Worldwide Banking Crisis Is Worst In 30 Years

[LaoPo]

There isnt a housing shortage in the Midlands and the North, the government are knocking down 400,000 houses similar to ones in London that sell for half a million pound. Property in these areas has gone up 300% or more in the last 10 years.

http://www.telegraph.co.uk/news/main.jhtml.../26/nhice26.xml

Furthermore the buy to let investors who own 9% of all property and just let the house sit idle in some cases as people arent willing to pay inflated rents havent helped the affordability, this is all on the back of artificially cheap loans, and now im bailing these people out.

The market should find its own level without government intervention that is ultimately keeping the wealth divide in society at unprecedented levels.

As your from the States you probably dont get UK news channels, the spin from our government is that we are in these troubling times because of America and the sub prime market. The same people were taking all the credit when things were going well, there is nothing like passing the buck for the mess they helped create.

I'm not from the US; I'm from the EU mainland and do read/watch BBC. Not that it changes much though.

LaoPo

[VegasVic]

need anything else be said? good luck and get ready.......

BB, thanks for the graph, it clearly shows what we in the states (and the markets here) already know and that is the worst of the subprime crisis is over as the subprime resets have begun a steep decline and will continue in that direction. I know you are still waiting for that 11,300 prediction of yours for the DOW, but you of all people should be able to read a graph and should have been able to see the double bottom that the DOW has already put in at around 12,000. I know that you are a true doomsday believer and prepetually see the glass of water as half empty, I am a little closer to the action over here and see the glass as half full and the forward looking markets seem to be on the same page as I am I hope you are not too short in U.S. equities, because the second half of CY 2008 will be very strong for the U.S. markets as the dollar begins to strengthen, oil and gold begin a sustained slide and the chinese capitalist experiment continues to unravel and funds are repatriated from the BRIC countries back to the markets in the U.S., and the record ammount of cash on the sidelines reenters the game Hopefully the U.S. will also drop its foolish ethynol program and corn, grain and soybean prices can return to normal, this shortsighted political boondogle out of Washington has created havoc in many poor nations across the globe as inflation is out of control in many areas of the globe that can least afford it.

[LivinLOS]

Can anyone imagine the Government/FED (ANY Government - ANY Central Bank) pumping $ Billions and Billions into 'normal' companies if they lose so much money....?

Wholly agree, i and most younger people in the UK cant afford to buy property due to irresponsible lending/borrowing over the last 10 years which has overvalued property, now these people who have made money sitting on the sofa should suffer the problem theyve created, i cant see why i as a taxpayer should be funding the government to bail out banks and their shareholders so they can carry on offering cheap loans keeping the property market artificially high, hence keeping people such as myself out of the 2 tier property system. I WANT A PROPERTY CRASH!

http://news.bbc.co.uk/1/hi/business/7355754.stm

We seem to be living in a free market when times are good but as soon as things turn sour its cap in hand to the taxpayer for the free ride.

But I guess many people dont realize how bad that Bear Sterns issue could have been.. With soo many counterparties to that interlinked derivative mess, that could have started a chain reaction causing massive bank failures, the end of many wall street firms (no skin of my nose) and total meltdown of the system.. The systemic risks were / are actually that high !!

[howtoescape]

But I guess many people dont realize how bad that Bear Sterns issue could have been.. With soo many counterparties to that interlinked derivative mess, that could have started a chain reaction causing massive bank failures, the end of many wall street firms (no skin of my nose) and total meltdown of the system.. The systemic risks were / are actually that high !!

I dont know anything about deriatives, but arent i right in thinking that Bear Sterns was at the time of its problems actually worth something so from that point of view JPMorgan was buying it below market value to make money, not because the system would collapse if they didnt, hence capitalism at work.

As banks now know that governments will bail them out ie Northern Rock in the UK or loan them billions of $$$$$ when things go wrong, this gives them free reign to carry on gambling on a ticket they know they cant lose on. As they can say if you dont give us money the entire system is going to fail, theyve got us by the balls so to speak.

[Pakboong]

I feel that few understand that the Fed's largest share holder is JP Morgan. The Fed could have given the $29 billion to Bear Stearns if bailing them out was the objective. Instead, they loaned the $29 billion to JP Morgan taking that Bank's leveraged debt to over $90 trillion by adding Bear's $13 trillion to their's. Bear's situation was connected to a total debt package that some experts feel to be well over $500 trillion. Bear only had $80 billion in assets which were leveraged out to $13 billion. The JP Morgan numbers are not likely to be much better than Bear's.

[Pakboong]

I feel that few understand that the Fed's largest share holder is JP Morgan. The Fed could have given the $29 billion to Bear Stearns if bailing them out was the objective. Instead, they loaned the $29 billion to JP Morgan taking that Bank's leveraged debt to over $90 trillion by adding Bear's $13 trillion to their's. Bear's situation was connected to a total debt package that some experts feel to be well over $500 trillion. Bear only had $80 billion in assets which were leveraged out to $13 billion. The JP Morgan numbers are not likely to be much better than Bear's.

