Next leg of banking collapse underway

Really2

Laughing_man wrote: »

No.



This is what write-down means, o.k?

What Does Write-Down Mean?
Reducing the book value of an asset because it is overvalued compared to the market value

.

I like your style you start off a post poking fun then try to sound a reasonable person at the end so you can get your so important thanks.
Sorry I don't fall for such playground psychology .

So lets clear this up how many times are your definition of a writedown mentioned?

http://www.google.co.uk/search?hl=en&defl=en&q=define:Writedown&sa=X&oi=glossary_definition&ct=title

A write-off may refer to either an accounting write-off or an income tax write-off. It is also a term commonly used in vehicle insurance to ...
en.wikipedia.org/wiki/Writedown
An adjustment; the precise amount adjusted by an act of writing down an asset; To make a downward adjustment in the value of an asset
en.wiktionary.org/wiki/writedown
write down - put down in writing; of texts, musical compositions, etc.
write down - expense: reduce the estimated value of something; "For tax purposes you can write off the laser printer"
wordnet.princeton.edu/perl/webwn
write down - write-off: (accounting) reduction in the book value of an asset
wordnet.princeton.edu/perl/webwn
Write-down - Depreciation is a term used in accounting, economics and finance to spread the cost of an asset over the span of several years.
en.wikipedia.org/wiki/Write-down
write-down - a depreciation, or a lowering in the price or value of something
en.wiktionary.org/wiki/write-down
For purposes of this subpart, writedown is reducing a borrower's debt to an amount that will result in a feasible plan of operation.
law.justia.com/us/cfr/title07/7-14.1.1.1.2.15.1.6.html
write down - To reduce the recorded value of an asset in an account, eg. owing to depreciation.
www.moneymanager.com.au/tools/glossary/dict_w.html
write down - Devaluation of assets for some or other reason, one such as damage
https://securities.standardbank.co.za/ost/nsp/Glossary/glossary.asp
write down - Focus group participants write their views on a topic during the session. This practice assists in getting participants to commit to their point of view before other participants can influence them.
www.marketresearchterms.com/w.php
write down - Describes the action of partially reducing the accounting value of an asset when used as a verb. When used as a noun, this term describes the actual charge that was taken against current earnings to reduce the value of the asset.
www.dripinvestor.com/investor-glossary.asp
write down - A financing mechanism by which a municipality or local housing authority purchases land and sells it at a reduced price to a developer.
www.lisc.org/twin_cities/resources/development_6809/development_6812.shtml
write down - to reduce the value of debt shown in the creditor’s accounts
www.geocities.com/efrajovel/glossdebt.htm

Not once, nothing mentioned about market value.

If you are not looking to sell does that mean you don't need to do writedowns as market value is irrelevent?

baby_boomer

Banks have got to value assets in order to produce capital ratios which satisfy the regulators and shareholders.

bubblesmoney

Laughing_man wrote: »

Thats a little trite. The clever people in finance have been doing some very hard sums to try and work this out, it's not hard to find an upside on twenty cents on the dollar and still they're not buying. That should really say something to you about the bottom line on this stuff.
Edit: Investors are accepting record low yields on U.S long term treaury debt, why take this if there is a potential 20-150% return on undervalued mortgage assets that everyone wants to sell now in the same period? It's easy to dust off the old 'no-one has a crystal ball' line but given this set of facts do you really think big writeups are just around the corner?

