Jim, the big-caps are on a razors edge, and it seems to me there are more accounting problems in the pipeline.
The upside is that my little ratdogstocks have for the most part clean & transparent books, they just don't have the willful deceit that these ego maniacs at the Enron's & TYCO's of the world do.
And, accounting hi-jinx needs to be met with a powerful kick to the balls of these companies that practice this b/s..And it looks like they are getting hit pretty good.
BTW, the AFC win yesterday indicates a down market, if you can believe anything the wizards on Wall Street say.
How long before we have to bail out Argentina, and worse, send troops to restore oreder??>>
Argentina Loans Plan May Wreck Banks, Analysts Say (Update2)
By Helen Murphy and John Lyons
Buenos Aires, Feb. 4 (Bloomberg) -- Argentina's decision to convert all dollar deposits and loans into pesos at below-market exchange rates will saddle banks with billions of dollars of losses and may lead to their collapse, analysts said.
President Eduardo Duhalde, who has faced almost daily protests over a freeze on deposits, yesterday ordered lenders, such as Banco de Galicia y Buenos Aires SA and Citigroup Inc.'s Argentine unit, to turn dollar loans into pesos at a rate of one-to-one and dollar deposits at 1.4, below the 1.95 rate at private exchange houses Friday. The president said he would favor middle class savers and companies over the banks as he tries to revive the economy.
``They are passing through the complete burden of the devaluation to the banking sector,'' said Siobhan Manning, a sovereign debt strategist with Caboto USA, which has managed the sale of Argentine bonds. ``They don't recognize the fact that banking system is on the verge of collapse.''
Duhalde also scrapped a dual exchange rate that fixed the peso at 1.4 per dollar for imports and exports while allowing it to float freely elsewhere. Moody's Investors Service said turning deposits and loans into pesos at different rates would make banks in Argentina insolvent.
Covering Losses
Santander Central Hispano SA, the No. 1 Spanish lender and owner of Argentina's fourth-largest bank, fell 52 cents, or 5.4 percent, to 9.10 euros since Duhalde devalued the currency Jan. 7. Banco Bilbao Vizcaya Argentaria SA, Spain's second-biggest bank and owner of Argentina's No. 5 lender, fell 71 cents, or 5.1 percent, to 13.14 euros.
Santander has already set aside 1.29 billion euros ($1.1 billion) to cover losses from investments in Argentina, more than the book value of its Banco Rio de la Plata unit. FleetBoston Financial Corp. lowered fourth quarter earnings by $628 million, the most of any U.S. bank, as it wrote off loans in Argentina.
Economy Minister Jorge Remes Lenicov announced the plan in a televised news conference, saying the government would seek to help banks cover losses by issuing a bond. He gave no further details. The government will also ask banks to convert $50 billion of sovereign loans into pesos one-to-one.
Those loans were issued last year in exchange for sovereign bonds in a restructuring organized after the government of former President Fernando de la Rua conceded it could no longer pay its bills.
``Argentina is bankrupt,'' Remes Lenicov said. ``We believe that this cost in the future will help us unlock the present.''
Funds for Banks
The economy minister said the government will help banks finance the billions of dollars of losses they face with the savings it reaps by converting its own sovereign debt into pesos. Argentina is also planning to tax oil exports and use the funds to prop up the banks.
``I think the banks have been getting away with murder,'' said Walter Molano, head of emerging markets at BCP Securities in Greenwich, Connecticut. ``Argentina needs to give the banks an ultimatum: provide liquidity as promised or lose the franchise to operate. Then the government can nationalize the banks and privatize them again some time later.''
Investors expect the peso to plunge. Dollars for delivery in six months cost 4.2 pesos, according to J.P. Morgan Chase & Co. prices. Under the new package of measures, the peso will also float freely for imports and exports.
Seeking Aid
The International Monetary Fund has said Argentina must let the peso float before it will consider new economic assistance. Argentina is seeking as much as $20 billion in loans from the IMF and other international lenders.
``If we have international support, and I'm convinced we will have it, the exit from this crisis will be accelerated,'' Remes Lenicov said.
The floating currency will make Argentina's manufacturers, farmers and ranchers more competitive and lead the country out of a recession that began in late 1998 and has left more than 18 percent of the workforce unemployed, Remes Lenicov said. More than 40 percent of the country lives in poverty, he said.
The government will print 3.5 billion of pesos to add to the 10.9 billion of peso notes and coins in circulation to finance Argentina's deficit. Remes Lenicov predicts inflation of 15 percent in the 2002 budget Duhalde will send to congress Tuesday.
``Floating the exchange rate is positive, but the central bank at this point also needed to reassure the market that it wasn't going to print loads of money,'' said Juergen Odenius, global head of emerging markets strategy at Commerzbank Securities in London. ``We don't see any support for the peso.''
Frozen Assets
Duhalde, the fifth president since late December, needed to relax banking limits to prevent the kind of riots that left as many as 27 people dead and toppled de la Rua. He also needed to respond to a Supreme Court ruling on Friday that the deposit freeze was unconstitutional.
Duhalde froze more than a third of the nation's $67 billion deposits after taking office, strengthening earlier restrictions designed to prevent a run on the banks and stop a plunge in the peso. The restrictions halted most commerce and pushed the economy, which analysts predict may contract as much as 10 percent this year, deeper into recession.
Under the new measures, depositors will be able to withdraw more of their savings from banks. Also, banks may be able to issue certificates to holders of frozen term deposits. Those certificates could be used to purchase expensive items such as homes or cars.
``Local banks probably will shut their doors if these measures go forward, or if the deposits are unfrozen under the Supreme Court ruling,'' said Antonio Hormigos, a fund manager at Ahorro Corporacion Gestion SA in Barcelona, which controls 1.2 billion euros. ``The situation just keeps getting worse for the financial sector, and the government is getting weaker.'' |