Sorry, $13 trillion

[LaoPo]

Buffett says recession may be worse than feared

Mon Apr 28, 2008 11:09am EDT

By Jonathan Stempel

NEW YORK (Reuters) - Warren Buffett, the world's richest person, said on Monday the U.S. economy is in a recession that will be more severe than most people expect.

Buffett made his comments on CNBC television after his Berkshire Hathaway Inc agreed to invest $6.5 billion in the takeover of chewing gum maker Wm Wrigley Jr Co. by Mars Inc in a $23 billion transaction.

"This is not a field of specialty for me, but my general feeling is that the recession will be longer and deeper than most people think," Buffett said. "This will not be short and shallow.

"I think consumers are feeling gas and food prices," he added, "and not feeling they've got a lot of money for other things."

He was not immediately available for further comment. Known for his frugality, the 77-year-old Buffett has lived in the same 10-room Omaha, Nebraska, house for a half-century, despite being worth an estimated $62 billion.

On Wednesday, the U.S. Commerce Department is expected to say how fast the economy grew in the first quarter. Economists on average have projected that gross domestic product grew at an annualized 0.2 percent rate in the quarter.

Two quarters of declining GDP is a traditional indicator of recession. That last happened in 2001. Economists expect the U.S. Federal Reserve on Wednesday to cut a key lending rate for a seventh time beginning last September.

Berkshire is a $197 billion conglomerate best known for its insurance holdings, such as auto insurer Geico Corp, but it owns more than 70 businesses.

Many of those businesses are tied to the housing market, including Acme Brick Co, insulation maker Johns Manville, and the real estate brokerage HomeServices of America Inc.

Others depend on consumers to spend more on discretionary items, such as Ben Bridge Jeweler and Borsheims Fine Jewelry.

"In the retail businesses ... if anything, they've gotten a little worse," Buffett said. "Of course, things connected with housing, whether it's in brick or whether it's in carpet, those businesses have shown no uptick at all. Jewelry had a bad Christmas ... and it stayed that way."

Buffett sees no respite from the housing slump.

"I think this is going to be fairly long and fairly deep, but who knows," he said.

In March, Forbes magazine pegged Buffett's net worth at $62 billion, ahead of Mexican tycoon Carlos Slim's $60 billion and Microsoft Corp Chairman Bill Gates's $58 billion. Gates is a friend of Buffett and a Berkshire director.

http://www.reuters.com/article/businessNew...dai&sp=true

LaoPo

[LivinLOS]

But I guess many people dont realize how bad that Bear Sterns issue could have been.. With soo many counterparties to that interlinked derivative mess, that could have started a chain reaction causing massive bank failures, the end of many wall street firms (no skin of my nose) and total meltdown of the system.. The systemic risks were / are actually that high !!

I dont know anything about deriatives, but arent i right in thinking that Bear Sterns was at the time of its problems actually worth something so from that point of view JPMorgan was buying it below market value to make money, not because the system would collapse if they didnt, hence capitalism at work.

As banks now know that governments will bail them out ie Northern Rock in the UK or loan them billions of $$$$$ when things go wrong, this gives them free reign to carry on gambling on a ticket they know they cant lose on. As they can say if you dont give us money the entire system is going to fail, theyve got us by the balls so to speak.

No thats a vastly oversimplified view... Look at it the other way, if it was merely a risk that the bank would liquidate and the remaining assets would be then stripped for value why would 'bail outs' need to happen ??

The fact is Bear like most of them have made bets on massively leveraged derivative instruments.. Now those are being revalued and should one party go bust (and is increasingly likely) then all thier counterparties are left running around holding naked trades.. Who in turn have to exit, lowering prices and causing many more to pop. A proper banking crises.

[LaoPo]

Fed Cuts Rate by a Quarter Point, to 2%

WASHINGTON — The Federal Reserve, mixing its concern about the weak economy with worries about the rising cost of energy and food, reduced short-term interest rates Wednesday for the seventh time in seven months and left open the possibility of further reductions.

The Fed’s action, lowering short-term rates to 2 percent from 2.25 percent, followed new indications that the American economy remained fragile, expanding by 0.6 percent on an annualized basis in the first quarter, not an overall downturn that would have indication a full recession had begun.

The poor record of economic growth, reported by the Commerce Department on Wednesday morning, reflected what most Americans have been experiencing since late last year — declines in consumer spending, housing prices and business investment, along with spreading unemployment.

The interest rate action was accompanied by a parallel decision to lower the Fed’s discount rate, the rate the Fed charges banks and thrift institutions, from 2.50 percent to 2.25 percent.

Continues here:

http://www.nytimes.com/2008/04/30/business...amp;oref=slogin

LaoPo

[VegasVic]

It seems that nobody cares if there are HUGE losses anymore....whether $ 3 Billion, 20 Billion, 40 Billion, 245 Billion...

who cares ?

Indeed. It's because of the new paradigm : "it's good when it's less worse than the forecasts".

People forecast let's say -10 billions. And if the result is -8, then, wizzz, euphoria !

Magic stick... people don't talk about the -8 billions. Voila.

