FDIC Will Need Half A Trillon Dollars, Says Analyst

The Federal Deposit Insurance Corp.’s (FDIC) list of troubled banks has increased by 30 percent this quarter, and this jump is causing the FDIC and the banking community to prepare for tomorrow’s problems today.

The FDIC may have to borrow money from the Treasury Department to handle an expected wave of bank failures coming down the road, according to the Wall Street Journal.

It would not be surprising if this were to occur, according to Chris Whalen, managing director of Institutional Risk Analytics. In an interview with CNBC, Whalen said the FDIC needs a backstop.

“They need about a half a trillion dollars in borrowing authority, and they need a vehicle to own these banks while we triage them and sell them.”

Read moreFDIC Will Need Half A Trillon Dollars, Says Analyst

Wall Street Journal: New credit hurdle looms for banks

U.S. and European banks, already burdened by losses and concerns about their financial health, face a new challenge: paying off hundreds of billions of dollars of debt coming due.

At issue are so-called floating-rate notes – securities used heavily by banks in 2006 to borrow money. A big chunk of those notes, which typically mature in two years, will come due over the next year or so, at a time when banks are struggling to raise fresh funds. That’s forcing banks to sell assets, compete heavily for deposits and issue expensive new debt.

The crunch will begin next month, when some $95 billion in floating-rate notes mature. J.P. Morgan Chase & Co. analyst Alex Roever estimates that financial institutions will have to pay off at least $787 billion in floating-rate notes and other medium-term obligations before the end of 2009. That’s about 43 percent more than they had to redeem in the previous 16 months.

The problem highlights how the pain of the credit crunch, now entering its second year, won’t end soon for banks or the broader economy. The Federal Deposit Insurance Corp. said on Tuesday that its list of “problem” banks at risk of failure had grown to 117 at the end of June, up from 90 at the end of March. FDIC Chairman Sheila Bair said her agency might have to borrow money from the Treasury Department to see it through an expected wave of bank failures. She said the borrowing could be needed to handle short-term cash-flow pressure brought on by reimbursements to depositors after bank failures.

Read moreWall Street Journal: New credit hurdle looms for banks

The Big Bailout: America as a Full-Spectrum Kleptocracy

Its name somewhat anachronistically means “assembly of old men.” George Washington famously – and, it must now be admitted, with excessive optimism – characterized it as an institutional saucer intended to cool legislation passed in the intemperate heat of the moment. Its members demand, with entirely unwarranted self-approval, to be called, collectively, the World’s Greatest Deliberative Body.

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The Wall Street Journal Senses Something is Wrong

A subscription to the Wall Street Journal costs several hundred dollars a year, so most people out there don’t get it and DollarCollapse.com rarely posts links to its articles. But everybody should see today’s edition, which probably sets the modern-day record for disturbing headlines. Here’s a sampling of what subscribers read this morning:

Read moreThe Wall Street Journal Senses Something is Wrong

Are “Dark Pools” Destined to be the Capital Markets’ Next Black Hole?

Related article:Big Traders Dive Into Dark Pools

We can almost hear that ominous “Jaws” theme music in the background and can see that huge dorsal fin as it slices threateningly through the water – knowing full well that the real terror is hidden beneath the water’s surface.

But this time around, it’s not a “Great White” that’s sparking our fears; it’s a well-capitalized and broadly based series of secret stock exchanges known as “Dark Pools of Liquidity,” “Dark Liquidity,” or just “Dark Pools.”

Most investors have never even heard the term – and are truly shocked to discover these “off-the-books” trading networks actually exist.

But to Wall Street insiders looking to anonymously move billions of dollars in stocks, bonds, and other investment instruments, dark pools are de rigueur – especially when you’re an institutional trader who doesn’t want to reveal your intentions or your actions to the “rest” of the market, until after the fact when the orders are “printed.”

And that makes these dark pools of capital highly problematic when it comes transparency: There is literally none in most pools and only limited visibility in others.

Dark Pools: From Trading Haven to Heavyweight

Dark Pools are electronic “crossing networks” that offer institutional investors many of the same benefits associated with making trades on the stock exchanges’ public limit order books – without tipping their hands to others, meaning publicly quoted prices aren’t affected. This is the capital markets’ version of a godsend – especially for traders who desire to move large blocks of shares without the public investors ever knowing.

Some examples of so-called crossing networks include Liquidnet Inc., Pipeline, the Posit unit of Investment Technology Group (ITG), or the SIGMA X unit of Goldman Sachs Group Inc. (GS).

In an era in which “secret” transactions contributed to what’s shaping up to be the largest credit crisis in history, you’d think that any mechanism that allows insiders to trade in complete secrecy and with total anonymity would be scrutinized more closely than a Roger Clemens vitamin shot. But that’s not the case with Dark Pools.

