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ppauper
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A large bank is about to go bust...we're not going to tell you which one

August 19th, 2008, 1:25 pm

Ex-IMF chief says a large US bank to go underself-fulfilling prophecy ?
 
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penguina
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Joined: August 17th, 2008, 11:36 pm

A large bank is about to go bust...we're not going to tell you which one

August 19th, 2008, 3:26 pm

it is just being realistic. The supply of naive bagholders (i.e. SWFs) is running out but the banks still need to raise large amounts of money, huge amounts of debt and fictional profits still has to be written off, and the recession in the real economy is only just starting. my prediction is that we're heading into debt deflation.
Last edited by penguina on August 18th, 2008, 10:00 pm, edited 1 time in total.
 
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BetaExoticBets
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Joined: January 30th, 2007, 11:25 am

A large bank is about to go bust...we're not going to tell you which one

August 19th, 2008, 8:09 pm

I can tell you which one it is based on the flow of bets on my book ;-)
 
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hayes
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Joined: July 18th, 2008, 11:24 am

A large bank is about to go bust...we're not going to tell you which one

August 19th, 2008, 8:22 pm

Well "for fun" let's just hypothesize here, that if a certain bank that's dropped in value by 20% today was to go belly up:Would it get offered to JPMorgan again at a bargain basement price? Or perhaps Bank of America? Goldmans? Citi?!?!If you were the U.S. government/ Fed/ SEC, what would you do with it?
 
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DominicConnor
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A large bank is about to go bust...we're not going to tell you which one

August 20th, 2008, 12:17 pm

If it is the bank I'm hearing about...The Bear situation was in a different environment. Not least because JP Morgan is unlikely to be able to swallow it.GS I'd rule out because it's (so far) successful strategies have dodged a good number of the bullets flying around, so why change tack unless the price was stupidly low ? If stupidly low you get the hassle that JP suffered with BS.JP took one of the biggest bets of modern times when it offered to take BS with two days due dilligence.BoA has had involvement with Countrywide, so does it want more ? I think not. and I don't think Citi or Lehman will be on the buyside of this either.A purchsae a big bet and banks have heavy lifting to get their capital up to strength. Any bank who bought <redacted> would not only be taking a big risk, but also it would be giving up many chances to make money on buying things that are unreasonably underpriced for quite a while. When such an event happened in London, it was botched by the pathetic Mervyn King who failed to stand up to the politicians, show leadership or indeed do anything useful at all. One thing that should have made it easier was that the British body politic is less xenohphobic than the USA, so if a foreign buyer had shown up, like a sovereign wealth fund, a Russian oligarch, or the Chinese government, they would have been welcome. Harder for a US administration to go down that road, especially this close to the elections.The oprions for the US govt would appear to either be nationalisation or writing a huge guarantee to a bank to take it on.It ought to be done by a reverse auction, but campaign coffers need filling.However, China offers a tantalising oportunity here...It holds a huge great big pile of US government debt.This goes far beyond rationality in terms of diversification and risk.It cannot even sell much without seriously risking the value of the rest.But it could swap US bonds for equity in a dying bank, and use a larger wad to provide it with a credit worthiness that is in effect guaranteed by both the Chinese and US governments. And on a scale that would make GS look like the bureua de change at at regional airport.But that is pure conjecture, since the PRC government does not take orders from me.
 
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hayes
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A large bank is about to go bust...we're not going to tell you which one

August 20th, 2008, 12:50 pm

Good points. This is all just speculative as there's no way of telling what (if anything) might happen.If they did fall the US government are in a puzzle. With the thought of a Chinese (Or anyone foreign looking or sounding) buyout unpaletable by the voters they'll probably be forced to try and find "A Very American Solution" to the problem. Like with Northern Rock, ultimately it is the taxpayer that foots the bill for patriotism and the desire to have banks too big to fail.Interesting that you're one of the few people I've heard note that JPM took on a huge risk. For every one of you there are 10 people who focus on the huge premium JPM received for taking Bear Stearns on. I guess both sides are right in that a big premium is necessary for a big bank to take on a big risk which is I think is the point you were leading towards.Could the US government be forced to nationalise it? I can see that happening for Fannie Mae and Freddie Mac, but not so sure about a private bank. My knowledge of US Banking law is limited but perhaps some special Chapter 11 situation with state backing?......Oh well fun and games.
 
