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Lehman chief warns of more big bank failures
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Thread: Lehman chief warns of more big bank failures

  1. #1
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    Default Lehman chief warns of more big bank failures

    Lehman Head Bryan Marsal has warned that Wall Street had not learned its lesson in the credit crisis and that another megabank bankruptcy is likely. Marsal made the remarks while in Berlin for a bankruptcy conference in an interview with German business daily Handelsblatt.

    Text of the interview

    Handelsblatt: you are handling the largest bankruptcy in human history. Can anything like this happen again?

    Bryan Marsal: It is even likely that a case like Lehman’s will repeat itself – in any event, as long as nothing fundamental changes in financial regulation and in financial institutions. Wall Street has not really learned a lot from the situation. There is still too much leverage in the market, and credit default swaps remain completely unregulated. Even with regulators and in the companies little has been done after the global catastrophe.

    HB: But financial regulators around the world are now pulling in the reins …

    Marsal: Oh, really? That’s just for show. The regulators are overworked and underpaid. Someone who earns $80,000 a year cannot seriously compete with someone who gets $400,000 for finding ways to get around the system. And so far no one from the regulators at the SEC, at the FDIC or our government has asked how the Lehman collapse could have been avoided and what countermeasures could be taken to prevent a recurrence.

    HB: So David loses to Goliath?

    Marsal: I wouldn’t put it that way. In Canada, for example, you have to put up at least 25 percent equity to finance your own home. The banks finance no more than three quarters of the money. If we had such a rule in the U.S., there would never have been the massive mortgage-speculation in the years from 2005 to 2007.

    HB: What should have been done?

    Marsal: You see, Lehman was not too big to go bust, rather too complex. An orderly bankruptcy with the assistance of the U.S. government would have saved investors losses in the order of 75 to 100 billion U.S. dollars. A similar global meltdown could be prevented only if there were global regulations for companies that are also as complex and global as Lehman was. Lehman saw itself as an American institution, but worked in 40 states and had more than 900 subsidiaries. Consequently, we have to deal with 80 different types of insolvency proceedings in 20 different jurisdictions. There is simply a lack of an overarching coordination of the regulatory bodies in the international financial markets. Banks are growing globally, but die locally, that’s the problem.

    http://philsbackupsite.wordpress.com...bank-failures/

  2. #2
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    We don't need more regulation, all we need is HONESTY (like mark-to-market, instead of mark-to-fantasy).

    My fear is that after the next collapse there will be such a huge outcry for "more regulation" and then they will take away most of our remaining financial freedoms!
    "Scenes are now to take place as will open the eyes of credulity and of insanity itself, to the dangers of a paper medium abandoned to the discretion of avarice and of swindlers." --Thomas Jefferson 1814

  3. #3
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    Marsal: I wouldn’t put it that way. In Canada, for example, you have to put up at least 25 percent equity to finance your own home. The banks finance no more than three quarters of the money. If we had such a rule in the U.S., there would never have been the massive mortgage-speculation in the years from 2005 to 2007.
    So then how come this supposed rule of 25% down hasn't stopped the real-estate bubble here in Canada? Does anybody know if 25% down is required in all circumstances without the CMHC (Canadian Housing Mortgage Corporation) backing the loan because I don't know anybody that has ever had to put as much as 25% down, maybe 10% at most. Besides, there are grants galore to assist buyers with purchasing a home.

    What I want to know is who in the world has or is stupid enough, anyway, to put down $100,000 on $400,000 home in a bloated market ready to burst like a swelling dead pig rotting in the summer sun. Oh please, take my life-savings and then help me figure out how to live 3 more lifetimes to pay off the rest.

    I get so tired of people saying how our banks do it right & are so wonderful. Tell me why, then, that Canadian banks are legally allowed to have ZERO DOLLARS in reserves. Its a little harder to make a run on a bank that requires no reserves. There's a lot more bullsh!it going on than this, but I'm so sick & tired of it hearing it. Like most banks, ours are just as sinister, but just better at their 'craft'.

    Sorry for ranting, I know I missed the main point of this post.
    All original wealth comes out of the ground.

  4. #4
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    Quote Originally Posted by Mighty Moose View Post
    So then how come this supposed rule of 25% down hasn't stopped the real-estate bubble here in Canada? Does anybody know if 25% down is required in all circumstances without the CMHC (Canadian Housing Mortgage Corporation) backing the loan because I don't know anybody that has ever had to put as much as 25% down, maybe 10% at most. Besides, there are grants galore to assist buyers with purchasing a home.

    What I want to know is who in the world has or is stupid enough, anyway, to put down $100,000 on $400,000 home in a bloated market ready to burst like a swelling dead pig rotting in the summer sun. Oh please, take my life-savings and then help me figure out how to live 3 more lifetimes to pay off the rest.

    I get so tired of people saying how our banks do it right & are so wonderful. Tell me why, then, that Canadian banks are legally allowed to have ZERO DOLLARS in reserves. Its a little harder to make a run on a bank that requires no reserves. There's a lot more bullsh!it going on than this, but I'm so sick & tired of it hearing it. Like most banks, ours are just as sinister, but just better at their 'craft'.

    Sorry for ranting, I know I missed the main point of this post.
    And now ScotiaBank ScotiaMocatta has an almost empty vault for all those "paper metal holders".

    Check out my post. I was shocked! It is no wonder ScotiaBank didn't want me seeing their vault when I opened my account at 40 King Street in Toronto. The vault is mostly empty!

