Bank Run "Kabul Edition"......

Should be no surprise that the name KARZAI is popping up again..... Some folks have learned quite a lot from us ( US & Europe ) when it comes to the play the "Bailout / Moral Hazard Game"...If this wouldn´t be so depressing one could almost "congratulate" the "fraudsters" for recognizing that this bank is definitely TBTF.... :-(

Das hier erneut der Name KARZAI auftaucht dürfte wohl nur noch die Bundesregierung überraschen..... ;-) Bei dem seit Jahren anhaltendem "Anschauungsunterricht" ( besondern in den USA & Europe ) wenig verwunderlich das praktisch weltweit das Thema "Bailout / Moral Hazard" ständig kopiert und wie in diesem Fall besonders "brilliant" gespielt wird...:-( Selten das eine an sich so kleine Bank ohne Zweifel der Kategorie "Too Big To Fail" zuzuordnen ist....



Afghans Move to Bail Out Kabul Bank WSJ

KABUL—Afghanistan's government inched closer to bailing out the country's largest bank, setting aside hundreds of millions of dollars that could be used to keep Kabul Bank solvent, officials said.

The move Sunday came as depositors continued to pull their money from the lender, mobbing branches in Kabul and other parts of the country. In the capital, police and soldiers were ordered to guard Kabul Bank branches and razor wire was strung outside the main branch to keep crowds in check.

Averting the failure of Afghanistan's largest bank, an institution with ties to President Hamid Karzai's administration, has become a priority for U.S. and Afghan officials concerned by the political and economic crisis that could result.

There were conflicting accounts of how much money the Afghan government was preparing to divert to Kabul Bank from its roughly $4.8 billion in foreign-exchange reserves. A central-bank official said the bailout would likely be in the $200 million range; a finance ministry official put the figure "closer to double that."

The central-bank official said several options were being discussed to recover the funds that are likely to be pumped into Kabul Bank. One option is forcing major shareholders who bought their stakes with loans from the bank to either repay what they borrowed or hand over their shares.

Another option is confiscating properties or businesses bought or built by bank insiders with loans from the lender.

Major shareholders include brothers of President Karzai and First Vice President Muhammad Fahim, U.S. and Afghan officials say. The "politics are delicate," the central-bank official said.

Finance Minister Omar Zakhilwal said the Afghan government Saturday transferred $100 million dollars to Kabul Bank to cover salaries for about 250,000 soldiers, police and teachers, who are paid through accounts at the lender.

Kabul Bank's woes became public late Tuesday, when word leaked that Afghanistan's central bank had forced out the lender's chairman and chief executive—its two biggest shareholders—amid allegations that they made hundreds of millions of dollars in sometimes-clandestine loans to themselves and Afghan government insiders.

U.S. and Afghan officials also say the bank used one of Afghanistan's traditional hawala money-transfer outfits to move hundreds of millions of dollars out of the country in an apparent attempt to avoid detection, though it isn't clear what the money was then used for.

On Wednesday and Thursday, depositors withdrew almost $180 million, more than a third of the $500 million the bank had on hand before the crisis.

It isn't clear if Kabul Bank's assets—mostly loans and property—are easily recoverable.

When bankers are more dangerous than warlords Felix Salmon

Speaking Wednesday from his villa in Dubai, which was paid for by Kabul Bank, Mahmoud Karzai, the president’s brother, said cash withdrawals from the bank were a “little bit more than usual” but did not threaten to cause a meltdown. A full-scale run on Kabul Bank, he added, “would be a major disaster.”

Yes, the president’s brother is a part owner of the bank, and he’s living in Dubai, in a villa paid for by the bank — which, incidentally, handles the payroll for Afghan soldiers and schoolteachers — and really, what could possibly go wrong?

Bill Black: “Control Fraud” Crushes Kabul NC

Kabul Bank has been revealed to be a “control fraud.” Control frauds occur when those that control a seemingly legitimate entity use it as a “weapon” to defraud. Control frauds cause greater financial losses than all other forms of property crime – combined. Control frauds can also cause immense damage to a nation because they are run by financial elites that curry favor from political elites. The result is that they are often able to loot “their” banks for years with impunity

The CIA tells us that Afghanistan raised roughly $1 billion in revenues last year and expended $3.3 billion. The shortfall, of course, was funded by us (the West, principally the U.S.). Indeed, that understates the case because Afghanistan raised the $1 billion in revenues primarily through customs duties and the U.S. and other Western nations indirectly or directly funded most of those customs duties.