Meanwhile : the real world is taking hits : real estate continues to fall in the US, foreclosures continue to grow, gasoline goes up, consummers are under pressure, the credit market is still frozen, etc.

The momentum is building. Slowly but surely.

Suckers rally in WS or in Europe won't change the situation.

agreed, if you look at the stats, this is nothing more than a short squeeze rally (shorts covering open positions), the trend is still down, with bounces along the way

also the anticpation of another fed rate cut on April 30

B.B. I try and keep on telling you that you had your short squeeze rally after the DOW first dipped below 12,000, then the Dow made its double bottom. This rally is for real and the Dow eclipsed 13,000 today just like I tried to tell you a couple of weeks ago. The more important news of todays market action was the convincing way that the S&P rocketed through 1395, watch for the S&P to out pace the DOW in this next leg of the run upwards! Nows the time for foreign investors to take advantage of investing in U.S. equities before the dollar makes its bull run. It looks as though my predictions of the years best short plays are finally taking hold (gold, the Euro, the Pound, and anything to do with mainland China!) remember its still early in this great short play so come on in the water is fine

[LaoPo]

The more important news of todays market action was the convincing way that the S&P rocketed through 1395, watch for the S&P to out pace the DOW in this next leg of the run upwards!

It seems that stupid Warren Buffett was all wrong when he recently said that the S & P was way too high in the 1330's and now being close to 1400. He should have listened to you VV !

LaoPo

[LaoPo]

The more important news of todays market action was the convincing way that the S&P rocketed through 1395, watch for the S&P to out pace the DOW in this next leg of the run upwards!

It seems that stupid Warren Buffett was all wrong when he recently said that the S & P was way too high in the 1330's and now being close to 1400. He should have listened to you VV !

LaoPo

Today: May 2nd:

"About 27,000 investors from every continent except Antarctica are gathering in Omaha. They will pack the city's Qwest center to hear Buffett and Berkshire Vice Chairman Charles Munger, 84, answer questions and talk about their plans."

Buffett Plots $40 Billion Spree as Crunch Diverts Other Bidders

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

Are you there too Vic ? I wish I would....

LaoPo

[bingobongo]

need anything else be said? good luck and get ready.......

BB, thanks for the graph, it clearly shows what we in the states (and the markets here) already know and that is the worst of the subprime crisis is over as the subprime resets have begun a steep decline and will continue in that direction. I know you are still waiting for that 11,300 prediction of yours for the DOW, but you of all people should be able to read a graph and should have been able to see the double bottom that the DOW has already put in at around 12,000. I know that you are a true doomsday believer and prepetually see the glass of water as half empty, I am a little closer to the action over here and see the glass as half full and the forward looking markets seem to be on the same page as I am I hope you are not too short in U.S. equities, because the second half of CY 2008 will be very strong for the U.S. markets as the dollar begins to strengthen, oil and gold begin a sustained slide and the chinese capitalist experiment continues to unravel and funds are repatriated from the BRIC countries back to the markets in the U.S., and the record ammount of cash on the sidelines reenters the game Hopefully the U.S. will also drop its foolish ethynol program and corn, grain and soybean prices can return to normal, this shortsighted political boondogle out of Washington has created havoc in many poor nations across the globe as inflation is out of control in many areas of the globe that can least afford it.

We are only in the 3rd inning of a 9 inning ball game

This chart from Credit Suisse shows the heavy subprime resets in 2008, plus it shows the reset problems with Alt-A and Option ARM loans in later years.

Although many of the homeowners in the 2009 to 2011 reset periods will refinance (if they can), this shows that the problems in housing will linger for several years. What is especially concerning is all these Option ARM resets in 2010 and 2011. Most of these homeowners are selecting the minimum payments (negatively amortizing) and many homeowners will be upside down when the ARM resets.

[BEENTHEREDONETHAT]

Seems a little strange to call the worlds riches man stupid when it comes to finance. If he is stupid where does that put the rest of us, when it comes to finanace?

[LaoPo]

Seems a little strange to call the worlds riches man stupid when it comes to finance. If he is stupid where does that put the rest of us, when it comes to finanace?

I thought the word 'stupid' was understood in that particular sentence but it seems it wasn't by everyone. I'm sure VegasVic understands the meaning of 'stupid' though since VV knows better than Warren Buffett....

Of course Mr, Buffett isn't stupid; au contraire

LaoPo

[LaoPo]

Countrywide Rating Cut to `Junk' By Standard & Poor's

By David Mildenberg

May 2 (Bloomberg) -- Countrywide Financial Corp.'s credit rating was unexpectedly cut below investment grade by Standard & Poor's Corp., which cited doubt about whether Bank of America Corp. will back the home lender's debt after they merge.

The revision reflects ``the new level of uncertainty as to the ultimate legal status of Countrywide's creditors'' after the lender's sale to Bank of America, Standard & Poor's said in a statement today. Prices on instruments that protect investors from a Countrywide default made their biggest jump in almost four months.

Bank of America, the second-largest U.S. bank by assets, agreed in January to buy Countrywide, the largest U.S. mortgage lender, for about $4 billion after speculation that Countrywide couldn't pay its debts and might go bankrupt. Bondholders have been counting on the merger to put Bank of America's AA credit rating behind Countrywide's $97.2 billion in debt.

