$52.5 Billion In Virtually Free US Bank Debt Due Next Month

Tyler Durden's picture

We were one of the earliest to raise concerns about the future impact of the maturing TLGP debt that was 'given' to the bank-holding-companies in the middle of the crisis three years ago. December is the first month with very significant maturities as more than $52bn comes due, with $14.9bn next week alone. The banks face at least two major problems from this debt maturing: 1) It is sizable and primary markets seem unlikely to be able or willing to soak up such large issuance without significant concessions, and 2) The extremely low cost of funds for this debt means that rolling into market rates will drastically impact earnings (as interest expenses jump - should fundamentals matter again). BAC faces $3.6bn maturing, MS $3.75bn, and JPM $7.55bn next week alone.

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Kali's picture

Oops!  Hahahahahahah

slaughterer's picture

When is Timmy going to discover his inner Hank Paulson?  

barkster's picture

this is probably the reason for today's selloff. gotta have an emergency so the fed can start QE666.

Ned Zeppelin's picture

Rollover, bitchez.

TGLP contain a hidden rollover clause? I bet it does.  At the same rates too.  No worries here for the TBTF.

GeneMarchbanks's picture

I, for one, sure hope fundamentals do make a comeback.

slaughterer's picture

Fundamentals?  That was for the 20th century.  

Smiley's picture

Commodities UP, rainbows and unicorns DOWN!

Tom Green Swedish's picture

It would be better for the rest of the world if commodities tanked.

 

On the other side is the speculator. The speculator neither produces nor consumes corn or soy or wheat, and wouldn't have a place to put the 20 tons of cereal he might buy at any given moment if ever it were delivered. Speculators make money through traditional market behavior, the arbitrage of buying low and selling high. And the physical stakeholders in grain futures have as a general rule welcomed traditional speculators to their market, for their endless stream of buy and sell orders gives the market its liquidity and provides bona fide hedgers a way to manage risk by allowing them to sell and buy just as they pleased.

But Goldman's index perverted the symmetry of this system. The structure of the GSCI paid no heed to the centuries-old buy-sell/sell-buy patterns. This newfangled derivative product was "long only," which meant the product was constructed to buy commodities, and only buy. At the bottom of this "long-only" strategy lay an intent to transform an investment in commodities (previously the purview of specialists) into something that looked a great deal like an investment in a stock -- the kind of asset class wherein anyone could park their money and let it accrue for decades (along the lines of General Electric or Apple). Once the commodity market had been made to look more like the stock market, bankers could expect new influxes of ready cash. But the long-only strategy possessed a flaw, at least for those of us who eat. The GSCI did not include a mechanism to sell or "short" a commodity.

This imbalance undermined the innate structure of the commodities markets, requiring bankers to buy and keep buying -- no matter what the price. Every time the due date of a long-only commodity index futures contract neared, bankers were required to "roll" their multi-billion dollar backlog of buy orders over into the next futures contract, two or three months down the line. And since the deflationary impact of shorting a position simply wasn't part of the GSCI, professional grain traders could make a killing by anticipating the market fluctuations these "rolls" would inevitably cause. "I make a living off the dumb money," commodity trader Emil van Essen told Businessweek last year. Commodity traders employed by the banks that had created the commodity index funds in the first place rode the tides of profit.

hedgeless_horseman's picture

 

 

...means that rolling into market rates will drastically impact earnings

As if.

hack3434's picture

god forbid the have to rollover at anything over 12bps

hedgeless_horseman's picture

 

 

God won't have to worry about it...that is the job of The Fed.

