New Credit Hurdle Looms for Banks

By CARRICK MOLLENKAMP
August 27, 2008; Page A1

U.S. and European banks, already burdened by losses and concerns about their financial health, face a new challenge: paying off hundreds of billions of dollars of debt coming due.

At issue are so-called floating-rate notes -- securities used heavily by banks in 2006 to borrow money. A big chunk of those notes, which typically mature in two years, will come due over the next year or so, at a time when banks are struggling to raise fresh funds. That's forcing banks to sell assets, compete heavily for deposits and issue expensive new debt.

The crunch will begin next month, when some $95 billion in floating-rate notes mature. J.P. Morgan Chase & Co. analyst Alex Roever estimates that financial institutions will have to pay off at least $787 billion in floating-rate notes and other medium-term obligations before the end of 2009. That's about 43% more than they had to redeem in the previous 16 months.

The problem highlights how the pain of the credit crunch, now entering its second year, won't end soon for banks or the broader economy. The Federal Deposit Insurance Corp. said on Tuesday that its list of "problem" banks at risk of failure had grown to 117 at the end of June, up from 90 at the end of March. FDIC Chairman Sheila Bair said her agency might have to borrow money from the Treasury Department to see it through an expected wave of bank failures. She said the borrowing could be needed to handle short-term cash-flow pressure brought on by reimbursements to depositors after bank failures.

continues http://online.wsj.com/article/SB121978478790274083.html?mod=googlenews_wsj

 

 

 

US thrifts' lost $5.4B in 2Q, second largest ever

By MARCY GORDON – 1 day ago

WASHINGTON (AP) — U.S. thrifts lost $5.4 billion in the second quarter and set aside a record amount to cover losses from bad mortgages and other loans.

Data from the U.S. Office of Thrift Supervision released Wednesday show federally-insured savings and loan institutions posted their second-largest quarterly loss ever in the April-June period, after the $8.8 billion loss in the fourth quarter of last year. Heavily focused on mortgage lending, thrifts have been stung by mounting home-loan defaults.

The $5.4 billion quarterly loss compared with net profits of $3.8 billion in the year-ago period, and a loss of $627 million in the first quarter.

The roughly 830 thrifts also set aside a record $14 billion to cover losses from bad mortgages and other loans.

continues http://ap.google.com/article/ALeqM5iRlUPUAGyrD81NGmZ_DFy5HJyggQD92QMN900

 

 

 

Study: Bankruptcies soar for senior citizens

By MATT SEDENSKY – 1 day ago

ST. AUGUSTINE, Fla. (AP) — First came the health problems. Then, unable to work, Ada Noda watched the bills pile up. And then, suffocating in debt, the 80-year-old did something she never thought she'd be forced to do.

She declared bankruptcy.

While the bankruptcy filing rate for those under 55 has fallen, it has soared for older Americans, according to a new analysis from the Consumer Bankruptcy Project, which examined a sampling of noncommercial bankruptcies filed between 1991 and 2007.

The older the age group, the worse it got — people 65 and up became more than twice as likely to file during that period, and the filing rate for those 75 and older more than quadrupled.

continues http://ap.google.com/article/ALeqM5ii9U-G8o4ThWIGNVnNb9H61jS04wD92QPQ1O0

 

 

 

Bankruptcy filings near 1M in past 12 months, up almost 30%
 

 

 
 
NEW YORK (AP) — Nearly 1 million individuals and businesses filed bankruptcy in the 12 months ended June 30, up 28.9% from the prior 12 months, according to U.S. Court data released Wednesday.

Of the 967,831 bankruptcy cases filed since July 1, 2007, non-business filings made up 96.5% of those cases, totaling 934,009. Of them, 592,376 were Chapter 7 filings, which involve liquidation of non-protected assets, like family homes.

Continues
 

http://www.usatoday.com/money/economy/2008-08-27-bankruptcy_N.htm

 

 

FDIC: 117 troubled banks, highest level since 2003

 

 


Aug 26, 4:04 PM (ET)

By MARCY GORDON

WASHINGTON (AP) - The number of troubled U.S. banks leaped to the highest level in about five years and bank profits plunged by 86 percent in the second quarter, as slumps in the housing and credit markets continued.