If you like this board check out http://www.tickerforum.org/cgi-ticker/akcs-www?forum=Breaking and especially read Karl Deniger's blog http://www.tickerforum.org/cgi-ticker/akcs-www?forum=Ticker This guy makes Generali look like a simpleton.

thanks for the links. did quite a bit of reading today and liked the style and content of karl deningers blog http://market-ticker.denninger.net/ pretty explosive stuff he has got there. liked the video of his deposition before the usa legislative authorities as well especially that govt chap who was grilled as to why he didnt want to disclose identity of the organisations that got more than 1trillion dollars in funds from the govt. that chap was prepared to disclose the sectors where the funds went but not the identity of the organisations that were given the funds!!!! extraordinary situation where legislators in a public hearing are not given access to details of who got 1 trillion dollars of public money.

liked these articles especially http://market-ticker.org/archives/689-Where-We-Are,-Where-Were-Heading-2009.html . hope the ones who read this article also read the links in that article especially the one about the madoff ponzi scheme

looks like his 2008 predictions were spot on. now the worrying thing is what happens if his 2009 predictions are spot on as well. especially this one ...

"The City" (London to be precise, Britain generally) will be recognized as getting it "worse than we are" (in America.) This will be the first of many validations of my thesis "we're screwed, they're gang-raped."

The pound or euro - and perhaps both - will likely be where the FX dislocation initiates if it occurs. I see the potential for the pound and euro to both reach par with the dollar, although I'm not going to go that far out on the tree limb and predict it - yet. Needless to say that would rocket the Dollar Index but it won't be our strength that does it - it will be their weakness.

dopester

tirano wrote: »

Anglo Irish Bank looks a mess, having to restrict large withdrawals
http://uk.reuters.com/article/UK_SMALLCAPSRPT/idUKLI28885020090118?pageNumber=1&virtualBrandChannel=0

I've just read your link and think you've spun your post. It seems more to do with restricting withdrawals from the banks largest debtors... who are very much under focus for their role in things.

Some may not hold the same view, but I feel sorry for shareholders in quite a number of listed companies/banks, who've been led a merry dance in the boom through the actions of directors and favoured clients, and the attitude to risk taken.

Yes they won on the upside, but some pensioners really have taken hits on holdings they may have had fair reason to assume were solid investments or strong defensive plays - but shares have that risk (thinking also of RBS, and HBOS and others).

Pensioners who accepted lower risk with saving deposit accounts throughout the boom years shouldn't be expected to suffer.

Irish media have reported that the Quinn Group, one of the largest family-owned businesses in Ireland, is Anglo's single largest debtor. A spokesman for Quinn declined to comment. No one from Anglo was immediately available to comment.
The Quinn Group, a conglomerate with interests in insurance, hotels, property and building products, is also one of the bank's biggest shareholders with a 15 percent stake bought in July when the shares were trading around 5 euros each.

They closed at 22 euro cents before the bank was nationalised on Thursday. Quinn's stake, which its chairman has since described as "very much regretted," and those of other shareholders may be worth nothing after the state takeover.

The government will hire an assessor to estimate Anglo's worth and decide on any compensation for shareholders but Lenihan has warned they may get nothing.

Anglo's funding has been under heightened pressure since December, when then-chairman Sean FitzPatrick admitted he had repeatedly misled shareholders about the amount of money he had borrowed from the bank.

FitzPatrick had 84 million euros worth of outstanding loans as of September. Other directors had loans of 95 million euros.
The bulk of Anglo's loan book is property-related and it has a heavy exposure to big commercial property developers who are suffering from the bursting of Ireland's real estate boom.

FitzPatrick has insisted that he did nothing illegal but The Mail newspaper reported on Sunday that the government will ask the fraud squad to look into the activities of FitzPatrick and others associated with the loans.

A spokesman for the Department of Finance described the report as speculation. He said the government was waiting for the financial regulator to complete its report into director loans at all Irish banks. That report is expected in a few weeks.

I think it is more to do with all the hidden loans they've been juggling around and other activities (such as one individual reported running up personal losses of hundreds of millions of pounds)...

..so the authorities may be locking down on people with such huge loans available to draw on, to prevent them convert loans to liquidity - as in my view, they may no longer be good risks for repayment to the bank.

Whilst certain individuals don't seem to have acted illegally... it still seems very murky to me.