``There is no assurance that any such debt would be redeemed, assumed or guaranteed,'' the Charlotte, North Carolina-based bank said in an April 30 regulatory filing, adding that no decision has been reached. Countrywide is based in Calabasas, California.

Bank of America rose 0.6 percent to $39.63 at 2:51 p.m. in New York Stock Exchange composite trading. Countrywide dropped 3 percent to $5.87. Credit-default swaps tied to Countrywide's home-lending unit climbed 95 basis points to 250, according to London-based CMA Datavision. The instruments pay buyers if a company breaks its debt agreements, and a rising price shows investors are more concerned about default.

Merger Doubts

``Until this filing, it was our understanding that Bank of America would acquire all of Countrywide,'' Standard & Poor's analyst Victoria Wagner wrote today. ``This new filing raises the possibility that this assumption is no longer true.''

Countrywide Financial and its home lending unit had their ratings cut to BB+/B from BBB+/A-2. Standard & Poor's also cut the rating on Countrywide Bank FSB to BBB/A-3 from A-/A2.

Investors have been asking Bank of America about plans to back Countrywide's debt since January, when the issue was raised in a conference call to discuss the merger. The bank has demurred ever since.

Bank of America spokesman Scott Silvestri said earlier today, before the S&P downgrade, that the filing ``just means we haven't made a decision.'' He referred questions about S&P's action to Countrywide, where officials couldn't be reached immediately for comment.

Completion Date

The purchase of Countrywide is scheduled to close in the third quarter. Investors have speculated Bank of America may seek a lower price or cancel the deal because U.S. home prices and sales have deteriorated.

``This confirms how tenuous this transaction is,'' said Christopher Whalen, managing director at Institutional Risk Analytics, a banking research firm in Torrance, California, referring to Bank of America's filing.

Whalen expects Bank of America to absorb the best assets, including Countrywide Bank, while the debt remains with a new company created by the merger, Red Oak Merger Corp. Red Oak may then file for bankruptcy, shielding Bank of America from liability, Whalen said.

Bank of America Chief Executive Officer Kenneth Lewis is a ``tough guy and he's got to protect his shareholders,'' Whalen said.

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

LaoPo

[VegasVic]

The more important news of todays market action was the convincing way that the S&P rocketed through 1395, watch for the S&P to out pace the DOW in this next leg of the run upwards!

It seems that stupid Warren Buffett was all wrong when he recently said that the S & P was way too high in the 1330's and now being close to 1400. He should have listened to you VV !

LaoPo

Now now lao, Warren is an old man and there is no reason to call him stupid, granted he should have turned the reigns in Berkshire over to a younger more entergetic individual a few years ago, but even though Warren has slipped in the last few years please give the man his due for what he accomplished in the decades preceeding the onset of his dementia In answer to your question, yes he was clearly wrong on where the S&P index was heading just as he is clearly wrong that the U.S. economy is currently in recession (as proven by the unemployment rate dropping yet again today). Even though time has passed Mr. Buffett by, we should still respect what he did accomplish in his lifetime, however given the quarterly results for Berkshire (net income down 64% and revenue down 22%), Warren really needs to step aside very soon before his legacy really does get tarnished. Lets not forget that Warren has been backing Hillary Clinton (not even the eventual nominee), so his judgement lately is dubious at best across the board. If you really feel the need to stoop to name calling then please direct your insults at me like you have routinely in the past and lay off the old man from Omaha, no matter what he has degenerated into Warren does deserve at least a modicum of respect even from the likes of you

[LaoPo]

The more important news of todays market action was the convincing way that the S&P rocketed through 1395, watch for the S&P to out pace the DOW in this next leg of the run upwards!

It seems that stupid Warren Buffett was all wrong when he recently said that the S & P was way too high in the 1330's and now being close to 1400. He should have listened to you VV !

LaoPo

Now now lao, Warren is an old man and there is no reason to call him stupid, granted he should have turned the reigns in Berkshire over to a younger more entergetic individual a few years ago, but even though Warren has slipped in the last few years please give the man his due for what he accomplished in the decades preceeding the onset of his dementia In answer to your question, yes he was clearly wrong on where the S&P index was heading just as he is clearly wrong that the U.S. economy is currently in recession (as proven by the unemployment rate dropping yet again today). Even though time has passed Mr. Buffett by, we should still respect what he did accomplish in his lifetime, however given the quarterly results for Berkshire (net income down 64% and revenue down 22%), Warren really needs to step aside very soon before his legacy really does get tarnished. Lets not forget that Warren has been backing Hillary Clinton (not even the eventual nominee), so his judgement lately is dubious at best across the board. If you really feel the need to stoop to name calling then please direct your insults at me like you have routinely in the past and lay off the old man from Omaha, no matter what he has degenerated into Warren does deserve at least a modicum of respect even from the likes of you

It seems that old fashioned European humor isn't understood by some in the US and I was right when I told the audience here: Buffett should have listened to VegasVic.

