Hmmm, would be interesting to follow up. Just seems to confirm that things might be worse than CNBC is letting on. Lucky it was "contained" as Bernanke and Paulson said. I think we are heading for the bust of the century but it may not happen until well after my puts expire. When CNBC can't deny there is a problem any more they will start talking about whether it will be a "V" or "U" shaped recovery.
Gigantic Bank Pool Pledged To Avert Disaster as Second Big Crash Stuns Wall Street Largest Financial Powers in the City Meet After Day of Hysterical Liquidation Sinking Prices Below Thursday's By Laurence Stern After the stock market had come crashing down again in a veritable deluge of forced and hysterical liquidation, word sped through the financial district last evening that the largest banks in the city were prepared to exert their organized power this morning to prevent further disaster. Arrangements described as "fully adequate" were completed at a conference at the offices of J. P. Morgan & Co. at Broad and Wall Streets... Although no formal statement was issued, it was the consensus of those at the meeting that the worst of the liquidation is over and that a natural demand for investment stocks now available on the bargain counter should go far toward an immediate restoration of trading stability.
As usual, guess who is waiting to buy the bottom of the "crash" Stocks Up in Strong Rally; Rockefellers Big Buyers; Exchanges Close 2-1/2 Days By Ferdinand Lundberg Revived by spontaneous investment buying and declarations of large extra cash dividends by leading companies, and free of the delirium that has recently gripped share owners, the stock market yesterday received a fresh start and scored a record comeback. Volume on the Stock Exchange totaled 10,727,320 shares, the third largest day on record. The high spot of the day from a stock market viewpoint was the statement by John D. Rockefeller that there was no need to destroy values and that he and his son, John D. Rockefeller Jr., had been heavy buyers of stocks for investment in the last few days, and would continue to buy at present prices...
"Financial storm definitely passed," banker Bernard Baruch cabled Winston Churchill in mid-November. "I see nothing in the present situation that is either menacing or warrants pessimism," Treasury Secretary Andrew Mellon announced on the last day of 1929.
This episode recalls attempts by German Banks to create a so called "BAD BANK" after the internet bubble. Banks like Dresdner Bank, which had 30 BN of bad loans in their ledger wanted to ged rid off this unpleasant "legacy". Finally, Dresdner invented a "Institutional Restructuring Unit" ( IRU ) for these "Non-Performing-Loans". It took the new appointed CEO of this IRU, Jan Kvarnstroem, several years to work off the "restructuring". He left Dresdner Bank at the end of 2006...
Oh, by the way : German economy experienced a sharp credit crunch - especially the small and medium sized companies suffered. The banks were less willing to lend... But maybe this time it´s different in the U.S. As we all know credit rating agencies are more then willing to label every piece of paper with an "AAA" rating...
The Financial Services Authority, the United Kingdom's markets regulator, has suggested that U.K. banks consider participating in the plan, a person familiar with the situation said. HSBC Holdings PLC, the largest U.K. bank, has an affiliate SIV called Cullinan Finance Ltd. with $35 billion in senior debt. An HSBC representative wasn't immediately available to comment. If the banks agree, the plan could be announced as early as Monday, people familiar with the matter said. Citigroup announces third-quarter earnings Monday. The tentative name for the fund is Master-Liquidity Enhancement Conduit, or M-LEC. Ha, ha, ha....great name! MASTER-LIQUIDITY ENHANCEMENT CONDUIT ! LMAO ! ROFL !
"The Super-SIV would issue short-term notes to finance the purchase of assets held by the SIVs affiliated with the banks" Investors might buy short term securities, say 90 day notes. It might be worth a try.
Citigroup, Bank of America Agree to Set Up $80 Billion CP Fund Oct. 15 (Bloomberg) -- Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. agreed to set up a fund of about $80 billion designed to help revive the asset-backed commercial paper market, according to people familiar with the discussions. An announcement may come as soon as today, said the people who declined to be named because the decision isn't public. The fund will buy assets from structured investment vehicles, units set up to finance purchases of securities such as corporate bonds and subprime mortgage debt. Other banks may join the fund, which would help SIVs avoid selling their $320 billion in holdings at fire-sale prices, further roiling the credit markets, the people said. The Treasury Department initiated the talks between the banks after a shut down of the commercial paper market left SIVs and other sellers unable to fund themselves, forcing sales of about $75 billion of assets. ``Treasury and the banks are showing they're willing to deal with this directly,'' said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co. in New York. ``They're taking nothing for granted. This will help to deaden the speculative forces.'' [...] The fund will be known as the Master Liquidity Enhancement Conduit, or MLEC, the people said. The fund will buy securities rated AAA or AA at Standard & Poor's and Aaa or Aa at Moody's Investors Service at market prices, the people said. It won't buy subprime mortgage assets, they said. What ? No subprime debt ? Come on Wall Street, that´s no fun !
I don't get it. Why do they want to setup a fund to buy AAA and AA paper? FED is taking this paper through discount window and as far as know there is a market for AAA and AA.