Bailout Helping Big Banks Buy Other Banks and Other Real Assets Cheap
Just the Early Stages of Economic and Financial Collapse
January 21, 2009The International Forecaster - We get the question: Why was Lehman Brothers allowed to go under? This was a seminal event in U.S. and global finance. It had to be done to take the system down even though Lehman’s owners were ultimate insiders. Why do you think you do not hear a peep out of Wall Street? It is because the key people in the key firms are in on it and taking orders - that is why. In the blink of an eye trillions of dollars were lost.
That amount of money is meaningless when you own the system. You can just create more. It is the power to create and control money and credit that always wins the day. The loss of confidence and trust now worldwide was deliberate. It allowed central banks and governments to totally control their fiscal and monetary systems. Essentially there was no one left to do so. Within the financial community those who understand what is happening dare not say a word or they’ll lose their companies or their lives...
Geithner “Involved in Just About Every Flawed Bailout” of the Bush Era
January 21, 2009New York Times - Timothy F. Geithner, President Obama’s nominee to be Treasury secretary, testified before the Senate Finance Committee at his confirmation hearing on Wednesday. As president of the New York Federal Reserve since 2003, Mr. Geithner has been a central player in building the vast bailout plans that the government has extended to Wall Street firms and other troubled financial institutions, such as the giant insurer American International Group. After his nomination, it was disclosed that Mr. Geithner failed to pay more than $34,000 in taxes for Social Security and Medicare when he was a senior official at the International Monetary Fund from 2001 to 2003, including a small payment in 2004 after he left...
Credit Crunch? What Credit Crunch?
December 11, 2008Reuters - The credit crunch is not nearly as severe as the U.S. authorities appear to believe, and public data actually suggest world credit markets are functioning remarkably well, a report released on December 11, 2008, says.
Governments are pumping masses of public money into the economy across the world because of the difficulties of a few big, vocal banks and industries such as car manufacturing, which would be in difficulty anyway, according to the report published by Celent, a financial services consultancy.
“It’s just stabbing in the dark with trillions of dollars,” Octavio Marenzi, report author and head of Celent, told Reuters in a telephone interview where he questioned the depth of the analysis that preceded numerous fiscal stimulus packages.The report, much of which is based on U.S. Federal Reserve data, challenges a long list of assumptions one by one, arguing that there is indeed a financial crisis but that, on aggregate, the problems of a few are by no means those of the many when it comes to obtaining credit.
“It is startling that many of (Federal Reserve) Chairman (Ben) Bernanke and (Treasury) Secretary (Henry) Paulson’s remarks are not supported or are flatly contradicted by the data provided by the very organizations they lead,” said the report...
Obama Team Weighs Government-Run Bank to Ease Crisis
January 18, 2009Reuters – The incoming Obama administration is considering ways of using government capital to acquire bad assets and unclog the financial system, people familiar with the Obama team's thinking said on Saturday.
The U.S. Federal Reserve, Treasury and Federal Deposit Insurance Corp, a bank regulator, have been in talks about ways to ease a banking crisis that is again deepening -- and a government-run "aggregator bank" is among the options.
Outgoing Treasury Secretary Henry Paulson and FDIC Chairman Sheila Bair said on Friday a government bank to round up bad assets was one of a number of ideas U.S. regulators had been discussing to restore confidence in U.S. banks...
Proposed Aggregator Bank is a Trojan Horse for the New “United States Bank”
Over 8 in 10 Corporations have Tax Havens
January 17, 2009AP - Eighty-three of the nation's 100 largest corporations, including Citigroup, Bank of America and News Corp., had subsidiaries in offshore tax havens in 2007, and some of the companies received federal bailout funding, a government watchdog said Friday.
The Government Accountability Office released a report that said Bank of America Inc., Citigroup Inc. and Morgan Stanley all had more than 100 units in countries that maintain low or no taxes. The three financial institutions were included in the $700 billion financial bailout approved by Congress.
Insurance giant American International Group Inc., which has received about $150 billion in bailout money, had 18 subsidiaries. JPMorgan Chase & Co. had 50 units and Wells Fargo & Co. had 18; both financial institutions received government bailout money...
