# US Banks under pressure



## Uncle Festivus (7 January 2008)

Not sure if it's genuine but apparently a customer advisory has been sent out, that Citibank has placed limits on withdrawals, both via wire withdrawals and from New York ATM's (from a scamming scheme??). Could be nothing.

Not sure if the Fed will allow a run on the US banking system without some form of intervention, even if it doesn't become public knowledge to prevent a run, similar to Northern Rock?


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## dhukka (7 January 2008)

Interesting rumour Unc, care to share the source?


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## Uncle Festivus (7 January 2008)

Yes, forgot the link, can't confirm otherwise.

http://www.dailyreckoning.com.au/citibank-trouble/2008/01/07/


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## dhukka (7 January 2008)

Yeah it's a pity there is no source in the Daily Reckoning post either. Could have been just what they said, a fraud protection measure. Interesting timing though, the biggest strain on ATM's is around Christmas / New Year. Seems to be the worst time for banks to be putting restrictions on withdrawls and transfers.


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## KIWIKARLOS (7 January 2008)

mate if I thought that story had any ounce of truth to it i would be down at my bank withdrawing all my funds 

If the biggest bank in the world starts limiting withdrawals and has a run on it we are all screwed :


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## ithatheekret (7 January 2008)

Boy if Citi has wound up standing in knee high crap , then Merrill must be upto their necks in it . 

Citi can be compared to the size of BHP versus RIO , where RIO is the smaller player .

If we start seeing more bad news on Merrill , I will avoid US financial stocks fullstop for a few years .....................

The only financial stocks then for viewing prospects , would be at home and Asia .


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## GreatPig (7 January 2008)

Try here.

And a mention of it here, also with a reference to the above article.

GP


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## numbercruncher (7 January 2008)

These guys havnt even hit the peak of subprime arm resets yet, the best is yet to come!

I read The Fed has some obscure ruling that lets them lend to banks and accept all the risks themselves, might see that in play this year hey ?


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## dhukka (7 January 2008)

I exchanged mails with Michael Shedlock author of Mish's Global Economic Tend Analysis blog who has his finger on the pulse. He seems to think it is much ado about nothing. He knew about the restrictions on transfers 3 weeks ago but said it was placed on individuals using PC's and that if it were affecting large corporates we would have definitely heard something about it by now. 

If you're interested, he had good post on Citi a couple of months back.


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## numbercruncher (7 January 2008)

Yes good read especially the last line ....




> Those focusing on the dividend picture at Citigroup (especially those who do not think that dividend will be cut) are sure focusing on the wrong picture. Citigroup is fighting for its financial life.


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## Smurf1976 (7 January 2008)

dhukka said:


> IHe knew about the restrictions on transfers 3 weeks ago but said it was placed on individuals using PC's and that if it were affecting large corporates we would have definitely heard something about it by now.



I think most will be more concerned about the effects on their personal finances than large corporates. If you can't withdraw you money then, regardless of the reason or who else is affected, that's about as bad as it gets.


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## dhukka (7 January 2008)

Smurf1976 said:


> I think most will be more concerned about the effects on their personal finances than large corporates. If you can't withdraw you money then, regardless of the reason or who else is affected, that's about as bad as it gets.




The reference to corporates is with respect to wire transfers. The original article states individuals had their wire transfers limited to $2,000 per day.  I'd say individuals could probably live with that. On the other hand, that type of restriction placed on corporates would be very disruptive. 

With respect to ATM transctions it appears people could withdraw money however their limit was halved. So someone with a $1,000 limit had it chopped to $500. No doubt inconvenient but bearable.


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## Smurf1976 (7 January 2008)

dhukka said:


> The reference to corporates is with respect to wire transfers. The original article states individuals had their wire transfers limited to $2,000 per day.  I'd say individuals could probably live with that. On the other hand, that type of restriction placed on corporates would be very disruptive.
> 
> With respect to ATM transctions it appears people could withdraw money however their limit was halved. So someone with a $1,000 limit had it chopped to $500. No doubt inconvenient but bearable.



Though you would be completely stuffed if you were setting up your first home, buying a car, wanting to buy shares or had some other reason for wanting to access a lot of cash.


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## Uncle Festivus (8 January 2008)

But why have they done this? Will this be a trend for internet banking? Why line up outside Northern Rock when you can do an electronic transfer? 
Is it time for :fan?


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## theasxgorilla (8 January 2008)

numbercruncher said:


> Yes good read especially the last line ....




Interesting. I feel little sympathy for Citigroup.  I remember getting a low interest credit card through them once, intending to use the low rate on the balance transfer for as long as possible and when I refused to use the card for Christmas shopping that year they slugged me with a $250 (approx) once off, miscellaneous fee.  Cumuppence anyone?

