Great Recession » eu http://www.greatrecession.info Because it's not a Depression.Yet. Fri, 06 Nov 2009 13:05:53 +0000 http://wordpress.org/?v=2.8.2 en hourly 1 EU Banks Lost Even More than US Banks http://www.greatrecession.info/2009/04/08/eu-banks-lost-even-more-than-us-banks/ http://www.greatrecession.info/2009/04/08/eu-banks-lost-even-more-than-us-banks/#comments Wed, 08 Apr 2009 09:34:04 +0000 alex.foti http://www.greatrecession.info/?p=3164 IMF Boosts Global Loss Estimate to $4 Trillion: Roubini Estimates $1.8 Trillion Fall on U.S. Banks/Brokers, Up to $2 Trillion on European Banks, Rest on Asia

    April 7: IMF to say that toxic debts racked up by banks and insurers around the world could spiral to $4 trillion. The IMF said in January that it expected the deterioration in US-originated assets to reach $2.2 trillion by the end of next year, but it is understood to be looking at raising losses on U.S. originated assets to $3.1 trillion (subject to further revision) in its next assessment of the global economy, due to be published on April 21. In addition, it is likely to boost that total by $900 billion for toxic assets originated in Europe and Asia. Banks and insurers have so far owned up to $1.29 trillion in writedowns (about $800bn in U.S., $400bn in Europe, remainder in Asia). Roubing calculates that U.S. banks/brokers take a $1.8T writedown, EU banks $2T, and the remainder in Asia.

    Loss Estimates for U.S. Banks/Brokers:

  • IMF in January update raised total loan and security loss estimate on U.S. originated assets to $2.2 trillion, of which about half incurred abroad. Times reports that IMF plans to raise total loss estimate to $3.1T in April Stability Report, subject to further revision.
  • Jan 20 Roubini/Parisi: Assuming a further 20% fall in house prices and unemployment peaking at 9-10%, we project total loan and securities losses amount to $3.6T, half of which accrue to the U.S. banking system, or $1.8T (of which $1.1 T in loan losses/ $600-700bn in securities writedowns).
  • Capitalization of FDIC banks is $1.4T, that of investment banks as of Q3 $110bn. If projected loan and securities losses materialize, the U.S. banking system is close to insolvency despite TARP 1 of $230bn and private capital of $200bn.
  • Outstanding loan are $12.4T. Of these, Roubini estimates $1.6T to turn bad. Of these, U.S banks and brokers are assumed to carry $1.1T
  • Mark-to-market prices as of December imply around $2T in writedowns on $10.8T U.S. originated securities outstanding. Flow of funds data show that 40% of U.S. originated securities are held abroad. U.S. banks’ share of writedowns is about 30-35%, or $600-700bn for U.S. banks/brokers according to weights in IMF GFSR October 2008, table 1.1
  • Chris Whalen (IRA): The bad news is that estimates that put aggregate loan charge-offs for all US banks over the next 12-18 months above $1 trillion are probably in the right neighborhood. The entire banking industry only has $1.5 trillion in capital, so new equity must obviously be provided by Washington and/or private investors.
  • Jan 25 Goldman (via Zero Hedge): Total loan losses will reach $2 trillion of which $1 trillion are carried by the U.S. banking system (50% mortgage losses and 50% other loan losses). Banks need a minimum of $300bn additional capital but most likely more.
  • Roubini: In order to restore healthy credit conditions, the banking system needs about $1-1.5T in public or private capital. This calls for a comprehensive solution along the lines of a ‘bad bank’ or RTC.

    • Loss Estimates For European Banks:

    Fed Board: Flow of funds data show that 40% of U.S. originated securitizations are held abroad–> about $4.4T out of $10.8T securitizations held abroad, assume $4 T in Europe. Average writedown rate on securitization is 17% as calculated by Roubini, so about $680bn writedowns apply for Europe.

  • Goldman Sachs: Total gross loan losses among European banks estimated at EUR 900bn, or $1.1 trillion>. This figure includes EUR310bn in losses falling on foreign registered banks and EUR77 registered in CEE ($400bn/$100bn respectively). (Note: report says that given that EU banks were slow in writing securities up they are justified in writing securities down slowly in the downturn as well–> focus on loans only.)
  • The IMF puts expected losses on European/Asian loans at $900bn, rather than $1.1T estimated above.
  • Danske:  European banks have $1.3T in claims on Central and Eastern European countries. Assuming that 20% of these loans turn bad, EU banks incur about $270bn in CEE-related losses, of which 70bn are already accounted for in Goldman loan loss estimate above.

    • –> Adding all up, expected losses among European banks amount to about $650bn exposure to U.S. securities +$1100 domestic&foreign loan losses+200 CEE=$1.95 Trillion

    >–>Compare with Roubini’s expected losses amoung U.S. banks and brokers of $1.8Trillion.

    –> Asia is expected to incur the remaining $200bn in writedowns for the total $4T expected by the IMF.

]]> http://www.greatrecession.info/2009/04/08/eu-banks-lost-even-more-than-us-banks/feed/ 0 Fuck the ECB: european solidarity trumps monetarist dogma http://www.greatrecession.info/2009/02/23/fuck-the-ecb-european-solidarity-trumps-monetarist-dogma/ http://www.greatrecession.info/2009/02/23/fuck-the-ecb-european-solidarity-trumps-monetarist-dogma/#comments Mon, 23 Feb 2009 16:48:47 +0000 alex.foti http://www.greatrecession.info/?p=1754 Friends, Sisters, Genderbenders of the european peninsula: the old guys in Frankfurt are trying to prevent Germany to bail out Ireland and other countries in the eurozone because otherwise “fiscal discipline” and the euro would be in danger. Trichet, Almunia, you there? Then listen well: fuck the Maastricht Treaty and the Stability Pact: its utter deflationary stupidity is being proved in the Great Recession, while you, the friends of rentiers and speculators are still worrying about inflation as unemployment skyrockets, and maintain ideological opposition to quantitative easing and deficit spending to address it. They are reactionary and are endangering the social and  political future of Europe. Let’s defeat the monetarist fuckers, let’s go Keynesian all the way: money for the people, not bankers and other crooked bastards!

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