All roads lead back to Sean Quinn
Links between Quinn and Anglo Irish Bank still have not been fully disclosed, writes Eamon Quinn

January 18, 2009

Announcing the nationalisation of Anglo Irish last Thursday night, Minister for Finance Brian Lenihan said the disclosure last month that bank chairman Sean FitzPatrick had hidden loans borrowed from Anglo over many years had weakened the funding of the bank.

Remarkably, for a bank that had long been under scrutiny for the rapid growth of its loan book, FitzPatrick had been treated with deference by the financial regulators here.

But experts from Irish universities say the role of another leading Irish businessman, Sean Quinn, once Ireland's richest man and owner of two regulated insurance companies, still remains hidden from the Irish public.

Sean Quinn: Anglo stake

The amount of loans, if any, Quinn has borrowed from Anglo Irish in the past and the full details of his family's large shareholding in the bank remain hidden despite the Irish state, since September, acting as the guarantor of bond debt and customer deposits on Anglo's balance sheet.

It had long been speculated that Quinn had built up a significant indirect stake in Anglo Irish Bank over an unknown period through stock market bets, called contracts for difference (CFDs). Quinn had staked huge sums that Anglo's shares would continue to rise, but it was only in July that the Irish public were told how badly the bets had soured.

Quinn faced losses of about €900m on the CFD losses, and, in an attempt to stem further losses, he was forced to buy outright a 15% stake in Anglo, that exposed him to further losses.

The role of the Financial Regulator and its talks with Quinn about his Anglo shareholding have never been disclosed.

Despite calls by the Irish Association of Investment Managers (IAIM) for full disclosure, the Irish Stock Exchange refused to oblige Quinn officially to report his stake because, according to his spokesman, unnamed Quinn family members held the shares between them.

The Financial Regulator should have known at a very early stage that Quinn was building - indirectly through CFDs - a huge exposure in Anglo Irish shares because the code of the Bank for International Settlements, the adviser to central banks, require bank regulators to be aware of such things.

In March, Anglo Irish executives blamed a one-day 19 per cent collapse in the Anglo share price on unidentified short-sellers. The Financial Regulator subsequently stopped short-selling in Anglo and other Irish bank stocks and the ban remains in place.

In October, Quinn was fined by the Financial Regulator and resigned from the board of his insurance company because he broke rules by borrowing money from the regulated insurance unit to help him buy shares, including in Anglo Irish.

"We still do not know the truth about what happened between Anglo Irish and Quinn Insurance," said Brian Lucey, professor of finance at Trinity College Dublin.

The Financial Regulator has refused to answer questions on why it let Quinn build up a substantial stake in recent years through contracts for difference that he bet on Anglo's shares continuing to climb.

Elaine Hutson of the UCD School of Business said the public should be told the full story of what went on at Anglo Irish.

"I'd be very concerned that we know very little about what was going on despite us being the guarantors of the bank through the sovereign debt," she said.

A spokesman for Sean Quinn said on Friday that he had no comment to make on Anglo Irish.

http://www.tribune.ie/business/news/article/2009/jan/18/all-roads-lead-back-to-sean-quinn/

poppy10_2

Royal Bank of Scotland announces a £20Billion loss

It's the biggest loss in British corporate history, and dwarfs the £692million loss they reported for the six months to June 2008

RBS has recieved a £20billion cash injection from the government..

baby_boomer

FT

Epic losses mean its time to bury the fatally wounded big banks.

"Friday’s bad news from Citigroup and Bank of America confirmed what many experts have long suspected: the subprime losses of 2007 were a bullet that fatally wounded the banks. Many lost so much money on toxic subprime mortgage-related derivatives that they have been essentially insolvent for more than a year. It has taken so long for these banks to fall only because of government support and some investors’ bottomless capacity for denial.

Consider Friday’s eye-popping figures. Bank of America recorded a $15.3bn (£10.4bn, €11.5bn) loss at Merrill Lynch, which it owns. Citigroup announced a total 2008 loss of $18.7bn, nearly half of which came from the fourth quarter. Even in the context of this crisis, these losses are epic."

