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Posts tagged ‘Citigroup’

Did You Hear the One About the Bankers?

 

By

CITIGROUP is lucky that Muammar el-Qaddafi was killed when he was. The Libyan leader’s death diverted attention from a lethal article involving Citigroup that deserved more attention because it helps to explain why many average Americans have expressed support for the Occupy Wall Street movement. The news was that Citigroup had to pay a $285 million fine to settle a case in which, with one hand, Citibank sold a package of toxic mortgage-backed securities to unsuspecting customers — securities that it knew were likely to go bust — and, with the other hand, shorted the same securities — that is, bet millions of dollars that they would go bust.

full article at source: http://www.nytimes.com/2011/10/30/opinion/sunday/friedman-did-you-hear-the-one-about-the-bankers.html?_r=2&src=ISMR_AP_LO_MST_FB

Wall Street Aristocracy Got $1.2 Trillion in Fed Loans

This article was sent into us this morning and it is shocking! This article exposes the extent of the damage to the world’s financial system and also the extent the American Government will go to protect its friends on Wall Street

Citigroup Inc. (C) and Bank of America Corp. (BAC) were the reigning champions of
finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and
brokerage firms to their best year ever with $104 billion of profits.

By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve.
The loans dwarfed the $160 billion in public bailouts the top 10 got from the
U.S. Treasury, yet until now the full amounts have remained secret.

full article and source:http://www.bloomberg.com/news/2011-08-21/wall-street-aristocracy-got-1-2-trillion-in-fed-s-secret-loans.html

Big Banks Will Pay for Optimism Driven Reduction of Reserves

By Reggie Middleton

from www.Boombustblog.com

As those that follow me know, I have been bearish on US banks since 2007. That bearish outlook resulted in massive returns ensuing years, just to have nearly half of it returned due to rampant shenanigans and outright fraud. Needless to say, it pissed me off – but it did much more than that. It created a re-bubble before the bubble that was bursting had a chance to fully deflate. As a result, what we have now is one big mess that is getting messier by the minute.

On Friday, July 16th, 2010 I posted “After a Careful Review of JP Morgan’s Earnings Release, I Must Ask – “What the Hell Are Those Boys Over at JP Morgan Thinking????”. The impetus of such was that this bank that all seem to be in awe of was taking a big risk in order to pad accounting earnings for a quarter or two. Below is an excerpt of my thoughts:

Trust me, the collateral behind many more mortgages will continue to depreciate materially as government giveaways and bubble blowing for housing fade!

The delinquency and NPA levels drifted down a bit, but they are still at very high levels. Charge-offs came down but the reduction in provisions has been quite disproportionate bringing down the allowance for loan losses. In 2Q10, the gross charge- offs declined 26.6% (q-o-q) to $6.2 billion (annualized charge off rate – 3.55%) from $8.4 billion in 1Q10 (annualized charge off rate – 4.74%). But the provisions for loan losses were slashed down 51.7% (q-o-q) to $3.4 billion (annualized rate – 1.9%) against $7.0 billion (annualized rate – 3.9%) in 1Q10. Consequently, the allowance for loan losses declined 6.2% (q-o-q) from $35.8 billion from $38.2 billion in 1Q10. Non performing loans and NPAs declined 5.1% (q-o-q) and 4.5% (q-o-q) respectively. Thus, the NPLs and NPAs as % of allowance for loan losses expanded to 45.1% and 50.7%, respectively from 44.6% and 49.8% in 1Q10. Delinquency rates, although moderated a bit, are still at high levels. Credit card – 30+ day delinquency rate was 4.96% and the real estate – 30+ day delinquency rate was 6.88%. The 30+ days delinquency rate for WaMu’s credit impaired portfolio was 27.91%.

read this great article at source: http://boombustblog.com/BoomBustBlog/As-Earnings-Season-is-Here-I-Reiterate-My-Warning-That-Big-Banks-Will-Pay-for-Optimism-Driven-Reduction-of-Reserves.html

comment:

Again  a great article from Reggie!

It would be no harm if you are in the markets to take out
some insurance as I myself have done over the last month so I am not that
worried where the market goes from here as I win each way  and the news at the moment is there is likely
to be lots of volatility in the coming weeks.