TruthInSunshine's picture

OT, but it's unwinding right now. The central banksters won't stop it (they can't), whether by printing toiler paper fiat or not (printing fiat only destroys private sector purchasing power now and the inflationary inputs offset any systemic risk modeled odds at staving of the great unwind and purge of securitized and unsecurited debt that will be necessary to cleanse the system, however painful that process is and lasts, by some wide odds - printing at this point = a complete collapse of ECB/Fed Reserve balance sheets, already staggering under the weight of unservicable toxic waste, with the significant adeverse affect of completing the task of grinding the consumer and the small and mid-size business into dust, not to mention compressing multinational corporate margins to the point of zero sum game non-profitability). Not only are sovereign insolvent, but so are the central banks, who actually have the ability to conjure money from thin air at zero cost basis. I haven't even touched upon the intractability of the 'balanced budget' Super-Committee farce.

I'd love for someone to poke any hole(s) in the following synopsis I wrote and culled from another thread over the weekend (tell me how/where I or those of us who are not mathematically challenged are wrong):

 

It's very quite simple as to how this will play out (and why).

Either you do or don't believe some or all of the following:

1)   The European Union is inevitably destined for failure (and the odds, for reasons to be reference below, of a fast & furious implosion have grown exponentionally higher over the last 6 months) as it's simply not possibly to have a central bank (the ECB) usurp the ability of the very disparate political, social and economic allegedly sovereign nations of what is now the EU to print their own money, given the radically divergent political social and economic stability/instability the peoples of these nations find themselves facing (e.g. Greeks vs Germans; e.g. Belgians vs. Italians), and given that those nations (few as they may be) that are solvent don't want to face the consequences to their own health of what would be bailing out the many nations that are not solvent (by many, I mean the predominant majority, and not insolvent by any small % of their annual GDP, either, with demographic ticking time-bombs on their balance sheets in the form of entitlements, also).

2)   If there is any chance to hold the EU together, whether for another couple of years or maybe 5 or 6 years (before the reality of math slaps the unicorns & rainbows delusion of a common European Union in the face again like a bucket of Icelandic Sea Water poured on the face of Spaniard sleeping in a hammock in Santander on a warm and sunny day), it means that the solvent few must give their consent (via the body politik, who definitely rarely have the best interests of their consituents in mind, but will only do what is best if they feel sufficient rage and the very real theat of untoward consequences for selling out) to the ECB to go ahead and fire up the CERN-esque Printing Press at the ECB.

3)    Such consent to print Euros at faster than the speed of light pace will toss all of Europe into an inflationary environment that will make any time since post WWI or circa-WWII look positively tame, and in fact, the inflation resulting from what would have to be a massive devaluation in the Euro, which is not a reserve currency (despite claims of such de facto status or 'waiting in the wings' status to the contrary), will far exceed anything that respective European Nations that form the EU saw back in the late 1970s, prior to turning the legal process of the hows and whys and how much and other such question pertaining to the printing of their own currency over to the ECB. It would not be hyperbole to claim that real average per annum inflation of 12% to 20% a year for a lengthy period of 5 to 10 years could be not only possible, but likely (that would result in a 60% to 200% increase in the cost of living over a 5 to 10 year period, for Europeans, depending on how long the ECB monetization had to endure, for those of you keeping score at home, and that assumes that the process will yield the desired results, and put things back together again - a big assumption). Again, even with this monetization, loose ECB policy and absolute policy goal (stated or not) of inflating away EU Zone debts enacted, it has the possibility of not only not resolving the disease that is causing the EU crisis, but of exacerbating it (especially given that solvent members of the EU will be dragged down and drowned, inevitably, with their far more numerous, non-solvent EU brethren, which carries with it a special set of political and social risks as the process gets to the flailing-clutching-gasping for air stage).

4)   If the solvent members, mainly Germany, declare nein!, then the winding up of the European Union turns into an outright implosion, Icelandic style, but on an obviously monentous scale, with debts purged and investment losses accelerating into a process that clears the pipeline in maybe  a year or two, but giving the ability of the former EU members (and what could be a new set of non-core former EU members) to get back to a lifestyle consistent with their means, and taking their own monetary and economic policy back from the EU, with no one imposing austerity upon them, with the corresponding element that they need to have the cash to do what they want to do before they decide to do it (e.g. maybe not so generous pensions, transfer payments and huge public sector employment, etc. etc.?). Conversely, the solvent members, whether still forming a core-EU alliance, or parting ways completely, are not threatened with a perverse sinking of their living standards, as they no longer have to subsidize the former hopelessly and helplessly insolvent member states.

