PlanMaestro

To put some humor into this: This is how the Germans think about the negotiations: http://www.youtube.com/watch?v=hsHWZHaqe1Y (Sopranos) But the situation is more like this: (Inglorious Bastards)

Not sure if this question is real or sarcastic, but here is the answer from one of the links in today's Krugman post: http://krugman.blogs.nytimes.com/2012/02/25/european-crisis-realities/ What we’re basically looking at, then, is a balance of payments problem, in which capital flooded south after the creation of the euro, leading to overvaluation in southern Europe. It’s not a perfect fit — Italy managed to have relatively high inflation without large trade deficits. But it’s the main way you should think about where we are. And the key point is that the two false diagnoses lead to policies that don’t address the real problem. You can slash the welfare state all you want (and the right wants to slash it down to bathtub-drowning size), but this has very little to do with export competitiveness. You can pursue crippling fiscal austerity, but this improves the external balance only by driving down the economy and hence import demand, with maybe, maybe, a gradual “internal devaluation” caused by high unemployment. Now, if you’re running a peripheral nation, and the troika demands austerity, you have no choice except the nuclear option of leaving the euro, coming soon to a Balkan nation near you. But non-GIPSI European leaders should realize that what the GIPSIs really need is a general European reflation. So let’s hope that they get this, and also give each of us a pony.

jajaja, that explains a lot. Greece has to go, for the good of them and the rest.

Parsad, I think your cultural stereotypes are blinding you. To go back to the 1992 Olympics well before the start of the euro when the current debt/gdp is well below Germany's? And this is not about right/left wing economics ... this is about economics. You want to run a mercantilistic operation ... be prepared for a currency competition and a trade war. Spain has been on the sharp end of the stick while these loan sharks in Berlin have the chutzpha of blaming the real estate bubble all on Spain when German money was all behind this. As I said, convert the Cajas debt into equity, kick Germany out of the ECB, ease money, and let's see who screams in Berlin. Let's call a spade a spade. PS: 1. Check the Spanish banking regulations. One of the best in the world, that included counter-cyclical provisioning but that did not stop the German hot money. 2. "Blatantly obvious": Parsad in all good nature there is a lot of research on this and it is not about right/left economics, it is about good economics.

Man, I think you have to check how many of those banking assets are in Latin America, the USA and the UK ... Santander and BBVA would do very well without Germany in the Eurozone. Switzerland and the UK are also suffering a lot with that large % of banking assets. Remember Spain has a 24% unemployment rate. Completely out of proportion with their fiscal and financial behavior. Let's convert the debt financing the Cajas into equity and see who screams in Berlin.

Parsad, check the debt load of the "PIIS". Germany has the same Debt/GDP as the rest of the Euro zone (82%) and in many respects the rest of the Euro zone is in a better position than the US or the UK on the Debt front. Also, can we stop this cultural stereotype about German thrift and Spanish waste that is not reflected in the numbers? Spain has a debt/GDP of 68% wile Germany has 82%. The German banks were as or more wasteful than their Spanish counterparts (ask who was financing the cajas and who had the better banking regulation). And for all their thrift 1 out of every 2 Spanish between 18-30y is unemployed. Talk about blaming the victim. This is a sudden-stop/BOP/currency crisis not a fiscal one. Let the Deutsche Mark appreciate to close the current account gap. Debt/GDP of all the countries in the eurozone http://en.wikipedia.org/wiki/Economy_of_the_European_Union#Economies_of_member_states

To the europeans, is there a procedure that can kick Germany out of the euro? Maybe just kick them out of monetary decisions and inflate out of this mess? I am not saying that it has get to this but they need to find a way to put Germany on the negotiation table.

Very true and the worst part is that the bailout is coming either way: it's either the periphery, that does not have to be a bailout just easy money, or Deutsche Bank, Commerzbank, Credit Agricole, Societe Generele, Paribas,.... http://variantperceptions.wordpress.com/2012/01/03/charting-banking-tangible-common-equity/ If that moment comes, I hope no one in Germany and France starts complaining that the periphery put a gun on their heads. It's their own fault. Time for the German and French politicians to come clean on this.