Eurocrats’ Immovable Rigor Over Debt Restructuring

Monday, April 25, 2011 – by Staff Report

 

A delegation of leading European and international monetary officials are planning a crisis summit in Athens in May amid growing fears that Greece may default on its sovereign debt. European officials are determined to avoid the need for Greece to change the terms of its debt repayments. – UK Telegraph

Dominant Social Theme: Those who lead Europe are determined not to let this crisis get the best of them. The Greeks must suffer so the banks shall not.

Free-Market Analysis: It would be funny if it weren’t actually happening. Senior officials, reports the Telegraph, from both the IMF and the European Central Bank plan a two-day “lightning visit” to Greece in early May. The purpose of the visit is to ensure that Greece will further pound on the necks of its citizens by meeting “goals” to pare the government deficit by US$50 billion.

One wonders exactly what a lightening visit of these worthies will look like. They are, surely – most of them – unathletic, and thus the lightening part of the description must apply to something other than movement. Will they gulp down food in fast food restaurants? Will they stay in rundown motels off the beaten track to gain mobility? Will they avoid alcohol so as not to impair their ability for quick thinking?

One also wonders about the attention being paid to poor Greece, which cannot manage her finances. The EU legislative establishment meanwhile stands unaudited for something like a decade now. The auditors simply will not sign off on the books, so great is the suspicion of corruption and fraud. We have not read anything about the EU central bank and the IMF descending for a “lightening visit” on Brussels, except maybe for cocktails.

Actually what the phrase “lightening visit” conjures up for us is a vision of these worthies jumping out of planes in their bespoke suits like a bunch of paratroopers. The execs hit the hills and valleys of fair Greece and roll, then rise shrugging off their rigging and rush to meet the fray. Any talk of debt restructuring or bank haircuts is to be confronted with maximum resolve and rigorous aggressiveness.

The article itself tells us that Greek Prime Minister George Papandreou would take part in such a paratrooper attack. He too is of this sort that practices immovable rigor in the face of the crisis. He “strongly denied rumors that Greece may be forced to restructure its debt imminently.” Finance minister George Papaconstantinou said that any restructuring of some US$700 billion in national debt is “out of the question.” More immovable rigor from a government that is capable only of extracting from its own citizens sums of money that ought to be collected from Greek and European elites that countenanced the EU undertaking in the first place. Here’s some more from the article:

However, Greek news channels have continued to broadcast the rumours. The biggest network, Mega TV, on Saturday reported a government official saying that “in the worst of cases, a rearrangement rather than a restructuring will take place in the future, featuring an extension of the repayment period for the loan, as has been granted for other countries.”

The influential newspaper To Vima reported that, in addition to the lengthening of deadlines for repayment instalments, Greece might seek a 30pc reduction in the debt itself. But it said such a decision might take “up to six months”. European officials are determined to avoid the need for Greece to change the terms of its debt repayments. On Saturday Jurgen Stark, an executive board member of the ECB, warned that a restructuring of debt in any of the troubled eurozone countries could trigger a banking crisis even worse than that of 2008.

“A restructuring would be short-sighted and bring considerable drawbacks,” he told ZDF, the German broadcaster. “In the worst case, the restructuring of a member state could overshadow the effects of the Lehman bankruptcy.” Fears among the international community have been met with increasing anger in Greece. On Friday, Mr. Papandreou lashed out at the credit rating agencies. In a piece posted on a Greek government website, the prime minister said the agencies were “seeking to shape our destiny and determine the future of our children.”

The Greek government has claimed that it will address the crisis by restructuring “the country” not the debt and to this end Greece announced late last week that it will cut about US$100 billion by selling assets such as “palaces, marinas and beaches.” It was the lack of details that likely led to the rumors of a restructuring as well. But if Greece does go through with these sales, unions and others opposed to Greek austerity will likely continue and expand their protests.

On Sunday, the ECB warned that any Greek restructuring could create a credit crisis similar to the one that took place when Lehman Brothers declared it was insolvent, which froze credit around the world. Juergen Stark, a member of the ECB executive board, said in an interview with German media that a “restructuring would be short sighted and bring considerable drawbacks … In the worst case, the restructuring of a member state could overshadow the effects of the Lehman bankruptcy.”