5)   If the implosion caused by a decision to not authorize the ECB to devalue the EUR is taken, then the brunt of the losses spurned by the non-repayment of debts falls far more on the shoulders of investors (whether individual or institutional buyers of equities or bonds [sovereign and otherwise], and CDS/CDO), rather than the taxpayer hammering that would result from trying to keep the EU intact.

6)   There can be no question that this train wreck could have been seen, and was in fact seen coming, for years now, and that there have been the sleaziest type of manuevering (see rest of this section as to the why of the 'sleazy') by the likes of the Goldman Sachs & JPM and their filthy ilk, to seize upon this latest crisis, who have now ramped up efforts to do everything they can to accelerate the crisis, and who are assuredly betting on positions that will reward them many, many times over, while knowing full well that a) they literally have a voice in the governments of key EU Member States and the ECB itself through former (and even present) agents of their firms as to how to influence the decisions that will be made, and b) if things go wrong for them despite 'a', they will simply fall back on their "we're too big too fail because if we did, it would only assure and hasten a global economic collapse, and therefore give us our taxpayer backstop; here's the blank check Mr. President, Mr. Treasury Secretary & our very dear friends (and colleagues) at the ECB & Federal Reserve (and in select EU governments), so go give your scary speeches to the public now about 'martial law' and 'tanks in the streets' and we'll fill in the number on the check."

7)   Like a rapidly transmitting virus, given the global derivatives market, and the interwoven nature of the credit markets the financial engineers have created, the contagian is already being spread, and there's no putting that genie back in the lamp, bitchez. This is no longer about just the EU (which is why you should expect another 'Tanks In The Streets/Martial Law' speech any day now, with the mandate of a blank U.S. taxpayer check (endless in time and amount) in the offing by one of our competent appointed or elected officials. You can bet there are every hour conversations between The Bernank & Timmmay and that the hotline between Dimon & Blankfein and The Bernank & Timmay is burning right now.

All you blue pill takers, disregard this, because it's - you know - the talk of conspiracy theorists and such.

For those with a strong enough CONSTITUTION to have already swallowed the red pill, or who think they can and would like to try, The  Money Masters, bitchez! 

The Money Masters

JR's picture

Speaking of debt, Ron Paul would agree; great post, TIS. Says Mish regarding the following video: “I used to have a modicum of respect for Bob Schieffer, host of Face the Nation. Not anymore. Instead of conducting an interview, Schieffer acted with clear intent to discredit Ron Paul. It backfired on Schieffer when Paul held his ground and refused to be cutoff by Schieffer's biased comments.”

Ron Paul Smacks Bob Schieffer on Face The Nation

http://globaleconomicanalysis.blogspot.com/2011/11/ron-paul-smacks-bob-schieffer-on-face.html

earleflorida's picture

i'm proud of the way ron paul handled the conversation, knowing quite well they [msm] would interrupt him repeatably with only 5-7minute air-time max. - paul's machine-gun answers, simultaneously bringing questions up with answers that would never had been asked kept the programmer, and moderator at bay -

bravo,... for his stark and honest reality - ron paul

"a voice that leaves no shadow of a wayward wind, but only the woodwind songs swirling freely about, that only a treeless forest inhabitants could easily dance upon, as every whisper blows about a subtle truth be told" 

NotApplicable's picture

You're taking a very focused view here. Too focused, IMO. Every calculation (political as well as mathematical) is missing the wild-card known as war, while relying on the restraining options known as the rule of law.

All of your scenarios above do not account for the reality for instance, that Corzine just stole over a billion dollars, likely killed the CME, yet, not a word about the criminality of the entire affair is emanating from the MSM and TPTB.