Federal Deposit Insurance Corp. data released Tuesday show 117 banks and thrifts were considered to be in trouble in the second quarter, up from 90 in the prior quarter and the biggest tally since mid-2003.

continues http://apnews.myway.com/article/20080826/D92Q653G5.html

 

FDIC Will Need Half A TRILLION Dollars

 

 

Citigroup Limits Meetings, Pares Color Photocopies

 

By Joyce Moullakis

 

Aug. 26 (Bloomberg) -- Citigroup Inc., the biggest U.S. bank by assets, banned off-site meetings among investment- banking employees and cut back on color photocopying to reduce expenses as revenue declines.

Executives in the New York-based bank's trading and investment-banking unit will need to ensure spending is ``highly efficient,'' according to an internal memorandum confirmed by a Citigroup spokesman in London today.

Citigroup is clamping down on spending after cutting about 14,000 jobs in the first half of 2008 and reporting $55 billion of writedowns and credit losses in the past year, more than any other bank, according to data compiled by Bloomberg. Revenue at the company's corporate and investment bank plunged 71 percent in the second quarter on losses for subprime-related assets.

continues http://www.bloomberg.com/apps/news?pid=20601087&sid=an2sIjEb_VBU&refer=home

 

Surge In US Foreclosures Spreads Past Subprimes

 

Moody's Reviewing All 2006, 2007 Jumbo Mortgage Bonds (Update1)

By Jody Shenn

Aug. 27 (Bloomberg) -- Moody's Investors Service is stepping up scrutiny of all prime-jumbo mortgage securities issued in 2006 and 2007 as the surge in U.S. foreclosures spreads beyond subprime loans.

Moody's is studying its rankings on the securities after late payments started increasing more quickly in recent months, according to a statement today from the New York-based ratings company. The bonds aren't all under formal reviews for downgrades, said Thomas Lemmon, a spokesman.

continues

http://www.bloomberg.com/apps/news?pid=20601087&sid=a2c71Nq2xb.w&refer=home

 

 

 

U.S., Europe, Japan Devised Plan to Prop Up Dollar, Nikkei Says

 

By Timothy R. Homan

Aug. 27 (Bloomberg) -- Finance officials from the U.S., Japan and Europe in mid-March drew up plans to strengthen the U.S. dollar following troubles at Bear Stearns Cos., Nikkei English News reported, citing unnamed sources.

The intervention designed by the U.S. Treasury Department, Japan's Finance Ministry and the European Central Bank called for the central banks to purchase dollars and sell euros and yen, with Japan providing the yen needed for the currency swap if the greenback's value dropped significantly, the news service said.

The three groups, which considered making an emergency statement through the Group of Seven industrial nations, did not stipulate a specific exchange rate for the potential intervention, nor did they detail the amount of money to be used, Nikkei said.

ECB spokeswoman Eszter Miltenyi and Treasury spokeswoman Brookly McLaughlin declined to comment on the report.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

Last Updated: August 27, 2008 14:06 EDT

 

http://www.bloomberg.com/apps/news?pid=20601087&sid=aafNFhZiOg.w&refer=home

 

 

WAMU the Killer Bank


August 18, 2008
Doug McIntosh

Wamu stands for Washington Mutual Savings Bank and it is the economic version of "JAWS." Jaws being the 1975 movie about great whites pulling unwary swimmers underwater and swallowing large chunks of them. I never saw the move since I grew up in the desert and movies about sharks aren't on my to do list. Rattlesnakes I can deal with, but sharks and watermoccasins seriously freak me out. Kinda of like what WAMU is going to do the unsuspecting public frolicking on the beach: suck the FDIC under and then spew out the debris before a horrified audience. This economic version of "On the Beach" is going to have a much quicker, although just as lethal ending.

You see, the FDIC insurance fund is around $44 Billion and covers around 1.15% of total bank assets of some 4.4 TRILLION. Now the real interesting thing about this number is the FDIC has taken out newspaper ads talking about how their insurance fund protects bank accounts, up to $100,000, as well as retirement accounts, like IRA's, up to $250,000. They started doing this after they had IndyMac go under, along with a few others, and deplete their insurance fund by 17% or $9 Billion dollars. Obviously, 44 Billion to cover 8500 banks et al isn't enough. Not that they can admit this, hence the newspaper ads and the propaganda campaign.

continues http://www.stevequayle.com/News.alert/08_Money/08_Mac_Attack/080828.WAMU.html