Aussie bank’s write-offs signal doom for Wall Street

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http://onlinejournal.com/artman/publish/article_3571.shtml


Apocalypse Down Under: Aussie bank’s write-offs signal doom for Wall Street


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Over at Nouriel Roubini’s blog, Dr. Doom made this observation about Merrill Lynch’s troubles, “Merrill Lynch’s decision to ‘sell’ a good chunk of its remaining CDOs at 22 cents to the dollar has been widely praised as the firm finally recognizing the full extent of its losses on these toxic instruments. This batch of $30.6 billion of CDOs was already marked down to $11.1 billion. Now with the ‘sale’ of it to Lone Star at a price of 6.7 billion Merrill Lynch is taking another $4.4 billion write-down and ‘selling’ it at 22% of the original face value. But is this a market-based ‘sale’? No way, calling this transaction a ‘sale’ is a joke.” (Nouriel Roubini’s Global EconoMonitor)

This isn’t a “sale”; it’s more like abandoning a sinking ship. The investment chieftains are getting scorched by their downgraded assets and have started dumping them at any cost. There’s no market for mortgage-backed anything now, and there won’t be until housing finds a bottom. By the time that happens, most of the CEOs and CFOs in the mega-brokerage houses will be squatting on street corners on the lower East Side with tin cup in hand. It’s that bad.

The Merrill Lynch deal illustrates just how crazy things have gotten. Merrill said it “will provide financing to the purchaser for approximately 75 percent of the purchase price.” Whoa. In other words, the banks are so anxious to offload their junk-paper, they’re almost paying people to take it off their hands. Now that’s desperation! No wonder the market is snorkeling its way to the bottom of the fishbowl. The problems haunting the financial markets have cross-pollinated with the real economy and are spreading misery everywhere. Unemployment is rising, growth is slowing, inflation is up, the dollar is down. We’ve heard it many times before, but it’s still jarring to see General Motors stock fall below Bed & Bath, or Starbucks shut down 600 stores, or million dollar McMansions sell for $425,000, or millions of middle-class families join the food stamp rolls. That’s tragic no matter how you slice it.

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The scariest news of the week comes from Down Under, where the National Australia Bank (NAB) announced it would “slash a £400m bond sale by two thirds. The retreat comes days after the Melbourne lender shocked the markets by announcing a 90pc write-down on its £550m holdings of US mortgage debt, an admission that it AAA-rated securities are virtually worthless. . . . The decision by National Australia Bank to make drastic provisions on its US mortgage debt could have ramifications in the US itself. It opted for a 100pc write-off on a clutch of ‘senior strips’ of collateralized debt obligations (CDO) worth £450m -- even though they were all rated AAA.” (Ambrose Evans Pritchard, “Australia faces worse crisis than America,” UK Telegraph)

This is a huge story with grave implications for America’s struggling banking system. No wonder the establishment media is avoiding it like the plague. If AAA rated CDOs are worthless, then some of the biggest financial institutions in the country will be packed off to the boneyard feet first.
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"HUGE STORY"

"media is avoiding it like the plague"

can we make the media report on it?

[Warpy]

1. No, we'll have to concentrate on offshore press

plus blogs and bulletin boards to keep us advised, as usual.

The good puppy corporate press is useless. I'm astonished that people keep expecting it to change and report something honestly and completely. It won't.