last six weeks to three months as the U.S. moves closer to a recession.

Last summer, worried about market disruptions that started with rising subprime-mortgage defaults, Soros, 77, returned to a more active role in managing the $17 billion Quantum Endowment Fund, whose profits pay for his philanthropic projects. Quantum returned an average of 30 percent a year before Soros started using outside managers in 2000 for much of his money.

He also decided to write a book, his 10th, ``The New Paradigm for Financial Markets''** (Public Affairs, 2008). Released today online, the book explains the causes of the current meltdown, a crisis he says has been in the making since 1980, and the trades he put in place this year to protect his wealth, much of it in Quantum.

Soros has bet on declines in the dollar, 10-year Treasuries and U.S. and European stocks. He expected foreign currencies to rise, as well as Chinese and Indian equities. The latter bet helped Quantum return 32 percent in 2007. Quantum's returns this year have ranged from up 3 percent to down 3 percent.

`Heightened Uncertainty'

The euro has climbed 7.5 percent against the dollar this year and the Japanese yen has gained 9.1 percent. These and other currencies may continue to strengthen, he said.

``There is an increasing unwillingness to hold dollars, though there's a lack of suitable alternatives,'' he said. ``It's a period of heightened uncertainty.''

Federal Reserve officials dropped their benchmark interest rate 2 percentage points this year to 2.25 percent, and Soros doesn't see that they can lower the rate much further, given the weak dollar.

``We are close to the limit,'' he said.

As for his wagers on developing markets, Soros hasn't abandoned his holdings in India, even with the 22 percent drop in the benchmark Indian index this year.

``The fundamentals remain good,'' he said. He is less certain about what will happen to Chinese H shares, which trade in Hong Kong.

Credit-Default Swaps

>>>>>: Credit default swaps -- a way to bet on the creditworthiness of a company -- may be the next crisis area because the market is unregulated, and it's impossible to know whether counterparties can meet their obligations in the event of a bond default. The market has a notional value of about $45 trillion -- or about half the total wealth of U.S. households.

Soros recommends the creation of an exchange with a sound capital structure and strict margin requirements, where current and future contracts could be traded.

The cause of the current troubles dates back to 1980, when U.S. President Ronald Reagan and U.K. Prime Minister Margaret Thatcher came to power, Soros said. It was during this time that borrowing ballooned and regulation of banks and financial markets became less stringent. These leaders, Soros said, believed that markets are self-correcting, meaning that if prices get out of whack, they will eventually revert to historical norms. Instead, this laissez-faire attitude created the current housing bubble, which in turn led to the seizing up of credit markets and the demise of Bear Stearns, Soros said.

To avoid a super-bubble in the future, Soros said banks must control their own borrowing. They must also curtail lending to clients such as hedge funds by demanding greater collateral and margin requirements on loans.

Asked if such moves would make it impossible to achieve returns like those of his pre-2000 days, Soros laughed.

``Since I'm designing these regulations, they would not hurt me,'' he said. ``We made direction bets but we haven't used leverage'' like the $25-to-$1 borrowing that brought down John Meriwether's Long-Term Capital Management LLC in 1998.

** http://www.georgesoros.com/creditcrisis08

http://www.bloomberg.com/apps/news?pid=206...&refer=news

LaoPo

Soros must be aware that the ratio at Bear Sterns was something like $160 to $1.

[LaoPo]

This time a rather 'small' Bank:

BayernLB Reports Record EU 4.3 Billion in Writedowns (That's US $ 6,7 Billion)

April 3 (Bloomberg) -- Bayerische Landesbank reported 4.3 billion euros ($6.7 billion) in writedowns from the subprime- market collapse, double its previous estimate and the biggest of any German state bank.

Profit fell to 175 million euros last year from 989 million euros in 2006, the Munich-based company said in a statement today. Germany's second-biggest state-owned bank and its owners agreed to cover as much as 6 billion euros in possible losses from 24 billion euros in assets that will be shifted to a new finance affiliate.

The credit-market slump has forced Germany's state-owned banks to slash the value of investments by more than 11 billion euros and cost BayernLB Chief Executive Officer Werner Schmidt his job. Smaller competitor WestLB AG yesterday reported its first loss in three years after 2.01 billion euros in markdowns.

``The main problem is no one can tell today how the market will develop in the future,'' said new CEO Michael Kemmer, who replaced Schmidt last month. The bank is unable to estimate how much more it will have to write down, he said.

BayernLB said in February it would write down 1.9 billion euros. Today's total includes 1.2 billion euros booked for last year and another 1.1 billion euros for the first quarter. It chalked up the remaining 2 billion euros in revaluation reserves, affecting the balance sheet rather than earnings.

