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News of the Weird



March 02, 2010 – Comments (5)



Fannie Taps Treasury for $15.3 Billion More After a 10th Loss
By Dawn Kopecki

Feb. 27 (Bloomberg) — Fannie Mae will seek $15.3 billion in U.S. aid, bringing the total owed under a government lifeline to $76.2 billion, after its 10th consecutive quarterly loss.



You've heard me refer before to the woes of unintended consequences.

Frank, Peterson Vow to Eliminate Provision Keeping Swaps Opaque
By Matthew Leising

March 1 (Bloomberg) — Congressional leaders are vowing to eliminate a provision in legislation passed by the House in December that would allow banks to keep the private derivatives market opaque, protecting billions in profits on swap trades.

Barney Frank and Collin Peterson, chairmen of the Financial Services and Agriculture Committees respectively, indicated they’ll remove a section of the bill that allows trades to be routed through systems that keep prices private, even though the legislation was touted as a way to make the transactions transparent.

The bill’s sponsors hadn’t intended to allow traders to use non-public confirmation systems, Peterson, a Democrat from Minnesota, said in an e-mailed statement in response to questions from Bloomberg News. “To the extent clarification of that language is needed, that will be pursued during the conference committee process.”



Greece Now, U.K. Next as Scots Ready for Pound Plunge
By Rodney Jefferson

March 1 (Bloomberg) — While the eyes of the world focus on Greece’s debt crisis, investors in Edinburgh are busy preparing for the U.K. to be next.

Turcan Connell, which caters to rich families, expects the pound to lose between 20 percent and 30 percent against the dollar once investors turn their sights on Britain as the government sells a record amount of debt. Sterling slid to a 10- month low versus the U.S. currency today.



RBS paid £1.3bn bonuses on profit of just £1bn
Royal Bank of Scotland paid its investment bankers £1.3bn in bonuses for making just £1bn in profit last year, not the record £5.7bn declared last week.
By Philip Aldrick
Published: 9:41PM GMT 28 Feb 2010

The state-backed lender’s results show that £4.7bn of the investment bank’s worst losses were hived off to the "non-core" division being wound down. Although the bank’s split into "core" and "non-core" units has been well explained, the separation generously flattered the investment bank’s numbers and allowed management to present it as a record year for the division.

Stephen Hester, chief executive, used the performance to justify the £1.3bn bonuses paid to investment bankers, at least 100 of which received more than £1m.

RBS’s numbers show that impairments in the "core" investment bank totalled just £640m, helping it produce £5.7bn of the £8.3bn of profits made by the bank’s ongoing businesses. By contrast, investment banking impairments dumped in the "non-core" bank totalled £4.7bn.

No other UK bank separates out its "toxic" legacy debt. Barclays’ investment bank, Barclays Capital, suffered £2.6bn of impairments last year, cutting profits to £2.46bn. However, analysts point out that RBS, now 84pc owned by the state, has taken more conservative marks on its assets than peers, which contributed to the size of the "non-core" writedowns.


AIG posts $9bn loss in fourth quarter

The insurer said it made a net loss of $9bn (£5.9bn) in the fourth quarter, compared with a $62.6bn loss in the same period in 2008.

The insurer made a net loss of $12.3bn for the whole of 2009.

In 2008, it lost more than $100bn.

AIG was bailed out by the US government in 2008 and is now 80% owned by it. In total, the firm has received $182.5bn of government funding.



California is a greater risk than Greece, warns JP Morgan chief
Jamie Dimon, chairman of JP Morgan Chase, has warned American investors should be more worried about the risk of default of the state of California than of Greece’s current debt woes.
By James Quinn, US Business Editor in New York
Published: 8:20PM GMT 26 Feb 2010

Mr Dimon told investors at the Wall Street bank’s annual meeting that "there could be contagion" if a state the size of California, the biggest of the United States, had problems making debt repayments. "Greece itself would not be an issue for this company, nor would any other country," said Mr Dimon. "We don’t really foresee the European Union coming apart." The senior banker said that JP Morgan Chase and other US rivals are largely immune from the European debt crisis, as the risks have largely been hedged.

California however poses more of a risk, given the state’s $20bn (£13.1bn) budget deficit, which Governor Arnold Schwarzenegger is desperately trying to reduce.



If California is our Greece, then it appears Georgia may be our Portugal:

Senate leader predicts ‘massive layoffs’
Posted: March 1, 2010 – 11:10am
By Walter C. Jones

ATLANTA – Senate Majority Leader Chip Rogers announced Monday morning that “massive layoffs” will be one result in how the legislature copes with a roughly $1 billion shortfall in expected revenue for next year’s budget.

“I’m not going to sugarcoat the situation we’re in. Yeah, there will be massive layoffs,” said Rogers, a Woodstock Republican.




5 Comments – Post Your Own

#1) On March 02, 2010 at 9:24 AM, catoismymotor (< 20) wrote:

Great. I've always wanted to live outside Lisbon.

My wife works for a county government and just got official word of how ugly it could get. Her department is looking at slashing its budget by 25%. That could mean letting people go. A month before I laid out the reality of what could happen due to decreased tax revenue. She took what I had to say with a grain of salt at the time. Now she asks me what my crystal ball tells me is going to happen next.

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#2) On March 02, 2010 at 9:42 AM, russiangambit (28.83) wrote:

cato, your wife works for the government and you live under the same roof? Really? Now I heard it all -)).

> AIG posts $9bn loss in fourth quarter

I remember being pretty outraged when a few months ago their new CEO promised to repay the govenrment  and the stock rallied on that news. It was such a blatant lie. The only way they can ever repay if hyperinflation happens.


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#3) On March 02, 2010 at 10:01 AM, catoismymotor (< 20) wrote:


When we met both of us were democrats. Over time my political and economic outlook changed. Hers has as well but to a lesser extent. She still remains a democrat, voted for Obama. In a few years she wants to leave the county and open her own business. I am proud of her for wanting to do that.


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#4) On March 03, 2010 at 10:26 AM, lemoneater (57.13) wrote:

Helpful blog. Thanks very much. I like to keep an eye on the pound although I'm not a forEX trader.

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#5) On March 09, 2010 at 1:10 AM, SnapDave (48.37) wrote:

Everyone has it a little backwards. California has a PR problem there. California is Spain. Some place like Illinois, Jersey or RI will be our Greece.  Don't count on NJ to get religion under Christie, Arnold came in knowing right and wrong - and quickly ran into the brick wall of entrenched interests. 

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