We know certain facts. Afghanistan has no deposit insurance system. Its government has no financial responsibility for bailing out Kabul Bank’s depositors. Nevertheless, Afghanistan’s government has announced it will bail out the depositors. The funds to bail out the depositors will come – indirectly, but surely – largely from the United States Treasury

Karzai Family Political Ties Shielded Bank in Afghanistan NYT

In early 2009, as President Hamid Karzai scanned the landscape for potential partners to run in his re-election bid, he was approached from an unusual corner: a bank.

After the deal, Kabul Bank poured millions into Mr. Karzai’s re-election campaign, Afghan officials said. Mahmoud Karzai and Haseen Fahim, drawing on Kabul Bank’s resources, were able to enrich their families aided by tens of millions of dollars in loans.

“The brothers orchestrated the political deal to serve their business interests,” said a prominent Afghan businessman in Kabul who, like virtually everyone interviewed for this article, spoke only on condition of anonymity. “Fahim became vice president, and the bank financed Karzai’s re-election.

“In Kabul, politics is all about money,” he said. “It’s the same thing.”

FT Alphaville

Afghanistan’s central bank has stepped in to take control of the troubled Kabulbank, its governor said on Tuesday, after suspected irregularities raised concerns over the country’s top private financial institution.

Central Bank Governor Abdul Qadir Fitrat told Reuters investigations had also been started into the dealings of the bank’s top two directors and shareholders, who were told to resign, and a brother of Afghanistan’s First Vice President, Mohammad Qasim Fahim.

Bird & Fortune "Moral Hazard & Baliouts"

This parody is looking more and more real on a daily basis.... Lets all hope that after the gigantic shortqueeze / dead cat bounce the financials around the world are able to find enough smart aka dumb money for their upcoming capital raising efforts. I think the window of opportunity will be very short lived.....

Leider wird diese satirische Abhandlung tagtäglich mehr und mehr zur traurigen Realität..... Bleibt zu hoffen das nach dem gigantischen Shortsqueeze bzw. der technischen Erholung der Finanzwerte weltweit die Institute in der Lage sind die dringend benötigten Kapitalerhöhungen durchzuführen. Ich persönlich glaube das dieses Zeitfenster nur recht kurzfristig geöffnet sein wird. Aus Sicht der Steuerzahler kann man nur hoffen, das sich genügend blauäugige Investoren finden die ( zum Teil erneut ) bereit sind in das fallendende Messer hinein zu greifen.

Northern Rock has borrowed $ 42 Billion from the BOE

I don´t care if someone still argues that this isn´t a bailout. What started with a speech from the head of the BOE Marvin King dissing the ECB and the Fed for providing liquidity has morphed into a disaster for the credibility of the BOE. They have rescued one of the most aggressive lender in the UK . I don´t care if the collateral from Northern Rock for the $ 42 billion is "first class". You just have to look at the UK housing market and combine this with the fact that Northern Rock was active in creative financing and the action from the BOE sends a clear message..... No wonder that the Bank of England set to win power for covert rescues .....

Wer spricht immer noch davon das es sich hier um keinen Bailout handelt....... Was mit einer Rede vom Kopf der BOE Marvin King angefangen hat indem er die anderen Notenbänker für deren großzügigen Liquiditätsspritzen kritisiert hat mutiert zu einem Debakel erster Klasse für ihn und die BOE. Erschwerend kommt hinzu das die Hilfe ausgerechnet dem mit Abstand aggressivsten Akteur auf dem UK Hypothekenmarkt zugeflossen ist. In meinen Augen zieht auch nicht das ja als Sicherheit angeblich das erstklassige Kreditbuch von Northern Rock eingebracht wird. Wenn ich mir den Zustand des UK Immobilienmarktes vor Augen führe und das mit der Tatsache kombiniere das Northern Rock führend im "kreativen" Hypothekensegment gewesen ist braucht man sich nicht wundern wenn dieses als Signal aufgefasst wird das im Zweifel die BOE oder der Steuerzahler schon helfen wird.......Kein Wunder das die BOE jetzt um Ermächtigung sucht verdeckte Rettungsaktionen durchzuführen......

