Sunday, August 16, 2009

Bad, Bad Assets.....

Some kind of follow up to Joke Of The Day "Well Capitalized......”

Wenn man so will eine Fortsetzung von Joke Of The Day "Well Capitalized......”

Dank an Randy Glasbergen

Bad, Bad Assets Floyd Norris
The F.D.I.C. announced the seizure of Colonial Bank and the transfer of the deposits to BB&T, a regional bank based in North Carolina. (As an aside, I’ll note that Colonial only wanted to expand into fast-growing areas, and never chose to enter North Carolina. Tortoise and Hare?)

You can learn all you really need to know about the assets Colonial amassed from the breakdown of what will happen to them, although details are sparse.

1. The F.D.I.C. gets $3 billion in assets that BB&T did not want at all.
2. BB&T gets $7 billion of assets.
3. BB&T gets another $15 billion of assets to manage, but the F.D.I.C. will share losses on them, in ways that are not yet disclosed.

That means that of the $25 billion in assets Colonial had, only 28 percent of them were deemed by BB&T to be worth taking on without any protection. And 12 percent were deemed not worthy of being taken under any terms.
WSJ: Loss Rates for FDIC higher than during S&L Crisis via Calculated Risk
At three of the five banks that failed Friday, increasing the total to 77 so far this year, the financial hit to the agency's deposit-insurance fund is expected by the FDIC to be about 50% of their assets.
As of Friday August 14, 2009, FDIC is Bankrupt via Mish

Below is a graph showing the DIF capital as a percentage of total bank deposits insured by the FDIC. Note that this graph is based on the old insurance limit with a maximum coverage of $100.000/account. This limit has been changed to cover up to $250.000/account until January 1st 2014. Estimates say that the change increases the deposits covered under FDIC insurance to approximately $6 trillion in total.

The current reserve ratio of 0.014%1 strongly indicates how bad this crisis has affected U.S financial institutions. However, this is not the entire story. If we take a closer look at non-current loans and charge-offs from banks one realizes that the FDIC still has a lot of work to be done. Combined non-current loans and charge-offs amounted to nearly $100 billion in Q109 compared to $15 billion/quarter pre-crisis. Moreover, according to analysts at the Royal Bank of Canada the U.S still has banking failures in the thousands to face before the crisis is over. In turn that should result in the FDIC requesting the pre-approved funding signed by the Congress in May 2009, including $100 billion from the U.S Treasury Department.


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4 Comments:

Blogger jmf said...

The situation in Europa is as bad as in the US or even worse....

August 17th, 2009
Swedbank sweats
FT Alphaville

4:22 AM  
Blogger jmf said...

August 17th, 2009
Nigerian Exchange Freezes Five Banks’ Share Prices
Bloomberg

Central Bank of Nigeria Governor Lamido Sanusi fired the chief executives on Aug. 14 after a central bank audit found the lenders were in a “grave situation” and their management had acted in a manner detrimental to the interests of depositors and creditors. Sanusi also announced that 400 billion naira ($2.55 billion) would be injected into the lenders to ensure they meet minimum capital requirements.

Eurasia Group, a New York-based research company, said in May that banks in Nigeria, Africa’s second-biggest oil producer, may have as much as $10 billion of toxic assets. The bad debt is partly the result of at least 1 trillion naira of margin loans used to buy shares as equities soared almost 13-fold since 2000, according to Bank of America Corp.

5:14 AM  
Blogger jmf said...


Treasury, FDIC And More: How Many Lies?
Denninger

The prospects of recovery of capital and a return on the equity investment to the taxpayer ARE HIGHLY SPECULATIVE.

Crossed out by hand. The final presentation of this to The American People was missing this key disclosure.

9:12 AM  
Blogger jmf said...


Why the FDIC won’t run out of money
Felix Salmon

12:23 PM  

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