by ilene - February 8th, 2010 9:14 pm
Courtesy of Adam Sharp at Bearish News
An analyst at Deutsche Bank created some buzz the other day when he said that the PIIGS’ (Portugal, Ireland, Italy, Greece, Spain) debt crisis could be a “dress rehearsal” for a U.S. one.
It makes for a catchy headline, but the funding crisis in America will play out differently than the PIIGS’ bloc does. The key difference is our ability to print money and devalue the dollar. QE is off-limits for EU members, at least. Bernanke would probably call that an advantage, but I’m not so sure.
Either way, it is nice to see some light shined on America’s debt problem. It’s not pretty, and the sooner we deal with it the better. From BusinessWeek:
The cost of insuring against U.S. and U.K. debt defaults may rise in the same way as it has for so- called European peripheral nations including Greece and Portugal, Deutsche Bank AG said.
‘The problems currently faced by peripheral Europe could be a dress rehearsal for what the U.S. and U.K. may face further down the road,’ Jim Reid, a strategist at Deutsche Bank in London, wrote in a research note today.
The cost of insuring against U.S. and U.K. debt defaults may rise in the same way as it has for so- called European peripheral nations including Greece and Portugal, Deutsche Bank AG said.
‘The problems currently faced by peripheral Europe could be a dress rehearsal for what the U.S. and U.K. may face further down the road,’ Jim Reid, a strategist at Deutsche Bank in London, wrote in a research note today.
I heard the “dress rehearsal” line on Bloomberg yesterday, during a Niall Ferguson segment. Scroll down for the clip, it’s among the better mainstream coverage of the global-debt-crisis coverage.
Worse than Greece?
The fundamental outlook for PIIGS is bad. Greece has gotten the lion’s share of attention lately lately. But you could argue the same or worse for the United States or U.K.
Zero Hedge recently escalated the acronym-hoopla by adding the U.K., Turkey, and Dubai to create STUPID. Regular readers objected to the absence of the U.S., expanding it to STUUPID.
America’s situation isn’t pretty, and may be worse than PIIGS’ or STUPID’s long-term. In the Bloomberg clip I mentioned earlier, Niall
…

Tags: America, Deutsche Bank, funding crisis, Greece, Ireland, Italy, PIIGS’ bloc, Portugal, Spain, U.K. debt defaults
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by ilene - February 2nd, 2010 7:08 pm
Courtesy of Reggie Middleton
Senator Corker challenged Mr. Volcker’s stance in today’s congressional hearings on the Volcker Rule by saying that no financial holding company that had a commercial bank failed while performing proprietary trading. It appears as if Mr. Corker may have received his information from the banking lobby, and did not do his own homework.
Let’s reference the largest commercial bank/thrift failure of all:
From …

Tags: Bank of America, CDS, Deutsche Bank, Goldman, Ken Lewis, Merrill, Merrill Lynch, Mr. Corker, Paul Volcker, prop HVOL4 trade, Ten. Senator Bob Corker, too big to fail banks, U.S. Government, US taxpayer, Zero Hedge
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by ilene - January 30th, 2010 12:58 pm
Guest Post: Sham Transactions That Led To AIG’s Downfall: The Ugly Truth Was Hiding In Plain Sight
Courtesy of Tyler Durden
Submitted by David Fiderer, posted originally at Huffington Post
Sham Transactions That Led To AIG’s Downfall: The Ugly Truth Was Hiding In Plain Sight
If you want to understand the deals that wiped out AIG, the best place to start is the website of the New York Fed. In the financial statement of Maiden Lane III, published last April, we see the gory details of the three largest CDO investments – Max 2008-1, Max 2007-1, and TRIAXX 2006-2A – acquired from AIG’s banks at par. Those deals, which totaled $10.7 billion, offer a template for evaluating the other sham transactions in the portfolio.
Initially, the business deal between AIG and the banks was that AIG sold credit default swap protection. Banks buy credit default swaps for two reasons: They want to slice and their dice credit risk, and/or they want to hide something. Here’s a simple, fairly innocuous, illustration: Suppose you’re a banker who tells his client, Procter & Gamble, "We want to expand the relationship and do more business with you." P&G then says, "Fine, lend us $100 million." Back at the office, your senior credit management says, "The maximum risk exposure we approve for P&G is $80 million." How do you keep in P&G’s good graces? You lend the company $100 million, and simultaneously offload $20 million in risk exposure by purchasing a credit default swap from another bank. P&G’s understanding is that you’ve lent them $100 million.
When Deutsche Bank bought a credit default swap from AIG in 2008, its primary motivation was not to slice up the credit risk, but to hide virtually all of it. Max 2008-1, a CDO that Deutsche arranged and closed on June 25, 2008, was huge. The total debt issue was $5.8 billion, of which 94%, or the entire $5.4 billion Class A-1 tranche, was covered by one credit default swap issued by AIG Financial Products. The Class A-1 tranche was considered "supersenior" because it was ahead of two other tranches, both originally rated Aaa, which totaled $200 million. (The remaining debt $200 million worth of debt was rated Aa, a and Baa at closing.)

Put another way, Deutsche Bank did not bring Max 2008-1 to "the marketplace," where investors might consider…

Tags: AIG, AIGFP, Banks, CDO, Deutsche Bank, Goldman Sachs, Maiden Lane III, sham transactions
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by ilene - August 6th, 2009 1:00 pm
Courtesy of Jesse’s Café Américain
Do banks ever stop swimming?
Ben will need to print quite a bit more manure to throw on those green shoots, tout suite.
Its almost feeding time.
Bloomberg
‘Underwater’ Mortgages to Hit 48%, Deutsche Bank Says
By Jody Shenn
August 5, 2009 15:32 EDT
Aug. 5 (Bloomberg) — Almost half of U.S. homeowners with a mortgage are likely to owe more than their properties are worth before the housing recession ends, Deutsche Bank AG said.
The percentage of “underwater” loans may rise to 48 percent, or 25 million homes, as prices drop through the first quarter of 2011, Karen Weaver and Ying Shen, analysts in New York at Deutsche Bank, wrote in a report today.
As of March 31, the share of homes mortgaged for more than their value was 26 percent, or about 14 million properties, according to Deutsche Bank. Further deterioration will depress consumer spending and boost defaults by borrowers who face unemployment, divorce, disability or other financial challenges, the securitization analysts said.
“Borrowers may also ‘ruthlessly’ or strategically default even without such life events,” they wrote…
Home prices will decline another 14 percent on average, the analysts wrote.
Full article here >>.
Tags: Deutsche Bank, Mortgages, underwater
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