Rock against the clock / FT
Each week the sums get ever more eyewatering. It has now emerged that Northern Rock has borrowed an extra £4.65bn from the Bank of England, taking its total state-sponsored borrowing to £20.6bn.

The facility is due to expire in February and is intended to enable the Newcastle lender to find its own solution to its funding crisis and examine possible bids.

Alistair Darling, the chancellor of exchequer, scotched one worry about the situation on Thursday when he told MPs that the European Commission had raised no objections to the facility. That suggests it is not being treated as state aid under European rules. So in theory there is scope for the facility to be extended. This matters because Northern Rock’s potential suitors – Cerberus, JC Flowers and Virgin Group – will surely want government assistance to be extended after any takeover.

After all, the size of the refinancing required for Northern Rock is the key obstacle to any bidder. A buyer will have to repay £20.6bn of Bank funding and replace £14bn of short- and medium-term loans. For example, Lloyds TSB sought a £30bn loan from the Bank as a condition of buying Northern Rock. A successful bidder would also need extra capital to continue writing a minimum volume of mortgages and drive some inflows of retail savings, because Northern Rock’s securitisation vehicle, Granite, must keep a certain level of mortgages within its securitisation trust to function.

So the government’s involvement in Northern Rock is looking increasingly long-term. The hope in Newcastle must be that the Eurocrat view that this does not fall foul of state-aid rules will be long-term too.

Market Sentiment & SIVs Explained... :-)

This is a must see! Hilarious.

Sehr treffend! Fantastisch!



Hat tip to Calculated Risk

Northern Rock still lending ‘recklessly’

What else would you expect when the BOE, FSA and the government come to the rescue as shown in Northern Bailout / Chancellor Guarantees All Northern Rock Bank Deposits to prevent a crisis ...... Hard to believe that the first posts on this topic Bank of England To Rescue Northern Rock / Stock Tanking / BOE A Paper Tiger ? & Northern Rock- Here’s What a Bank Run Looks Like are just 14 days old......

Was anderes soll amn aiuch erwarten wenn alles was in UK Rang und Namen hat(te) ;-) zur Rettung einer nicht rettungswürdigen weil extrem agressiven Bank eingreift (siehe Northern Bailout / Chancellor Guarantees All Northern Rock Bank Deposits )........ Kaum zu glauben das die ersten Posts Bank of England To Rescue Northern Rock / Stock Tanking / BOE A Paper Tiger ? & Northern Rock- Here’s What a Bank Run Looks Like erst knapp 14 Tage her sind.......

Northern Rock still lending ‘recklessly’ / Times
Northern Rock stands accused of “reckless” lending after it emerged this weekend that the beleaguered bank is still offering mortgages of six times salary to potential borrowers.

Despite provoking the worst banking crisis for decades, the bank last week offered a reporter posing as a first-time buyer a £180,000 mortgage even though he had a salary of only £30,000.

The loan was at least £30,000 more than other leading lenders were prepared to offer. Repayments for the loan would have accounted for more than 60% of the fictional buyer’s take-home salary.

>And once again i have to quote Jeff Matthews "I´m not making this up". This ad campaign is real! Make sure you click on the link to see all ads... Link to NR Ad campaign. Comedy gold even without Photoshop

>Und bei dem nächsten Link muß ich wohl ausdrücklich betonen das dieses eine reale Anzeigenkampagne von Northern Rock ist. Undedingt alle Motive der Werbung "bestaunen" Link to NR Ad campaign. Comedy gold even without Photoshop.

>And you also should read this Northern Rock- No Words Just Pictures via the UK House Price Crash Forum.

>Und es wäre eine Schande sich den nachfolgen Link Northern Rock- No Words Just Pictures vom UK House Price Crash Forum entgehen zu lassen. .

bigger / größer to read the fineprint / um das Kleingedruckte zu lesen!

Hat tip to DissipatedYouthIsValuable

The reporter, posing as another potential customer, was also offered a so-called “negative equity mortgage” worth 117% of the value of the property he claimed to be interested in buying. The mortgages offered by other banks to the same potential borrower were significantly lower.....

