Banking Crisis to Worsen?

[I'm all 67X]

http://www.247wallst.com/2008/02/signs-point-to.html

Signs Point To Banking Crisis Getting Much Worse

The evidence comes in in pieces. One bit of bad news here and one there.

Today, the FT reported that US banks had tapped the Fed’s Term Auction Facility for over $50 billion in the last few weeks. As one analyst pointed out "The TAF ... allows the banks to borrow money against all sort of dodgy collateral,” says Christopher Wood, analyst at CLSA. “The banks are increasingly giving the Fed the garbage collateral nobody else wants to take ... [this] suggests a perilous condition for America’s banking system.”

The news that Credit Suisse (NYSE: CS) had "found" $2.85 billion in write-downs for asset-backed paper was not terribly encouraging. It is certainly an indication that banks are still having substantial problems valuing assets which are based on a weakening housing market and do not trade because of a locked-up credit markets. The banks can guess at the value of what they hold, but have no way to know for certain.

There is also an emerging body of analysis which says that large banks may have to write-down about $15 billion in LBO loans in the early part of this year. According to The Wall Street Journal "the extent of the damage is likely to emerge as banks file their annual reports next month and report first-quarter results in April."

None of these calculations take into account the falling value of paper backed by student loans, credit card debt, or loans for car purchases. They also leave out a potentially massive hit if bond-insurers like MBIA (MBI) or Ambac (ABK) face cuts in their credit ratings.

The total market in LBO debt now runs around $200 billion. The size of the mortgage-back and consumer-credit markets can only be guessed at. Write-downs for some of these securities have not begun in earnest.

The debacles at AIG (AIG) and Credit Suisse are surely a sign that financial companies and their auditors are having trouble putting a dollar amount on assets for which there is not market.

Every sign, and that is every sign, points to bank and brokerage write-downs in 2008 which will make 2007 seems like a picnic.

Douglas A. McIntyre

[JenGC]

Every time I hear someone say the economy will go up, I want to roll my eyes and declare that it will never rebound due to what I know of the biblical prophesies. They are all comparing this to the Great Depression where we were able to pull out of it. I still say this will never rebound hence paving the way for the one world currency/government. Woe to those left to suffer through the wrath of the Lamb.

[RobertB]

Signs Point To Banking Crisis Getting Much Worse
There is too much chaos and hidden problems in the entire international banking system to recover, in the opinion of many. And it is a slow financial burn, so to speak. The entire banking system and world economy is likely going to go down the tubes, resulting in a "D," in the eyes of many.

[Cowgirl4Christ]

I've seen in other posts where those of us watching the economy issues have been accused of forecasting "gloom and doom." However, and I'm SOOO not a scholar of economics, what is going on in our world today is so vastly more complicated than it could possibly have been during the Depression. It's a very tangled web that I believe the anti-Christ will "offer" to fix. We're talking about economics on a global level here and it's far more complex and complicated and much bigger of an issue than stocks being bought and sold on Wall Street!

[RobertB]

I've seen in other posts where those of us watching the economy issues have been accused of forecasting "gloom and doom." However, and I'm SOOO not a scholar of economics, what is going on in our world today is so vastly more complicated than it could possibly have been during the Depression. It's a very tangled web that I believe the anti-Christ will "offer" to fix. We're talking about economics on a global level here and it's far more complex and complicated and much bigger of an issue than stocks being bought and sold on Wall Street!

Very good point.

[InHisSteps]

I've seen in other posts where those of us watching the economy issues have been accused of forecasting "gloom and doom." However, and I'm SOOO not a scholar of economics, what is going on in our world today is so vastly more complicated than it could possibly have been during the Depression. It's a very tangled web that I believe the anti-Christ will "offer" to fix. We're talking about economics on a global level here and it's far more complex and complicated and much bigger of an issue than stocks being bought and sold on Wall Street!

:thumb
You nailed it! Because the problem is global, the fix will be global, hence a OWG and global currency/economy. It will be all or nothing.

[Nova]

It is global. For example, England nationalized a big bank within the past few weeks. Our government is loaning banks billions thru TAF. So we are shoring it up differently, but still big bucks changing hands.

We have major financial risks on several fronts. Consumers are debt strapped. Banks have huge writeoffs with poor loans & bad speculation (derivatives), government debt is out of control. All those are driving down the value of most stocks. I'd like to be optimistic. I'd prefer that things not be as they are. But all these things together paint a negative picture.

Although the fallout will be global, I think things will be worse here in the US, than in other western countries. We are simply more overextended. Used to a high standard of living funded on debt. And import most of what we need to survive.

[logosone]

Every time I hear someone say the economy will go up, I want to roll my eyes and declare that it will never rebound due to what I know of the biblical prophesies. They are all comparing this to the Great Depression where we were able to pull out of it. I still say this will never rebound hence paving the way for the one world currency/government. Woe to those left to suffer through the wrath of the Lamb.

Thank You JenGC! This is a no-brainer IMO. The 800 pound gorilla is getting ready to go on a starvation diet very soon. Look at the real estate markets? Who in their right mind's ever thought that you can just continue to escalate the price of a piece of finite property forever? The chickens are roosting and people cannot accept it.