Posted on 05/07/2009 11:24:35 PM PDT by TigerLikesRooster
Stress test shows bank credit losses could be $600 billion
Ten of 19 institutions must raise $74.6 billion in private capital by November
By Ronald D. Orol, MarketWatch
Last update: 7:49 p.m. EDT May 7, 2009
Comments: 942
WASHINGTON (MarketWatch) -- Federal regulators released the long-anticipated, controversial stress tests on the health of the 19 largest financial institutions on Thursday, showing that the banking sector is secure, but under a pessimistic forecast, banks' credit losses over the next two years could be $600 billion.
(Excerpt) Read more at marketwatch.com ...
Ping!
Can I get another breakdown on Regions? Thanks
That's a lie.
They're done all of the time.
This is the first time they've been made public.
Keiser says workers are 'pathetic.' He adds, 'They deserve what they get because they refuse to stand up for themselves against the bankers and hedge funds. Millions of workers are being set up by Obama because they will be fired. They are being X-ed out of the equation.'
>”No one should want to own shares in a bank with even the prospect of partial government ownership,” he said. <
i was in wells fargo and mentioned the wsj figure of $13-15 billion, and they got snarly.
banks are not going to loan much money until this is solved.
The so called ‘stress tests’ are yet another excuse for Obama Inc & Big Banking’s plant Geithner to funnel even more of the tax payers billions to selected Insider cohorts’ offshore accounts, via the TARP, the biggest financial scam of the public in American history.
What gripes me the most is the way people just nod their heads at the news and go back to work. The Frogs (God love 'em) would be rioting in the streets. French unions would be locking down railroads, blocking food deliveries, closing highways and demanding justice.
Just talking figuratively. Sorry about my vivid language. We still have free political speech in America !
That is - until demon worshiping criminals bribe Congress -- and take it all away. Then all freepers will be hauled away and locked in FEMA prison camps.
The bought and paid for hacks, led by Obama Inc, & the Dem 'leadership', once again more than eager to ram through additional billions for the same Wall Street billionaire Insiders, cognizant they will be 'rewarded' for their legislative efforts, offshore, out of the public's view.
If King Zero really wanted to solve the economic crisis he would have declared a one year moratorium on all Alt-A and subprime mortgage payments. He could have declared credit card interest charges above 7% illegal. That would have given Congress a year to investigate the issues. Americans could look forward to criminals being arrested and bankers in orange jumpsuits being prosecuted.
Instead, Obama caved into the threats, blackmail and demands of the very people that caused the problem. What we now have is criminals in control of our government. JMHO: The situation will get worse before it gets better.
Please read this because its important to understand what is really going on:
Inside the Fed’s Playbook
“Banks don’t have to have the money they lend before they make loans, because the Fed will ‘provide’ the necessary reserves by making them available at the federal funds rate” - today amounting to limitless free money at zero percent interest to be loaned out at higher rates for profit. The “slight of hand” is that the Fed “creates reserves out of thin air.”
Loans then become deposits that banks can freely re-lend many times over - the more deposits, the greater the amount of lending. It’s a process of multiplying the money supply and charging interest for doing it, a very profitable business when working well in a healthy economy.
So, the process works as follows:
— banks “lend money (they) don’t have;”
— loans become deposits on their books;
— when borrowers spend their money, banks raise their reserves back to the required 10% (or less) “by borrowing from the Fed or other sources;” and
— the Fed never runs out of reserves because its “open market operations” create more of them; it simply manufactures whatever amounts it wishes out of thin air, and the public is none the wiser or that they’re being taxed to pay for this shell game.
Reserves don’t comprise safe money to pay claimants. They’re accounting entries at Federal Reserve banks letting commercial banks “make many times those sums in loans.” In plain English, “reserve accounts are a smoke and mirrors accounting trick concealing the fact that banks create the money they lend out of thin air, borrowing any ‘reserves’ they need from the Fed, which also creates the money out of thin air.” What a business, especially given how secretive it is under the protection and auspices of the federal government that sanctions the con.
There’s more as well. Besides what they loan out, banks “create their own investment money” to use for their own purposes. Traditionally, commercial banks invested conservatively, but not investment banks. They raise money for their clients through stock issuances and sales. But more important is their “proprietary trading” that involves using their own money to buy or sell stocks, bonds, currencies, commodities, or any other financial instrument or derivative thereof no matter how risky.
Since investment and commercial banks may be one in the same, limitless sums are available through magical money creation and open-ended Fed borrowing, then leveraged multiple times through more borrowing. The game worked “magically” until it no longer did the old way, so alternatives are used.