Northern Rock- Here’s What a Bank Run Looks Like

If you have read the news from Friday it is no wonder that the customers act first and ask later......

Nachdem man die Nachrichten vom Freitag mitbekommen hat ist es wenig verwunderlich das die Kunden erst handeln und dann Fragen stellen....

And what would you do when you read the not so "rock solid" data like this....

Und was würdet Ihr tun wenn Ihr die "grundsoliden" Finanzdaten lesen würdet.....

Northern Rock has £80bn in mortgages outstanding supported by just £2bn of shareholders’ equity and £78bn of mostly short-term debt.

And the company has set aside only 0.04% for bad debts. On an average mortgage lent of around £180,000, this amounts to a miniscule £67.

A big hat tip to my friends from Housing Doom & New York City Housing Bubble





Please check the comments for updates

Für Neuigkeiten in Sachen Northern Rock bitte die Kommentare lesen

Bank of England To Rescue Northern Rock / Stock Tanking / BOE A Paper Tiger ?

No wonder the housing & mortgage market is more and more dominating headlines even in the yellow press...... And you know worse the situation in the UK is when Bekham; Kate Moss etc are not dominating page one in the yellow press...... ;-)

Bei der Marktlage ist es kein Wunder das es der Immobilienmarkt es sogar im Boulevard immer öfter auf die Titelseiten schafft...... Und wenn es weder Beckham, Moss, usw auf Platz 1 der Yellow Press schaffen muß schon ungewöhnliches passieren..... ;-)

Tomorrows headline will be including Northern Rock ( wich had an 18.9% share of UK net mortgage lending ) and the bank run ....... Make sure you read the updates in the comment section. This story has some extra large legs......

Die nächste Überschrift enthält sicher schon Northern Rock (die immerhin knapp 19% Marktanteil innehaben oder sollte ich besser sagen hatten) und den"Bankensturm"..... Bitte lest zum Thema auch die Updates in den Kommentaren.... Diese Geschichte wird uns noch längere Zeit verfolgen...

What happend to the "Virtuous Circle" from Northern Rock...... ? Looks it is now more a "Vicious Cirlce"

Was ist bloß aus dem gerühmten "Virtuous Circle" von Northern Rock geworden.....?

FT The Bank of England will on Friday provide emergeny funding to rescue Northern Rock, a leading UK mortgage lender that has fallen victim to the credit squeeze triggered by the US subprime meltdown.

Northern Rock, which had more than $200bn in assets at the end of June, is the first UK financial institution to be propped up since the BoE in 1998 revised the rules under which it would act as a lender of last resort.

14. In exceptional circumstances, there may be a need for an operation which goes beyond the Bank’s published framework for operations in the money market. Such a support operation is expected to happen very rarely and would normally only be undertaken in the case of a genuine threat to the stability of the financial system to avoid a serious disturbance to the UK economy.”

>Just a few days ago Mervyn King, the governor of the Bank of England said this

>Vor ein paar Tagen hatte Mervyn King, the governor of the Bank of England folgendes zu sagen

In an unusual public display of discord, the British central bank criticized other central banks yesterday for injecting cash into the financial system to help stabilize credit markets, saying that such a policy amounted to a bailout of investors who made bad decisions.

The main thrust of his written testimony to Parliament, however, was a sharp warning about “moral hazard” — a term used to describe the downside of policies that effectively rescue investors when their bets turn out wrong.

“The provision of such liquidity support undermines the efficient pricing of risk by providing ex-post insurance for risky behavior,” Mr. King wrote. “That encourages excessive risk-taking and sows the seeds of a future crisis.”

> Look at the next chart and watch what the housing bubble has done since they tapped the "lender of last resort" rule the last time in 1998.... Got gold....?

> Guckt Euch an was der Immobilienmakt seit dem letzten Eingreifen der BOE im Jahr 1998 performed hat...... Got gold...?

The Bank is expected to say on Friday that a similar facility is available to any other institution facing short-term difficulties.

> When i look at this chart they should worry about the longer term problems....

> Wenn ich mir diesen Chart ansehe glaube ich zudem das die wirkliche Problematik eher langfristiger Natur ist......

Bloomberg is reporting this
The Bank of England is confident about the quality of Northern Rock's mortgage book, the FT said. The lender has struggled with refinancing obligations, including mortgage- backed securities, the report said.