“it is not speed that kills, it is the sudden stop” - Rudi Dornbusch http://www.businessweek.com/magazine/the-mit-family-tree-01192012-gfx.html Sorry Parsad, it is actually Germany's, for their unwillingness to compromise, and France's, for pushing for an euro with some big internal faults. Maybe the periphery's only problem is their stubbornness in believing in a European project when now it is clear there is none. I am glad the periphery is finally making a stand. It may surprise everyone but Spain's fiscal situation (Debt/GDP) is better than Germany's. Spain's is a Balance of Payments crisis (sudden stop) that is very different from a Fiscal crisis. One is a problem in flows and the other in stock (http://en.wikipedia.org/wiki/Stock_and_flow) From Wikipedia: Regarding policy measures adopted during sudden stop episodes, the massive slowdown in capital inflows, usually presented as large capital outflows, can be counteracted by exchange rate devaluation, loss of international reserves and/or increases in real interest rates. The nominal exchange rate behavior during most sudden stop episodes show that sudden stops in emerging markets are followed by a devaluation of the domestic currency, while most depreciation episodes in developed countries are not related to sudden stop phases. Real interest rates sharply increase during sudden stop episodes, especially in the case of emerging market economies. A sharp loss of international reserves is also observed during sudden stop episodes, both in developed countries and emerging markets. The current account balance shows a sharp reduction in current account deficits, with a significantly higher increase in the current account balance in emerging markets. http://en.wikipedia.org/wiki/Sudden_stop_(economics)) http://en.wikipedia.org/wiki/Currency_crisis I strongly recommend people start reading Guillermo Calvo and Rudi Dornbusch, there is a lot of research on this subject. http://www.nber.org/papers/w9828 http://www.nber.org/papers/w10520.pdf http://papers.ssrn.com/sol3/papers.cfm?abstract_id=669452 these are just a few BOP crisis examples from the period 1982-1997 (nothing new under the sun) Table 1. Sudden Stop Country/Episode SS (percentage of GDP) Argentina,1982–83 20 Argentina,1994–95 4 Chile,1981–83 7 Chile,1990–91 8 Ecuador,1995–96 19 Hungary,1995–96 7 Indonesia,1996–97 5 Malaysia,1993–94 15 Mexico,1981–83 12 Mexico,1993–95 6 Philippines,1996–97 7 Venezuela,1992–94 9 Korea,1996–97 11 Thailand,1996–97 26 Turkey,1993–94 10

I am starting to see some mispricing in Brazil too most probably because of the Spanish woes and the nationalization of YPF. Capital outflows have finally given some space to the Real and Brazilian exporters. Some potential ideas: Telefonica Brazil VIV: almost no net debt despite being a telecom, ROE around 20%, P/E 8x. Santander Brazil BSBR: very well capitalized TCE/TA ~15%, P/E 9x, P/B 0.8 Petrobras PBR: P/E 6x, ROE 11%

Millstein in his own words http://www.politico.com/news/stories/1111/67705.html

Portugal Telecom taken to the cleaners today. International 55% of revenues, 40% of EBITDA, 45% of CAPEX. $4.4B in net debt. $1.1B in EBITDA-CAPEX. Other Portuguese stocks under pressure?

I am stopping myself short of calling Chris Whalen a loony, but he assumes that: 1. the 8.5B settlement will fall in litigation. 2. the other parties will score record setting wins in subsequent litigation worth 100B 3. this new litigation will succeed in a short a amount of time, 4. if they win or settle that it will have to be paid instantaneously 5. that FIRREA will not only protect the FDIC but also this new claimants. None of these steps is probable and if anyone fails Bank of America survives w/o dilution. Actually, I think some of these steps are close to impossible. But CW, the person not the bank, goes on television and says not only that it is a possibility, but that is THE most probable scenario and that Bank of America should be restructured NOW. As I said, I am stopping myself of calling CW a loony. He has been right on other issues, like denouncing the FDIC-reserves-running-out headlines. Maybe he has other incentives like starting a new hedge fund.

