Sunday, September 28, 2008

Global banks failing despite Bailout Deal

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Belgian and Dutch central banks and regulators were discussing measures to restore confidence in Fortis, the financial-services company whose stock plunged 35 percent in Brussels trading last week. ``We are working on enhancing the confidence in the market of the Fortis share,'' Hein Lannoy, a spokesman for the Belgian financial regulator CBFA, said today by telephone. He declined to be more specific. The parties will hold a conference call and ``if necessary there will be a physical meeting,'' Lannoy said. Brussels and Amsterdam-based Fortis needs more capital after spending 24 billion euros ($35 billion) on ABN Amro Holding NV assets last year just as the U.S. subprime-mortgage market started to collapse. Fortis tumbled a record 20 percent two days ago, when the company picked Filip Dierckx to replace Herman Verwilst as chief executive officer. The move was aimed at reassuring investors concerned that a plan to raise 8.3 billion euros would force Fortis to sell assets at knock-down prices. ``Fortis failed to restore confidence on its own and that can only be done now with the help of the regulatory institutions or rivals,'' said Corne van Zeijl, a senior portfolio manager at SNS Asset Management in Den Bosch, the Netherlands, who oversees about 750 million euros and owns Fortis shares. The Dutch central bank governing board met late yesterday with Finance Minister Wouter Bos, Het Financieele Dagblad and news service ANP reported. Takeover Talks Stall ``Bos is being informed meticulously by the Dutch central bank,'' ministry spokesman Jilles Heringa said. Heringa and Herman Lutke Schipholt, a spokesman for the Dutch central bank, declined to confirm the meeting. Talks about a takeover of Fortis by ING Groep NV and BNP Paribas SA stalled late yesterday amid demands for state guarantees, De Standaard reported on its Web site, without saying where it got the information. The Sunday Times reported the Belgian central bank and regulator are preparing to bail out Fortis. The newspaper didn't say where it got the information. Peter Jong, a spokesman for Amsterdam-based ING, and Jonathan Mullen, a spokesman for BNP Paribas in Paris, declined to comment. Wilfried Remans, a spokesman for Fortis, also declined to comment and referred to the company's statements on Sept. 26. Fortis last week said it had earmarked for sale banking and insurance businesses that may be valued as high as 10 billion euros. The Belgian company said it won't sell assets at fire-sale prices and doesn't have an urgent need for funds. Asset Sales The financial-services company said on June 26 it would sell so-called non-core assets, notes and asset-backed debt to raise money. Fortis planned to part with 2 billion euros of assets this year and next. The lender also scrapped a 1.4 billion-euro dividend and sold 1.5 billion euros of shares to investors, including Ping An Insurance (Group) Co. Verwilst and Dierckx appeared together at an impromptu press conference in Brussels on Sept. 26 to reassure investors about the capital-raising plan. While the company may sell more assets than it earlier expected as it becomes harder to raise money by other means, the bank's financial position is ``solid,'' Verwilst said. Customer moves at its Benelux banking unit have remained limited to less than 3 percent of assets since the start of the year, Fortis said. Funding Base Fortis has about 3 billion euros of bonds maturing this year and needs to refinance an additional 7 billion euros next year, said Ivan Lathouders, an analyst at Banque Degroof SA in Brussels, in a report last week. Fortis, formed in the 1990 merger of the Dutch insurance company NV Amev, Belgian insurer AG Group and the Dutch bank VSB, said last week it had a funding base of more than 300 billion euros from sources including retail and private deposits and institutional investors. Fortis has about 5.2 million retail customers. It employs about 85,000 people and operates 2,500 retail branches including ABN Amro. The company reported a 49 percent decline in second-quarter profit on credit-related writedowns on Aug. 4. The banking business's core Tier I ratio, which measures a bank's ability to absorb losses, was 7.4 percent at the end of June compared with Fortis's own target of 6 percent. The company's structured credit portfolio, which includes collateralized debt obligations and U.S. mortgage-backed securities, amounted to 41.7 billion euros at the end of June. Fortis said Aug. 4 the pretax impact of the credit market turmoil on its earnings was 918 million euros in the first half. Belgian and Dutch regulators restricted short-selling in the shares and derivatives of financial companies for three months last week to curtail a market rout. The rules require investors betting on a decline in stock prices to arrange to borrow the shares before selling them. The Belgian and Dutch regulators also requested investors to refrain from lending the securities.