> Confidence in a bank that is offering products like this ?

> Vertrauen in die Kreditbücher einer Bank die Produkte wie dieses begeben ?

Say the value of your property is £100,000. You could get a secured mortgage of up to £95,000. And have the facility to borrow up to £30,000 unsecured loan for anything else.

You can draw on this £30,000 as it suits you. So, you might need £10,000 now and hold £20,000 in reserve.

> Too bad that they didn´t include the above 100% financing in the following chart... ;-)

> Schade das Northern im Chart nicht ebenfalls die 100% plus Finanzierung aufführt..... ;-)

> On top of this they seem to very optmisitic about the quality of their books...

> Zudem erscheint mir die Bank doch recht optimistisch was die Qualität Ihres Kreditbuches angeht......

The charge for loan loss impairment amounted to £56.8 million for the first half (2006 first half - £44.5million) representing 0.12% of mean advances to customers (2006 first half - 0.12%).

The combination of high quality lending, low interest rates, low early arrears and continued strong average LTV of the portfolio have continued to contain the levels of loan loss impairment provisions required for residential mortgages. Write offs in the first half amounted to £8 million representing only 0.01% of outstanding residential mortgage balances.

We do not expect to see a higher impairment charge in the second half than in the first half of 2007

> When i look at the growth rate it it clear that have been offering very agressive products.... I´m not sure if they deserve the help......"Moral Hazard" Mr. King?

> Wenn ich mir die Wachstumsraten ansehe ist klar zu erkennen das gerade Northern Rock ganz besonders agressiv im Markt unterwegs gewesen sein muß. Warum gerade dieser Spieler die Hilfe verdient......

The loan will be made at a ``punitive rate of interest,'' the British Broadcasting Corp. said.

``If someone was struggling and had to go to the Bank of England for assistance, Northern Rock would be first in the queue because of the way they fund their mortgages,'' Ian Murrell, a director at Wills & Co. stockbrokers in London, said on Thursday before the BBC report. ``It's all funded in the money markets,'' he said.

> No wonder that there is a good amount of mistrust between UK banks.....

> Wenig verwunderlich das es ein erheblichen Mißtrauen zwischen UK Banken gibt....

Northern Rock shares fell 4.9 percent to 639 pence yesterday, the lowest since March 2003. The stock has dropped by half this year, valuing the lender at 2.69 billion pounds ($5.45 billion) and making it an attractive acquisition target, MF Global Securities Ltd. analysts said Wednesday. The stock is the worst performer of the nine members on the FTSE ASX Banks Index.

You can add another 25% haicut......

Yesterday's action by the U.K. central bank was its first to help credit markets since the subprime market collapsed. Governor Mervyn King yesterday indicated the bank won't go as far as the European Central Bank and the Federal Reserve in helping banks cope with the credit rout because policy makers can't afford to ``encourage excessive risk taking.''

Commercial banks, which agree to hold a specific amount of money at the Bank of England at the end of each month-long maintenance period, can now undershoot that target by 37.5 percent to free up cash if needed. That compares with the usual limit of 1 percent.

> After reading all this i have to admit that my respect for Mr. King and the BOE is deteriorating significantly.......But as long as this comment is true "Northern Rock collateral to be similar to euro-zone banks" he is not worse than Trichet ( but this should be no compliment)....Too bad that nobody knows the exact details. The official BOE release does not provide further information ...... And the BOE should not complain about the fact that after their "U-Turn" the speculations are rampant...

> Alles in allem bleibt festzuhalten das mein Respekt für Herrn King und die BOE erheblich gelitten hat.....Aber solange diese Aussage zutreffend ist "Northern Rock collateral to be similar to euro-zone banks" ist er zumindest nicht schlechter als Trichet ( was aber kaum als Kompliment aufzufassen ist).... Dumm nur das keinerlei weitere Details bekanntgegeben worden sind. Die offizielle BOE Mitteiling hüllt sich dazu in Schweigen. Und nachdem die BOE eine solch dramatische Kehtwende binnen weniger Tage hingelegt hat darf man sich nicht beschweren wenn die Spekulationen ins Kraut schießen......

Disclosure: Short Pound vs €, long Gold, Goldmines/Hui, NAK