Greece’s debt load is perhaps one-and-a-half times its annual output and knowledgeable observers have questioned whether it is mathematically possible for Greece to pay its debts without some sort of restructuring. Such restructuring of sovereign debt used to be a routine matter in the world of high finance. Institutions, mostly, took a hit and people got on with it. Not anymore.

Today, even the tiniest deviation from a regime of austerity and rigor will cause a worldwide financial collapse, we are told. And Greece is only one of three insolvent European countries – Portugal and Ireland being the others. We don’t believe the happy talk about Spain either. As has been pointed out in these pages, Spanish banks are likely carrying (at least) tens of billions in real estate loans that are not being marked to their value, which is virtually nil. Spain seems to us essentially bankrupt no matter what the ridiculous “stress tests” show.

We wonder how long the EU leadership can carry on like this. We pointed out recently that the Anglo-American power elite, having lost the advantage of secrecy as regards its plans to build a one-world-order has fallen back on implementing its designs simply by force. Its fear-based promotions are not having the intended effect and thus it seeks to offer the impression that its strategies are unstoppable.

But this has its drawbacks. When one wishes to impress upon the people the inevitability of one’s designs, then not even one failure can be countenanced, nor one question can be raised. This is an almost impossible burden because the promotion retains no elasticity and sooner or later there shall be some sort of breach.

The stance the EU is now adopting with its constant emergency agitation seems to us to be counterproductive. If the EU survives, then EU leaders look as if they were too pessimistic. If the crisis triggers a much larger one, then they run the risk of looking as if they have lost control. Why, we ask, are those running the EU program, purposefully placing themselves in this trap?

Conclusion: Either they are panicking or they are in some sense inviting the crisis. We have mentioned this before. Are they (and the powers-that-be generally) planning on some sort of controlled worldwide chaos to usher in a global currency and global governance? Is the Sovereign Debt Crisis itself something of a charade? These are risky games indeed. Tug on any one thread now (as Eurocrats themselves maintain!) and the larger design may begin to unravel. OK, then … Is Greece that thread?

source:http://www.thedailybell.com/2156/Eurocrats-Immovable-Rigor-Over-Debt-Restructuring.html

If the megabanks are so big on lending, why do their loan books keep shrinking?

Stingy megabanks swimming in cash

Posted by Colin Barr

April 21, 2011 6:17 am

The biggest U.S. banks tell us they have spent the past quarter writing loans, renewing credit lines and generally being upstanding economic citizens. Bank of America (BAC) says it provided consumers and businesses with $144 billion in credit in the first quarter, Wells Fargo (WFC) ponied up $151 billion and JPMorgan Chase (JPM), swinging for the PR fences, claims to have lent out an improbable-looking $450 billion.These guys are our economic heart?Yet loan balances actually shrank from a year ago at all three banks in the first quarter, just as they did at their old pal Citi (C). This at a time when the too-big-to-fail four are being drenched with new deposits (see chart, right).All told, average loans outstanding at  the fearsome four dropped 7% from a year earlier – a decline of $210 billion — even as deposits rose 5%.If this is what the bailed-out captains of the financial sector call supporting the recovery, no wonder the economy is going nowhere fast.

The banks, of course, protest that there are good reasons that their loan balances are dropping even as they wrap themselves in the flag of credit extension.

Good customers aren’t exactly banging down the door demanding loans, they say, and won’t till the recovery really gets rolling. And making loans for the sake of it doesn’t pay off, as we may have learned during the financial meltdown.

“We got to where we are today by making good loans and making sound credit decisions,” Wells Fargo’s chief financial officer, Tim Sloan, said in an interview Wednesday.

And yes, even with all that shrinkage there are pockets of loan growth at the banks. JPMorgan Chase says loans to midsize companies rose every month last year, and Wells points to strength in auto dealer and commercial lending, along with the oft-questioned commercial real estate sector. “We love that business,” says Sloan.