LaoPo

[LaoPo]

Buffett sees credit crisis easing

Investment guru Warren Buffett says the worst of the global credit crunch is over for Wall Street, but not for the man or woman on the street.

The chief executive of Berkshire Hathaway said there would be "a lot of pain to come" for mortgage holders.

He made the comments as Berkshire Hathaway's annual meeting got under way in Omaha, Nebraska, attended by a record 31,000 people.

The meeting has become known as "Woodstock for Capitalists".

Mr Buffet's investment decisions often go against the market and are followed religiously by many.

However, Berkshire Hathaway, the company Mr Buffet took over in 1965, has not escaped the credit crisis.

It saw its first quarter profit tumble 64%, hurt by losses tied to derivatives contracts and a steep slide in insurance premiums.

"The worst of the crisis in Wall Street is over," Mr Buffett told Bloomberg Television shortly before the weekend meeting began.

"In terms of people with individual mortgages, there's still a lot of pain left to come," he added.

Succession fears

Mr Buffett, ranked the world's richest man by Forbes magazine, praised the Federal Reserve's rescue of Bear Stearns.

He said the move avoided financial market chaos.

"I think the Fed did the right thing in stepping in on Bear Stearns," Mr Buffett said.

"Just imagine the thousands of counterparties around the world having to undo contracts."

The central bank helped broker the buyout by JP Morgan, after financial institutions became reluctant to lend to Wall Street's fifth-largest investment bank.

At the meeting, Mr Buffett also tried to reassure shareholders that Berkshire Hathaway would be fine once he had gone, but the 77-year-old billionaire offered few new details of the company's succession plan.

Berkshire Hathaway has stakes in American Express, Coca-Cola, Wal-Mart Stores and Tesco.

---BBC news

LaoPo

[Seizhin]

I somehow thanks Lao for keeping this topic up and updated it.

I'm really taking a close watch on the news and I dont have to go around searching for it.

[LaoPo]

I somehow thanks Lao for keeping this topic up and updated it.

I'm really taking a close watch on the news and I dont have to go around searching for it.

LaoPo

[lannarebirth]

Mr Buffet is undoubtedly a savvy investor. What many people fail to take into consideration is, that more and more he has become a short to intermediate term trader as well. When he's got his trader's hat on you would be most advantaged by assuming he's thinking the opposite of what he suggests others should believe. His objective is to make profits for himself and his shareholders alone. If you're not in that group, you're the one he's trying to derive the profits from.

Edited May 5, 2008 by lannarebirth

[LaoPo]

Mr Buffet is undoubtedly a savvy investor. What many people fail to take into consideration is, that more and more he has become a short to intermediate term trader as well. When he's got his trader's hat on you would be most advantaged by assuming he's thinking the opposite of what he suggests others should believe. His objective is to make profits for himself and his shareholders alone. If you're not in that group, you're the one he's trying to derive the profits from.

I agree partly; since he still has substantial parts in large companies for many years, like Coco Cola.

However, it's not so easy for Berkshire Hathaway, Buffett's investment vehicle, to invest in a certain stock/company. It must be a large company or medium size; he's looking now into Germany since there are quite a number of medium to larger -mostly private- family companies without successors. He must act in silence also since the amounts he's investing are huge.

LaoPo

[digitele]

He is very balanced in his investing. He never invests in a business he does not completly understand.

He never put any funds toward the internet bubble companies in the late 90's. Some shareholders questioned this.

Time proved him to be very right of course.

Another example, this comes from someone who knows him and related it to me.

He was quietly investing in the US carpet mills. Some thought the Chinese and foreign firms held the price advantage.

His rationale was their products would be the same weight, shipping etc. and he would only concentrate on the US market.

They couldn't and didn't compete and BH did very well on this simple thinking.

Ever seen wall to wall carpeting in the US that was imported from China?

Chink-Ching

[LaoPo]

Buffett to Fans: Opportunity Exists But Berkshire May Not Be Best Bet

By KAREN RICHARDSON

May 5, 2008

All eyes were on Warren Buffett at Berkshire Hathaway's annual meeting at the Qwest Center in Omaha, Neb.

Investors, take heart: Warren Buffett sees investment opportunities in the U.S. stock and bond markets, and believes widespread financial turmoil from the credit crunch is behind us.

Speaking to reporters Sunday, a day after Berkshire Hathaway Inc.'s annual fan-fest for shareholders at the Qwest Center in Omaha, Neb., both Mr. Buffett, 77 years old, and Vice Chairman Charlie Munger, 84, criticized regulators, politicians and accountants for lax oversight of financial institutions that are at the center of the subprime-mortgage crisis, and, according to Mr. Munger, were guilty of "deep conflicts of interest."

"The regulators and the accountants have failed us terribly," Mr. Munger said, adding that mark-to-market accounting rules are necessary but can obscure other problems within a company.

This year at Mr. Buffett's annual gathering for shareholders -- often called "Woodstock for Capitalists" -- 31,000 Buffett enthusiasts were serenaded by Fruit of the Loom minstrels, enjoyed samples of Berkshire portfolio companies such as Dilly Bars and watched artist Michael Israel speed-paint a Buffett portrait with Benjamin Moore paints.