ASX.G


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## Uncle Festivus (8 January 2008)

An interesting article/opinion

http://www.minyanville.com/articles/C-jpm-bac-WB-wfc/index/a/15423



> Forget about support and resistance levels, retracements, entry points/stops, overbought/oversold, and all the other technical stuff, and just look at the picture.  The stocks of the largest financial institutions on the planet, *Citigroup* (C), *Bank of America* (BAC), *Wachovia *(WB), *Wells Fargo* (WFC), *JP Morgan Chase* (JPM) – the institutions where money for our finance-based economy lives – are showing extreme distress, more so than at any other time including ’02, when the market was in free fall; and back then, debt derivatives (CDS) outstanding were a fraction of what exists today.  What’s even more worrisome is that the CDS on these banks’ debt seem to be confirming such level of distress.


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## ithatheekret (9 January 2008)

Just listened to Hank on CNBC , tripped on his tongue from the onset ......

" we have a structure problem with benefits " 

" he thinks , banks should take on more losses " 
(now I get it  ...... that's why the save the banks plan came out huh .)

he didn't say will or must , just , he thinks oh and he can't use red pens .

.......... best darn Forrest Gump impersonation I've seen in awhile .

Nice bit of side spin on the 2/28's , partially spat it out that they still don't have *ALL* the data from the banks and mortgage lenders , good save by the team , in a we won't go there moment .

Clearly a worried man ........ and then finished it all off with he believes in the USD and the finale was a team back pat on the bench moment .

Clearly the winner here was Austar , I mean I actually paid to hear that crap .

Kudlow can't see recession and Jims got a recession proof stock ....... oxymorons or less oxy .

Bread and butter elections ..........


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## rub92me (15 January 2008)

Rumours for Citigroup are not looking good. 

Citigroup write-offs could reach $24 billion

By MarketWatch
Last update: 3:52 a.m. EST Jan. 14, LONDON (MarketWatch) -- Citigroup may write off up to $24 billion over subprime- and credit-related losses, putting as many as 20,000 jobs at risk, according to a published report on Monday.
Citi also may cut its dividend payment, CNBC reported, without attribution. 
Citigroup (C:Citigroup, Inc  Last: 29.06+0.50+1.75%) may raise as much as $15 billion from selling stakes to foreign and domestic investors, the report said. 
The CNBC report, as well as one from The Wall Street Journal, pointed to some of those shares being sold to Saudi Arabia Prince Alwaleed bin Talal, already Citi's largest shareholder.


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## wayneL (18 January 2008)

Another Jim Cramer rant... on financials doom and a few home truths.

http://www.cnbc.com/id/15840232?video=624755222&play=1 

Cramer joins the non-muppets.


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## ithatheekret (18 January 2008)

There go the dreams for a couple more years stateside ........ we know what's next .


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## wayneL (18 January 2008)

ithatheekret said:


> There go the dreams for a couple more years stateside ........ we know what's next .



But... but... but.... Uncle Ben said no recession!!

http://www.marketwatch.com/news/sto...x?guid={F10569DE-6604-4C5B-85A0-4431A94C88AA}

Wahhhhh!


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## ithatheekret (20 January 2008)

I've been looking back on a few market announcements , news spruiks and the likes . I've caught Merrills by the short and curlies a beauty .

Note , they have called a $14B write off previously and Nelson Chai the CFO directed to the market that the issue was covered by bond insurers , well that's has to be rot , because the 2006 asset back securities were written up just over $30B , this has not been completely written down and the latest figures give no clue as to where the units stand , yet alone the charge on them .

I can see negative credit adjustable around $3B , which is obviously the hedging costs , but the rest is plainly not in sight . I haven't even got to commercial holdings yet .............

Q4 writedowns are stated at $16.7B , that's around $24/$25B accounted for , and I still don't get a correct total from previous statements and posted results . I still can't see between $5-$8B in stated sub-prime issues , and there has to be more , as previously stated I haven't got to commercial property yet  . 

The last market call was a good play on words for my liking , the short position taken to hedge the book is more hope than anything . It first needs to take into account that the short is in safe hands .

This is going to be good , looks like a nice bounce , more bad news , then more bad news from Merrills . For a stock that's lost a third of it's market cap and is now the smallest on the block ........... sheesh . The blocks gotten smaller too.

No more bad news was declared , if more comes out , it's a hanging offence .


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## ithatheekret (20 January 2008)

*Now for commercial property problems .
* _edited for spelling errors by myself sorry the Australian_

http://www.theaustralian.news.com.au/story/0,25197,23069027-36375,00.html


*Crunch hits US commercial property *

Jennifer S. Forsyth, Michael Corkery and Tamara Audi | January 18, 2008 
THE credit crunch roaring through the US residential real estate market is starting to bite commercial projects, too.

