First off, when Ken Lewis tells me something, I believe him. So this is most likely the work of some disgruntled employees (Ang Moz), but nevertheless: “Bank of America and Citigroup won’t live to see May. The government will take them over within the next 60 days. The announcement may come as soon as tomorrow evening.” Do we buy this, in part or whole? We feel like traitors to the brand for even thinking such thoughts but we need to determine what’s what, democratically:
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- Use the Bloomberg command
NH BLG_DEALBREAKER <GO>
to access Dealbreaker
At some point shorting these bad boys doesn’t seem as worth it. Bigger fish to fry seems applicable.
Would that mean all the employees who had restricted stock, that they were not allowed to sell, get bageled? I have a couple of trader/salesman friends (and 1 relative) who used to have 7 figure nest eggs, now worth just a couple hundred K. Does that then go to 0? Crap, that sucks.
WFC, GE are getting a pounding:
GE is single digits and WFC is almost there.
DON’T BLINK YOU MIGHT MISS IT ALL!!!!
@1 – You can’t spell “fish” without J-P-M. (I always sucked at spelling, though.)
60 days. . .maybe 90. putting the 0 in hope.
The silence out of Treasury is deafening. You would think at least some of their back-channel buddies would know what is going on. Then again, GS seems to be persona non grata in the Obama admin.
Nationalizing C and moreso BAC are very tricky for Treasury. There are legitimate issues about the BAC/MER deal that could lead to liability to shareholders.
More than that, how do we justify stopping with C and BAC? Why not take down MS and GS? What solvency test do MS and GS pass that C and BAC fail?
And what about the cascade of failures into the insurance sector if these banks go down?
Nationalization is a dangerous, dangerous road. Are these bondholders who are calling for nationalization really thinking through the ramifications?
Treasury’s full of America’s best and brightest chimps.
@4, don’t talk ill of the house of morgan, there’s nothing to see there!
@6: I am no fan of nationalization, but I also well remember Japan, 1990s. The ramifications of letting technically insolvent banks stumble on may be worse than nationalization. Would have to study that more.
letting technically insolvent banks stumble is one thing.. the assets these banks have are not worthless or even as close to worthless as they are now.. the govt needs to step up to the plate with a plan..their lack of insight has accelerated this disaster.
Help mee government! Heeeeelllllp meeee!!!
What a bunch of whiners.
@10 – spot on – but it’s in the government’s hands now – God help us.
Other.
BAC will merge with Satyam to give them more legitimacy.
Lets play that game where we guess where the DJIA will close.
I’ll Start: 7031
@11 – what’s the aggregate amount of taxes investors have paid to the US Treasury in the last 50 years?
If the government has happily been a 15-90% partner in the profits and failed in its responsibilities as a regulator, maybe it’s time government step up and take on some risk.
My biggest fear is not BAC or C going bankrupt. It’s that the Treasury will seize the banks BEFORE they are bankrupt to protect the insurance fund and bondholders. Equity holders should not be subject to that kind of risk.
Either support the banks or let them play out and let the chips fall.
@15
Your missing the entire god damn point. The Banks are INSOLVENT. Probably better to go the nationalization route now with C & BAC, because when treasury applies their coming stress test, they’ll drop dead on the treadmill. Only the guy shouting “You go, Girl” won’t be around to prop them up.
Erin Burnett had better get back from her vacation soon … the only time I can relieve my sexual tension right now is when Margaret Brennan reports from Fashion Week.
fap fap fap fap
@16
Tell me genius how are they insolvent??? I still to this day haven’t heard one figure on why BAC is insolvent. All its been is a bunch media hype and conjecture with no numbers behind it.
I’m convinced if the media decided the tooth fairy was real and ran a weekend worth of crazy footage the entire American public would start erecting churches in her honor.
Rumor is that if the banks get nationalized, the government will begin mandating that overworked analysts eat the same meals as inner-city public school students on federally assisted meal programs, Seamlessweb.com and New York bicycle delivery men will give way to a unibrowed woman trudging her way down Wall Street with cartons of sour milk and yesterday’s meatloaf. http://thebigrottenapple.com/2009/02/18/how-bank-nationalization-might-look/
@18: it’s not too big a mystery. Their Level 3 assets (and probably a good chunk of Level 2), about a trillion dollars, far outstrip their shareholders equity ($150 billion). Even assuming only 20% of Level 2/3 go bad, you’ve wiped out the equity.
@18
It’s not what I think. Look at the stock price. You see any buyers at 2 bucks? Me either. You think the toxic assets still on the books are worth more or less than where they are currently marked?
Do you see a sudden turnaround in the economic condition of the United States, are have we yet to see the bottom?
Citibank was insolvent in 1991, which became the basis for “too big to fail.”
Had they let Citi fail then, arguably we NEVER would have gotten into this mess, knowing there was a hazard out there to be reckoned with.