Mr. Buffett credited the Federal Reserve for helping to avert a more-widespread crisis on Wall Street by orchestrating a bailout of Bear Stearns Cos. that "prevented, in my opinion, the contagion where you're going to have runs on investment banks."

Bank losses "aren't over by a long shot, but a lot of it has already been recognized," he said, adding that the depth of the housing crisis, unemployment and other economic factors would help determine how long the write-downs continue.

"The idea of financial panic -- that has been pretty much taken care of," he said.

As to buying opportunities, Mr. Buffett told shareholders, "We are happy to invest in businesses that earn their money in the euro, or in companies that derive their earnings in Germany, or from the sterling in the [united Kingdom], because I don't have a feeling that those currencies are going to depreciate in a big way against the dollar." Sunday he said a Berkshire unit is close to buying a midsize company in the U.K., but he didn't elaborate. This month, Mr. Buffett is scheduled to tour five European cities looking for more buying opportunities.

What may not be an attractive buying opportunity? Berkshire itself, Mr. Buffett said on Saturday. "Anyone who expects us to come close to replicating the past should sell their stock. It's not gonna happen," he said. "You may have something better to do with your money than buy Berkshire."

No, his face isn't on the dollar bill. Yet.

Mr. Buffett also said Berkshire Hathaway's four-month-old municipal-bond insurance business garnered more than $400 million of premiums in the first quarter, boasting that this made its new business bigger than that of its rival. "This whole company has been built in just a couple of months," Mr. Buffett said.

Sunday he took a few jabs at rivals, saying he was confounded by the ability of his municipal-bond insurer's biggest rivals, MBIA Inc. and Ambac Financial Corp., to retain their triple-A ratings.

"If you can find another illustration of a company whose stock that's gone down by 95% in one year and is still rated triple-A, I have yet to see it," Mr. Buffett said.

---The Wall Street Journal

LaoPo

[LaoPo]

Buffett says U.S. in recession; banks to face pain

Sun May 4, 2008 7:51pm EDT

OMAHA, Nebraska (Reuters) - Warren Buffett on Sunday said he does not expect financial markets to panic as write-downs and losses for bad debts mount in the financial services industry, but said those losses were not over "by a long shot."

The world's richest person, who runs Berkshire Hathaway Inc , said at a press conference the Federal Reserve brought markets back from a precipice in March in helping broker JPMorgan Chase & Co's purchase of Bear Stearns Cos , which was on the brink of bankruptcy.

"There's going to be more pain, sure," Buffett said. "The action of the Fed, in terms of Bear Stearns, prevented in my opinion the contagion where you're essentially going to have bank runs on the investment banks ... The idea of a financial panic ... has been pretty well taken care of. That was a watershed event."

He added, though: "That doesn't mean the losses are over by a long shot ... We've looked at some of the investment banks, and it's clear some more losses are going to be incurred."

Buffett also praised Wells Fargo & Co, the nation's fifth-largest bank. Berkshire is by far the bank's largest shareholder. "I predict Wells will be earning a lot more money 10 years from now," Buffett said.

---reuters

LaoPo

[LaoPo]

U.S. Foreclosures Rise 65 Percent as Vacated Homes Add to Glut "More than 243,300 properties..."

By Dan Levy

May 14 (Bloomberg) -- U.S. foreclosure filings climbed 65 percent and bank seizures more than doubled in April from a year earlier as rates on adjustable mortgages increased and vacated homes added to a glut of unsold homes, RealtyTrac Inc. said.

More than 243,300 properties, or one in every 519 households, were in some stage of foreclosure, the highest monthly total since RealtyTrac, a seller of default data, began statistics in January 2005. Nevada, California and Florida had the highest rates. Filings rose 4 percent from March.

Properties in foreclosure ``contribute to already bloated inventories of homes for sale, and put downward pressure on home values,'' RealtyTrac Chief Executive Officer James Saccacio said today in a statement.

The collapse of the U.S. housing market, the worst since the Great Depression, is contributing to the economic slowdown and may push the economy into a recession. Median prices for a single- family home fell 7.7 percent in the first quarter, the biggest drop in 29 years, the National Association of Realtors reported yesterday. There were 4.06 million U.S. homes for sale at the end of March, 40,000 more than the prior month, the Realtors association said in an April 22 report.

``Inventory levels have soared to unprecedented levels'' Brian Fabbri, chief North American economist for BNP Paribas, said in an interview. ``Builders and homeowners have to lower their prices significantly to sell that inventory out.''

Bank Seizures

Bank repossessions jumped 145 percent in April from a year earlier to 54,574, according to Irvine, California-based RealtyTrac. The company has database of more than 1.5 million properties and monitors foreclosure filings including defaults notices, auction sale notices and bank seizures.

Banks will seize about 60,000 properties a month through December, when about 1 million U.S. homes, or a quarter of all homes for sale, may be bank-owned, Rick Sharga, RealtyTrac's executive vice president of marketing, said in an interview.

``These are the properties that are causing the bloat in the inventory,'' he said.