Laughing_man

Really2 wrote: »

I like your style you start off a post poking fun then try to sound a reasonable person at the end so you can get your so important thanks.
Sorry I don't fall for such playground psychology .

So lets clear this up how many times are your definition of a writedown mentioned?

http://www.google.co.uk/search?hl=en&defl=en&q=define:Writedown&sa=X&oi=glossary_definition&ct=title

A write-off may refer to either an accounting write-off or an income tax write-off. It is also a term commonly used in vehicle insurance to ...
en.wikipedia.org/wiki/Writedown
An adjustment; the precise amount adjusted by an act of writing down an asset; To make a downward adjustment in the value of an asset
en.wiktionary.org/wiki/writedown
write down - put down in writing; of texts, musical compositions, etc.
write down - expense: reduce the estimated value of something; "For tax purposes you can write off the laser printer"
wordnet.princeton.edu/perl/webwn
write down - write-off: (accounting) reduction in the book value of an asset
wordnet.princeton.edu/perl/webwn
Write-down - Depreciation is a term used in accounting, economics and finance to spread the cost of an asset over the span of several years.
en.wikipedia.org/wiki/Write-down
write-down - a depreciation, or a lowering in the price or value of something
en.wiktionary.org/wiki/write-down
For purposes of this subpart, writedown is reducing a borrower's debt to an amount that will result in a feasible plan of operation.
law.justia.com/us/cfr/title07/7-14.1.1.1.2.15.1.6.html
write down - To reduce the recorded value of an asset in an account, eg. owing to depreciation.
www.moneymanager.com.au/tools/glossary/dict_w.html
write down - Devaluation of assets for some or other reason, one such as damage
https://securities.standardbank.co.za/ost/nsp/Glossary/glossary.asp
write down - Focus group participants write their views on a topic during the session. This practice assists in getting participants to commit to their point of view before other participants can influence them.
www.marketresearchterms.com/w.php
write down - Describes the action of partially reducing the accounting value of an asset when used as a verb. When used as a noun, this term describes the actual charge that was taken against current earnings to reduce the value of the asset.
www.dripinvestor.com/investor-glossary.asp
write down - A financing mechanism by which a municipality or local housing authority purchases land and sells it at a reduced price to a developer.
www.lisc.org/twin_cities/resources/development_6809/development_6812.shtml
write down - to reduce the value of debt shown in the creditor’s accounts
www.geocities.com/efrajovel/glossdebt.htm

Not once, nothing mentioned about market value.

Look, 'writedown' has a very specific meaning in the context of valueing MBS's that I have explained at length. I went to a little trouble post a source other than my own authority earlier, which you either didn't read or couldn't understand. Here it is again, I've even bolded the most relevant parts to save you the trouble of going through the whole thing:

http://en.wikipedia.org/wiki/Mark-to-market

Effect on subprime crisis and Emergency Economic Stabilization Act of 2008
Former FDIC Chair William Isaac placed much of the blame for the subprime mortgage crisis on the Securities and Exchange Commission and its fair-value accounting rules, especially the requirement for banks to "mark-to-market" their assets, particularly the mortgage backed securities.[6] Whether this is true or not was subject to an ongoing debate during 2008. [7]
The debate arises because this accounting rule requires companies to adjust the value of marketable securities (such as the mortgage-backed securities (MBS) at the center of the crisis) to their market value. The intent of the standard is to help investors understand the value of these assets at a point in time, rather than just their historical purchase price. Because the market for these assets is distressed, it is difficult to sell many MBS at other than fire-sale prices, which may be below the actual value that the mortgage cash flow related to the MBS would merit. As initially interpreted by companies and their auditors, the typically lower sale value was used as the market value rather than the cash flow value. Many large financial institutions recognized significant losses during 2007 and 2008 as a result of marking-down MBS asset prices to market value.
For some institutions, this also triggered a margin call, where lenders that had provided the funds using the MBS as collateral had contractual rights to get their money back.[8] This resulted in further forced sales of MBS and emergency efforts to obtain cash (liquidity) to pay off the margin call. Markdowns may also reduce the value of bank regulatory capital, requiring additional capital raising and creating uncertainty regarding the health of the bank.[9]
It is the combination of the extensive use of financial leverage (i.e., borrowing to invest, leaving limited room in the event of a downturn), margin calls and large reported losses that may have exacerbated the crisis.[10] If cash value, rather than sale value, is used the size of market value adjustments under the accounting standard would typically be reduced. One might question why banks or GSE (Fannie Mae and Freddie Mac) are allowed to use high-risk, difficult to value assets like MBS or deferred tax assets as part of their regulatory capital base. Whether a margin call is involved is not part of the accounting standard itself; it is part of the contracts negotiated between lender and borrower.
On September 30, 2008, the SEC and the FASB issued a joint clarification regarding the implementation of fair value accounting in cases where a market is disorderly or inactive. This guidance clarifies that forced liquidations are not indicative of fair value, as this is not an "orderly" transaction. Further, it clarifies that estimates of fair value can be made using the expected cash flows from such instruments, provided that the estimates reflect adjustments that a willing buyer would make, such as adjustments for default and liquidity risks.[11]
Section 132 of the Emergency Economic Stabilization Act of 2008, titled "Authority to Suspend Mark-to-Market Accounting" restates the Securities and Exchange Commission’s authority to suspend the application of FAS 157 if the SEC determines that it is in the public interest and protects investors.
Section 133 of the Act, titled "Study on Mark-to-Market Accounting," requires the SEC, in consultation with the Federal Reserve Board and the Department of the Treasury, to conduct a study on mark-to-market accounting standards as provided in FAS 157, including its effects on balance sheets, impact on the quality of financial information, and other matters, and to report to Congress within 90 days on its findings.[12]
The Emergency Economic Stabilization Act of 2008 was passed and signed into law on October 3, 2008. On October 7, 2008, the SEC began to conduct a study on "mark-to-market" accounting, as authorized by Sec. 133 of the Emergency Economic Stabilization Act of 2008.[13]
On October 10, 2008, the FASB issued further guidance to provide an example of how to estimate fair value in cases where the market for that asset is not active at a reporting date.[14]

It's not 'my' definition of a write-down, but the one required under current accounting rules that apply to these instruments, a technical term with a specific meaning in this context. When they say 'banks suffered writedowns on subprime securities' or 'Subprime write-downs forced so-and-so to seek government aid' on the news this is what they mean, not making a provision for bad loans or trying to gues future defaults or whatever you were trying to say. The list of other various definitions for the term you posted was a waste of a google and an attempt to confuse the situation with pointless semantics- which is one of the hallmarks of idiocy BTW.

If you are not looking to sell does that mean you don't need to do writedowns as market value is irrelevent?

Under the old model of mortgage lending this is true.

However, the problem debt was made and- this is important- securitised years ago before the crisis. Since then its been divied up and traded around the world many times and the accounting rules and agency ratings were put in place to help investors to understand what they were buying was worth. It's now impossible to un-securitise it and treat them like traditional mortgages again, in the same way you can't turn cake back into flour and eggs and so on. Otherwise there wouldn't be as much of a problem.

Now I'm not expecting you to say something like 'o.k maybe my first thought on this was wrong'- which it was, but its probably best to stop digging and let this one lie.

Really2

Laughing_man wrote: »

Look, 'writedown' has a very specific meaning in the context of valueing MBS's that I have explained at length. I went to a little trouble post a source other than my own authority earlier, which you either didn't read or couldn't understand. Here it is again, I've even bolded the most relevant parts to save you the trouble of going through the whole thing:

http://en.wikipedia.org/wiki/Mark-to-market



It's not 'my' definition of a write-down, but the one required under current accounting rules that apply to these instruments, a technical term with a specific meaning in this context. When they say 'banks suffered writedowns on subprime securities' or 'Subprime write-downs forced so-and-so to seek government aid' on the news this is what they mean, not making a provision for bad loans or trying to gues future defaults or whatever you were trying to say. The list of other various definitions for the term you posted was a waste of a google and an attempt to confuse the situation with pointless semantics- which is one of the hallmarks of idiocy BTW.



