Money, Investment, Finances

Anime Dad wrote:Fixed rate loans are few & far between here anyway.

Really.....?

Scary. :sweat:

bmwracer wrote:
Really.....?

Scary. :sweat:

Yep. This is something I get annoyed about. The big banks here all make record profits almost every year, yet still go around closing branches, sacking staff, charging ridiculous transaction fees and putting out loans that have very few benefits for the borrower :grumble:

The Federal Reserve Bank here sets the "official" interest rate, which the banks are supposed to use as a basis for their lending rate. But lately, the banks have been putting up their rates independently of the Reserve bank. To protect their profits, apparently... they are involved in the Subprime issues over there too :sweat:

Anime Dad wrote:Yep. This is something I get annoyed about. The big banks here all make record profits almost every year, yet still go around closing branches, sacking staff, charging ridiculous transaction fees and putting out loans that have very few benefits for the borrower :grumble:

The Federal Reserve Bank here sets the "official" interest rate, which the banks are supposed to use as a basis for their lending rate. But lately, the banks have been putting up their rates independently of the Reserve bank. To protect their profits, apparently... they are involved in the Subprime issues over there too :sweat:

Us little guys are always behind the eight ball. :sweat:

bmwracer wrote:
Us little guys are always behind the eight ball. :sweat:

Which is the majority of America.
The minority are the ones who don't give a crap and still make money. That's where you gotta aim for!

So, anybody have any opinion on the Lehman Brothers/Merrill Lynch meltdown? This is the good side of not having any money, I've got nothing to lose!! :dancing:

gaijinmark wrote:So, anybody have any opinion on the Lehman Brothers/Merrill Lynch meltdown? This is the good side of not having any money, I've got nothing to lose!! :dancing:

It's nice that the government will bail them out, but the money comes out of our pocket indirectly, ne?

And if us John and Jane Does were in the same situation, I don't see the government throwing us a life preserver...

bmwracer wrote:
It's nice that the government will bail them out, but the money comes out of our pocket indirectly, ne?

And if us John and Jane Does were in the same situation, I don't see the government throwing us a life preserver...

:say_yes:

Mark

So, anybody have any opinion on the Lehman Brothers/Merrill Lynch meltdown?

At the moment, I"m mulling over which will hurt least. Jumping off the Golden Gate Bridge, or stepping out in front of a bus.

Okay, that's panic talking, but Mother Merrill has all of my money... and I've spent the last day making phone calls and trying to figure out who's lying to me.

Re: Lehman Brothers... The gov. decided not to bail them out. That's why they've gone into bankrupcy. This will have a huge effect on the rest of the market. Lehman Brothers was gigantic. (The Asian stock markets took a nose dive after the announcement about Lehman.)

Merrill Lynch wasn't bailed out by the gov. either. They were bought by Bank of America. ML is an investment firm.

As a result of the buy out, B of A's problem is going to be that they now have (I think) over 10% of the Nation's money. And that's supposed to be the cap. So they'll have to hide some money somewhere.

As for the big loan companies the gov bailed out last week... man we'd better hope the gov bails them out. If not, John and Jane Doe are gonna be heading for the bread lines and soup kitchens.

The screw up here is just like the one that got California in trouble over energy prices a couple of years ago.

The administration's mantra has been Free Market!!! De Regulation!!!

Without the regulators and regulations set by the gov, Enron and their buddies went to town stealing from Californians.

Without regulators and regulations, the banks and loaners had a great time making risky loans at rates that were almost sure to fail. It was a get rich scheme for the bankers.

Then the bubble burst. People, in record numbers, lost their homes, and defaulted on their loans. The banks didn't have the money on hand to cover the losses.

It's another bubble. It burst for us in 1929 (No leverage regulations). It burst for the Japanese in the early 90s. And it's bursting again for us (the housing bubble).

From what I"ve read, and what I"ve been told, we're not on the brink of another 1929. But we're sure as shootin' going into a deep recession.

Geezer wrote:Merrill Lynch wasn't bailed out by the gov. either. They were bought by Bank of America.

Yeah, that's right. :doh:

As a result of the buy out, B of A's problem is going to be that they now have (I think) over 10% of the Nation's money. And that's supposed to be the cap. So they'll have to hide some money somewhere.

One word: Switzerland.

From what I"ve read, and what I"ve been told, we're not on the brink of another 1929. But we're sure as shootin' going into a deep recession.

Guess I should hold off looking at an HDTV and/or a new car then. :sweat:

Now Morgan Stanley might be bought out...this is fuggin' crazy!