Peak Everything's picture

Maybe. The usual objective of war is to burn some stuff (energy, bombs, lives) to take stuff from people who have stuff so that you end up with more stuff than you burned to get it. But nobody in Europe has any stuff. Everyone is broke and nobody has any reserves of the only physical wealth that matters: oil. War will simply burn up more energy thus forcing its price higher than today's price which is already crushing economies.

 

Pitchman's picture

Trillions of CDS with nothing to back it

Europe's Voluntary Haircuts?, CDS Market Sham & B of A: Less Than Zero

MF Global is a fractal in a frying pan.

 
The Disappearance of Chivalry - George Santayana & Murder By Joystick

*

THE ROOT OF OUR SOCIAL, ECONOMIC, MILITARISTIC WOW'S IS AN EVIL, MONETARY SYSTEM.  EVERYTHING ELSE IS A SYMPTOM OR AN ACTION THAT SUPPORTS IT.  AT THE HEART OF THIS SYSTEM ARE THE CENTRAL BANKS; THE FED, THOSE WHO CONTROL IT AND THEIR DISHONEST, DEBT BASED MONETARY POLICIES.  AS SUCH; LAWS, THE CAPTURE OF GOVERNMENT AND THE SUSPENSION OF ACCOUNTING RULES IS FOR THEIR BENEFIT.  AN ACCOUNT OF THE PEOPLE HAS NO PLACE IN IT.  INDEED, IF THE PEOPLE WERE ITS PRIMARY CONCERN, THE WORLD WOULD BE MORE FREE, LESS VIOLENT AND MORE PROSPEROUS.

THE PRIVATELY HELD FED IS THE TOP REGULATOR OF ITS TBTF OWNERS AND MEMBER BANKS.   IT'S CREATION OF MONEY OUT OF THIN AIR; LOANED, AT INTEREST, TO THE SOVEREIGN AND ITS FRACTIONAL RESERVE SYSTEM IS THE MOST INSIDIOUS OF CRIMINAL PONZIS FOR WHICH ALL ITS FAUX REGULATIONS AND FINANCIAL MISALLOCATIONS FOLLOW. 

TO FREE OURSELVES, RESTORE FREE MARKET CAPITALISM AND REESTABLISH OUR CONSTITUTIONAL REPUBLIC, WE MUST FIRST ELIMINATE THE MOST PERNICIOUS CORRUPTING FORCE OF ALL.

END THE FED!

See:

Money Power And The Central Bank: Life Is But A MEME

END THE FED: THE FIRST STEP IN RESTORING OUR CONSTITUTIONAL REPUBLIC

14 Reasons Why We Should Nationalize The Federal Reserve

Stuppy's picture

How much corporate debt typically comes due each month?  Is this a 5% increase from the previous month or a 50% increase?

Oh regional Indian's picture

Surely such loose change will magically re-appear through the rape of FASB.....these guys all have huge suckers into dark pools floating all around the world. 

Let there be a real liquidity event, like a US or EU wide physical run on a top 5 bank.

Then we'll see who is really in trouble.

ORI

final-cut-trailer-01/

Potemkin Village Idiot's picture

...and then Hanukkah starts on December 20th.

LawsofPhysics's picture

How delicious.  The vast majority of the debt is a fraud.  I really don't want to be a billionaire through devaluation.  I know the value of my labor and that of my employees, let's get this collapse over with already.  Fucking bring it.

Dapper Dan's picture

GE?

The biggest user of the guarantees is General Electric Capital Corp., the finance arm of Fairfield, Connecticut-based GE, with $45 billion outstanding according to the FDIC. New York-based Citigroup is second with $44 billion.

Who knew?

buzzsaw99's picture

Turbo Timmy

Helicopter Ben

Bank holding company

Not a problem

Dick Darlington's picture

Maybe the banks could ask help from the government of Belgium. Oh, i forgot, they STILL don't have one! Alex, i'll take "no government for at least 2 year" for 400.