Stimulus Plan Repeals Big Tax Break for Banks
January 17, 2009AP - House Democrats' version of the $825 billion recession rescue package would end billions of dollars in tax breaks the Bush administration quietly gave to banks last fall. Already almost exclusive beneficiaries of a $700 billion Wall Street bailout, banks are largely left out of the House stimulus package that President-elect Barack Obama wants passed quickly through Congress. Those getting financial bailout money wouldn't even be eligible for one of the main business tax breaks aimed at priming the economic pump.
Homebuilders, manufacturers, retailers and low-income families share the bulk of the $275 billion in proposed new tax cuts...
Bank of America Gets Big Government Bailout
Bank of America Corp. was "rescued" January 16, 2009, by the U.S. government (taxpayers) through a $20 billion bailout (handout) and a guarantee for almost $100 billion of potential losses on toxic assets to cushion the blow from a deteriorating balance sheet at Merrill Lynch & Co., its recently acquired brokerage. The bailout (free money at taxpayers' expense) makes Bank of America the biggest recipient of taxpayer money next to Citigroup as the government pours cash into the nation's banks (so that they can buy other assets for pennies on the dollar to further consolidate wealth into the hands of the elite). The capital (handout) is on top of $25 billion (handout) that Bank of America previously got from the Treasury Department's Troubled Asset Relief Program (TARP) in October.January 16, 2009
Reuters – The U.S. government extended $20 billion of new aid to Bank of America Corp hours before both the largest U.S. bank, and the country's third largest, Citigroup, reported multibillion-dollar losses from the ongoing global credit crisis.
Bank of America posted its first quarterly loss in 17 years on the heels of the government's midnight announcement that it would help the bank absorb its January 1 purchase of troubled brokerage Merrill Lynch & Co.
The U.S. Treasury will provide the new aid in exchange for preferred stock, and along with the Federal Reserve and Federal Deposit Insurance Corp, agreed to limit Bank of America's potential losses on $118 billion in tainted assets. Also scrambling to survive huge new losses triggered by the credit crunch was Citigroup, which unveiled plans to split in two and shed troubled assets.
U.S. Treasury Secretary Henry Paulson, on his last full day in office, said a substantial portion of the second half of the government's $700 billion financial rescue fund should be reserved for bank capital programs.Top U.S. policy-makers said they are discussing setting up a government bank that would use federal funds to buy troubled assets from financial institutions to try to stem the crisis. Paulson and FDIC Chairman Sheila Bair both said an "aggregator bank" was one of several ideas U.S. regulators had discussed.
The Treasury said it will lend Chrysler LLC's finance arm $1.5 billion to help it make new car loans as part of a broader program to revive the U.S. auto industry. The Treasury earlier extended a $4 billion loan to Chrysler for its automotive operations and had granted $13.4 billion in operating loans to General Motors Corp...
Video: Has Bank Bailout Gone Too Far?
Obama Scores Win as Senate Grants Final $350 Billion of Bailout
January 15, 2009New York Times - In a solid win for the Obama administration before it even takes office, the Senate on Thursday easily voted down a measure that would have withheld the remaining half of the $700 billion bailout fund. The chamber voted down the resolution of disapproval (S J Res 5) by a vote of 42-52 after a week of intense lobbying by the Obama team as it begins addressing the nation's financial troubles.
Next up is economic stimulus legislation that is expected to be worth more than $800 billion and will challenge the administration's ability to win crucial votes in Congress.
"This was a test of leadership at a time when leadership was desperately needed in our country," said Senate Majority Leader Harry Reid, D-Nev.But the outcome remained in doubt until early Thursday afternoon. Just a few hours before senators cast their votes, leaders on both sides of the aisle received a letter from Obama providing more details about the conditions he proposes to attach to the remaining $350 billion of bailout money. The Republican caucus requested that information during a meeting with Obama advisers Wednesday night.