Morgan Stanley in Talks
With Wachovia, Others

By AARON LUCCHETTI, RANDALL SMITH and JENNY STRASBURG

Wall Street Journal

Morgan Stanley fought for its life Wednesday, entering preliminary merger talks with Wachovia Corp. and other banks as a seventh straight decline in the company's share price sent the stock to its lowest level since 1998.

After a harrowing day, Morgan Stanley's shares finished down $6.95, or 24%, to $21.75. Goldman Sachs Group, the largest U.S. investment bank by market value, also fell $18.51, or 14%, to $114.50.

While the situation is more acute at Morgan Stanley, the two Wall Street banks are both battling extraordinary market pressures that have already pushed stable franchises such as Lehman Brothers Holdings Inc. and Merrill Lynch & Co. into bankruptcy protection or hasty merger deals. At Morgan Stanley and Goldman Sachs, two of the oldest and most successful investment banks, market confidence withered in the past 24 hours for firms that were once trusted and envied.

Eyeing their trading screens and television sets, a sense of disbelief hung over people who thought of themselves as largely insulated from credit-market fears. "I've lost more than half my net worth in a month," said one Goldman employee.

The perception hurting investment-bank shares is that they can no longer rely on jittery global markets to replenish the cash necessary to fund their trading and lending businesses. That has forced the companies' borrowing costs higher, which means ultimately, it will likely become prohibitively expensive for them to fund their businesses.

Commercial banks like Wachovia are perceived as more stable, creating strong incentive for investment banks to link up with them, as Merrill Lynch did earlier this week with Bank of America Corp. But even some retail banks are under attack, such as the country's largest savings-and-loan, Washington Mutual Inc., which was exploring its own deal Wednesday with Citigroup Inc. and Wells Fargo & Co.

Inside Morgan Stanley there was a growing feeling that the firm's chief executive, John Mack, would have to explore a merger or outside investment. Just 10 days ago Mr. Mack said in a Fortune magazine interview that he was "not thinking about selling the firm."

But markets have moved with such force that yesterday Mr. Mack fielded a call from Wachovia CEO Robert Steel about a potential tie-up. Messrs. Mack and Steel both attended Duke University and have been on its board of trustees for more than a decade. Mr. Mack grew up in Mooresville, N.C., about 30 miles from Charlotte, N.C., where Wachovia is based.

A spokeswoman for Morgan Stanley said that the firm is "focused on solutions" to address the falling stock price. Wachovia declined to comment.

Morgan Stanley is also exploring preliminary tie-ups with a range of other banks around the globe, say people familiar with the matter. Morgan Stanley may well remain independent, but if a deal were struck it could come with the likes of HSBC Holdings PLC of the U.K., Banco Santander SA of Spain, Japan's Nomura Holdings Inc., a Chinese financial institution or a domestic partner such as Bank of New York Mellon Corp., say the people familiar with the matter.

Mr. Mack also took another tack Wednesday. He dialed U.S. Treasury Secretary Henry Paulson and Securities and Exchange Commission Chairman Christopher Cox, as well as Goldman Sachs CEO Lloyd Blankfein, to discuss how to stop the rapid decline in the two firms' share price. The two firms didn't discuss a merger but focused instead on how to stop short-sellers betting on a decline in Goldman and Morgan shares, people familiar with the matter said.

More on the Crisis
Mounting Fears Pummel World MarketsUnheard Pleas, Lost Chances for AIG Worst Crisis Since '30s, With No End in SightComplete Coverage: Wall Street in CrisisIt's unclear what the firms could do, and whether government officials can do much to stop a share-price slide that claims more financial company victims each week. Some pension funds and other big institutional investors, such as the California State Teachers' Retirement System, have said they'll cease lending their shares of Goldman and Morgan Stanley to short sellers, who borrow shares and sell them with hopes of buying them back later at a lower price.
In a memo to employees in the middle of trading Wednesday, Mr. Mack asked: "What's happening out there? It's very clear to me -- we're in the midst of a market controlled by fear and rumors, and short sellers are driving our stock down." A Goldman spokesman said, "You'd expect us to be concerned about any inappropriate market activity."

The companies may be able to weather the storm, but conditions have worsened. Through midday Wednesday, Morgan Stanley had lost about 10% of the assets in its prime-brokerage business, which services large clients like hedge funds, since the start of the week, up from 3% through Tuesday, according to a person familiar with the firm.

"Morgan Stanley has a strong capital and liquidity position," and the prime brokerage makes up a minimal part of that, the firm said in a statement. "Despite recent market volatility, we are confident that Morgan Stanley will maintain an industry-leading prime brokerage franchise."
Unlike Lehman Brothers, which filed for bankruptcy protection Monday after its shares slid last week, Morgan's share price decline doesn't come as its trying to raise capital by selling equity in the company. Morgan Chief Financial Officer Colm Kelleher said Tuesday the firm doesn't need to issue debt or new stock until 2009. But the share-price decline has unnerved some hedge-fund clients.