But mostly, loans are shrinking. That’s partly because banks must put the worst mistakes of the bubble era in the rearview mirror, by taking losses on bad loans and letting other low-quality portfolios run off. Both those moves lead to lower loans outstanding. All four banks are taking their lumps on that front. BofA is running off loans from the beyond-lax Angelo Mozilo era at Countrywide, JPMorgan is dealing with the sales-at-any-cost (see a shining example, below right) mindset of Kerry Killinger & Co. at Washington Mutual, and Wells Fargo is trying to rid itself of the worst Pick-a-Pay dross it picked up in its acquisition of Wachovia. Citi, of course, has its own issues.How to make bad credit decisions

Still, it’s clear the banks are not lending quite as freely as their press release claims would have you believe. And the declines are all the more striking because they come when the banks, like their perk-addicted CEOs, are swimming in cash.

Average deposits at the four biggest banks rose by $154 billion over the past year, with Bank of America breaking $1 trillion in deposits for the first time and JPMorgan falling just $4 billion short of that mark.As a result, all the big banks now have at least $1.06 in deposits for every dollar in loans outstanding. At this time a year ago, only JPMorgan was above $1 in deposits for each dollar in loans.There is something to be said for banks having a lot of cash on hand, of course. As everyone but Dick Fuld learned from the crisis, running out of money makes it hard to persuade others of your firm’s franchise value. And of course it is hard to grow a business without reaching out to new users.

“We are glad to have a highly liquid balance sheet,” says Sloan. “Deposit growth gives us a chance to bring in new customers and cross-sell our products.”

Given the banks’ penchant for cooking up rosy-looking credit creation numbers at a time when their loan books are actually shrinking, maybe those products should come with a grain of salt.

source: http://finance.fortune.cnn.com/2011/04/21/stingy-megabanks-swimming-in-cash/?section=magazines_fortune

Comment:

I still expect to see the high for the Dow this year about 1000 points away from where we are right now at least and then see a full retracement all the way down to 9750 at least .Euro Dollar, Well we have reach my expected 1.4250 target and now I am looking for the 1.50 BAC I am hedged and so I don’t real y care. If we get to 10.90 I will again buy .Citi I am hoping to tack on some more stock at 4.00$ or under but I am not so sure it will get down there .

Stock update

 Citi, came out today with their results and I was not surprised ,I expected that the stock might go down a few points but its seem to be holding ,with the Dow down 230 points and Citi up 2points I would expect it to slowly head higher from here to about 6$ mark.

BAC Bank of Americais a different story, I am still bullish on this stock but I expect it to test the 11$ level and on a successful test I would hope to see it advance from there again up to resistance around 15$ mark(Note the 14 MDA braking down below the 200MDA) I took our insurance tree weeks ago the 14$ June put at a cost of 1 $ and I expect this to give me protection to the down side. Still I think at that level it would be an excellent buy for a year out from now!     The Dow is throwing a tantrum and the Transports are just marking time despite the big down day the charts are not shouting “sell” just yet

Citigroup to Double Hong Kong Consumer Bank Client Base

“At last some good news on the jobs front  in Ireland “
Citigroup to Double Hong Kong Consumer Bank Client Base, Challenging HSBC
By Stephanie Tong – Dec 12, 2010 4:01 PM GMT
 

Citigroup Inc. aims to double the number of clients at its consumer banking unit in Hong Kong as it challenges HSBC Holdings Plc and Standard Chartered Plc by adding branches, cash machines and online services.

The New York-based bank targets two million consumer- banking customers in the city in three to five years, up from a million now, Jonathan Larsen, Citigroup’s head of consumer banking for the Asia-Pacific region, said in a Dec. 9 interview.

“Hong Kong is an attractive market,” Larsen said. “We think that we deserve a much larger slice of that market and we think we can achieve that.”

Citigroup stepped up expansion in the city of 7 million people this year, almost doubling its number of branches to 43 and adding more than 60 automated teller machines. The company is signing up more than 10,000 new retail banking customers a month in Hong Kong, a fivefold increase from the pace at the start of the year, according to spokesman James Griffiths.

HSBC, based in London and founded in Hong Kong in 1865, is the largest bank in the city with around 100 branches and more than 4 million clients at its personal financial services unit. Standard Chartered, the British bank that gets most of its profit from Asia, has about 80 branches and operates more than 200 ATMs.