Several senators credited other parts of the letter with tipping the scales for the vote. Obama also proposed directing a minimum of $50 billion toward foreclosure mitigation, increased transparency in the financial system and stronger reporting requirements for firms receiving bailout funds. The letter, signed by Lawrence H. Summers, Obama's top economic adviser, also placed the new president in the position to approve any transaction proposed by the Treasury Department.
"[Obama] has to sign off on it," said Iowa Democrat Tom Harkin, who voted against the resolution. "We know where the buck stops."Obama representatives spent the last week lobbying hard for the release of the next $350 billion from the unpopular Troubled Asset Relief Program (TARP) created last October (PL 110-343). But as of Wednesday night, Republicans were still searching for guarantees that the money would not go to industries outside the financial sector. The letter said the administration intends to use TARP funds only to aid financial institutions. Automakers would receive more funds only to guarantee long-term viability...
Senate Allows Release of Remaining Financial Bailout Funds
Republican senators have questioned the need to release the second half of the TARP money, citing the lack of a pressing crisis. Democrats cited reports that Bank of America and Citigroup are in need of billions more in TARP funds as a way to refute those claims...
Citigroup, Morgan Stanley to Merge Brokerages
January 13, 2009Reuters - Citigroup Inc agreed to merge its Smith Barney brokerage with Morgan Stanley's wealth management unit, a big step in the possible dismantling of what was once the world's largest bank. The joint venture will create the largest U.S. brokerage, known as Morgan Stanley Smith Barney, with more than 20,000 brokers and $1.7 trillion in client assets. The brokerage force will surpass Bank of America Corp., which bought former No. 1 Merrill Lynch on January 1.
Morgan Stanley will pay Citigroup $2.7 billion in cash for an initial 51 percent stake in the venture that could increase to 100 percent after five years, the companies said on Tuesday.
Citigroup, meanwhile, is expected to shed "non-core" businesses and may announce plans on January 22, a person familiar with the matter said, the same day it is expected to post a big fourth-quarter loss...
Morgan Stanley Could Pay $2-3 Billion for Smith Barney
Janunary 11, 2009Reuters - Morgan Stanley could pay $2 billion to $3 billion or more for a controlling stake in Citigroup Inc.'s Smith Barney retail brokerage business, two people familiar with the matter said. The cash would be a big boon for Citigroup, which is under tremendous pressure from the U.S. government to shore up its balance sheet after taking $45 billion of government capital in October and November, they said. The bank is considering multiple options in addition to the Morgan Stanley deal...
Officials: Tracking Bailout Money is Difficult
December 31, 2008AP – Government officials overseeing a $700 billion bailout have acknowledged difficulties tracking the money and assessing the program's effectiveness. The information was contained in a document, released Wednesday, of a Dec. 10 meeting of the Financial Stability Oversight Board. The panel, headed by Federal Reserve Chairman Ben Bernanke, includes Treasury Secretary Henry Paulson and Securities and Exchange Commission chief Christopher Cox.
While offering no details, the document also mentioned that officials at that meeting discussed "potential methods" of using the bailout program to help curb home foreclosures and ease problems in the housing market. More broadly, the officials discussed "the difficulty of isolating the effects" of the bailout program "given the variety of policy actions taken by the U.S. government to support financial stability and promote economic growth."
The officials also noted the "difficulties associated with monitoring the use of specific funds" provided to individual financial institutions, according to the document...
Follow the Money? Treasury Doesn’t Wanna
December 10, 2008ProPublica - The Treasury Department has invested about $197 billion of the bailout money. About $49 billion more should soon be out the door (see our running tally here). Are banks boosting lending? Are they hording it? Are they using it to gobble up smaller banks?
Who knows. The Treasury Department certainly doesn’t have much of an idea about how that money’s being spent. The reason, as both the Government Accountability Office and a new report (PDF) today from the congressional oversight panel point out, is because Treasury isn’t tracking it. And it remains unclear whether Treasury thinks it ought to...
GMAC Gets $5 Billion From Treasury to Help Revive Auto Lending
December 29, 2008Bloomberg - The U.S. Treasury said it will purchase a $5 billion stake in GMAC LLC, the financing arm of General Motors Corp. The Treasury will purchase a $5 billion stake in GMAC and lend $1 billion to GM so the automaker can contribute to the lender’s reorganization as a bank holding company, according to a statement issued yesterday. The loan is in addition to $13.4 billion the Treasury agreed earlier this month to lend to GM and Chrysler LLC...