Delinquencies on subprime mortgages will continue to rise and defaults on prime loans also may accelerate as people lose their jobs in a slowing economy, Fabbri said. About $460 billion of adjustable-rate loans were scheduled to reset this year, according to New York-based analysts at Citigroup Inc.

Congressional Action

Foreclosures are mounting even as the Bush Administration and Congress propose relief for homeowners. The Democrat-led U.S. House of Representatives approved a $300 billion plan May 8 that would allow the government to insure refinanced mortgages. Acting Housing and Urban Development Secretary Roy Bernardi said the next day he was willing to compromise on the proposal after Republican President George W. Bush threatened to veto it.

Nevada had the highest U.S. foreclosure rate for the 16th consecutive month. One of every 146 households was in some stage of foreclosure, 3.6 times the national rate, RealtyTrac said. Filings almost doubled from a year earlier to 7,276.

California had the second-highest rate, one for every 204 households, and the most filings for the 16th consecutive month at 64,683. Filings more than doubled from a year earlier and were down less than 1 percent from March.

Arizona had the third-highest rate, one for every 224 households. Filings almost tripled from a year earlier to 11,620.

Florida had the second most filings at 35,264 and the fourth- highest rate, one for every 242 households. Foreclosures increased 146 percent from a year earlier and rose almost 17 percent from March.

Ohio ranked third in filings at 11,680. Arizona, Texas, Michigan, Georgia, Illinois, Nevada and Maryland also ranked in top 10 states with the most filings, RealtyTrac said.

Foreclosure filings in New York were up 39 percent from a year ago and up 12 percent from March. The state ranked 29th with 5,696 filings.

In New Jersey, foreclosure filings ranked 15th at 5,143, up 65 percent from a year ago and up 15 percent from March. Connecticut foreclosures ranked 19th at 1,707, down 59 percent from a year ago and down 20 percent from March.

---Bloomberg

LaoPo

[lannarebirth]

Libor Liars

Libor Set for Overhaul as Credibility Is Doubted

By Ben Livesey and Gavin Finch

May 13 (Bloomberg) -- The benchmark interest rate for at least $347 trillion of derivatives and 6 million U.S. mortgages is set for its biggest shakeup in a decade on concern that banks misquoted their true borrowing costs.

``We have not run away or hidden from the need for reform or the need for review'' of ``serious issues'' in the U.K. financial-services industry, British Bankers' Association Chief Executive Officer Angela Knight said at a hearing of a parliamentary committee in London today. The BBA is set to announce the results of its most far-reaching review of the way it sets the London interbank offered rate in a decade on May 30.

The association, an unregulated London-based trade group, is under pressure to show that Libor is reliable following complaints by investors that financial institutions weren't telling the truth about their funding costs after rising mortgage defaults contaminated credit markets and drove up borrowing costs.

While the association set the one-month dollar Libor rate at 2.72 percent on April 7, the Federal Reserve said banks paid 2.82 percent for secured loans later that day. Secured loans typically yield less than unsecured debt.

``The Libor numbers that banks reported to the BBA were a lie,'' said Tim Bond, head of global asset allocation at Barclays Capital in London. ``They had been all along. The BBA has been trying to investigate them and that's why banks have started to report the right numbers.''

April Warning

Libor rates jumped after the association said April 16 that any member banks found to be misquoting rates will be banned. The cost of borrowing in dollars for three months rose 18 basis points to 2.91 percent in the following two days, the biggest increase since the start of the credit squeeze last August. The one-month rate climbed 14 basis points, the most since November.

The cost of borrowing in dollars for three months should be as much as 30 basis points, or 0.30 percentage point, higher than the current rate, Citigroup Inc. said in a report last month.

Banks are understating borrowing costs on concern they will be perceived as ``weakened'' by the credit turmoil that forced financial companies to record $323 billion of losses and credit- markets writedowns, said Peter Hahn, a fellow at the London- based Cass Business School.

``Since the credit crunch, it's something that appears to have been manipulated,'' said Hahn, a former managing director at Citigroup. ``We are in an extraordinarily delicate confidence time where a small event can shatter things quite easily.''

Review Brought Forward

The BBA accelerated its annual review of Libor to assess if there's a fault with how the rate is computed, if it reflects ``difficult markets'' or is ``giving the right answer, just one that people don't want to hear,'' Knight said yesterday.

``Libor has stood the test of two decades,'' she said at today's parliamentary committee hearing. While the association has contacted all the member banks to investigate Libor ``volatility,'' the swings in the rate are ``hardly surprising'' amid the credit turmoil, Knight said.

The association has submitted a report based on discussions with member banks to its independent Foreign Exchange and Money Market Committee, which is carrying out the review of Libor, said Brian Mairs, a spokesman for the BBA in London.

The banking group, which represents Citigroup, HSBC Holdings Plc and 14 other lenders, asks members each morning to say how much it would cost them to borrow from each other for 15 different periods ranging from a day to a year in dollars, British pounds, euros and eight other currencies.

BIS Report

The Bank for International Settlements said in a March report some lenders were manipulating the rates to prevent their borrowing costs from escalating. The system still worked as it was meant to do as the credit crunch began in the middle of last year, the Basel, Switzerland-based BIS said.