Citigroup’s consumer banking unit oversees retail banking, wealth management for individuals with up to $10 million of assets, credit cards and small and medium-sized businesses. HSBC includes retail banking, credit cards, insurance, pension savings and investments in its personal financial services operations.

Asian Plans

Hong Kong, where the economy grew 6.8 percent in the third quarter, is part of Citigroup’s push to expand in Asia. The U.S. bank plans to boost its branch network in the region to more than 1,000 in the next three to four years from 710 now, Larsen said. Citigroup aims to triple its number of outlets in China to about 100 within three years.

Standard Chartered said last week that intensifying competition among banks is driving staff costs higher, predicting expenses will rise faster than revenue this year.

In Hong Kong, Citigroup is chipping away at HSBC’s dominant position by expanding the range of outlets where customers can access banking services. The bank said in October it agreed to install ATMs in 7-Eleven stores across the city.

“We are not going to stop,” said Larsen. “We will keep adding ATM locations. We are going to keep finding partners that can help us to add value. We are going to keep making sure that we are a very visible player.”

To contact the reporter on this story: Stephanie Tong in Hong Kong at stong17@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net

Dec 9 (Reuters) – U.S. financial services group Citigroup (C.N) will hire 250 people in Ireland next year in operations, funds, technology and product development, the company said on Thursday.Citigroup already employs more than 2,200 workers in Dublin and Waterford, around 100 miles south of the capital, and has hired 300 people in the past 12 months.

The jobs announcement was a rare piece of good news for Ireland which has been rocked by a financial crisis that has seen unemployment soar, emigration return and its application for an 85 billion euros ($113 billion) bailout from the IMF and European Union last month. (Reporting by Carmel Crimmins; Editing by Dan Lalor)

Comment :

I have for the past year thought that this bank is one of the few I would invest in now more so as they are investing in Ireland again!

US Bond Bubble ready to pop

Wall Street up-date from Thomas Kee

By Thomas Kee

LA JOLLA, Calif. (MarketWatch) — In recent months, Wall Street has used the prospects for quantitative easing to influence buying decisions, then they used the probabilities of a Republican-controlled Congress, and then of course, earnings.

No one can argue with the strong earnings season, even banks like Bank of America Corp. /quotes/comstock/13*!bac/quotes/nls/bac (BAC 11.56, +0.11, +0.97%)  , Wells Fargo & Co. /quotes/comstock/13*!wfc/quotes/nls/wfc (WFC 26.06, +0.12, +0.46%)  , Citigroup Inc. /quotes/comstock/13*!c/quotes/nls/c (C 4.19, +0.02, +0.48%) , and J.P. Morgan Chase & Co. /quotes/comstock/13*!jpm/quotes/nls/jpm (JPM 37.63, +0.12, +0.32%) were able to beat earnings from moving money out of reserves, but everyone knows that domestic growth will curtail unless the economy gets on track, and that is why the FOMC is trying to inflate our way to growth.

In this article, I will discuss my proprietary longer-term economic model, The Investment Rate. I will broadly explain its projections, and offer insight to future economic conditions. It is not about next week, or next month, but projects by years and decades.

The recent weakness in the dollar was caused by the prospects for quantitative easing, or QE2. By now, everyone recognizes this, and stock market investors are happy. Everything considered, earnings were great, and now investors expect earnings to be great next time too.

The immediate concern is, regardless of economic conditions, that margins will be squeezed because corporate America finds it very difficult to pass on higher costs to a consumer base that is suffering from so much unemployment. Some people will be able to pay higher prices, but most will not. Therefore, the weak dollar, because of QE2, influences commodity prices higher and puts a squeeze on corporate margins that reduces the outlook for earnings growth going forward. The smart ones hedge their costs prudently, but those hedges eventually expire as well.

/conga/story/2010/11/trading-strategies.html 1The immediate prospects for corporate earnings are tightening, not only because of higher commodity prices due to what some think is a positive effort by the FOMC, but also to a fundamental shift in our economy as that relates to The Investment Rate. The Investment Rate is a tool that tells us the rate of change in the amount of new money slated to be invested into the economy by U.S. consumers over time.