Fed Grants GMAC's Request to Become Bank Holding Company
December 24, 2008AP - The Federal Reserve gave an early Christmas present to General Motors' finance arm, allowing the ailing provider of auto loans to qualify for the government's $700 billion rescue fund.
The Fed announced late Wednesday that it had approved GMAC Financial Services' request to become a bank holding company. That designation makes GMAC eligible to receive a portion of the bailout fund and get emergency loans directly from the Fed. The plan also significantly reduces the ownership stakes of GM and Cerberus Capital Management LP, in GMAC.
Analysts had speculated that without financial help, GMAC would have had to file for bankruptcy protection or shut down, dealing a serious blow to GM's own chances for survival. The Fed cited "emergency conditions" in justifying its decision.
Before the Fed's decision, GMAC was facing a crucial deadline Friday to complete a deal with its bondholders that would allow it to exchange debt for equity. GMAC was struggling to convince investors to provide the capital that it desperately needed to win approval to become a bank holding company. The U.S. central bank acted before the debt deal deadline, which GMAC says still stands and will expire on Friday.
The Fed's move to provide government aid to one of the nation's biggest suppliers of auto loans was just the latest extension of the federal bailout program, initially designed to shore up ailing banks. As the credit crisis kept ballooning, the program expanded to include insurers, credit card companies, and the automakers themselves. Just last week, President George W. Bush ordered an emergency bailout of the industry, offering $17.4 billion in rescue loans, and citing imminent danger to the national economy.
"To make the auto package complete, they had to do something with the financing," said David Cole, chairman of the Center for Automotive Research. "It's really tied to the whole survival of the industry..."
Federal Reserve Approves CIT Group as Bank Holding Company
December 23, 3008Xinhua - The Federal Reserve said Monday it has approved commercial financial services firm CIT Group as a bank holding company. "In light of the unusual and exigent circumstances affecting the financial markets, and all other facts and circumstances, the (Federal Reserve) Board has determined that emergency conditions exist that justify expeditious action on this proposal," the U.S. central bank said in a statement.
CIT, with total consolidated assets of approximately 80.8 billion dollars, provides a variety of commercial financing and leasing products and services. The Fed's decision will allow the New York-based company to have permanent access to the central bank's emergency loan window.
Goldman Sachs and Morgan Stanley Have Become Bank Holding Companies
Both Goldman and Morgan, financial institutions owned by the global elite, are reporting record losses for the fourth quarter of 2008; however, both companies were able to post a full-year profit thanks to earnings in each of the prior quarters. Despite posting profits for the first three quarters, the companies received $10 billion each from the government's Troubled Asset Relief Program (Morgan Stanley is a spinoff of JPMorgan, which received $25 billion in TARP money). They were made bank holding companies on September 22, 2008, just in time to be eligible for TARP money.
Goldman and Morgan are bullion banks, the Gold Cartel’s hit men, trading the gold market from the short side and bombing the market in coordinated anti-trust fashion at the beck and call of our government, making a great deal of money in the process … as you have all witnessed the past couple of months.
Note that Treasury Secretary Henry Paulson is former CEO of Goldman Sachs.
December 17, 2008
Dow Jones Newswires - Morgan Stanley said Wednesday it lost $2.37 billion during its fiscal fourth quarter as it took a range of losses on assets amid one of the roughest quarters for investment banks. The New York-based firm, which is aggressively building on its new status as a bank holding company, lost $2.34 per share for the quarter ended Nov. 30. It lost $3.61 billion, or $3.61 per share, during the year-ago period when it took a $9.4 billion write-down on mortgage-related assets as the housing crisis began to spiral downward.
Analysts polled by Thomson Reuters, on average, forecast a loss of 34 cents per share. Analysts have been slashing their estimates for the past several weeks amid the ongoing market turmoil. Only a month ago, they were estimating Morgan Stanley would earn 30 cents per share. Over the past year amid the tumult, analyst estimates have often varied wildly from actual results because of uncertainty surrounding banks' holdings and the value of some illiquid assets.