Risk Officer Fired

The company has about 33 billion euros in asset-backed securities including 3.79 billion euros in investments backed by subprime mortgages, U.S. home loans to borrowers with poor credit histories.

The bank announced earlier today that Chief Risk Officer Gerhard Gribkowsky was fired and will be replaced by management board member Ralph Schmidt.

Former CEO Schmidt stepped down after he ``embarrassed'' the lender's administrative board and its deputy chairman Erwin Huber, finance minister of the German state of Bavaria, by seeking to publish figures on BayernLB's subprime losses without first informing them, the German newspaper Sueddeutsche Zeitung reported on Feb. 15.

The state of Bavaria and the Bavarian savings bank association each own half of BayernLB.

Deutsche Bank AG, Germany's biggest bank, said earlier this week it cut the value of securities and loans by 2.5 billion euros in the first quarter, saying conditions have become ``significantly more challenging.'' Zurich-based UBS AG reported a 12 billion-Swiss franc ($11.9 billion) quarterly loss after $19 billion in extra writedowns.

Overall the world's biggest banks and securities firms have announced more than $232 billion in writedowns and losses, a sum that may rise to $600 billion, according to German financial regulator BaFin.

http://www.bloomberg.com/apps/news?pid=206...mp;refer=europe

LaoPo

[AFKAFSinLOS]

"I am still buying stock" A statement by Albert B. Sloan. The quote first appeared in "Time"magazine.

For those of you who do not know this gentleman he was the General Manager of General Motors, and he made this public statement at the height of the 1929 stockmarket crash. He had "confidence"in the financial markets of the time.

"All we need is confidence and a square deal" F D R.

The same applies today.

I'll be honest and never heard of the man "Albert P. Sloan" (not B.).

But, if I read some info about him I can understand that he said, back than "I am still buying stock", learning that:

"The total assets of the Sloan Foundation have a market value of about $1.5 billion. Financial statements can be found in the Foundation's on-line Annual Report." Pretty updated website.

and:

"The Alfred P. Sloan Foundation, a philanthropic nonprofit institution, was established in 1934 by Alfred Pritchard Sloan, Jr., then President and Chief Executive Officer of the General Motors Corporation."

It's easy to say that if you have a few bucks left "at the height of the 1929 stock market crash" Most people didn't have a dime, back than.......

http://www.sloan.org/main.shtml

LaoPo

Perhaps Alfred was a bit sharper than his brother Albert

[LaoPo]

Perhaps Alfred was a bit sharper than his brother Albert

Alfred was a lot sharper (not having a brother Albert, or am I wrong ?).....and a controversial chap as well, this Sloan guy....

http://globalresearch.ca/index.php?context...;articleId=5571

LaoPo

[AFKAFSinLOS]

"I am still buying stock" A statement by Albert B. Sloan. The quote first appeared in "Time"magazine.

For those of you who do not know this gentleman he was the General Manager of General Motors, and he made this public statement at the height of the 1929 stockmarket crash. He had "confidence"in the financial markets of the time.

Perhaps Alfred was a bit sharper than his brother Albert

Alfred was a lot sharper (not having a brother Albert, or am I wrong ?).....and a controversial chap as well, this Sloan guy....

http://globalresearch.ca/index.php?context...;articleId=5571

LaoPo

I reckon you need to ask david96. He's the one who seems to know Albert.... I'm one of those who don't know him

Or could be that given Albert would be 79 now, his memory is going a little and he thinks he's Alfred...

Edited April 3, 2008 by AFKAFSinLOS

[AFKAFSinLOS]

Sorry didn't want to detract from the general thread but did wonder about the Sloan brothers.

As I've moved the focus away, perhaps I should try and make up.

My comment on original title: Worst Banking Crisis in 30 years? I think that's more dramatic journalism to catch the headlines. I mean how many "financial" crises have there been in the last 30 years? Only need one hand for that. If we're more specific and say "banking" crisis that's fewer still. '97 = Asian Crisis. 1987 wouldn't describe as a "banking" crisis, although in both there were falls in bank share prices.

If they had said worst "US Banking Crisis" they'd definitely have a point

All in all, this "2008 Banking Crisis" doesn't seem so bad compared with many. Think of the 25% drops in a single day in the previous ones. 2008 just a small correction in my books...

Edited April 3, 2008 by AFKAFSinLOS

[LaoPo]

The title "Worldwide Banking Crisis Is Worst In 30 Years" wasn't (dramatic) journalism.

It was a title given by Morgan Stanley and Oliver Wyman in a joint report.

