Bank Stocks Won’t Get Lift From FASB, Goldman Says The Funhouse move
“Our core view is that banks will not bottom until underperforming asset growth decelerates,” Richard Ramsden, a New York-based analyst at Goldman Sachs, wrote in a report today. “Loans are going bad faster than banks earn money.” I guess we will be needing Giethner’s scheme to bailout the banksters, defraud the taxpayers and enrich the PIMROCKS after all. But will teh Geithner scheme be sufficient to still save Citi without bondholders taking the much needed haircut which might be enabled if Geithner gets his “resolution authority” passed as and when needed.
Calpers Apollo Bet Sours as Private Equity Doubles Down on DebtApparently California Publblic Employees Retirement System pourd almost $2 billion into Apollo Management, Leon Blacks PE firm. Most of Apollo’s acquisitions in 2008 have lost more than thier value. It is a good thing Calpers still has almost 200 billion under management. The losses from their investment in Apollow as not that substantial, however, the fund still lost 27% of its value between July 1 08 and Jan 31.
is pitching Geithner’s $1 Trillion scheme to hedge funds Citadel, Lone Star, Perella Weinberg,
Obama Banking Policy Signals $1 Trillion Writedowns From Loans
If I read Josh Rosner’s take on the matter correctly, the PPIP program to buy bad loans and other such non-performing assets would allow teh FDIC to put a bank such as Citi into a “silent resolution.” It’s a way “to functional winde down a bank as big as Citi without the world realizing that they’re essentially in resoltion. The real value of this is a tool to resolve a too-big-to-fail institution.” Lordy-lordy! If that is what Geithner’s scheme is leading to ~ a resoltion of Citi, then maybe some good will come of it, after all.
“Assets sold under the Legacy Loans Program may be worth an average of 56.3 cents on the dollar, based on the results of FDIC auctions at failed banks over the past 15 months. Writedowns would total $1 trillion if the program buys $500 billion in loans at 32 cents on the dollar, the average for non- performing commercial loans in the FDIC sales.
“This is going to be our Yucca Mountain right here,” said Joseph Mason, an associate professor at Louisiana State University in Baton Rouge and former FDIC visiting scholar, referring to the proposed radioactive-waste storage site in Nevada.
“You can put it in a train car and ship it across the country. The half-life of this stuff is real long, but it has to burn off,” he said.
“In announcing its loan-sale program last week, the Treasury provided an example of a purchase price of 84 cents on the dollar, with taxpayers putting up 6 cents, investors 6 cents and the FDIC guaranteeing 72 cents in financing.
“Eighty-four cents is just laughable” because the market value for loans is much lower, said Barry Ritholtz Mannequin: On the Move Salvation movie download , chief executive officer of New York-based FusionIQ, an independent research firm.
“The U.S. is structuring the loan purchases to leave the government with most of the risk, while investors stand to gain most of any profit, economist Stiglitz said.
“There’s almost no upside for the taxpayer,” he said. “The government is giving a 110 percent bailout.”
“If there’s an issue with the program, it’s going to be trying to get banks to sell assets,” FDIC Chairman Sheila Bair said in a speech the same day at the Isenberg School of Management of the University of Massachusetts in Amherst.
“If I have concern, it’s the pricing may not be where seller and buyer are willing to meet,” she said.
“Any standoff between investors and banks over loan prices may scuttle Geithner’s plan to segregate non-performing assets and restart lending, said Bob Eisenbeis, chief monetary economist with Vineland, New Jersey-based Cumberland Advisors and a former Atlanta Federal Reserve Bank research director.
“It’s hard to believe that the really bad stuff that’s causing all the problems are going to be offered for sale,” Eisenbeis said. “The institutions won’t want to sell them if they get a true price, because their capital would take too much of a hit.”
While regulators don’t intend to publish the details of their stress tests, the results will effectively become known once banks announce how much capital they need to raise. Regulators will then give lenders six months to obtain funds from investors or taxpayers as a last resort.”
Stephen Emery of Mission Capital Advisors says “Terms offered under the Legacy Loans Program, including government-backed financing, will also help boost demand and selling prices by as much as 20 percent, The leverage will allow buyers to bump their price a little bit,” Emery said. “But that still doesn’t mean that something that was worth 30 is now worth 60. What’s going to happen is now it’s worth 35 or 36 cents.”
If Emery is correct, the gap between what we expect to pay and what we actually pay to purchase this dreck from the banksters will be alot closer to mark to market values than the banksters mark-to-fantasy-model or hold-to-maturity values they want to be paid. If so, this whole Geithner scheme may be a lot less offensive than it was when details were first pitched on March 23.
Bank of America and Citigroup spokesmen have declined comments. Can’t say I blame them. Stay tuned, it ain’t over until the fat lady sings. Go read the entire article! It is sure to create some buzz over the next few months.