Shares of Morgan Stanley fell $1.07, or 6.6 percent, to $15.06 in late morning trading. Morgan Stanley took a wide range of charges and losses during the quarter as the value of many assets held by banks plummeted amid the ongoing turmoil. Its fixed income division reported losses of just $1.2 billion during the quarter, compared with losses of $7.9 billion last year. The most recent quarter's loss was smaller because mortgage-related losses shrunk and commodities trading revenue increased with growing volatility in the sector.
Morgan Stanley took an additional $1.1 billion in other sales and trading losses tied to acquisition financing and write-downs on securities held by subsidiary banks. Another $1.8 billion was lost on investments in real estate funds, principal investments and investments tied to benefits for employee deferred compensation.
Morgan Stanley's quarterly loss comes just a day after competitor Goldman Sachs Group Inc. reported its first quarterly loss since it went public in 1999. Goldman lost a wider-than-expected $2.29 billion, or $4.97 per share. Like Goldman, though, Morgan Stanley was able to post a full-year profit thanks to earnings in each of the three prior quarters. Morgan Stanley earned $1.59 billion, or $1.45 per share, during fiscal 2008.
The pair's fourth-quarter losses came during a period when the investment banking sector nearly collapsed in September as Lehman Brothers Holdings Inc. filed for bankruptcy protection and Merrill Lynch & Co. sold itself, leaving only Morgan Stanley and Goldman as independent firms.
Both Morgan Stanley and Goldman quickly gained approval to (September 22, 2008) become bank holding companies in an effort to remain independent.
"The rate of change in the global financial system is extraordinary. Now the last of the Wall Street investment banking heavyweights, Goldman Sachs and Morgan Stanley, are about to flee the shadow banking system (and become retail banks). The Federal Reserve Board last night approved applications from the two remaining Wall Street investment banks to become bank holding companies. Their decision to seek refuge within the traditional banking system follows the forced merger of Bear Stearns into JPMorgan Chase, the collapse of Lehman Brothers and the proposed takeover of Merrill Lynch by Bank of America. The change in status will bring the two investment banks least-ravaged by the credit crisis within the supervisory orbit of the Federal Reserve Board and give them permanent access to the Fed’s discount window and the liquidity it provides. It would also enable them to attract retail deposits and reduce the volatility and risk associated with their reliance on markets for funding." - Stephen Bartholomeusz, 'The End of Shadow Banking', Business Spectator, September 22, 2008
M. Stanley Buys $217 Million Stake in Vietnam's State Oil Firm (December 2007)
JP Morgan Earmarks $750 Million for Asia Private Equity (February 2008)
Goldman Sachs Runs the U.S. Economy (September 2008)
Fed Makes Goldman Sachs and Morgan Stanley Bank Holding Companies (September 22, 2008)
Hong Kong Appoints Morgan Stanley Asia Chief to Crisis Group (October 2008
Morgan Stanley Puts $37.5 Million in First India Private Equity Deal (December 2008)
Goldman, M.Stanley, Bain to Buy into China Film Firm (December 2008)
Goldman Sachs' Link to the Fed, Treasury, Bank of England
Paulson Debt Plan May Benefit Mostly Goldman and Morgan
September 23, 2008Bloomberg - Goldman Sachs Group Inc. and Morgan Stanley may be among the biggest beneficiaries of the $700 billion U.S. plan to buy assets from financial companies while many banks see limited aid, according to Bank of America Corp.
"Its benefits, in its current form, will be largely limited to investment banks and other banks that have aggressively written down the value of their holdings and have already recognized the attendant capital impairment," Jeffrey Rosenberg, Bank of America's head of credit strategy research, wrote in a report dated yesterday, without identifying particular banks.
FDIC Rules Will Ban New Banks
December 17, 2008Atlanta Business Chronicle - The Federal Deposit Insurance Corp. may be implementing what is effectively a ban on new banks in metro Atlanta and other distressed areas nationwide, as the financial industry’s and broader economy’s deterioration accelerates.