Under the old model of mortgage lending this is true.

However, the problem debt was made and- this is important- securitised years ago before the crisis. Since then its been divied up and traded around the world many times and the accounting rules and agency ratings were put in place to help investors to understand what they were buying was worth. It's now impossible to un-securitise it and treat them like traditional mortgages again, in the same way you can't turn cake back into flour and eggs and so on. Otherwise there wouldn't be as much of a problem.

Now I'm not expecting you to say something like 'o.k maybe my first thought on this was wrong'- which it was, but its probably best to stop digging and let this one lie.

Dont you go on all I did is specify what a writedown was you turn it in to a war.:rotfl:

Is that yous !!! talking? as for going on about google links HELLO what do you do.
http://www.allbusiness.com/glossaries/write-down/4941919-1.html
Dictionary of Real Estate Terms
write-down
To diminish in amount on the records, generally to reflect a market value loss.
Example: Bank auditors, upon discovering that a certain mortgage was worthless, insisted on a write-down. The bank recorded the decline as a bad debt expense.

So its not the market value of the loans but the assets the loans relate to(wothless mortgage = Loan value higher than asset). Put down as a bad debt expense.

It's oK you can say sorry by PM to avoid embaressment.

Really2

Laughing_man wrote: »

.

Why do you log off after every time I answer does it take you that long to reaserch an answer. Wast of a google as you put it.:)

Generali

Laughing_man wrote: »

I don't know what a CYA reason is to be frank, can you fill me in? Of course you're right using discounted cash flow would be preferable for a bank because the sale price and book value would probably be higher. There has to be transparancy in the model used, or a standard valuation model that works for everyone needs to be created- keeping everything on level 3 just isn't going to work. The lack of trust between banks, as I far as I can tell, is because thier balance sheets are deliberately opaque and as we have seen no amount of liquidity can make up for it.

The point of many of the bailouts, the TAF, the TSLF, the TARP and the half trillion super bailout is to buy MBS's etc. up or trade them for cash for a while. So if they want shot of them, which apparrently they do so they can make new and presumably better loans and end the crunch, they fall under mark to market accounting rules. Part of the problem is that these rules weren't really designed with this sort of stress test in mind and will have to changed.

Holding on to the loans creates an additional problem for the American banks- where mortgages are non-recourse- of sitting on a huge stock of repossesed properties which in places like California and Nevada- where default and foreclosure is still on the up according to MrMortgage: http://mrmortgage.ml-implode.com/ - are now worth much less than the mortgage balances and each distressed sale devalues similar properties in the same area. This creates more negative equity and more default and foreclosure and so on. This problem will not be easily fixed by changing the accounting rules.



No.



This is what write-down means, o.k?

The problem is securitisation, just like they're saying in the documentaries. Once a mortgage on a house has been securitised it stops behaving like a mortgage and becomes more like a house. It's traded at a price on a market, the person buying it may use a discounted cash flow model to work out fair value, but the person selling it is required under current accounting rules to mark its price on thier balance sheet at the last price a similar asset sold for.

A good analogy is estate agent valuation, if you had your place valued at 200k, giving you 100k in equity, in 2007 and you got the same bloke in again today and he valued it at 150K you would be forced to writedown your housing equity by 50k on your personal balance sheet- you could pretend it was still worth 200k- by sticking it on level 3- but you couldn't actually sell it for that price. The banks are going through exactly the same thing only with bundles of mortgages not individual houses.

I call a mark to market CYA as it gives the auditor something (s)he can point at on a Bloomberg screen as a reason for a valuation.

For a loan, discounted cash flow gives a better valuation model IMO.