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Deepening financial crisis engulfs the banking industry
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Source: Daily Telegraph
NewsDateTime: 11 hours ago

U.S. Dollar Falls on Bailout Plan Disagreements
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Source: DailyFx
NewsDateTime: 9/26/2008

Small Businesses to Fed: Where’s Our Bailout?
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Source: Wall Street Journal
NewsDateTime: 9/23/2008

Congress restarts debate on $700B bailout
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Source: Corpus Christi Caller
NewsDateTime: 9/26/2008

'Progress being made' on bailout
Chairman of the House Financial Services Committee, Rep. Barney Frank, D-Mass., talks with reporters after a meeting on the market turmoil in Washington. Photo by Getty Images U.S. President George W. Bush makes a statement outside the Oval Office at ...
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Source: Rocky Mountain News
NewsDateTime: 9/27/2008

The details of the bailout deal

From Office of Speaker Nancy Pelosi -- Sept. 28, 2008

Significant bipartisan work has built consensus around dramatic improvements to the original Bush-Paulson plan to stabilize American financial markets -- including cutting in half the Administration's initial request for $700 billion and requiring Congressional review for any future commitment of taxpayers' funds. If the government loses money, the financial industry will pay back the taxpayers.
3 Phases of a Financial Rescue with Strong Taxpayer Protections
# Reinvest in the troubled financial markets … to stabilize our economy and insulate Main Street from Wall Street
# Reimburse the taxpayer … through ownership of shares and appreciation in the value of purchased assets
# Reform business-as-usual on Wall Street … strong Congressional oversight and no golden parachutes
Democrats have insisted from day one on substantial changes to make the Bush-Paulson plan acceptable -- protecting American taxpayers and Main Street -- and these elements will be included in the legislation
Protection for taxpayers, ensuring THEY share IN ANY profits
# Cuts the payment of $700 billion in half and conditions future payments on Congressional review
# Gives taxpayers an ownership stake and profit-making opportunities with participating companies
# Puts taxpayers first in line to recover assets if participating company fails
# Guarantees taxpayers are repaid in full -- if other protections have not actually produced a profit
# Allows the government to purchase troubled assets from pension plans, local governments, and small banks that serve low- and middle-income families
Limits on excessive compensation for CEOs and executives
New restrictions on CEO and executive compensation for participating companies:
# No multi-million dollar golden parachutes
# Limits CEO compensation that encourages unnecessary risk-taking
# Recovers bonuses paid based on promised gains that later turn out to be false or inaccurate
Strong independent oversight and transparency
Four separate independent oversight entities or processes to protect the taxpayer
# A strong oversight board appointed by bipartisan leaders of Congress
# A GAO presence at Treasury to oversee the program and conduct audits to ensure strong internal controls, and to prevent waste, fraud, and abuse
# An independent Inspector General to monitor the Treasury Secretary's decisions
Transparency -- requiring posting of transactions online -- to help jumpstart private sector demand
# Meaningful judicial review of the Treasury Secretary's actions
Help to prevent home foreclosures crippling the American economy
# The government can use its power as the owner of mortgages and mortgage backed securities to facilitate loan modifications (such as, reduced principal or interest rate, lengthened time to pay back the mortgage) to help reduce the 2 million projected foreclosures in the next year
# Extends provision (passed earlier in this Congress) to stop tax liability on mortgage foreclosures
# Helps save small businesses that need credit by aiding small community banks hurt by the mortgage crisis—allowing these banks to deduct losses from investments in Fannie Mae and Freddie Mac stocks

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