FIRREA protects the depositors and the FDIC, not other claimants. In case of a capital deficiency the FDIC follows a standard procedure that I posted in a previous link that "prescribes a specific course of action" and that "strips regulators of much of their supervisory discretion". That course action for a Group 5 bank, that would be the case here for Countrywide, is to appoint a receiver or conservator within 90 days, and that is what they HAVE to do. After that, I do not see how this other claimants have other resource that put in line behind the depositors and the FDIC that would be the only beneficiaries of the cross guarantee benefits of FIRREA. http://www.clevelandfed.org/research/Commentary/1992/0901.pdf There are several examples of how this works that I posted also in a previous link. I am open to other interpretation based on other examples but I had not seen them. http://mpra.ub.uni-muenchen.de/14116/1/LossSharingRules.pdf This has been discussed in other threads. Bank of America is swimming in liquidity, with loans to deposits around 70%. Bank of America NOT ONLY CAN pay all their debt, but WANTS to pay all their debt.It is swimming in liquidity. Debt is expensive when you can fund with deposits a closed to zero interest rate ... Moynihan has been open about this.

Old presentation on how they manage the Variable Annuity business, the one gave them headaches. http://www.thehartford.com/higfiles/pdf/HIGSmithBarneyAnnuityLifeRisk060705.pdf And a good Citi presentation on the Variable Annuity industry: http://www.peterkatt.com/newsletters/SmithBarney.pdf

Whalen is talking about the private label putbacks (mp3) http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/9/2_Chris_Whalen.html http://finance.yahoo.com/blogs/daily-ticker/whalen-bofa-survive-file-bankruptcy-202956404.html;_ylt=AiL.4EAWL00tvWy2EnlgXZ27YWsA;_ylu=X3oDMTFjNGoxYjM4BHBvcwM1BHNlYwNGUERhaWx5VGlja2VyQmxvZwRzbGsDd2hhbGVuYm9mYXdp the ones where the settlement is for $8.5 billion (pending on article 77 litigation)and that is probably already reserved http://investor.bankofamerica.com/phoenix.zhtml?c=71595&p=irol-newsArticle&ID=1580643&highlight He assumes 100B instead of 8.5B, and that Countrywide isn't ring-fenced with the bankruptcy veil ... particular point of view but it grabs headlines and invitations to the Blodget show.

FDICIA's Prompt Corrective Action Provisions http://www.clevelandfed.org/research/Commentary/1992/0901.pdf This is how the FDIC works in case of the undercapitalization of a sub. I do not think it will get to this and BAC is very well capitalized and reserved anyway. But still, it would be nice to be completely sure that the Countrywide bankruptcy can be used as a negotiation card in extremis.

twacowfca, do you have an example of a bank where "source of strength" was used in this context? It seems the "cross guarantee" is the tool used by the FDIC not the "source of strength". It has also been the main way that the FDIC has extorted recapitalizations of subs. Check appendix at the end for a list of examples: http://mpra.ub.uni-muenchen.de/14116/1/LossSharingRules.pdf The FRB’s authority to exercise its source-of-strength policy outside the application process has been constrained by legal challenges. Moreover, FDICIA’s prompt corrective action provisions, while acknowledging a BHC’s responsibility to its banking subsidiaries, explicitly identify the circumstances in which a holding company is required to support its banking subsidiaries and set a limit on the amount of the BHC’s responsibilities. In contrast, the FDIC’s cross-guarantee authority has survived legal challenges to its use and has emerged with its legal standing firmly established. And, in practice, the authority has proven to be an important regulatory tool for preventing and/or reducing losses to the deposit insurance fund. The FDIC has issued cross-guarantee assessments in nearly a dozen cases resulting in recovery of about a third of its estimated losses in those cases. The FDIC has also used its cross- guarantee authority to facilitate the sale or recapitalization (or both) of dozens of troubled banks.

Isn't FIRREA about protecting depositors and the FDIC, not other claimants? Ally, a bank holding company since 2008, is showing it is possible as we speak. http://online.wsj.com/article/SB10001424052702304192704577403782887891126.html Allowing Ally to put its residential mortgage subsidiary into bankruptcy is very different because bank depositors don't have to be protected as is required in BAC's case. In what sense is different if the depositors and the FDIC are protected? The Countrywide lawsuits are by other claimants in a junior position to the depositors. FIRREA is not about protecting all claimants, it is about protecting the FDIC An important element of FIRREA was its cross-guarantee provisions. These were intended to protect the deposit insurance funds by establishing that insured financial institutions were liable for losses incurred by the FDIC (and for losses that the FDIC reasonably anticipates incurring) in connection with either (1) the default of a commonly controlled insured depository institution or (2) any assistance provided by the FDIC to any commonly controlled depository institution in danger of default. For example, healthy affiliates of a bank holding company (BHC) that controlled a failed institution could be required to pay a share of the loss incurred by the FDIC in resolving the failed institution. The cross guarantee provisions applied to institutions controlled by the same BHC, or to one depository institution controlled by another. The FDIC could waive this liability if it determined that waiver was in the best interest of the BIF or the SAIF.48 http://www.fdic.gov/bank/historical/history/87_136.pdf