Rival banks and brokers were working overtime Wednesday to gain prime-brokerage business from hedge funds as Morgan Stanley's stock slid.

Deutsche Bank AG, UBS AG and Credit Suisse Group were among firms marketing to Morgan Stanley's clients, people familiar with the pitches said. Wednesday, Deutsche circulated slides marketing itself as a safe haven for hedge funds. One called "DB: A Solid Counterparty" compared the firm's creditworthiness with Morgan Stanley, Goldman Sachs and others.

"The increase in incoming inquiries has been marked this week," says Philip Vasan, head of Credit Suisse's prime brokerage.
The possible loss of independence for Morgan Stanley would be a stunning fall for a firm which has long prided itself on a blue-chip Wall Street heritage. Morgan Stanley was formed in 1935 by former executives of J.P. Morgan & Co. after Congress barred banks from securities underwriting in 1933 in a reform enacted after the market crash of 1929.

Donald Putman, a managing partner at investment banking boutique Grail Partners, said that he didn't expect Mr. Mack to fight for independence. Like Merrill Lynch CEO John Thain, who agreed to sell the firm to Bank of America earlier this week] Mr. Mack "doesn't have theological objections to a transaction" with a global commercial bank, Mr. Putnam said.

Mr. Mack entertained the idea of a lock-up with Merrill Lynch last weekend as banking executives met at the Federal Reserve Bank of New York to discuss the future of Lehman Brothers, but Merrill wanted to move too quickly for Mr. Mack, according to people familiar with the matter.

Goldman Sachs has publicly toed a much more independent line in recent weeks. Its share price hasn't fallen as much as Morgan Stanley's, but its latest quarterly earnings report was its worst since 2005. The company says it has managed risk better than many commercial banks. They add that commercial banks use the same funding markets as Goldman and Morgan Stanley do for large parts of their businesses.

Mr. Mack and his fellow executives had hoped that their stock price would react better to the company's earnings announcement this week. The company's profits and net revenue topped even Goldman Sachs, the largest investment bank by market value.

But after the earnings announcement late Tuesday afternoon caused initial enthusiasm among investors, Morgan Stanley shares resumed their downward march Wednesday. They continued lower even after the SEC announced that new restrictions would be placed on investors who bet on declines in share prices.

Write to Aaron Lucchetti at [email protected], Randall Smith at [email protected] and Jenny Strasburg at [email protected]