11-21 12:30: Belgium government negotiator tenders resignation, according to the...

hedgeless_horseman's picture

 

 

I don't know how to say Space Monkey in Flemish, but Sudden Debt is doing a great job as a one-man project mayhem-Belgium.

GeneMarchbanks's picture

Again?!

I didn't even know Belgium was a real place, let alone has a government. Which is weird because I live in Europe... I think.

NTS: Put away the Salvia Divinorum before posting...

buzlightening's picture

We know who has bought up all the gold at wholesale prices, as the unwind brings down the paper fiat ponzi saturated debt based currencies.  Wouldn't surprise me to see the next bubble gold, way up sky high, as we know there's no investment in the physical among ameriCON'd.  All in the hands of the global power brokers ready for the end game.  Not a wisp left for rank'n file when the fiat burns to ashes.  Same historical wash, rinse, repeat cycle upon global citizens by bankstering thugs.  In fraud we trust and being royally jiffy lubed by the neoCONoplians should not surprise anyone, with one brain cell of economic common sense left.  

Roland99's picture

anyone up for some a dis?

 

Bob Marley - Redemption Song
http://www.youtube.com/watch?v=6yXRGdZdonM

 

JW n FL's picture

 

 

http://www.youtube.com/watch?v=nC8-DsLFqS0

Damian Marley - CONFRONTATION

Try an updated version of Bob!

JW n FL's picture

 

 

Sounds like a Job for an Offshore Trust! that is funded thru JP and or add other name here ---> __________.

The Bank will draw down from the FED window.. loan the offshore entity "$X" and then the offshore will buy / re-fi / bridge (at some amazing numbers, so that the transaction can be repeated over and over and over for Fees) and in the end.. all of the above can crash, with a certain amount of privacy.. so that no blame is spilled over onto the Flag(s) of the original Players..

Shit they can sell it for 95% of its Value (not face value) to BoJ and skip the fee earnings train above.. but why would they not want free, fee monies?

there is nothing new.

the sheep are too stupid to understand it.

the people who do understand it are more worried about possible quality of life changes, so no honesty there.

for every "1" person educated.. there are 100 different ways to side track them with some self re-enforcing bullshit that they "Know" already and 'Want too.. or "Would Rather" think about due to their feelings / beliefs.

Europe / Euro will crash.. it will in the long run play out better for America.. China will crash.. which will play out better for America.. in the long run.. and we will remain on top going forward.. and history will show we invested in the failures to the detriment of our own Country.

WE designed their failures.. the U.S. Dollar will be worth more than Gold.. and all of those in China that loaded up on Gold and Silver will be trading it for U.S. dollars at a discount.. fucking up our pricing!

 

Anyone who would like to discuss the facts offered.. I am happy to be proven wrong, un-like most. But this is what I see.

for those of you that are not grown up enough to understand how much I hate the idea of America Purging itself so that some Rich Fuckers can think that they are looking out for the long term (cheap-er) energy needs of their families..

basically if you don't like what I said.. neither do I.. but this a grown up conversation so save the petty, childish shit for your childish friends. I am searching for good, quality counter weight to the above, I once again would like to be proved wrong.. so that I can sleep better at nite.

 

guasilas's picture

You mean they'll have to pay for their money?

That must be wrong.

Zero Govt's picture

Yeah doesn't seem right

Where is Benny and the Helly?

Snakeeyes's picture

This is starting to get insane.

The European Investment Bank (EIB) Ski Slope Goes Black Diamond!

http://confoundedinterest.wordpress.com

disabledvet's picture

How is "22 billion" free? You mean "interest free" right? And of course "that better stop right now or else!"

JW n FL's picture

 

 

+++++++++++++++++++++++++++++++++

for the laugh!

rambler6421's picture

Don't worry, banksters will have their way.

 

libertarian86.blogspot.com