And, if you think 2008 (but don't forget 2007...) is just a small correction, I think of the operating profit for a Giant company like Coca Cola with a 'mere' $ 7.2 Billion.

I don't know about most people on TV but $ 7,2 Billion operating profit is quite a bit of money in my opinion.

Now, if we take that into consideration, losses of 100's of $ Billions with Banks seems quite a bit to me and it will take a long time before those losses are turned into profits again. It will take a long time.

LaoPo

[AFKAFSinLOS]

The title "Worldwide Banking Crisis Is Worst In 30 Years" wasn't (dramatic) journalism.

It was a title given by Morgan Stanley and Oliver Wyman in a joint report.

And, if you think 2008 (but don't forget 2007...) is just a small correction, I think of the operating profit for a Giant company like Coca Cola with a 'mere' $ 7.2 Billion.

I don't know about most people on TV but $ 7,2 Billion operating profit is quite a bit of money in my opinion.

Now, if we take that into consideration, losses of 100's of $ Billions with Banks seems quite a bit to me and it will take a long time before those losses are turned into profits again. It will take a long time.

LaoPo

Still think the title of their report is relative. How many crises have there really been in the last 30 years? 30 years is also not really a long time when you consider crises happen say every 5-10 years for different reasons, i.e cyclical, and worst of 3-5 cycles maybe? That wouldn't grab the headlines though if they said "worst of the last 5 crises".

Real title is simply: "The Banking Crisis has been bad", but we all know that. Hence they try and make it sounds more dramatic by saying 30 years etc...

Yes you've got a fair point if you're talking about the crisis in terms of loss write offs. If you're talking in terms of stock market losses etc there's a slightly different slant. Yes the write-offs are big.

Edited April 3, 2008 by AFKAFSinLOS

[LaoPo]

Fed has loaned Bear $25 bln under new lending plan

NEW YORK (MarketWatch) -- J.P. Morgan Chase & Co CEO Jamie Dimon said Thursday that Bear Stearns , which Morgan has agreed to buy, has borrowed $25 billion from a new Federal Reserve facility established to loan money directly to investment banks with trouble financing their business. Dimon, along with Bear CEO Alan Schwartz, are testifying in front of a Senate Committee Thursday.

http://www.marketwatch.com/news/story/fed-...&dist=msr_5

LaoPo

[LaoPo]

Fed, Treasury defend bailout of Bear Stearns

Collapse would have had severe consequences, officials say

By Greg Robb, MarketWatch

Last update: 4:19 p.m. EDT April 3, 2008

WASHINGTON (MarketWatch) - The collapse of investment bank Bear Stearns would have caused such severe damage to the U.S. economy and global financial system that a rescue of the wrecked firm was justified even though taxpayer money is at risk in the bailout, officials and regulators involved in the plan said on Thursday.

In hearings before the Senate Banking Committee, the officials said the sudden destruction of the nation's fifth-largest investment bank would have had unpredictable and potentially severe consequences on the nation's economy. Stock prices may have plunged, and the resulting turmoil would have worsened the existing credit crunch by further lowering home prices and drying up credit for homeowners and businesses, the officials added.

"Are there risks here? Yes, but the risks are modest in comparison to the substantial damage to the economy and economic well-being that potentially would have accompanied Bear's insolvency," said New York Federal Reserve President Timothy Geithner, who played a central role in the 96-hour rush to rescue Bear Stearns last month.

"It became clear that Bear's involvement in the complex and intricate web of relationships that characterize our financial system, at the point in time when markets were especially vulnerable, was such that a sudden failure would lead to a chaotic unwinding of positions in already damaged markets," Geithner commented.

Ben Bernanke, the Fed chairman, was unable to quantify the exact risk faced by taxpayers. But he said that "Main Street" was more of a beneficiary of the rescue than Wall Street. "If the financial system crashes, or at least is severely hobbled, then the economy can't grow in a healthy way either, and that's why we did what we did."

Robert Steel, Treasury undersecretary for domestic finance and a former Goldman Sachs executive, called the bailout "necessary and appropriate."

"During times of market stress, certain issues may hold the potential to spill over to the broader markets and cause harm to the American economy," Steel said.

Key members of Congress signaled that they were not seeking to block the Bear Stearns rescue plan.

Sen. Chris Dodd, the chairman of the Senate Banking Committee, said he would not try to "second guess" the Fed and Treasury. Dodd is chairing the hearing of the events surrounding the Bear Stearns bailout.

"I think they made the right decision," Dodd said in an interview on Bloomberg TV.

Continues here:

http://www.marketwatch.com/news/story/fed-...D76641C74347%7D

LaoPo