It is this new money that moves the markets and the economy. Only new investment dollars can allow the market to grow; we cannot churn old money and expect positive results. One asset class may outperform another in that case, but the overall market cannot grow without the infusion of new money. The Investment Rate tells us the rate of change in the amount of new money every year.

I have been using The Investment Rate as a leading indicator since I developed it in 2002. It was then a bullish indicator because it told me that the amount of new money available to be invested into the economy every year between 2002 and 2007 would also increase every year during that time span. In 2007 I warned everyone that The Investment Rate was at a turning point in that demand had peaked and a transition lower would begin soon. On CNBC, I was nicknamed the Grim Reaper. The IR had turned bearish. Well, the Grim Reaper is back.

The third major down period in U.S. history began in 2007. It is nowhere close to over. During periods of weakness, akin to the Great Depression and the stagflation period of the 1970s, bounce backs are normal. In fact, we were long from March of 2009 until April of 2010. Admittedly, the past two months took me by surprise, but my longer-term outlook remains firmly intact. The recent increase is doing nothing to influence the longer-term trend. This is a bounce higher within a longer term down period. The only way earnings growth will continue is if it is focused solely overseas, and even with that, margins are still going to tighten given high commodity costs.

The strategy for November is straightforward. If the Dow industrials /quotes/comstock/10w!i:dji/delayed (DJIA 11,118, +4.54, +0.04%)  remain below 11,220 buy ProShares UltraShort Russell 2000 /quotes/comstock/13*!twm/quotes/nls/twm (TWM 15.84, -0.19, -1.19%) , iPath S&P 500 VIX Short-Term Futures ETN /quotes/comstock/13*!vxx/quotes/nls/vxx (VXX 13.10, +0.05, +0.36%) , ProShares UntraShort Real Estate ETF /quotes/comstock/13*!srs/quotes/nls/srs (SRS 19.69, -0.04, -0.20%) , and ProShares UltraShort Financials /quotes/comstock/13*!skf/quotes/nls/skf (SKF 19.05, +0.03, +0.16%) and expect to squat on them for a while. On the other hand, if the market breaks above 11,220 buy ProShares Ultra Dow 30 /quotes/comstock/13*!ddm/quotes/nls/ddm (DDM 49.95, +0.13, +0.26%)   and let it ride. If it breaks and then reverses back conversion strategies are necessary — 112220 is longer term resistance, and it needs to be respected.

I expect continued weakness in the U.S. economy, and the declines could even become severe after the FOMC decision, the election, and quantitative easing. Sell the news is a high probability, and should influence near term direction. My longer term forecasts suggest a Greater Depression is an equally high probability over time too.

source http://www.marketwatch.com/story/the-grim-reaper-is-back-2010-11-01

Comment

Keeping an eye on the US is essential when looking for insights as to where the Irish economy in going

we need a strong US economy!

Bank of America Corp

Bondholders are penalizing Bank of America Corp. the most of any of the largest U.S. financial firms as the investigation into the foreclosure crisis expands. Credit-default swaps on the country’s largest bank by assets rose above those of its peers by a record margin, according to data provider CMA. The contracts, which imply Bank of America has lost its investment-grade rating, exceed Citigroup Inc.’s by the most ever and surpassed Morgan Stanley’s this week for the first time in a year.

 Attorneys general from all 50 states joined to open an investigation into whether lenders and mortgage companies falsified documents as they sought to repossess homes. Charlotte, North Carolina-based Bank of America said Oct. 8 it would curtail foreclosure sales nationwide, as speculation rose the lender would have to buy back home mortgages with faulty documentation. “As we look at the financial landscape and try to put pen to paper and figure out who might be most exposed to problems associated with foreclosure moratoria, with robo-signers, with mortgage put-backs,

Bank of America’s at the top of the list,” said David Havens, a financial institution debt analyst at Nomura Holdings Inc. in New York. Bank of America is being singled out for expanding its real-estate operations and acquiring Countrywide Financial Corp., then the biggest U.S. mortgage lender, in 2008 during the worst housing slump since the Great Depression, Havens said. The bank also increased its mortgage assets through the $29 billion purchase of Merrill Lynch & Co. in January 2009 under pressure from the Federal Reserve, which was trying to prevent failure of the U.S. banking system. ‘Nothing Different’ “There’s nothing different about our company today than yesterday,” Chief Executive Officer Brian T. Moynihan said after a speech in Boston yesterday.

