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12 July 2008 at 5:35 a.m.
This is the largest financial institution to ever fail in the USA. It was seized shortly after the market closed yesterday.
The run on the bank was stopped by just locking the doors. I'm sure people are freaking out today over their deposits.
The FDIC has 99 years to repay.
Tony Snow died today.
12 July 2008 at 6:24 a.m.
By Ambrose Evans-Pritchard Last Updated: 1:59am BST 08/07/2008
Bridgewater Associates has issued an apocalyptic warning to clients that bank losses from the worldwide credit crisis may reach $1,600bn (£800bn), four times official estimates and enough to pose a grave risk to the financial system.
The giant US hedge fund said that it doubted whether lenders would be able to shoulder the full losses, disguised until now by “mark-to-model” methods of valuing structured credit.
“We are facing an avalanche of bad assets. We have big doubts as to whether financial institutions will be able to obtain enough new capital to cover their losses. The credit crisis is going to get worse,” said the group in a confidential report, leaked to the Swiss newspaper SonntagsZeitung.
advertisementBank losses on this scale would have far-reaching effects. Lenders would have to curtail loans by roughly 10-to-one to preserve their capital ratios. This would imply a further contraction of credit by up to $12,000bn worldwide unless banks could raise fresh capital.
It would be almost impossible to attract or even find such sums from investors. While sovereign wealth funds command roughly $3,000bn in funds, this money is mostly committed already. The funds have grown extremely wary of Western banks with sub-prime exposure after burning their fingers so many times already.
The credit crisis in full Bridgewater said true losses would mushroom if the banks were compelled to use “mark-to-market”, which foretells a much crueller haircut for investors in the outstanding pool of structured debt from mortgages, credit cards, car loans and such like, together worth $26.6bn.
The International Monetary Fund has estimated bank losses of roughly $400bn. A chunk has already been covered by fresh infusions of capital, allowing the lenders to continue lubricating the global financial system without having to squeeze credit too hard.
The great unknown is whether this is the end of the debacle. A number of hedge funds believe the alleged losses - typically measured by the ABX index - may overstate the likely level of defaults. They are buying the spurned securities for as little as eight cents on the dollar.
If Bridgewater is anywhere near correct, governments alone have the wherewithal to rescue the system. This would mean the de facto nationalisation of the banking systems in the US, Britain and Europe
12 July 2008 at 7:10 a.m.
Shares of US mortgage finance giants Fannie Mae and Freddie Mac were in a freefall Friday on heightened concerns the trillion-dollar firms may face insolvency or a government takeover. Freddie Mac plunged 47 percent to 4.23 dollars at 1450 GMT following a 22 percent slide on Thursday and Fannie Mae lost 44 percent to 7.40 dollars after a 14 percent drop in the prior session.
The shares of the two firms have lost around 80 percent since the start of the year.
The latest action came amid a new report saying the government could put the finance giants in receivership, which would make their shares worthless.
The New York Times said the administration of President George W. Bush is weighing the possibility of having to place one or both companies in a conservatorship to protect them from the snowballing collapse of the US mortgage finance market.
The Wall Street Journal, which first reported Thursday that the Bush administration was weighing strategies to keep the firms afloat, said Friday that pressure was on them now to raise fresh capital.
Treasury Secretary Henry Paulson, in a brief statement, offered no indication of any imminent intervention.
“Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission,” Paulson said.
“We are maintaining a dialogue with regulators and with the companies.”
Under a 1992 law, if either is seen as being severely undercapitalized, it may be placed into government conservatorship.
One research note this week said the two firms may have to raise tens of billions of dollars in fresh capital under new accounting rules to offset massive losses in their home loan portfolios.
The two firms, which have no explicit government backing despite their government charter, provide liquidity to the housing market by buying mortgages and repackaging them into securities sold to investors. But the horrific housing slump has led to billions of dollars in losses for the firms.
16 July 2008 at 6:41 a.m.
hey 50cal, you'll get a kick out of this….
The men who created indymac are the same two guys, CEO's of Countrywide. CW is bankrupt.
16 July 2008 at 9:14 a.m.
yeah you should see where the tops of enron ended up!
20 July 2008 at 9:27 p.m.
These people are not getting their money. Have you seen any of the interviews of these people? Have you seen any of the footage of the police and security calming the situation last week?
Just imagine going to the bank to get your life savings and you're met by security.
21 July 2008 at 3:42 a.m.
Washington Mutual and other banks are refusing to take the Cashier's Checks from IndyMac.
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