Wall Street banks expect billions more in write-downs

[DuaneBidoux]

Source: International Herald Tribune

Wall Street banks are bracing for another wave of multibillion-dollar losses as the crisis that began with subprime mortgages spreads through the credit markets.

In recent weeks one part of the debt market after another has buckled. High-risk loans used to finance corporate buyouts have plummeted in value. Securities backed by commercial real estate mortgages and student loans have fallen sharply. Even auction-rate securities, arcane investments usually considered as safe as cash, have stumbled.

The breadth and scale of the declines mean more pain for major banks, which have already written off more than $120 billion of losses stemming from bad mortgage-related investments.



Read more: http://www.iht.com/articles/2008/02/19/business/wall.php

[aquart]

1. But will it mean no bonuses this year?

Will anyone be forced to renegotiate a golden parachute?

[Earth_First]

7. There will be champagne and caviar next year...

The bonuses will still flow like Evian tap water from stainless steel fixtures in their hilltop gated communities.

A sucker rally will post this gloom and doom behind us as a late fourth-quarter rally will erase the collective memory of all but a few of us.

[salin]

2. what, the risky enronesque debts racked up in buyouts that

are ... not worth much? What a surprise. Clearly nothing was learned from the corporate implosions of 2002. While this type of debt is only mentioned as part of a list of the 'bad debts' to be written off - I wish it would get more of a sharper focus itself.

In the last decade (especially since 2000) - the buyout and merger frenzy has gone with little scrutiny - and yet the debt accrued, requiring increasing amounts of obligations have gone unquestioned while the excuse for outsourcing and moving operations overseas is always about high labor costs in the states, while no menton of the cost of the increasing debts are made as part of the equation as to erosion of profits.

I have written about my concerns about the absurd levels of debt in this country from federal, to corporate to individual since 2002 - when the enron story grew and the risky vehicles with no value that were used by enron became learned. "Leveraged debt", leveraged by chicanary. I have never wished so much that I had been wrong in my reading of the tea leaves. :-(

[RuleOfNah]

3. Decades of retro.

How many buyouts are now at risk? A lot?

High-risk loans used to finance corporate buyouts have plummeted in value.

Which historical economic train wreck is being reenacted this week? All of them, at once? How Norquist.

Leverage is the heroin of finance.

[salin]

4. Buyouts at risk of not happening...

probably at good thing for the companies involved in the long run. The big question - is what happens to those companies who accrued massive debt during merger/acquisition - and face decreasing revenues (as in decline in consumer spending) on which to pay off that debt? How much of that will come back to banks and/or institutional investors who bought what they thought were highly rated bonds?

I agree with your question per which historical train wreck is being reenacted - and the confluence of those disasters. Junk Bond crises (but at least junk bond buyers knew they were buying junk bonds, didn't they?), Savings and Loans crisis, corporate implosion crisis, dollar devaluation crisis (as seen in south america, or even after the collapse of the soviet union, in russia), bank crashes (not there.... yet)... what others can we add?

[RuleOfNah]

5. The what that was there.

The big question - is what happens to those companies who accrued massive debt during merger/acquisition - and face decreasing revenues (as in decline in consumer spending) on which to pay off that debt? How much of that will come back to banks and/or institutional investors who bought what they thought were highly rated bonds?

I have been wondering about asset recovery. With outsourcing and just-in-time there isn't much to auction off. After NAFTA there were stories about factories Mexico. The factories that had relocated to Mexico were packing up and moving to the next haven. That seems to be a trend.

What others to add? Oil inflation? Commodities inflation (mmmm, ethanol)? Drought/climate/bees?

[soothsayer]

6. The Powers That Be made their money on the upside, and will prolly make it again on the downside

This is a classic pump and dump