FIRREA and bank holding companies: all about protecting the FDIC insurance. My understanding is that the BK veil is a completely separate issue but I would like to know if not. http://12.35.11.68/PUBLICAT/ECONREV/EconRevArchive/1990/2q90keet.pdf

Isn't FIRREA about protecting depositors and the FDIC, not other claimants? Ally, a bank holding company since 2008, is showing it is possible as we speak. http://online.wsj.com/article/SB10001424052702304192704577403782887891126.html

http://seekingalpha.com/news-article/2970191-bank-of-america-enters-into-agreement-to-sell-remaining-interest-in-archstone?source=email_portfolio&ifp=0 Bank of America (BAC) announced today that it and Barclays Bank PLC have entered into an agreement with Equity Residential and Lehman Brothers Holdings Inc. pursuant to which Bank of America and Barclays will sell their remaining 26.5 percent interest in Archstone, a privately-held owner, operator and developer of multifamily apartment properties, for a purchase price of $1.58 billion to Lehman pursuant to Lehmans exercise of its right of first offer. Bank of America and Barclays will pay an $80 million break-up fee to Equity Residential if the sale to Lehman closes. Upon consummation of this transaction, which is anticipated to occur in the second quarter of 2012, Bank of America and Barclays will have sold a 53.0 percent controlling interest in Archstone in two steps for a total purchase price of $2.905 billion. Archstone has net debt and third-party preferred securities of approximately $10.5 billion. Pursuant to the agreement, the parties have released each other from all claims relating to Archstone.

Not so fast? http://newsandinsight.thomsonreuters.com/Legal/News/2012/05_-_May/AIG_(mostly)_survives_Countrywide_timeliness_defense_in_MBS_case/ AIG's $6 billion in mortgage-backed securities claims against Countrywide survived a near-death experience late Wednesday, when U.S. District Judge Mariana Pfaelzer of Los Angeles issued her ruling on Countrywide's statute of limitations defense. In a 25-page opinion, Pfaelzer tossed AIG's federal securities claims, as well as some fraud and negligent misrepresentation claims by AIG subsidiaries. But AIG said in an email statement that the ruling leaves alive "more than 98 percent of the recovery it seeks." For a plaintiff that feared the worst -- as AIG most certainly did, thanks to a silver bullet Pfaelzer handed to Countrywide in February -- the judge's ruling is a stunning reprieve.

http://www.charlotteobserver.com/2012/05/24/3263327/bofa-reaches-mobile-milestone.html#storylink=cpy Bank of America Corp. said Wednesday that it has surpassed 10 million mobile banking customers, firmly planting the Charlotte bank as the dominant player in the emerging sector. .... A year ago, Bank of America had 7 million mobile users, and the company has lately been averaging 43,000 net new users each week. In a presentation to investors earlier this week, CEO Brian Moynihan touted the investment the bank has been making in mobile. .... Wells Fargo is a bit behind Bank of America in mobile adoption, boasting about 7.7 million users. But it is the first to roll out a new feature, called “Send & Receive Money,” that will allow users to transfer money using their mobile devices using the recipient’s phone number or email address. The feature is based on a system called clearXchange, which is based in Charlotte and is jointly owned by Wells Fargo, Bank of America and JPMorgan Chase & Co. .... Wells Fargo’s mobile platform has experienced rapid growth as well, said Brett Pitts, senior vice president at Wells Fargo’s Internet Services Group. He said it took years for its traditional online banking platform to reach 7 million customers, but the mobile adoption speed was “breathtaking.”

Here is the Paulson's 13D including a presentation http://www.sec.gov/Archives/edgar/data/874766/000119312512061267/d301791dsc13d.htm Statutory reports: http://ir.thehartford.com/statutory.cfm Also re-read the TARP warrants prospectus and it seems to me it is very similar to BAC's including the adjustment of both strike price and number of warrants. Has anyone found any differences?