Libor is used to guide banks in setting rates on most adjustable-rate mortgages. It's also the benchmark for the $1.2 trillion of interest-rate swap contracts traded every day worldwide, according to the BIS.

``Libor is a proxy for the effective rates of the economy,'' said Rav Singh, an interest-rate strategist at Morgan Stanley in London. ``Libor eventually feeds into the economy. There's so much on the back of the Libor problem. There are structured products, all the swaps and then there are the hedging positions.''

Fed Cuts

To ease the credit crunch, the Fed cut rates seven times, created three lending facilities to help both banks and securities firms obtain funds and backed the takeover of Bear Stearns Cos., which was on the verge of collapse. In all, the central bank made more than $600 billion available to lenders and allowed Wall Street firms to borrow money overnight at the same so-called discount rate charged to commercial banks. Fed Chairman Ben S. Bernanke provided $29 billion of financing to back JPMorgan Chase & Co.'s bailout of Bear Stearns in March.

Bank representatives declined to say what recommendations they are making to change Libor.

HSBC and HBOS Plc spokesmen declined to comment, as did Bank of America Corp. spokesman Scott Silvestri. Barclays, Royal Bank of Scotland Group Plc, Lloyds TSB Group Plc also declined to comment. Deutsche Bank AG spokesman Ronald Weichert wasn't immediately able to comment.

``I can confirm that along with the other 15 members of the BBA, as happens every year, we have been in consultations,'' said Richard Bassett, a London-based spokesman for WestLB AG. Rabobank Groep NV spokesman Anthony Arthur wasn't immediately available for comment.

Spokesmen for Mitsubishi UFJ Financial Group Inc. and Norinchukin Bank Ltd. weren't immediately available. A Royal Bank of Canada spokeswoman said it had discussions with the BBA as part of consultations with all Libor panel members and awaits the association's recommendations.

To contact the reporters on this story: Ben Livesey in London [email protected]; Gavin Finch in London at [email protected]

Last Updated: May 13, 2008 13:10 EDT

http://www.bloomberg.com/apps/news?pid=new...id=aP0bLIoaijv0

[Pakboong]

On March 10, 2008, Bear Stearns stock dropped to $70 a share -- a recent low, but not the first time the stock had reached that level in 2008, having also traded there eight weeks earlier. On or before March 10, 2008, requests were made to the Options Exchanges to open a new April series of puts with exercise prices of 20 and 22.5 and a new March series with an exercise price of 25. The March series had only eight days left to expiration, meaning the stock would have to drop by an unlikely $45 a share in eight days for the put-buyers to score. It was a very risky bet, unless the traders knew something the market didn’t; and they evidently thought they did, because after the series opened on March 11, 2008, purchases were made of massive volumes of puts controlling millions of shares.

On or before March 13, 2008, another request was made of the Options Exchanges to open additional March and April put series with very low exercise prices, although the March put options would have just five days of trading to expiration. Again the exchanges accommodated the requests and massive amounts of puts were bought. Olagues contends that there is only one plausible explanation for “anyone in his right mind to buy puts with five days of life remaining with strike prices far below the market price”: the deal must have already been arranged by March 10 or before.

These facts were in sharp contrast to the story told by officials who testified at congressional hearings on April 4. All witnesses agreed that false rumors had undermined confidence in Bear Stearns, making the company crash despite adequate liquidity just days before. On March 10, 2008, Reuters was citing Bear Stearns sources saying there was no liquidity crisis and no truth to the speculation of liquidity problems. On March 11, the Chairman of the Securities and Exchange Commission himself expressed confidence in its “capital cushion.” Even “mad” TV investment guru Jim Cramer was proclaiming that all was well and the viewers should hold on. On March 12, official assurances continued. Olagues writes:

[LaoPo]

ECB to Lend Banks Up to $25 Billion to Calm Markets

By Christian Vits

May 16 (Bloomberg) -- The European Central Bank said it will offer banks up to $25 billion for 28 days, renewing a dollar auction it is conducting with the U.S. Federal Reserve to facilitate lending among commercial banks.

Bids should be submitted by 9:30 a.m. Frankfurt time on May 19, the Frankfurt-based central bank said in a statement today. Successful bidders receive the funds on May 22 at a fixed rate ``equal to the marginal rate of the simultaneous Fed tender.''

The ECB said May 2 it would increase the amount of U.S. dollar liquidity it provides to European banks by auctioning $25 billion every two weeks in conjunction with the Fed. Central banks in the U.S., the U.K., Switzerland and Canada started coordinating to offer dollar liquidity in December to lower money-market rates.

The ECB intends ``to continue the provision of U.S. dollar liquidity for as long as the Governing Council considers it to be needed in view of the prevailing market conditions,'' the ECB said in its statement on May 2.

The cost of borrowing dollars overnight fell for the first time in a week, the British Bankers' Association said today. The London interbank offered rate, or Libor, dropped 8 basis points to 2.18 percent and the three-month dollar rate declined 2 basis points to 2.70 percent.

---Bloomberg

LaoPo