Ian Bruce Eichner, the developer of a twin-tower casino resort in the heart of Las Vegas, on Wednesday defaulted on a $US760 million ($864 million) loan from Deutsche Bank after he failed to get refinancing. 

The default on the loan supporting the $US3 billion Cosmopolitan Resort Casino is a signal of trouble for Mr Eichner, who gained notice during an earlier real estate downturn in the early 1990s when he lost several projects in New York City. 

Owners and developers of some of the country's choicest properties are having trouble refinancing shorter-term loans they received during the boom days. 

Recent casualties include Centro Properties Group of Australia, one of the largest owners of shopping centres in the US. Its stock has sunk because it cannot refinance $US3.4 billion in short-term debt. Also, New York developer Harry Macklowe, who bought a group of Manhattan office buildings last year at the top of the market, is struggling to repay some $US7 billion in debt that comes due in February. Mr Macklowe just put his prized General Motors Building in central Manhattan on the block. 

During the boom, investment banks made loans for both commercial and residential properties, quickly packaged them into securities and sold them to investors. Five months ago, the market for securities backed by sub-prime home loans seized up as defaults by these less creditworthy borrowers surged. The sub-prime problem is at the heart of huge write-downs on Wall Street, where the toll is set to pass $US100 billion. 

Now the same system is breaking down in commercial property, because few investors want securities backed by loans to commercial real estate owners. Moody's Investors Service warned last week that the corporate default rate for the construction and building industry could reach 12 per cent this year and predicted a 6 per cent default rate in the hotel, gaming and leisure industries. 

Mr Eichner yesterday received a notice of default on the $US760million loan, which came due early on Wednesday. He had failed to obtain refinancing to pay back the loan. The default triggered technical defaults on additional debt totalling $US175 million. 

Mr Eichner may still succeed in finding new investors, something he has been struggling to do for weeks. Work is continuing on the 3000-room casino and hotel, which is scheduled to open in late 2009, according to a spokesman for the casino. He said he didn't know whether it would be halted by the default action. 

Mr Eichner released a statement blaming "current challenges within the real estate and debt capital markets which are out of our control". He said he was working with Deutsche Bank and Merrill Lynch on raising new equity. "This action by our lender comes as no surprise," he said. Deutsche Bank and Merrill Lynch declined to comment. 

The Cosmopolitan includes 2184 "condo hotel" units, which are condominiums that typically get rented out as hotel rooms. During the housing boom, speculators in cities such as Las Vegas, Miami and San Diego snapped up these units because they promised to rise in value while also producing rental income. 

Lately, investors have soured on condo hotels. In Las Vegas, a group of buyers are suing a development partnership behind the Signature condo-hotel project, claiming room rates aren't as high as promised. A spokesman for MGM Mirage, now the operator of the project, denied promises were made about the rates. 

The Cosmopolitan spokesman said 84 per cent of the condo-hotel units had been sold. "It's a successful offering," he said. 

The Cosmopolitan is designed to include a high-rise hotel tower, to be managed by Global Hyatt as a Grand Hyatt, as well as another tower with the condo-hotel units. 

Mr Eichner's problems come as Las Vegas is in the midst of an unprecedented construction boom that is affecting nearly every corner of the Strip, the central thoroughfare that is lined with hotels and casinos. 

The Venetian, a lavish casino hotel, is holding a grand opening this week of a $US2 billion addition called the Palazzo. MGM Mirage's massive CityCentre project promises to transform a large chunk of the Strip with residential properties and non-casino luxury hotels. Some $US35 billion of new construction is planned or under way in Las Vegas, according to the Las Vegas Convention and Visitors Authority. That is expected to produce about 40,000 new hotel rooms by 2012. 

However, some projects are being delayed or getting cancelled as financing dries up and the housing market slows. Plans to renovate the legendary Las Vegas Tropicana are on hold after the casino's owner, Kentucky based Columbia Sussex, had troubles with a casino in Atlantic City. 

Mr Macklowe and Mr Eichner both have histories of living on the edge. Mr Macklowe lost the Hotel Macklowe near Times Square and at least two other properties in the real estate bust of the early 1990s, while Mr Eichner lost a series of buildings, including two New York skyscrapers. His saga was portrayed in a 1993 book by Jerry Adler: High Rise: How 1000 Men and Women Worked Around the Clock for Five Years and Lost $200 Million Building a Skyscraper. 

Mr Eichner began his comeback in Miami with a South Beach condominium project that was recently completed. 

Then he turned his attention to Las Vegas. Unlike many projects on the Strip that raise money via public stock or bond markets, the Cosmopolitan is privately owned and financed.


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