Posted on 12/11/2008 6:03:58 PM PST by rabscuttle385
NEW YORK (Reuters) - Jim Rogers, one of the world's most prominent international investors, on Thursday called most of the largest U.S. banks "totally bankrupt," and said government efforts to fix the sector are wrongheaded.
Speaking by teleconference at the Reuters Investment Outlook 2009 Summit, the co-founder with George Soros of the Quantum Fund, said the government's $700 billion rescue package for the sector doesn't address how banks manage their balance sheets, and instead rewards weaker lenders with new capital.
Dozens of banks have won infusions from the Troubled Asset Relief Program created in early October, just after the Sept 15 bankruptcy filing by Lehman Brothers Holdings Inc (LEHMQ.PK). Some of the funds are being used for acquisitions.
"Without giving specific names, most of the significant American banks, the larger banks, are bankrupt, totally bankrupt," said Rogers, who is now a private investor.
(Excerpt) Read more at reuters.com ...
“Savings and mortgage provider ING Direct has reassured savers that their money is safe following this week’s €10bn (£7.8bn) injection of cash by the Dutch government.”
http://www.guardian.co.uk/money/2008/oct/25/savings-banks
“Bear Stearns reassured investors earlier this week that it was solvent, but speculation that Bear faced a liquidity crunch had some traders and hedge funds moving to limit their exposure to it.”
The comment was so stupid, I wanted to confirm that was what you meant.
Everyone knows they can’t cover themselves in the event of a run.
With FDIC insurance, why should they have to cover 100% of their demand deposits?
It’s a silly idea.
What is, that banks are unsound?
Holding 100% of demand deposits as cash on hand.
Do you deny that they can’t cover their demand deposits?
Over what time frame? 24 hours, no they can't. So what?
Do you deny that bank runs deny a fraction of the depositors their money?
How large a fraction? What % of their money?
Really, this is not controversial stuff.
Really, it's a silly idea.
But you should run with it. I'm sure everyone will run to deposit their money with you, safely, to earn 0% interest.
“The comment was so stupid, I wanted to confirm that was what you meant.”
What comment? That banks are unsound? You do realize that banks being unsound and whether or not I think we should require 100% coverage of deposits are two different issues, right? That’s why I explicitly said that I don’t consider this a moral issue, because I didn’t want anyone to infer that I have a moral problem with banks being unsound. My moral problems lie elsewhere, namely with the Federal Reserve System. As for individual banks, go on being unsound, if you like.
“It’s a silly idea.”
“What is, that banks are unsound?”
“Holding 100% of demand deposits as cash on hand.”
Please, stop pretending as if I said banks should be required to hold 100% of demand deposits in cash on hand. I said no such thing. If you were going to pretend that I did, why did you ask twice? Twice you asked if I think there should be 100% coverage, and twice I said i wouldn’t require it, in so many words.
All I said was that not doing so makes them unsound, which is absolutely true given what we’ve seen with real life bank runs. I propose other means of preventing bank runs and inflation, beyond concerns about fractional reserve banking.
Some are, some aren't.
Please, stop pretending as if I said banks should be required to hold 100% of demand deposits in cash on hand.
It shouldn't be required. But you think it might be a good idea. Because bank runs happen every day.
All I said was that not doing so makes them unsound,
You think that every bank that holds less than 100% of demand deposits as cash is unsound? How many banks ever need to redeem 100% of their demand deposits as cash? Say in the last year?
I propose other means of preventing bank runs and inflation, beyond concerns about fractional reserve banking.
Please share with the class.
No way. It took over a year for his predictions to come true after his little-publicized advice on FoxNews' low-rated Saturday show. See graph below. Soros is different. He is destructive. He talked down the British Pound relentlessly, putting billions into shorting it lower and lower until it succumbed. He is a market terrorist. Rogers is a market maverick.
So this is the same Jim Rogers who told Fortune readers to “sell long-term government bonds short” today?
http://money.cnn.com/galleries/2008/fortune/0812/gallery.market_gurus.fortune/5.html
He is also right a great deal of the time, and on the other side of the gaggle of fools, charlatans. thieves, liars and idiots who form the financial/political power base in our culture...., but that is a redundancy, isn't it?
Both morally and financially............and ethically..........
Maybe and maybe not! But you can bank on the fact that they are 99.9% BS.
This a gift from deregulation are no regulation! No one should ever be able to sell bogus insurance no matter what you call it and no one should be able to buy insurance without an insurable interest. There is no value without risk!!
Well, I have seen S&Ls with worse numbers.
That’s the way it’s always been.
If a person thought they were getting a 100% guaranteed return on their savings and CD with full protection in all cases then that person would be a complete idiot.
What do you think an investment is?
There is a bone of contention on these credit defaults no?
As I understand it, if the parameter is breeched, say 5% of the bundled creditors default, the insurer takes possession of the tranch. He then pays the counterparty the full value of the tranch. Aha, but there is no value, or very little value since there is no market.
Who owes who what?
yitbos
What Credit Default Swaps really are could not be said. They are insurance and if they were called ‘insurance’ they would be highly regulated.
And because they are loosely regulated there were/are no audits to show that reserves were adequate. This is why AIG was bailed out.
Wall Street got a little too clever wanting to avoid regulation, they called the insurance ‘swaps’.
And what do CDS insure? Mortage Based Securities or MBS. These were sold like bonds and the seller would offer CDS ‘insurance’ along with these bonds. Thus, the MBS seemed ‘safe’. And they were bought up like there is no tomorrow because of their high return rates.
When you figure accredited individuals, especially those sitting on cash after the dot com bust, could only get 2-3% on CDs, the ‘insured safety’ and high rate of return of MBS seemed a no-brainer.
But what buyers of MBS did not understand is that MBS was a sandwich of high risk borrowers (subprime) mixed in with low risk borrowers, and when the high risk went into default, the CDS were/are exposed as unfunded facades (worthless, scam).
“Speaking by teleconference at the Reuters Investment Outlook 2009 Summit, the co-founder with GEORGE SOROS of the Quantum Fund,”
Why does my knee jerk whenever I see the name George Soros?
Most of the buyers of MBS/CDS were financial institutions. As holders of worthless securities these holders of MBS/CDS became insolvent.
Bernanke/Paulson’s first idea was to make a market for MBS (as long as there was a market for MBS there would be less risk to the CDS market). But making a market for MBS meant buying MBS at a price that was not mark-to-market, thereby leaving the Fed holding worthless securities without an equity stake.
Along comes a brilliant London financier to steer Bernanke/Paulson into taking equity stakes by ‘direct cash infusions’.
The mechanics of the ‘direct cash infusion’ scheme must have involved taking the worthless MBS off the failing bank balance sheet and substituting cash, but how then get equity? Must have been a condition of TARP to cancel the CDS contract. Participating banks had no choice, either TARP or bankruptcy. They could also opt to fight for CDS performance in court but they knew CDS was a scam.
Now which is scarier? A securities market gone bust or a government that doesn’t know what they’re doing with leveraged assets of trillions upon trillions of dollars?
Thanks for posting that quote- excellent!
Same thing with Peter Schiff and a few others.
The one thing they admittedly missed is the current dollar bubble, due to massive deleveraging- everyone is looking for dollars to pay off debts, so the supply is short- for the moment.
It’s a good time to convert Federal Reserve Notes to hard assets.
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