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penguina
Posts: 174
Joined: August 17th, 2008, 11:36 pm

A large bank is about to go bust...we're not going to tell you which one

August 20th, 2008, 1:07 pm

re: Bear Stearns. My understanding was that this was only done because the Fed (possibly illegally) guaranteed $30bn of Bear's "assets." Therefore the Fed took on a large amount of the risk.The SWFs have already lost money hand over fist recapitalising the banks. Maybe China wants the Ponzi scheme to go on a little longer but frankly this can't go on forever, its crazy.The Fed, US Gov, and the SEC are all part of the problem. I doubt they have any solutions other than buying time. For example the fuss the SEC made about banning naked short selling in some financials was blatant market manipulation intended to make short sellers cover. Naked short selling was already illegal anyway.I agree with Mish Shedlock. The Fed should be abolished.
 
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penguina
Posts: 174
Joined: August 17th, 2008, 11:36 pm

A large bank is about to go bust...we're not going to tell you which one

August 20th, 2008, 1:26 pm

QuoteOriginally posted by: DominicConnorHowever, China offers a tantalising oportunity here...It holds a huge great big pile of US government debt.This goes far beyond rationality in terms of diversification and risk.It cannot even sell much without seriously risking the value of the rest.But it could swap US bonds for equity in a dying bank, and use a larger wad to provide it with a credit worthiness that is in effect guaranteed by both the Chinese and US governments. And on a scale that would make GS look like the bureua de change at at regional airport.But that is pure conjecture, since the PRC government does not take orders from me.Correct me if I'm wrong, but I would have thought this would lead to a bond market collapse with yields shooting up.
 
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AlanB
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Joined: July 14th, 2002, 3:00 am

A large bank is about to go bust...we're not going to tell you which one

August 20th, 2008, 2:24 pm

Can anyone venture a guess as to which bank will go under?
 
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list
Posts: 2041
Joined: October 26th, 2005, 2:08 pm

A large bank is about to go bust...we're not going to tell you which one

August 20th, 2008, 2:41 pm

I heard today the Fannie's President and CEO he combine in his talk about revenue and 80% losses for recent time. When experts talking about mortgage losses it is not transperant which cash flows dried out. Are there defaults of morgages portfolios or they do not have cash becuase they bought too much derivatives or what? It looks the government will take care over F&F probably will nationalize them or sell part to Asia tigers. It is not look wisdom all the time to pump tranches to keep financial institutions.It is a question that time to time comes up watching the companies trouble. This is Modigliani-Miller theorem. It state the cost of a company does not depend on its structure.It understandable that if we buy the company the cost combines equity and debt. So buyer pays for future income as well as for future payments. On the other hand it looks mindless to pay the same price for a brand new car and the same type of broken car after we replace something and pay for that one third of the original cost. It looks that the real market price of the company rather PV of the difference of two flows E-D than E+D?
 
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TraderJoe
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Joined: February 1st, 2005, 11:21 pm

A large bank is about to go bust...we're not going to tell you which one

August 20th, 2008, 2:47 pm

Isn't it obvious ?
 
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Y0da
Posts: 387
Joined: August 7th, 2007, 4:48 pm

A large bank is about to go bust...we're not going to tell you which one

August 20th, 2008, 2:53 pm

So, don't keep your savings at one bank but rather 10 banks and don'tbe too greedy on interest rates for the time being, right?
 
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ppauper
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Joined: November 15th, 2001, 1:29 pm

A large bank is about to go bust...we're not going to tell you which one

August 21st, 2008, 12:22 pm

QuoteOriginally posted by: penguina Maybe China wants the Ponzi scheme to go on a little longer but frankly this can't go on forever, its crazywhich particular ponzi scheme ?fiat currency ? the Fed ? social security ?QuoteI agree with Mish Shedlock. The Fed should be abolished.the bandwagon is growing !
 
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farmer
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Joined: December 16th, 2002, 7:09 am

A large bank is about to go bust...we're not going to tell you which one

August 21st, 2008, 12:32 pm

I really think US real estate has bottomed. At least where I live, it is a good value down 5%-40%. The places that were silly are down 40% and are no longer silly. People can lend all day at these prices, even to people with no jobs, and they will come out alive.
 
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ppauper
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Posts: 70239
Joined: November 15th, 2001, 1:29 pm

A large bank is about to go bust...we're not going to tell you which one

August 21st, 2008, 12:33 pm

QuoteOriginally posted by: ppauperQuoteOriginally posted by: penguinaQuoteI agree with Mish Shedlock. The Fed should be abolished.the bandwagon is growing !sign the petition !
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