The FDIC, the nation’s bank deposit guarantor, has increased scrutiny of new banks applying for deposit insurance in select areas of the Southeast and other regions, including Western states, industry insiders said. The new reviews, insiders said, make approval difficult in practice, if not impossible.
“It is a de facto ban,” said Stephen Johnson, CEO of Alpharetta-based consultant T. Stephen Johnson & Associates Inc. “I’ve never seen a time this difficult to get a charter.”Johnson is a longtime bank organizer and consultant in Atlanta, raising $500 million for various bank investments during his two-decade career.
Spurring the new rules are worsening industry performance and an increasing skepticism that new banks can succeed in the same places where others have failed this year, those familiar with the process said.
However, Mark Schmidt, the FDIC’s Atlanta regional director, adamantly denied that a ban, either formal or informal, is in place. He said the FDIC is continuing to review new bank applications, and expects some to receive approval. Schmidt did acknowledge deposit insurance approval is harder to get, and the FDIC is becoming more discriminating in who it approves nationwide, including in metro Atlanta...
Goldman Says Its Investment in China Will Accelerate
December 12, 2008Reuters - Goldman Sachs will accelerate investment in China as opposition to foreign investment eases and the need for funding rises, an executive said. Kevin Zhang, a managing director for Goldman Sachs (Asia), said he was focusing on opportunities in China's growing consumer sector as well as renewable energy.
"We will continue to accelerate our pace of investment in China," Mr Zhang told reporters. "In the 15 years that I have been with Goldman, this is possibly the best investment environment I have seen," he said.The executive did not provide any value for Goldman's planned investments.
Mr Zhang was speaking on the sidelines of an event marking a near $US100 million joint investment by Goldman and China's CDH Ventures in Himin Solar Energy Group, the country's top maker of solar water heaters...
Earlier this year, US buyout giant Carlyle Group finally walked away from three years of negotiations to buy Xugong, the country's top construction equipment maker, after running into bureaucratic obstacles. The Xugong deal was seen as strategically sensitive by some Chinese officials and businessmen.
Bank of America Takeover of Merrill Lynch Approved
December 5, 2008Reuters - Shareholders approved Bank of America Corp's takeover of Merrill Lynch & Co, a transaction fraught with risk but one that will create a banking giant with a leading position in almost every major area of the financial system.
Bank of America will surpass JPMorgan Chase & Co and Citigroup Inc as the largest US bank, with $2.7 trillion of assets. Its brokerage, credit card, investment banking, mortgage and wealth management operations, plus its deposit base, will be the nation's largest or close to it.
The all-stock purchase valued Merrill on Thursday at $19.7 billion, down from an original $50 billion on Sept. 15 because shares of Charlotte, North Carolina-based Bank of America have slid. Shareholders of both companies had to approve the transaction, which is expected to close this month...
The takeover ends 94 years of independence for Merrill, in a year when Wall Street's top investment banks all met their demise or changed their stripes. Bear Stearns Cos was acquired by JPMorgan, Lehman Brothers Holdings Inc filed for bankruptcy, and Goldman Sachs Group Inc and Morgan Stanley converted into bank holding companies...
Rothschild Investment Banking Posts Record Results
November 21, 2008Seeking Alpha - The inability of the current investment banking model to withstand the ongoing liquidity crisis has forced many investment bankers out of business or those few that have survived to get by on reduced or no bonuses this year. However, as lenders globally continue to write off and provision for a significant volume of soured loans, U.K.’s Rothschild group, one of the world’s leading investment banking organizations, has posted record results. The bank has been able to maintain its very strong performance again this year, despite the credit crunch, economic slowdown and the threat of a U.S. recession, with investment banking and corporate banking businesses both producing record revenues.
The bank, according to Timesonline -- reported a 31%, 459 million euro, improvement in profits. In addition, record results from the organization’s advisory and private banking operations enabled the bank to pay record bonuses to its 2,700 people in June.
