Rubenstein Says `Enormous' Bank Losses Unrecognized

[marmar]

from Bloomberg:





Rubenstein Says `Enormous' Bank Losses Unrecognized (Update1)

By Ryan J. Donmoyer and Alison Fitzgerald

May 12 (Bloomberg) -- U.S. and European banks and financial institutions have ``enormous losses'' from bad loans they haven't yet recognized and may have a harder time wooing sovereign-fund rescuers, Carlyle Group Chairman David Rubenstein said.

``Based on information I see,'' it will take at least a year before all losses are realized, and some financial institutions may fail, Rubenstein said at a breakfast meeting of the Institute for Education Public Policy Roundtable in Washington. He didn't name any companies.

``The sovereign wealth funds are not likely to jump into the fray again to bail out these institutions,'' Rubenstein said. ``Many financial institutions aren't going to be able to survive as independent institutions.''

Rubenstein said sovereign wealth funds are becoming wary after losing $25 billion on their investments in struggling banks and securities firms worldwide.

Financial institutions worldwide have recorded $329.2 billion in credit losses and writedowns and raised $246.6 billion in capital since the beginning of 2007. Rubenstein said about $60 billion of that capital was provided by sovereign funds last fall, and their investments today are worth about $35 billion. ......(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=aozdYkg4RG3A&refer=home

[nashville_brook]

1. alternate headline: Carlyle Group Chair Says Bank Failures Ahead

[Warpy]

2. He's right. The numbers they're doling out in driblets

are scary enough, but the real numbers will have them all trying to function while insolvent for many years to come.

The problem is the structured investment vehicle, usually bad loans snipped into pieces by hedge funds and bundled according to their perceived risk level at the time and sold to brokerages, banks, pensions, and insurance companies who didn't know what the hell they were buying, but loved the rate of return they were promised. Men whose jobs depended upon achieving a certain per year investment profit for the institution loved them. As they were sold back and forth, their paper value escalated even as what they were backed with--bum housing loans--continued to depreciate.

The truth is that institutional investors, from pension funds through central banks, are awash in this bad paper. They're only starting to realize that since August, which is when a few of them started to wave away the smoke and look behind the mirrors.

If they told us the extent of the bad news right now, there would be blind panic.