Archive - Mar 20, 2009 - Story

Some internet convergence optimism from the ever cheerful Morgan Stanley lifer Mary Meeker, to dispel the recent FDIC hatin' on ZH. Hat tip to Paul Kedrosky.

Meeker Tech '09 - Get more Business Plans

This brings the 2009 total to 20 banks down and counting. The latest three are:

• FirstCity Bank of Stockbridge, GA, had total assets of $297 million and total deposits of $278 million. At the time of closing, the bank had approximately $778,000 in deposits that exceeded the insurance limits. In English this means tomorrow some people will realize they are $778,000 poorer.

Hat tip to reader Camila for pointing out that Bloomberg's earlier editorial mistake in reporting the truth was subsequently mitigated substantially. The title of the original Bloomberg article was "Bair Says FDIC Reserves May Hit Zero Without New Fees", which was subsequently moderated to the current "Bair Defends Fee To Build Deposit Reserves Amid Bank Opposition."

Hat tip to reader Camila for pointing out that Bloomberg's earlier editorial mistake in reporting the truth was subsequently mitigated substantially. The title of the original Bloomberg article was "Bair Says FDIC Reserves May Hit Zero Without New Fees", which was subsequently moderated to the current "Bair Defends Fee To Build Deposit Reserves Amid Bank Opposition."

Vik is freaking out again ergo leaked memos... This time it is potential employee defections and bonus refunds... And some not so good news for distress causing people.

To: All Citi Colleagues

From: Vikram Pandit

Date: March 20, 2009

Re: Washington Update

It has been confirmed that Chris Sullivan, (curiously still with a green light on his Bloomberg profile) is taking the Ironclad parked in the dodecatuple secret bottom basement of 32 Old Slip, and will sail the East River all the way up to Boston where he will be joining Fidelity as president of its bond fund. Sullivan is moving on up in the world, not just in a purely magnetic north sense, as at Fidelity he will oversee more than $170 billion in bond assets.

When I wrote about this issue a week ago, I thought I was going to be called out for prognosticating gloom and doom as usual...Well, no such luck, in fact quite the opposite. Sheila Bair came out with some very scary words for depositors everywhere:

One-time potential auto czar and now merely actual auto cheerleader, Steve Rattner, said GM may need "'considerably' more government aid than their request for as much as $21.6 billion."

GM, which recently was beaming after it had said everything is cool and no more cash will be needed in the short-term must have finally figured out how to scroll down on the excel-based P&L and seen all those red cells.

One-time potential auto czar and now merely actual auto cheerleader, Steve Rattner, said GM may need "'considerably' more government aid than their request for as much as $21.6 billion."

GM, which recently was beaming after it had said everything is cool and no more cash will be needed in the short-term must have finally figured out how to scroll down on the excel-based P&L and seen all those red cells.

ISDA just announced it will publish a protocol for the Rouse Company's (read General Growth Partners) CDS auction protocol. Yet another consequence of the Monday default on over $2 billion in debt. At this point I don't see how a successful forbearance makes little sense as the CDS has been officially triggered.

Simon Property Group's new "A3/A-" bond issue, which is pricing at a 10.875% yield just got upsized from $500 million to $650 million. Just like the marginal buyers of the MGM 13s of 13 are now very sorry, we smell something quite comparable happening here oh so soon.

In a nutshell - Goldman had bought billions in AIG CDS in the 2004 to 2006 timeframe. Whether this was predicated by their expectation that subprime would blow up, or their very early understanding just how bad things at AIG were, one will never know, especially not the SEC. However, one look at the CDS chart below shows what prevailing levels for AIG's CDS was in that time frame. As one can see, AIG 5 yr CDS traded in a range of 4 bps to 52.50 bps between October 1, 2004 (only goes back so far) and December 31, 2006.

In a nutshell - Goldman had bought billions in AIG CDS in the 2004 to 2006 timeframe. Whether this was predicated by their expectation that subprime would blow up, or their very early understanding just how bad things at AIG were, one will never know, especially not the SEC. However, one look at the CDS chart below shows what prevailing levels for AIG's CDS was in that time frame. As one can see, AIG 5 yr CDS traded in a range of 4 bps to 52.50 bps between October 1, 2004 (only goes back so far) and December 31, 2006.

Some of the Q&A. FT, Bloomberg and WSJ are ripping David Viniar apart:

Q. How did you treat mark to market dispute and did you do anything in response to noticing improprieties with AIG's marking methodology?

"We believe the value of some positions was lower than they believed. Our response to their weakness was to scale down our trade." [Here comes the MTM can of whoopas at AIG and elsewhere.]

Q. Was it GS's collateral calls that pushed AIG over the edge and does GS feel guilty?

And if you are long any tranche of CMBS deals GCCFC 2004-GG1 and LB-UBS Commercial Mortgage Trust 2004-C4, you may want to freak out too. S&P just announced that it is monitoring these two loans "after learning that the loans for three General Growth Properties Inc. (GGP)-related malls that serve as collateral for the transactions were transferred to their respective special servicers on March 18, 2009, due to maturity defaults.