The bank’s chairman David de Rothschild, following unconventional investment banking strategies, has steered his organization clear of proprietary trading, prime broking and other activities that have devastated rivals as a result of an environment where asset prices keep falling while liabilities remain fixed. The bank however, still wrote off 96 million euro because of souring loans. At some point, considering the global financial system is galloping off a cliff - today’s difficulties in investment banking will prompt an overhaul of the system favoring those players that have shown themselves to be the most cautious during this cycle.
Alongside its pro-forma group-wide results, Rothschild also unveiled that it had entered into a co-operation agreement in the field of M&A and Equity Capital Markets advisory in the food and agriculture sectors on a global basis with Netherlands’ Rabobank, a premier global financial institution providing financing and other services to food and agri business clients around the world.
As part of the deal, notes Timesonline, Rabobank is buying a 7.5% stake in one of the key holding companies in the Rothschild empire, Rothschild Continuation Holdings, which owns the N M Rothschild business in the U.K.
Rabobank becomes the second biggest investor outside the Rothschild family after the trading group Jardine Matheson, which owns 20%. This is Rothschild’s second joint venture with a Dutch bank.
Rothschild advisory clients include Rio Tinto (RTP), which is fighting a hostile bid from BHP, Billiton (BHP), and British Energy in its deal with France’s power giant EDF, a deal that gives the French company a dominant role in the British nuclear industry.
Bank of America Buys Additional Stake in China Construction Bank Corp.
November 18, 2008Alibaba - Dow Jones reported that Bank of America Corp. bought an additional 8.4 percent stake in China Construction Bank Corp. for $7 billion, so it now holds 19.13 percent of China Construction Bank with an intent to exercise an option to buy more shares in the bank.
Bank of America Buys Stake in China Construction Bank Corp. (June 2005)
Bailout Helping Bankers Buy Banks and Other Real Assets Cheap
November 15, 2008Global Research - The financial crisis is deepening, with the risk of seriously disrupting the system of international payments. This crisis is far more serious than the Great Depression. All major sectors of the global economy are affected. Recent reports suggest that the system of Letters of Credit as well as international shipping, which constitute the lifeline of the international trading system, are potentially in jeopardy.
The proposed bank "bailout" under the so-called Troubled Asset Relief Program (TARP) is not a "solution" to the crisis but the "cause" of further collapse.
The "bailout" contributes to a further process of destabilization of the financial architecture. It transfers large amounts of public money, at taxpayers expense, into the hands of private financiers. It leads to a spiraling public debt and an unprecedented centralization of banking power. Moreover, the bailout money is used by the financial giants to secure corporate acquisitions both in the financial sector and the real economy. In turn, this unprecedented concentration of financial power spearheads entire sectors of industry and the services economy into bankruptcy, leading to the layoff of tens of thousands of workers.
The upper spheres of Wall Street overshadow the real economy. The accumulation of large amounts of money wealth by a handful of Wall Street conglomerates and their associated hedge funds is reinvested in the acquisition of real assets. Paper wealth is transformed into the ownership and control of real productive assets, including industry, services, natural resources, infrastructure, etc.
Among the companies on the verge of bankruptcy are some highly lucrative and profitable operations. The important question: who takes over the ownership of bankrupt giant industrial corporations?
Bankruptcies and foreclosures are a money-spinning operation for the financial giants. With the collapse in stock market values, listed companies experience a major collapse of the price of their stock, which immediately affects their creditworthiness and their ability to borrow and/ or to renegotiate debts ( which are based on the quoted value of their assets).
The institutional speculators, the hedge funds, et al have cashed in on their windfall loot. They trigger the collapse of listed companies through short selling and other speculative operations. They then cash in on their large scale speculative gains.
According to a report in the Financial Times, there is evidence that the plunge of the US automobile industry was in part the result of manipulation:
"General Motors and Ford lost 31 per cent to $3.01 and 10.9 per cent to $1.80 despite hopes that Washington may save the industry from the brink of collapse. The fall came after Deutsche Bank set a price target of zero on GM."The financiers are on a shopping-spree. America’s Forbes 400 billionaires are waiting in limbo. Once they have consolidated their position in the banking industry, the financial giants including JP Morgan Chase, Bank of America, et al will use their windfall money gains and bailout money provided under TARP, to further extend their control over the real economy.