Having embraced the moral hazard and believing in the too big to fail policy, we have a heavy bleeder with hemophilia on our hands now.
Let it be done by Sunday. Sick of hearing about it. Only ones to blame are the managers of the bank at all levels. They did what they had to do to goose their bonuses, rather than keeping an eye on the banks capital.
@ 20
Wait, are you saying the Tooth Fairy (proper noun) ISN’T real??!?!
HERESY!
I think C and BAC are a done deal. The real question is what will happen to WFC, JPM, and maybe GE.
MS and GS may be in bad shape, but they are being successful at delevering and clearing out some of the garbage. They may actually take off on any nationalization news.
@16/@18 – Good, long post by John Hempton on bank solvency:
http://brontecapital.blogspot.com/2009/02/bank-solvency-and-geithner-plan.html
Important to understand what you mean before you start throwing around the term “insolvent.” Too few people care enough to do so.
C @ $2 a share. Keep watching it today.
Can I buy a Whopper with that?
It does look like C might go down first.
I don’t think Lewis and Pandit will have a job offer at the table from the US Gov.
@26
When you begin parsing the meaning of insolvent, the game is up. Sort of like debating the meaning of “is”.
@18
There is but one reason you have not found solid figures to establish the banks’ value. When you have paper on the books for which there is no longer a market, what is the correct mark?
Not being a neophyte to any of this, I can assure you the marks are a good six months behind reality.
@25…Nationalize GE!!!? Are you freaking insane?
@22
Jackass the GOV has guaranteed those assets that your talking about. Jesus no one even remembers last week…
@23
Stock can be any price on any given day. Doesn’t make it insolvent.
18 – really? Seriously? Its not difficult. Pull up a balance sheet, make some REALISTIC assumptions, and viola – FAIL. Insolvent means equity is negative.
Here, I’ll help:
BAC
Intangibles – $8.5bln
Goodwill – $82bln
MSR’s – $13bln
Deferred Taxes ~ $3.7bln (cant find exact)
All versus “equity” of $177bln…means a margin of $70bln against a loan book of $977bln and a bunch of L3 trading assets. Doesnt take much of a stretch to see them insolvent. Read a financial statement, genius.
@26,
If you remove the non-market based liquidity currently being provided by the US Govt, BAC and C would fail all of John Hempton’s solvency tests, I beleive.
So yeah, they are solvent because the Govt is keeping them solvent. But is that solvent?
how in the world could the government nationalize BAC AFTER making them go through on the MER deal? Every attorney in the country would be lining up to sue the Government
too pollish, didn’t read
Does Pandit H1B get cancelled if its nationalised?
@34
Good luck with that.
More importantly, who has bigger cans? Liz Claman or Michelle Caruso-Cabrera?
@34: Suing the government is a fools errand. Its unlikely.
34 here I am being serious though he tried to back off the deal and they told him not to; how can they take them over?
Did anyone else notice that Brian Sullivan from Bberg TV went to Fox Business?
Probably not.
@31
Please tell me you are not responsible for any money anywhere at anytime.
@38 Doesn’t matter. Amanda Drury is the winner.
Trish Regan is the top pick.
Isn’t the US govt insolvent, why does everyone assume nationalization is going to work.. its not a question of SHOULD they be nationalized its a question of IF it will actually benefit anyone.. i vote no
Is the Citibank branch in Guam open Saturdays? Would that indicate something?
@30 – GE is a bank that happens to have a small industrials business.
Not kidding in the least…..Guam is booming…….US military relocating 20,000 from Okinawa to there……
Amanda Drury is motorboat ready, but God she needs to do something about her eye brows.
It’s like she’s got Sir Allen’s moustache over each eye.
@43 False. They are both B-cups at best.
LOL @ 42
@42
GS GLOBAL FIXED INCOME
@51
That speaks volumes. Are you close on your margin calls?
this is ridiculous…with all the talks of nationalization you’d think we live in some sort of puppet market like North Korea. Nationalization isn’t the right option.
US Gov is a bunch of idiots
this is ridiculous…with all the talks of nationalization you’d think we live in some sort of puppet market like North Korea. Nationalization isn’t the right option.
US Gov is a bunch of idiots
You think that the Gov will be better at managing these banks than Pandit and Lewis?
@49, please….
http://img266.imageshack.us/img266/6618/mandy1bc5.jpg
@ 47 — sorry,it won’t matter — jarheads and squids are all in Navy Federal Credit Union…
@54
Seems to me it required the incompetence and malfeasance of Wall Street to have generated the invitation to the US Government to this macabre party.
Everybody talks about moral hazard, but that’s not the issue that got us here. It was agency costs and a complete lack of shareholder oversight. The high level decision makers had every incentive to put their companies books at risk so they could maximize their astronomical short term bonuses by writing naked CDSs and loading up on MBSs. Bonus pools with serious clawback provisions would have made the leaders of these companies take a much closer look at the risks they were taking and would have led to a more mild deleveraging process with some significant capital raising in 2007.
