All those who thought only our brilliant financial alchemists had the ingenious idea of sweeping all the toxic assets plaguing bank balance sheets under the rug of taxpayer bailouts "until things get better," are in for a surprise. It appears that recently insolvent Spain is not only as big an offender in this regard, but has been ahead of the curve for a several years. In an attempt to pretend all was good, Spain's banks, which are now locked out of financial markets for good reason, onboarded worthless mortgages as long ago as two years back. This was done with the hope that sooner or later (but definitely in under two years) prices would pick up and these homes could be sold for at least one dollar of equity. Alas, something happened on the road to financial nirvana: the Keynesian model collapsed, and the properties are now worth less than they ever have been, are generating the same amount of cash as they did two years ago (none), and now, finally, banks are forced to start accounting for these loans in a manner at least marginally close to reality. The result: a scramble to reflate the housing bubble like never before, in the hope to get at least a few mortgage payments out of the newest batch of greater fool. As the WSJ reports: "Banks are piling on incentives. Midsize Banco Espanol de Credito SA offers deferred deposit payments and 100% financing "for many of our houses," according to its website. Larger lender Banco Bilbao Vizcaya Argentaria SA and smaller Banco Pastor SA offer generous financing and lower teaser rates, as well." In other words, all the ingredients that were present in the creation of the first housing bubble are here once again. And just to be safe, Spain has decided to multiply the dosage by a factor of ten. When this little scheme implodes, which it will, the consequences for the economy will be comparably be about 10 times as bad.
Cut the Partisan Crap ... BOTH the Private Sector AND the Government are to Blame for the Financial CrisisSubmitted by George Washington on 05/01/2010 23:26 -0400
Don't fall for 'ye ole divide-and-conquer strategy ...
The ECB is finally realizing that Greece will be a major issue for years if not decades to come. Which is why Jean-Claude Trichet finally put the debate of whether his bank will accept BBB- rated collateral beyond 2010 to rest. The answer is yes. This also takes out Moody's ridiculous A2 Greek rating out of the equation: finally Moody's can vote with its conscience. "It is the intention of the ECB's Governing Council to keep the minimum credit threshold in the collateral framework at investment grade level (BBB-) beyond the end of 2010. In parallel, we would introduce, as of January 2011, a graded haircut schedule, which will continue to adequately protect the Eurosystem." Considering how well the Eurosystem has been protected to date, we can't wait to see just how well this experiment will play out.
FDIC Sells Failed Banks' Toxic Crap Back To Soon-To-Be-Failed Banks At 50% Haircut With Explicit Taxpayer GuaranteeSubmitted by Tyler Durden on 03/12/2010 13:07 -0400
The FDIC has just announced that it has closed the sale of $1.8 billion of Notes backed by RMBS "from seven failed bank receiverships." The value of the actual aggregate balance: $3.6 billion. And somehow banks still keep their RMBS books marked at par. Furthermore, "the timely payment of principal and interest due on the notes are
guaranteed by the FDIC, and that guaranty is backed by the full faith
and credit of the United States. Sure enough, smelling this insane deal, the vultures came out to snack on the taxpayer's corpse: "The transaction was met with robust investor demand, with over 70 investors participating across fixed and floating rate series. The investors included banks, investment funds, insurance funds and pension funds. All investors were qualified institutional buyers." Just how many of these "banks, investment funds, insurance funds and pension funds" are viable to begin with, courtesy of the FDIC's permission for every failed bank to continue existing is an amusing question, and Zero Hedge will attempt to get an itemized list of the participating buyers.
Over the past year there have been some phenomenal moves in stocks, which some call high beta names, but which for all intents and purposes can be called "crap" companies (we use the term generically in the fashion it has been previously used by the mainstream media). So Zero Hedge decided to do a more in-depth analysis of just which names have benefited by the unprecedented equity rally, and whether their fundamentals justify the record moves from the stocks' 52 week lows.