The next step consists in transforming liquid assets, namely money paper wealth, into the acquisition of real economy assets.
Banks Prefer Using Bailout Funds to Buy More Banks
October 28, 2008About.com - The $700 billion bailout/rescue funds were supposed to help banks stay liquid. As a result, they would presumably continue lending money, helping businesses operate and stimulate the economy. Consumers would also benefit because they would keep their jobs and be able to get loans to buy stuff.
Alas, that's not how all the banks see it. According to the Consumerist, Chase talks about using their $25 billion "as a war chest to buy other banks, and hoard it in case times get tougher."
Of course, if nobody's lending, we haven't solved the problem. This means that either the banks aren't interested in helping, or they don't think the problem is very big and it's just an opportunity to snatch up banks at a bargain.
Banks Use Bailout to Buy Up Other Banks
October 27, 2008MSNBC - The Treasury's $700 billion program to rescue the financial services industry, which began with a three-page memo six weeks ago, is evolving yet again. When the fleshed-out proposal was passed by Congress and signed into law Oct. 3, Treasury Secretary Hank Paulson's plan was to use the money to buy "toxic" mortgage-related securities weighing down banks and clogging the flow of credit to business and consumers. Then two weeks ago the Bush administration changed course and decided to invest $125 billion directly into some of the nation's biggest banks to restore confidence into the financial system and get capital flowing more quickly.
Now the Treasury is pouring another $125 billion into small and medium-sized banks, but some analysts contend the program has been transformed to a much more grandiose undertaking that will essentially weed out the weak banks from the strong.
Several of the banks that have received preliminary approval from the Treasury for investments have said they plan to use some of the money for acquisitions, including SunTrust and Regions Financial Corp., both of which expect to receive about $3.5 billion apiece. Even smaller institutions, like Seattle-based Washington Federal Inc., which announced a $200 million commitment from the government, plan to deploy some of the money to expand its retail franchise through acquisitions.
Many analysts believe the investments are being doled out to the strongest financial institutions, with the aim of spurring consolidation among banks and protecting the government from having to salvage some of the industry's weakest players. "It appears to us that these 'gifted' banks will receive the capital whether they need it or not, as they will likely do the cleanup on behalf of the Fed and the Treasury by acquiring weaker institutions," wrote Morgan Keegan & Co. analyst Robert Patten in a research note late Friday.
In what was the first instance of a bank using its investment from the government to make an acquisition, Pittsburgh-based PNC Financial Services Group Inc. said Friday it plans to acquire National City Corp. for $5.58 billion. PNC said it had received $7.7 billion in cash through selling stock to the government under the program.
Fox-Pitt Kelton analyst Andrew Marquardt believes a distressed sale was National City's only option after it became apparent that the Cleveland-based bank would not receive approval to participate in the government's program. "Our understanding is that a key reason for National City to sell in the same week that it reported third-quarter results was that National City management became aware that it was highly unlikely to be able to participate in the TARP capital purchase program," Marquardt wrote in a note to clients.
Critics of the program contend that the government will in effect wind up handpicking which banks win and which lose.
Assistant Treasury Secretary David Nason said Monday that the administration's major aim is to stabilize the financial system and that stronger institutions will be in a better position to make loans and support the overall economy. The emphasis on acquisitions makes sense, said Jason O'Donnell, senior research analyst at Boenning & Scattergood, but there are also significant ramifications.
"While on the whole it's positive in terms of its implications for improving capital, improving lending," O'Donnell said, "it is likely to have the unintended consequence of separating the winners and losers, which is normally a process that the free market is engaged in."And while further consolidation could very well lead to improved lending, it may take longer to achieve, said John Jay, senior analyst at Aite Group, a Boston-based financial services research firm. Meanwhile, the smaller institutions that don't get any government support will wind up walking around with a big target on their back, he said.
"If they're not given any type of government help, that is a pretty explicit statement on where they stand," Jay said.Read more here and here
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