US - Subprime

[millionairemind]

Bank losses from credit crisis may run to $1,600bn, warns Bridgewater
By Ambrose Evans-Pritchard
Last Updated: 1:59am BST 08/07/2008

Bridgewater Associates has issued an apocalyptic warning to clients that bank losses from the worldwide credit crisis may reach $1,600bn (£800bn), four times official estimates and enough to pose a grave risk to the financial system.

The giant US hedge fund said that it doubted whether lenders would be able to shoulder the full losses, disguised until now by "mark-to-model" methods of valuing structured credit.

"We are facing an avalanche of bad assets. We have big doubts as to whether financial institutions will be able to obtain enough new capital to cover their losses. The credit crisis is going to get worse," said the group in a confidential report, leaked to the Swiss newspaper SonntagsZeitung.

Bank losses on this scale would have far-reaching effects. Lenders would have to curtail loans by roughly 10-to-one to preserve their capital ratios. This would imply a further contraction of credit by up to $12,000bn worldwide unless banks could raise fresh capital.

It would be almost impossible to attract or even find such sums from investors. While sovereign wealth funds command roughly $3,000bn in funds, this money is mostly committed already. The funds have grown extremely wary of Western banks with sub-prime exposure after burning their fingers so many times already.

Bridgewater said true losses would mushroom if the banks were compelled to use "mark-to-market", which foretells a much crueller haircut for investors in the outstanding pool of structured debt from mortgages, credit cards, car loans and such like, together worth $26.6bn.

The International Monetary Fund has estimated bank losses of roughly $400bn. A chunk has already been covered by fresh infusions of capital, allowing the lenders to continue lubricating the global financial system without having to squeeze credit too hard.

The great unknown is whether this is the end of the debacle. A number of hedge funds believe the alleged losses - typically measured by the ABX index - may overstate the likely level of defaults. They are buying the spurned securities for as little as eight cents on the dollar.

If Bridgewater is anywhere near correct, governments alone have the wherewithal to rescue the system. This would mean the de facto nationalisation of the banking systems in the US, Britain and Europe.

[LenaHuat]

It's unlikely nationalization will take place.
Central Banks juz have to relax their Tier1 and Tier2 capital requirements.

[kennynah]

but i guess, this will put pressure on currency value? fuelling further inflation as a result?

[millionairemind]

JPM CEO says Wall St. losses not due to accounting
Tue Jul 8, 2008 11:24pm EDT

NEW YORK (Reuters) - Jamie Dimon, chief executive of JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz), on Tuesday took aim at top Wall Street executives who claim the recent credit crisis and widespread bank loses were mainly due to accounting changes requiring extensive markdowns.

In an interview with Charlie Rose aired Tuesday on PBS, Dimon said, "It was not an accounting issue, okay?...The people who made the mistakes are to blame."

In the second part of a wide-ranging interview, Dimon said the regulatory systems covering the financial world need tightening in the wake of billions of dollars in losses at financial institutions in recent quarters.

"We need to do some serious work to try to avoid getting into this serious problem again," Dimon told Rose.

He also suggested that the next president should be prepared for a continuation of the existing problems facing the economy.

"I think the new president has to be prepared for dealing with a serious downturn," said Dimon. "And if we don't get our hands around this energy issue, we could severely damage the future health of the United States."

Dimon, who is a Democrat, also called for tax changes to make the system more "egalitarian."

"I think there is nothing wrong with taxing the wealthy a little bit more and having a more egalitarian society," said Dimon.

[kennynah]

posb no problem hor? becos if have, skarly their atm cannot dispense money...how? no money to take bus

[learn2win]

wah, ATM cannot topup my cashcard then jialut leh..i need to pay for ERP!

[kennynah]

hahaha....u must be quite fedup with ERP.... but who isn't, right?

[learn2win]

K,

now everyday I need to pay extra 2 bucks just to enter CBD to fetch my wife....

[kennynah]

l2w :

that's one plate of chicken rice or 3 cans of coke light from ntuc or $40 per month charity or $4K from 1st prize 4D..... hmmm....

my thoughts.... one gets what one votes for... juicy annie kwan

[blid2def]

l2w :

that's one plate of chicken rice or 3 cans of coke light from ntuc or $40 per month charity or $4K from 1st prize 4D..... hmmm....

my thoughts.... one gets what one votes for... juicy annie kwan

or didn't get the chance to not vote for.