Japan's banks go on a global buying spree
By Michiyo Nakamoto in Tokyo and Sundeep Tucker in Hong,Kong
Published: September 24 2008 03:00 | Last updated: September 24 2008 03:00
In a world where capital is king, Japan's well-capitalised financial institutions can afford to do a little empire-building.
This week two of Japan's largest banks unveiled overseas deals that will give them a much larger role in the world's financial markets.
Nomura, Japan's biggest broker, yesterday swooped on the European operations of Lehman Brothers just 24 hours after snapping up the Asian assets of the bankrupt US bank.
At the same time, Mitsubishi UFJ Financial Group (MUFG), Japan's largest bank, agreed to take a stake of up to 20 per cent in Morgan Stanley, at an estimated cost of up to Y900bn($8.5bn).
The two deals, which were negotiated within days, highlight the opportunities that have opened up for Japanese banks to extend their global reach and gain financial expertise at attractive valuations. Until recently, Japan's conservative financial institutions were largely absent from the global M&A scene. Nomura acquired Instinet in 2006 and took a 15 per cent stake in Fortress, the hedge fund manager, that same year.
But Japan's financial sector was largely preoccupied with re-building domestic operations after emerging from its own bad loan nightmare and, in the case of investment banks, a prolonged market slump.
The mega-banks were still repaying huge sums of public funds they had received to prop them up during the non-performing loan crisis. Memories of their last overseas foray during the bubble economy, when Japanese companies went on a buying spree in the West, discouraged a swift return to the go-go mood of that era.
In the 1980s, Fuji Bank acquired 52 per cent of Heller Financial and Dai-ichi Kangyo Bank acquired 80 per cent of CIT, a commercial and consumer finance company.
Both banks were forced to sell their stakes in the US financial institutions during Japan's banking crisis and merged with IBJ to form Mizuho.
In 1986, Sumitomo helped Goldman Sachs with a $500m capital investment.
The US investment bank returned the favour in 2003, when SMFG in turn needed to boost its own capital, buying $1.27bn worth of the Japanese bank's convertible preference shares.
However, the situation has reversed again. Japanese banks have not been as damaged by the subprime debacle. They are now well capitalised - MUFG has a tier one capital adequacy ratio of 7.33 per cent - and have little use for that capital at home.
The domestic market offers few prospects for growth these days, as the appetite for corporate loans has remained weak.
Yet deposits have remained at high levels, creating big imbalance between the banks' deposits and their loans.
With tier-one capital adequacy at or close to 8 per cent, "all the profits [the big Japanese banks] are generating is excess to what they need, so that capital needs to go somewhere," according to one analyst. "Japanese banks will have positive net profits this year. They are among the few banks in the world that are generating capital," he says.
MUFG, for example, spent $3.5bn to raise its stake in Union Bank of California from 65 to 100 per cent. And the group, which has Y120,000bn in deposits said it would use cash to pay for its Morgan Stanley investment.
Nomura, meanwhile, had been seeking an opportunity to expand its presence overseas, with a Y600bn war chest that it raised earlier this year.
Analysts are now waiting to see whether this week's developments will spark further investment activity. Sumitomo Mitsui Financial Group, for example, has a close relationship with Goldman Sachs and earlier this year invested about $1bn in Barclays. Mizuho, Japan's second-largest bank, recently pumped $1.2bn into Merrill Lynch.
Splashing the cash is the easy part - the hard task is making the acquisitions work.
MUFG will have a seat on the board, but analysts wonder why it is committing so much capital to a bank whose destiny it is unlikely to be able to shape.
While Nomura's purchase of some of Lehman's non-US businesses was probably worth a punt on valuation alone, it will be a mammoth exercise to marry the Japanese and US cultures.
Previous attempt by Japanese banks to go global partly foundered on the inability of powerbrokers in Tokyo to delegate sufficiently to non-Japanese staff in far-flung offices.
One Hong Kong-based banker at a rival firm said: "There is no doubt that the Japanese are back on the scene but these Lehman bankers across Asia will slowly walk away if Tokyo tries to control them too much. And Nomura's bankers in Tokyo are hardly going to be happy to be working alongside new colleagues who earn so much more than they do. I wish them the best of luck."
Copyright The Financial Times Limited 2008

WaMu is NoMu.

Amazing how $16 billion in withdrawals in the past couple of weeks will send a bank to failure.

I guess we won't be seeing anymore of those WaMu commercials touting all the wonderful "free" services they offer. :beaten:

dochira wrote:WaMu is NoMu.

Amazing how $16 billion in withdrawals in the past couple of weeks will send a bank to failure.

Yeah, I pulled out my $1B weeks ago... :victory:

Re: The past week, Shoga nai

gaijinmark wrote:Re: The past week, Shoga nai

More like Taihen deshita. :sweat:

Some interesting insight about the auto industry meltdown...

"The U.S. has a successful, growing and very productive auto-manufacturing sector, it is simply not in Detroit , not in union plants and it is not owned by Ford, GM or Chrysler. Almost every major German, Japanese and Korean car company has factories in the United States . In many cases the imports that Americans buy are manufactured in the United States. Cars with industry leading quality ratings from Toyota and Mercedes Benz are the product of American hourly workers.

The potential demise of the Detroit car industry is not due to lack of automotive ability. Ford and GM are not unable to make cars. They both have thriving and profitable overseas operations, manufacturing and marketing cars based on local designs and facilities. Their problems are tied to the North American market, to the cost structure that has evolved with its unions and to the impositions of regulators. The American manufacturers are not competitive in their home market but they are extremely so in Europe and China ."

http://www.futuresmag.com/cms/futures/Breaking%20News/2008/12/08-dec07?origin=channels-Forex%20Central,Current%20Analysis

^ Not surprised.

Unions and the bloated salaries/perks of execs aided the meltdown, I'm sure... It was a long time coming, really.

The union-less foreign car manufacturers in the U.S. seem to be doing okay: no word of layoffs or the like, huh?

bmwracer wrote:^ Not surprised.

Unions and the bloated salaries/perks of execs aided the meltdown, I'm sure... It was a long time coming, really.

The union-less foreign car manufacturers in the U.S. seem to be doing okay: no word of layoffs or the like, huh?

Not that I have anything against unions, but yeah those manufacturers' relative cost per vehicle is far lower than cars made by the big three. Couple that with the fact that their sales figures are probably not as abysmal as the Three Stooges and we have some understanding why they aren't in the same fix.

Tu_triky wrote:Not that I have anything against unions

I have mixed feelings about them.

There was a time and day for them, but they're just a profiteering, influence-peddling lobby group now, IMO....