Hi,
Have people already seen the attached articles published in the no less than 'best in class' newspaper, the FT. I'm quite surprised at the article, appearing at this stage.
I am sure my source is not a hoaxy source.
Selva
Subject: FT Article - Have Citigroup, JP Morgan & Bank of America Collaps ed?
From: monica@uobkayhian.com | This is Spam | Add to Address Book
Date: Tue, 6 Aug 2002 14:01:03 +0800
One more to add to the scary sceanario.
This FT article thinks the big 3 US banks have collapsed and the
Fed is
propping them up. According to Marc Faber on CNBC, Enron and Worldcom
are
pittance compared to these giants.
===================================================
FT Article - Have Citigroup, JP Morgan & Bank
of America Collapsed?
HAVE THE BIG U.S. DERIVATIVES BANKS EXPLODED?
July 27 (EIRNS)--HAVE THE BIG U.S. DERIVATIVES BANKS EXPLODED?
Indications are growing that the top three U.S. derivatives
banks--J.P.
Morgan Chase, Citigroup and Bank of America?have been pushed to, if
not
over, the brink of "technical" bankruptcy by problems in the
derivatives
markets. We say "technical" because the top U.S. banks have long
counted
hundreds of billions of dollars of fictitious assets on their books,
making
them bankrupt in reality, and solvent only by perception.
Both Morgan Chase and Citigroup have shown up with uncanny frequency
as
the top lenders to the current crop of exploding corporations and
are
clearly facing huge losses on their loan portfolios. With corporations
and
individuals going bankrupt at record rates and defaults soaring, the
loan
problems at Morgan Chase, Citigroup and Bank of America go far beyond
what
has publicly surfaced, but their loan problems pale in comparison to
the
dangers lurking in their derivatives portfolio.
J.P. Morgan Chase, the world's largest derivatives bank, is a
prime
example; a loss equivalent to less than 0.2% of its $24
trillion
derivatives portfolio would be enough to wipe out every last penny of
the
bank's equity capital. {EIR} believes that Morgan Chase
actually
collapsed in mid-2001, and is being secretly run by the Federal
Reserve,
similar to the way the Fed took over Citicorp in 1989. Morgan
Chase is
the result of the acquisition of J.P. Morgan & Co. by the bigger
Chase
Manhattan. The deal, which closed on the last day of 2000, has
been an
absolute disaster as measured in ordinary--and therefore
misleading--market
terms.
The market capitalization of the combined Morgan Chase is now less
than
that of Chase alone on the day before the merger, with Morgan (or at
least
its equivalent value) having simply vaporized. This is not
surprising, as
it was likely a bankruptcy at Morgan, and perhaps Chase as well, which
led
to the takeover of Morgan by Chase.
Citigroup may again be under Fed control as well, as rumors of
major
derivatives losses circulate. Citigroup is the result of the 1998
takeover
of Citicorp by Travelers Insurance, creating what is now the largest
bank
in the U.S., with just over $1 trillion in assets and $9
trillion in
derivatives. Former Treasury Secretary Robert Rubin revealed on
July 15
that he was retiring from his position as vice-chairman at the bank,
and
three days later it was announced that Saudi Prince Alwaleed bin
Talal,
Citigroup's largest individual shareholder, had invested another
$500
million in the bank, raising his holding to $10 billion.
Alwaleed, a nephew of Saudi King Fahd, obtained his Initial stake in
the
bank shortly after the Fed took it over in 1989 and began
arranging a
bailout. The latest cash infusion raises suspicion that Alwaleed is
again
performing such a service for Citigroup. Not to be left out is
Bank of
America, whose $620 billion in assets puts it third behind
Citigroup's $1
trillion and Morgan Chase's $713 billion. Bank of America's $10
trillion in
derivatives puts it solidly on the hot seat in any financial crisis,
and it
has also loaned heavily to bankrupt companies. Rumors are flying that
Bank
of America has applied to the Fed for a secret bailout. Banking
sources in
Europe have confirmed that a major derivatives crisis is underway,
centered
around the giant U.S. derivatives banks, Morgan Chase and
Citigroup in
particular. Were one of the big derivatives banks to explode, it
could
overwhelm the Fed's ability to cover up the losses, triggering a
chain
reaction which could blow out the entire global financial system.
The above perspective is included in the cover story for EIR #29,
and in
EIW, in an article by John Hoefle, "Two Years into the Worst
Financial
Crash in History" (available in a2307jph001).
[Source: Financial Times, July 27, 2002]
THERE IS CONCERN OVER THE EFFECT OF AN LTCM-LIKE CRASH iN THE
BANKING
SYSTEM, A FINANCIAL TIMES EDITORIAL, entitled "Where's the risk?"
indicates
today. "There are dangers that institutions take bets on particular
risk
models that turn out to be wrong. Long Term Capital Management
nearly
collapsed in 1998 after the Russian default undermined its
investment
assumptions. Similar mistakes could emerge if others have taken on too
much
bank credit, assuming the extraordinary bubble of the 1990s would
continue
for longer." Bankruptcies in non-banking institutions "rarely pose a
threat
to the financial system," says the article. "Yet banks cannot
insulate
themselves fully from corporate defaults. In many cases, the
riskiest
element of lending cannot be sold to other institutions and
must
therefore be held on the bank's balance sheet. Banks that have
pioneered
derivatives and those trying to enter the market are likely to be
most
exposed to such risks....
So far, such problems have been largely absent. Some 800
derivatives
contracts worth $8 billion have been settled smoothly after Enron. But
more
large corporate collapses could strain to breaking point,
organizations
that have so far coped with the losses. With default rates on
U.S.
corporate bonds at record levels, the pressure is already high."
[Source: FT July 27, 2002, "Goodbye easy money"]
BEWARE THE IDES OF AUGUST, SAYS ANOTHER FINANCIAL TIMES article by
Philip
Coggan. "In the very short term, there is a looming deadline of Aug.
14,
by which time U.S. chief executives must assure the Securities and
Exchange
Commission that their accounts are in order. The fear is that
executives
will use the deadline to indulge in a `kitchen sink' revelation of
all
their corporations' potential bad news." Even the diversion of an Iraq
war
could have effects opposite to the administration's intentions,
says
Coggan: "Investors remain nervous about the scope for U.S. military
action
against Iraq, which could result in a sharp rise in the oil price and
which
could increase the risk of another terrorist attack on the U.S." |