Bear Raids and Short Sales
The 1929 “Crash” happened on three “Black” days but “continued for nearly four years, stoked by speculators who made huge profits not only on the market’s” ascent but during its plunge to 11% of its peak value.
Called a “bear raid,” it targets vulnerable stocks for “take-down” quick profits or corporate takeovers at fire sale prices. When done on a large scale, short selling can impact markets greatly on the downside just like heavy “program buying” can rocket it up. The whole business amounts to blatant manipulation for quick profits.
Short sellers actually do it with borrowed (not owned) stock, then sell it into the market. If it declines (it may also rise, of course), it’s re-bought at the lower price, returned to the seller, with short-sellers pocketing the difference as profit. It’s not investing. It’s gambling with someone else’s stock, without permission to borrow it, and as a result harms its owner by driving down the price when it works.
“Short selling is sometimes justified as being necessary to keep a brake on (over-exuberance) that might otherwise drive popular stocks into dangerous ‘bubbles.’
(However,) Any alleged advantages to a company from the liquidity afforded by short selling (and supposedly keeping markets honest) are offset by the serious harm (this causes) companies targeted for take-down(s) in bear raids.” When done with enough force, it can destroy companies if that’s the intent.
“Short selling is the modern version of the counterfeiting (that brought) down the Continental in the 1770s.” Currencies, bonds, and commodities can be shorted just like stocks - to manipulate them for profit.
Worse still, and illegal, is so-called naked short-selling without first borrowing the security shorted, assuring it can be borrowed, or arranging to borrow it as required by law - the reason being that it’s an even easier way to manipulate stock prices so SEC regulations ban it.
Even so, the idea that markets move randomly is rubbish. So is believing that companies or nations don’t target competitors for destruction by attacking their worth through short selling or other manipulative ways.
Hedge funds and Derivatives
“Hedge funds are private funds that pool the assets of wealthy investors with the aim of making ‘absolute returns’ - making a profit whether (markets go) up or down” on whatever financial assets they invest in. Leverage is used for maximum profitability, the more of it the greater gain or loss. In futures trading, it’s called the margin - placing “many more bets than if they had paid the full price.”
Originally, hedge funds were to “hedge (investment) bets….against currency or interest rate fluctuations (but) they quickly became instruments for manipulation and control.” At their peak, they controlled over half of daily equity market trading because of their numbers, size, amount of capital, and frequency of their buying or selling.
Derivatives are one of their key tools - essentially making “side bets that some underlying investment will go up or down” to insure against the risk. “All derivatives are variations on futures trading (and like it) is inherently speculation or gambling.” Familiar examples include puts and calls - on whether assets will go down or up.
“Over 90% of the derivatives held by banks….are ‘over-the-counter’ (ones) specially tailored to financial institutions (with) exotic and complex features, not traded on standard exchanges.” They’re unregulated, hard to trace, and “very hard to understand,” quite often impossible. In a 1998 interview, banking columnist John Hoefle called them “the last gasp of a financial bubble.” More recently Warren Buffett said they were “financial weapons of mass destruction” even though he owns a sizable amount of them and incurred considerable losses as a result.
Derivatives aren’t assets. They’re “just bets” on how assets will perform using very little real money. Most is borrowed to make private unreported, unregulated bets that have soared to a “notional value” of around $370 trillion, according to the Bank for International Settlements as of 2006. Notional value is “the number of units of an asset underlying the contract, multiplied by the spot price of the asset.” In other words, “fanciful, dubious or imaginary” assets.
The amount gets so large because when unregulated “gamblers can bet any amount of money they want,” and when markets work well for them, the sky’s the limit. In mid-2006, the Office of the Controller of the Currency reported that around 97% of US bank-held derivatives were owned by five major US banks, including JP Morgan Chase and Citigroup. In November 2005, Bloomberg reported that the credit derivatives market was “vulnerable to a crisis if one (of their major bank holders) fails to pay on contracts that insure creditors from companies defaulting….” John Hoefle warned we were “on the verge of the biggest financial blowout in centuries, bigger than the Great Depression….”
Since banks can create money out of thin air, how can they go bankrupt? Because under accounting rules, commercial banks have to balance their books so their assets equal liabilities. “They can create all the money they can find borrowers for, but” if loans default, banks must record a loss.
Just imagine - if the government created money and not banks, economic stability would follow, crises could be avoided or greatly lessened, inflation would be minimal or non-existant, prosperous growth would be long-term, and bank loans would be far less risky than today assuring steady profits but in smaller amounts.
Please read my most recent posts. Hit my freeper page.
Check this chart:
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