Next leg of banking collapse underway

WTF?_2

Bank of America gets huge bailout totalling almost $140 billion only months after it bought out Merrill Lynch:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aZs1pLsWbonk&refer=worldwide

Jan. 16 (Bloomberg) -- Bank of America Corp., the largest U.S. bank by assets, received a $138 billion emergency lifeline from the government to support its acquisition of Merrill Lynch & Co. and prevent the global financial crisis from deepening.

The U.S. government agreed to invest $20 billion more in Bank of America and guarantee $118 billion of assets “as part of its commitment to support financial-market stability,” the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement shortly after midnight in Washington.

More woes at Citigroup:

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5526678.ece

Citigroup shares dived to a 16-year low as investors braced themselves for the financial group to announce today its worst loss since the credit crunch began. For the final three months of last year the bank is expected to have dropped into the red by more than $10 billion (£6.8 billion). It will mark the fifth consecutive quarterly deficit and stoke concerns that Citigroup will need another infusion of Government cash, further diluting the holding of existing shareholders, who have seen the value of their shares evaporate on the back of previous government aid and a plunge in their market value.

Speculation was mounting last night that Citigroup could announce plans for further aid. It has brought forward its fourth-quarter results by six days. Citigroup’s shares fell by 70 cents, or 15 per cent, last night to $3.83 in New York after a 23 per cent decline on Wednesday.

Adam Compton, an analyst at GMT Capital, said: “The sale of Smith Barney, a really great business, shows just how desperately it needs capital.” Citigroup sold a majority share in Smith Barney, its wealth management business, to Morgan Stanley this week.

[EDIT] Anglo Irish Bank nationalised in Ireland:

http://news.bbc.co.uk/1/hi/business/7832203.stm

The Irish government has said it is to nationalise the Anglo Irish Bank after deciding pumping money into the lender was not enough to secure its future.

The state had planned on injecting 1.5bn euros (£1.4bn) into the bank, but said its weak funding and damage to its reputation prompted a change of tack.

Thats on top of bad news yesterday from DB and HSBC.

Really2

!!!!!!? wrote: »

HSBC.

What was the HSBC bad news? The one they may have to cut there dividend?

I thought the bank of America bail out was started months ago?(or was that it was in a bit of trouble)

posh*spice

I read somewhere (don't remember where ) that we are only about half way through the write offs - that is, banks have written off a trillion dollars but there is still another trillion to go:o

carolt

Surely that depends how bad things get.

How much they have to write off depends on how many people or businesses go bankrupt, how much house prices fall etc. Dont see how we can put a figure on it except in hindsight.

Really2

carolt wrote: »

Surely that depends how bad things get.

How much they have to write off depends on how many people or businesses go bankrupt, how much house prices fall etc. Dont see how we can put a figure on it except in hindsight.

Hi Carol you are right.

People do not realise a write down is for "potential" bad debt.
So banks are putting billions aside "just in case" these debts go bad.
These are not actual losses yet just accounted for potential losses.
Some debts may never go bad that money will be transfer back during the next "happy days"

Altough Writedowns cause problems to the P&L. They are seen as prudent accounting.

Conflict

Really2 wrote: »

What was the HSBC bad news? The one they may have to cut there dividend?

I thought the bank of America bail out was started months ago?(or was that it was in a bit of trouble)

The HSBC thing was a tiny bit of bad news ($3.4 Billion Madoff related loss) and a lot of Morgan Stanley saying HSBC weren't as perfect as everyone males them out to be. Resulted in other banks (UBS most notably) backing up HSBC and MAJORLY slagging off MS - a real handbags at dawn war.

Most people are seeing it as a joke given MS are basically the living dead.

The BoA thing is a new Bailout, they just need a another few $100 Billion US to tide it over for a few months.

chucky

posh*spice wrote: »

I read somewhere (don't remember where ) that we are only about half way through the write offs - that is, banks have written off a trillion dollars but there is still another trillion to go:o

that will/may happen after Obama's honeymoon

there's one more UK bank that needs to crash or be nationalised before things get better

carolt

chucky wrote: »

that will/may happen after Obama's honeymoon

there's one more UK bank that needs to crash or be nationalised before things get better

Which one?

mbga9pgf

Really2 wrote: »

Hi Carol you are right.

People do not realise a write down is for "potential" bad debt.
So banks are putting billions aside "just in case" these debts go bad.
These are not actual losses yet just accounted for potential losses.
Some debts may never go bad that money will be transfer back during the next "happy days"

Altough Writedowns cause problems to the P&L. They are seen as prudent accounting.

And the writedowns are not set to stop until 2011. Hence why I firmly believe this is going to be long and drawn out.

posh*spice

carolt wrote: »

Surely that depends how bad things get.

How much they have to write off depends on how many people or businesses go bankrupt, how much house prices fall etc. Dont see how we can put a figure on it except in hindsight.

I was just talking about the credit crunch write offs. That doesn't count anything to do with the recession.....

purch

One piece of good news.

At least most of this new money that the US and UK Governments are creating won't come back to haunt us as Inflation.

It's all disapearing down a big black hole called the Banks Balance Sheets !!!