The bank’s review of foreclosures will take “a few weeks to get through,” he said. Jerry Dubrowski, a spokesman for Bank of America, declined to comment further. Elsewhere in credit markets, the extra yield investors demand to own company bonds instead of similar-maturity government debt rose 1 basis point to 168 basis points, or 1.68 percentage points, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index. The spread has narrowed 13 basis points since Aug. 31. Yields averaged 3.396 percent yesterday, the index shows.

Structured Notes Structured notes issuance in the U.S. reached a record, with banks selling $38.4 billion of the securities this year as investors turn away from stocks and toward fixed-income products. Sales of the products, which are bonds bundled with derivatives, compare with $33.9 billion last year and $37.6 billion in the previous record year of 2008, according to database StructuredRetailProducts.com. Credit-default swaps on the Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, were little changed, rising 0.08 basis point to a mid-price of 98.54 basis points as of 12:58 p.m. in New York, according to index administrator Markit Group Ltd. In London, the Markit iTraxx Europe Index of 125 companies with investment-grade ratings increased 1.93 to 102.5.

The indexes typically rise as investor confidence deteriorates and fall as it improves. Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt. ‘Political Implications’ The cost to protect Bank of America’s debt for five years climbed for a fourth day, touching yesterday’s record of 205 basis points, according to Phoenix Partners Group. The difference between the swap price and the average of the five largest banks grew yesterday to 41.1 basis points, the most on record. Citigroup’s swaps rose 3.2 basis points to 177 today and contracts on New York-based Morgan Stanley fell 2.2 basis points to 173, Phoenix data show.

In February, Citigroup’s contracts were 94.4 basis points higher than those of Bank of America’s, according to CMA. “For all of these residential real estate issues that are dominating the headlines today and have significant political implications in the 19 days going into the election, Bank of America sits there more exposed than Citigroup right now,” Nomura’s Havens said. Implied Ratings Prices on Bank of America’s credit-default swaps imply the debt is ranked Ba1 as of Oct. 13, five levels below its actual A2 grade, according to Moody’s Corp.’s capital markets research group. That’s the first time the firm’s swaps have signaled a junk ranking since May 6, the data show. Bank of America’s $2.5 billion of 4.5 percent notes due in April 2015 fell 0.381 cent to 103.89 cents on the dollar as of 11:36 a.m. in New York, Trace data show. The bonds were issued at 99.9 cents in March to yield 215 basis points more than Treasuries.

 The bank has $360 billion of bonds outstanding, Bloomberg data show. The rising price of swaps reflects potential costs that banks may face on so-called mortgage put-backs from investors. Put-backs occur when a mortgage lender is forced to repurchase a loan that’s been sold for securitization. Banks may also have to pay for legal challenges. Loan-Servicing Grade The Association of Financial Guaranty Insurers, a trade group for bond insurers, said in a letter last month toMoynihan that his bank should repurchase as much as $20 billion in home loans that were based on wrong or missing information. Moody’s put Bank of America’s loan-servicing grade on review for a possible downgrade on Oct. 4, citing irregularities in the foreclosure process and deterioration of loss mitigation and collections.

The bank’s swaps have doubled this year, adding 106.4 basis points. That’s still down from 400.7 basis points in March 2009, CMA data show. “You’ve had balance sheet repair but the work isn’t done,” said Joel Levington, managing director of corporate credit at Brookfield Investment Management Inc. in New York. “People need to get their hard hats back on.”

Comment:

If the market is now taking heed of the problems of Bank of America and mortgage defaults why are the Irish Banks ignoring the same problems here in Ireland? I believe the problem of negative equity is not entirely all the fault of the mortgage holders there is percentage of the fault on the lending intuitions as I believe they did not carry out due diligence on all transactions and standards were not enforced. Standard procedures were not adhered to in a lot of cases. We the taxpayers are going to have to face the problem sooner or later with a mass default of mortgages or a mass bailout, a kind of NAMA for homeowners and the Department of Finance knows it but the banks are pussy footing around the problem. This very possibility was discussed to –day on radio one

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