18:16
The U.S. banking system is bankrupt?
Recent statistics, revised upward indicate that U.S. banks have suffered $ 850 billion of losses and writedowns in 2008, 90 billion for only 125 billion for Citigroup and Wells Fargo all Wachovia.
According to the IMF, the total losses from the banking crisis is expected to exceed 2200 billion U.S. dollars. Already, federal authorities have had to inject more 1.000milliards dollars to avoid further bankruptcies, the type of Lehman Brothers, all the measures implemented by the United States to overcome the crisis and recession amounting to 3.000 billion for the entire U.S. economy!
And banks are not the only victims of the financial crisis. Mention may also AIG, which through its para-banking subsidiary, AIG Financial Products, has already reached 98 billion loss in 2008, which required a takeover of the state (80% stake), and total payment of $ 180 billion.
Where are these losses? Obviously, credit subprime that are causing this crisis. But these have been resold through the channel of CDOs (Collateral Debt Obligations), securities traded on a market of over-the-counter, thus completely opaque and unregulated.
To protect against default risk, investors (often other banks) have contracted CDS (Credit Default Swaps) with other financial institutions, which has spread the "toxic" assets across the global banking system.
Today, the total outstanding CDS exceeds 60,000 billion * dollars * (cons only 6,400 billion at end 2004). The astronomical amount of these products is explained, according to Marc Chesney, a professor at the University of Zurich, by speculation, the stock of outstanding CDS to be near the 5,000 billion of risky debt on which the CDS are backed .
For Warren Buffett, the potential losses on these CDS exceed 10,000 billion! You should know that already, the bankruptcy of Lehman Brothers had affected large international banks, exchange for investment banking transactions in CDS. But this mechanism has been generalized. AIG had sold well over $ 450 billion to other banks (including two-thirds of foreign institutions). Thus, a substantial portion of federal assistance to AIG is already in the repayment of liabilities of the insurance company vis-à-vis foreign banks (including the General Society, for $ 12 billion). We must also remember that the rescue of AIG can repay the investors who had bet on Lehman Brothers by buying CDS this bank. So what, you it the situation could get worse?
Is that, beyond mortgages (subprime) that have been securitized (the creation of CDOs) and then provided (implementation of CDS), there are other "sword of Damocles": loans to consumption, including the default rate increases rapidly and credit cards * t * (up also unpaid), excluding the effect of impairments on the balance sheets of banks, severely under-capitalized, despite the 500 billion paid by the federal state line.
To save the American banking system, the government has used the full range of possible solutions: partial nationalization (AIG) or total (Freddie Mac, Fannie Mae) guarantee provided to structures concentrating toxic assets, draft "bad bank" supported by the state and even appeal to private investors, through sales systems debt auction (if there are investors interested ...)
What are the implications of these initiatives? We can already say that we are witnessing a massive transfer of private debt into public debt: the amount of "Treasury Bonds" (U.S. Treasury obligations) has almost doubled since the beginning of the year. And this is just the beginning. The U.S. budget deficit could reach 8% in 2009: the rescue of the banking sector is the price.
source of : cafedelabourse.com
According to the IMF, the total losses from the banking crisis is expected to exceed 2200 billion U.S. dollars. Already, federal authorities have had to inject more 1.000milliards dollars to avoid further bankruptcies, the type of Lehman Brothers, all the measures implemented by the United States to overcome the crisis and recession amounting to 3.000 billion for the entire U.S. economy!
And banks are not the only victims of the financial crisis. Mention may also AIG, which through its para-banking subsidiary, AIG Financial Products, has already reached 98 billion loss in 2008, which required a takeover of the state (80% stake), and total payment of $ 180 billion.
Where are these losses? Obviously, credit subprime that are causing this crisis. But these have been resold through the channel of CDOs (Collateral Debt Obligations), securities traded on a market of over-the-counter, thus completely opaque and unregulated.
To protect against default risk, investors (often other banks) have contracted CDS (Credit Default Swaps) with other financial institutions, which has spread the "toxic" assets across the global banking system.
Today, the total outstanding CDS exceeds 60,000 billion * dollars * (cons only 6,400 billion at end 2004). The astronomical amount of these products is explained, according to Marc Chesney, a professor at the University of Zurich, by speculation, the stock of outstanding CDS to be near the 5,000 billion of risky debt on which the CDS are backed .
For Warren Buffett, the potential losses on these CDS exceed 10,000 billion! You should know that already, the bankruptcy of Lehman Brothers had affected large international banks, exchange for investment banking transactions in CDS. But this mechanism has been generalized. AIG had sold well over $ 450 billion to other banks (including two-thirds of foreign institutions). Thus, a substantial portion of federal assistance to AIG is already in the repayment of liabilities of the insurance company vis-à-vis foreign banks (including the General Society, for $ 12 billion). We must also remember that the rescue of AIG can repay the investors who had bet on Lehman Brothers by buying CDS this bank. So what, you it the situation could get worse?
Is that, beyond mortgages (subprime) that have been securitized (the creation of CDOs) and then provided (implementation of CDS), there are other "sword of Damocles": loans to consumption, including the default rate increases rapidly and credit cards * t * (up also unpaid), excluding the effect of impairments on the balance sheets of banks, severely under-capitalized, despite the 500 billion paid by the federal state line.
To save the American banking system, the government has used the full range of possible solutions: partial nationalization (AIG) or total (Freddie Mac, Fannie Mae) guarantee provided to structures concentrating toxic assets, draft "bad bank" supported by the state and even appeal to private investors, through sales systems debt auction (if there are investors interested ...)
What are the implications of these initiatives? We can already say that we are witnessing a massive transfer of private debt into public debt: the amount of "Treasury Bonds" (U.S. Treasury obligations) has almost doubled since the beginning of the year. And this is just the beginning. The U.S. budget deficit could reach 8% in 2009: the rescue of the banking sector is the price.
source of : cafedelabourse.com
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