    Harvey & Lenny Organ & Adrian Douglas: Drop Another Bombshell In What Could End Up Being The Largest Fraud In History
    http://forums.silverseek.com/showthread.php?t=11218
    "Scenes are now to take place as will open the eyes of credulity and of insanity itself, to the dangers of a paper medium abandoned to the discretion of avarice and of swindlers." --Thomas Jefferson 1814

  5. #5
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    Quote Originally Posted by Mighty Moose View Post
    Sorry for ranting, I know I missed the main point of this post.
    ... a MIGHTY ranting indeed ...

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    Default And then this....Senior SEC Employee Warns of Potential Municipal Bond Mkt Collapse

    Senior SEC Employee Warns of Potential Municipal Bond Market Collapse

    Rick Bookstaber, who is a a Senior Policy Advisor to the Director of the SEC, Mary Schapiro, continues to maintain his own private non_SEC affiliated blog.

    Prior to joinning the SEC, Bookstaber served as the managing director in charge of firm-wide risk management at Salomon Brothers, director of risk management at Moore Capital Management, and Morgan Stanley's first market risk manager. He is the author of three books and a number of articles on finance topics ranging from option theory to risk management, and has received various awards for his research. He holds a Ph.D. in Economics from the Massachusetts Institute of Technology.

    On his blog he writes that he doesn't think:

    ...we will see a big crisis emerging for some time in banks, hedge funds or derivatives, mostly because, like with a knockout punch, the risks that matter don’t come from where you are looking...

    He is not so sanguine about the municipal bond market:

    So, where to look next. To see other potential sources of crisis, let’s first recount the lessons learned from this crisis:

    1. Problems occur when things get leveraged and complex (and thus opaque).
    2. If the problems occur in a very big market, especially in a very big market like housing that is tied to the credit markets, things can go systemic.
    3. The notion that you can diversify by holding a geographically broad-based portfolio, (“there has never been a nation-wide housing recession”), works fine – until it doesn’t.
    4. A portfolio that is apparently hedged can blow apart. So we have to look at the gross value of positions, even if they are thought to be hedged.
    5. Don’t bet on ratings, because rating agencies are conflicted and might not be all too dependable at their job.
    6. Defaults are never easy to manage, but it gets worse when there are a lot of them happening at the same time. It is harder to manage the mess, and there is less of a stigma in defaulting. And it is all the worse when, as is the case in the housing markets, those defaulting are not businessmen. As an added complication, with housing the revenue that we thought was there really wasn’t. Income that was supposed to be there to finance the mortgages – even when that income was fairly stated – became committed to other areas (like second mortgages). .

    Well, guess where we have a market that is (1) leveraged and opaque, that is (2) very big and tied to the credit markets; and is (3) viewed by investors as being diversifiable by holding a geographically broad-based portfolio; with (4) huge portfolios where assets and liabilities are apparently matched; and with (5) questionable analysis by rating agencies; and where (6) there are many entities, entities that may not approach default with business-like dispatch, and that have already mortgaged sources of revenue that are thought to support their liabilities?

    Answer: The municipal market.

    Leverage and Opacity. Leverage in the municipal market comes from making future obligations to employees in order to pay them less now. This is borrowing in the form of high pension benefits and post-retirement health care, but borrowing nonetheless. Put another way, in taking lower pay today, the employees have lent money to the municipality, with that money to be repaid via their retirement benefits. The opaqueness comes from the methods of reporting. For example, municipalities are not held to the same standards as corporations in their disclosure.

    Size and potential systemic effects. That this is a big market in the credit space goes without saying.

    Diversification. Geographic diversification would give a lot more comfort for municipals if it hadn’t just failed for the housing market. Think of why housing breached the regional barriers. It was because similar methods of leveraging were being employed through the country. So the question to ask is: Are there common sorts of strategies being applied in municipalities across the nation?

    Gross versus net exposure. The leverage for municipals is not easy to see. It might appear to be lower than it really is because many, including rating agencies, look at the unfunded portion of these liabilities. They ignore the fact that these promised payments are covered using risky portfolios. And not just risky -- the portfolio might apply hefty (a.k.a. unrealistic) actuarial assumptions of asset growth.

    Rating agencies. In terms of the work of the rating agencies, here are two questions to ask. First, list the last time they did an on-site exam of the municipalities they are rating. Second, are they looking at the potential mismatch between assets and liabilities, or simply at the net – the under funded portion of the portfolio.

    Defaults. Municipalities are not quite as numerous as homeowners, but there certainly are a lot of them. And they have the same issues as homeowners. Granted, they will not pour cement down the toilet before walking away. But they have a potentially equally irrational group – the local taxpayers – to deal with.

    Oh, and just as homeowners took their income and locked it up via secondary loans, much of the tax base for municipalities is already mortgaged, through the sale of tax-related revenues streams like tolls and parking fees. Indeed, although general obligation bonds are considered the cream of the crop, they might just as well be regarded as the residual claim after anything with solid fee streams has been sold off.

    Once a few municipalities default, there is a risk of a widespread cascade in defaults because the opprobrium will be lessened, all the more so if the defaults are spurred along by a taxpayer revolt – democracy at work.


    Well, he's a government employee, so you have to expect the shot he takes at the end, against taxpayers who revolt, but otherwise the analysis, itself, of the municipal market is strong. No one knows how many landmines are planted ready to be stepped on. Those investing in municipal bonds to get a tax break on interest earned may find out they are going to end up with a capital loss tax break instead, and no interest income at all.

    Posted by Robert Wenzel at 11:42 AM

  7. #7
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    There are two sources of municipal salvation. The taxpayer and federal government. Repeat, there are two sources. Of course there really is only one source the ultimate payer in all things governmental, the taxpayer. So how hard are they going to squeeze us? I think till every last drop of sustenance comes out and we scream bloody murder. Then they'll squeeze some more.

    ag

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    I just love this **** !!!!!!!!!!!! --" let us be a beacon unto others, that "the shitwhtfan super sooooooooooooon!!!
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