@55
Could they do worse?
@56, granted, amanda has them both on overall hotness and bangability. hands down.
But we’re talking funbags here. first of all, it’s probably a wonderbra.
and secondly:
http://img355.imageshack.us/img355/2223/2052708dy3.jpg
and in closing:
http://i5.photobucket.com/albums/y156/freehosting/LizClaman.jpg
(somebody turn down the A/C)
ps @48, those aren’t eyebrows. It’s called an australian dirty sanchez.
@59,
I’d like your thoughts on my post @56.
Thanks in advance,
56
IMPEACH OBAMA
@60.. ya they could do worse, anyone who watched the house financial services committee debacle last week is petrified of nationalization..
@60 can you name one thing the government does well?
@65, Yes. F*ck things up.
@59 – Uh, actually, given that the higher ups typically got paid 50% or more of their current comp in long-term vesting stock in their own firms, they had every incentive to pay attention to tail risk. Plus, a very large portion of their net worth was typically tied up in vested and unvested company stock, too, from prior awards. People like these got slaughtered when the wheels came off the bus.
It is too facile to blame the current crisis on evil bankers’ (long-term stupid) greed and/or flawed compensation structures, which, I grant you, were flawed. Look less to manipulation and scheming and more to blindness and arrogance for root causes.
Let’s get serious here: Liz’s sweet sweet sweater meat wins. Always.
-TGWWBH
65 Its not like the gov is going to go in and run these banks, as if they were post office branches. Nationalization means they’re going to become the owners: wipe out existing equity holders and use the govts credit strength to prop up the place until management can get its house in order. Its happened in Sweeden, France and to a limited extent in Japan.
67 Isn’t paying 50%+ in long-term vesting stock a relatively new trend, that began taking hold in 2007? Before that the norm was stock options, with two year vesting.
@63 RIGHT THERE WITH YA!
Yesterday when he landed in Canada there were WELCOME PRESIDENT PELOSI signs
Remember Remember the 5th of November.
JUST OVER THE WIRE —
(BN) Dodd Says Short-Term Bank Nationalization Might Be NecessarY.
that bastard should be in jail with a roommate named bubba and rangel.
I’m a hedge fund CEO. What is a legacy loan?
Means toxic assets on a balance sheet(different for a Will) the term Legacy loan was created by the Euphemism Department of the Federal Government. Geithner is running that department as well.
Usually it’s a gift or inheritance that we leave our children. Anything that brings up the picture of a child is always good.
I think “toxic legacy loans” would actually be more appropriate. timmy is good at this.
think of it a a hedge fund that pisses all it’s assets down the drain.
These terms were used by Timothy Geithner is his report …
“Third … together with the Fed, FDIC and private sector, we will establish a Public Private Investment Fund. This program will provide government capital and government financing to help leverage private capital to help get private markets working again for the legacy loans and assets that are now burdening the entire financial system.
See the ‘Piss down the drain Fund, LP’
Uh @67, sounds like they had every incentive to lever up risk to maximize that 50% up front and risk the 50% (according to you) on “tail risk” which is exactly what they did. Try again.
BAILOUT SURFIN U.S.A.
(Surfin U.S.A., the Beachboys)
WilliamBanzai7 and the Bailout Boys
Singalong link: http://www.youtube.com/watch?v=k1FaflUn4Co
Listen everyone there’s a Bailout ocean
Across the U.S.A.
Greedy bankers n CEOs are surfin’
Like its gold rush Californ-i-a
You’d seem ‘em wearing their Hermes ties
Bespoke brogues too
A big flashy French jet will do
BAILOUT U.S.A.
You’d catch ‘em bailout surfin’ at CITI
(Inside outside U.S.A.)
AIG’s bottomless line
(Inside outside U.S.A.)
Detroit City and Charlotte
(Inside outside U.S.A.)
Why won’t someone draw a line
(Inside outside U.S.A.)
All over East Side Manhattan
(Inside outside U.S.A.)
Goin down the faux capitalist way
(Inside outside)
Everybody’s gone bailout surfin’
BAILOUT U.S.A.
We’ll all be planning out a TARP get away
We’re gonna take real soon
We’re waxing down our slippery surfboards
We can’t wait for Dr Doom
We’ll all be gone for the summer
We’re on a Ponzi safari to stay
Tell the shareholders and taxpayers we’re bailout surfin’
BAILOUT U.S.A.
Everybody’s gone bailout surfin’
BAILOUT U.S.A.
Everybody’s gone bailout surfin’
BAILOUT U.S.A
MdWtA9 Thanks a lot for the blog post.Really looking forward to read more. Want more.