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Thursday, September 25

"It ain't over 'til it's over." "And the beat goes on."

UPDATE: "...the biggest bank failure in U.S. history."
"JPMorgan Buys WaMu's Deposits as Thrift Is Seized by Regulators"
Bloomberg: "JPMorgan Chase & Co., the third- biggest U.S. bank by assets, agreed to acquire the deposits of Washington Mutual Inc. as the thrift was seized by regulators in the biggest bank failure in U.S. history.

"JPMorgan will pay $1.9 billion, the Federal Deposit Insurance Corp. said in a statement today. It won't acquire liabilities including claims by equity, subordinated and senior debt holders, the FDIC said.

"WaMu, based in Seattle, collapsed after its credit rating was slashed to junk and potential suitors passed on making a bid. Facing $19 billion of losses on soured mortgage loans, the lender put itself up for sale last week. WaMu in March rebuffed a takeover offer from JPMorgan that WaMu valued at $4 a share."

"WaMu had about 2,300 branches and $182 billion of customer deposits at the end of June. Its $310 billion of assets dwarf those of Continental Illinois Corp., previously the largest failed bank, which had $40 billion ($83 billion in 2008 dollars) when it was taken over in 1984."

WAPO: Bailout Could DEEPEN Crisis, CBO Chief Says
Asset Sales May Lead to Write-Downs, Insolvencies, Orszag Tells Congress
The director of the Congressional Budget Office said yesterday that the proposed Wall Street bailout could actually worsen the current financial crisis.

During testimony before the House Budget Committee, Peter R. Orszag -- Congress's top bookkeeper -- said the bailout could expose the way companies are stowing toxic assets on their books, leading to greater problems.

"Ironically, the intervention could even trigger additional failures of large institutions, because some institutions may be carrying troubled assets on their books at inflated values," Orszag said in his testimony. "Establishing clearer prices might reveal those institutions to be insolvent."

In an interview later yesterday, Orszag explained using the following example: Suppose a company has Asset X, whose value is recorded on the books as $100. Because of the current economic decline, Asset X's real value has dropped to $50. If the company takes part in the government bailout and sells Asset X for $50, the company has to report a $50 loss on its books. On a scale of millions of dollars, such write-downs could ruin a company.

Such companies "look solvent today only because it's kind of hidden," Orszag said. "They actually are insolvent" already, he said.

FDIC May Need $150 Billion Bailout as Local Bank Failures Mount: "Out of the frying pan and into the fi..." Make that "Out of Purgatory and into Hell."

(EDIT/ADD) Quote of the Day: "If you think the people that created the crisis can fix the crisis you are a fool. They engineered the crisis in order to gain even more control over everything while paying the least amount for it. And they are doing all of this with your money. It’s not just bad business and unmitigated greed. It’s also intentional. But on their way to all those bright dreams and personal glory… on their way to snatching everything for themselves and destroying you in the process they overlooked something and that is that a person’s reach should never exceed their grasp. They just haven’t grasped that." -- Les Visible

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