Read moreAre “Dark Pools” Destined to be the Capital Markets’ Next Black Hole?

Small Banks: Billions in Troubled Construction Loans

Wall Street is bracing for regional and small banks to fess up to large losses from their mounting volume of soured construction loans made primarily to home builders.

According to the Federal Deposit Insurance Corp., $45.4 billion of the $631.8 billion in construction loans outstanding at the end of the first quarter were delinquent. When banks announce second-quarter results in coming weeks, they are expected to report sharp increases in loans that builders can’t repay. Banks are also facing intensifying pressure from federal and state regulators to deal with the problem loans on their books.

WHICH BANKS WILL FEEL THE PAIN?
See a sortable list of small and regional banks with sizable exposure to construction and land loans and with notable delinquency rates.

That will put additional pressure on an already stressed financial system. Banks have begun to dump bad construction and land loans at discounts, curtail new lending and halt construction projects that are under way to preserve capital. Some analysts even see a wave of bank failures as a possibility.

Read moreSmall Banks: Billions in Troubled Construction Loans

Food Riots are Coming to the U.S.

There is a time for food, and a time for ethical appraisals. This was the case even before Bertolt Brecht gave life to that expression in Die Driegroschen Oper. The time for a reasoned, coherent understanding for the growing food crisis is not just overdue, but seemingly past. Robert Zoellick of the World Bank, an organization often dedicated to flouting, rather than achieving its claimed goal of poverty reduction, stated the problem in Davos in January this year. ‘Hunger and malnutrition are the forgotten Millennium Development Goal.’

Global food prices have gone through the roof, terrifying the 3 billion or so people who live off less than $2 a day. This should terrify everybody else. In November, the UN Food and Agricultural Organization reported that food prices had suffered a 18 percent inflation in China, 13 percent in Indonesia and Pakistan, and 10 percent or more in Latin America, Russia and India. The devil in the detail is even more distressing: a doubling in the price of wheat, a twenty percent increase in the price of rice, an increase by half in maize prices.

Read moreFood Riots are Coming to the U.S.

Global free market for food and energy faces biggest threat in decades

The global free market for food and energy is facing its biggest threat in decades as a host of countries push through draconian measures to hold down prices, raising fears of a new “resource nationalism” that could endanger world food security.


Somali’s demonstrate against high food prices in the capital Mogadishu. At least two people were killed in clashes

India shocked the markets yesterday by suspending trading in futures contracts for a range of farm products in a bid to clamp down on alleged speculators and curb inflation, now running at 7.6pc.

The country’s Forward Markets Commission said contracts for soybean oil, chana (chickpeas), potatoes, and rubber had been banned for four months, even though a report by the Indian parliament last month concluded that soaring food costs had almost nothing to do with the futures contracts. Traders in Mumbai slammed the ban as an act of brazen political populism.

The move has been seen as a concession to India’s Communist MPs – key allies of premier Manmohan Singh – who want a full-fledged ban on futures trading in sugar, cooking oil, and grains.

As food and fuel riots spread across the world, a string of governments have resorted to steps that menace the free flow of food and key commodities. Argentina has banned beef exports, while Egypt and India have stopped shipments of rice.

Kazakhstan has prohibited wheat exports. Russia has slapped a 40pc export duty on shipments, and Pakistan a 35pc duty.

China, Cambodia, Malaysia, Philipines, Sri Lanka, and Vietnam have all imposed export controls or forms of rationing to ease the crisis.

UN Secretary-General Ban Ki-moon has warned that this lurch towards national controls is becoming a threat to the open global system we all take for granted. “If not handled properly, this crisis could result in a cascade of others and affect political security around the world,” he said.

A new report by UBS says the scramble for scarce raw materials is turning ever more political, with ominous implications for ill-endowed societies that rely on imports.

“The bottom line is that countries with resources, particularly in food and energy are becoming more protective of these resources,” it said.

(I know I am repeating myself and I know that many are already well prepared. This is for the ones that are not:
Store food and water “NOW”. Do this in a relaxed manner because your brain shuts down when you are under stress and in survival mode. – The Infinite Unknown)

Read moreGlobal free market for food and energy faces biggest threat in decades

Foreign investors veto Fed rescue

As feared, foreign bond holders have begun to exercise a collective vote of no confidence in the devaluation policies of the US government. The Federal Reserve faces a potential veto of its rescue measures.

Asian, Mid East and European investors stood aside at last week’s auction of 10-year US Treasury notes. “It was a disaster,” said Ray Attrill from 4castweb. “We may be close to the point where the uglier consequences of benign neglect towards the currency are revealed.”

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