Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: MythMan who wrote (384395)	4/20/2009 11:41:59 AM
From: Trumptown	4 Recommendations Read Replies (2) \| Respond to of 436258

<<Speaking in Trinidad on Sunday, President Barack Obama said that he'll require "accountability" for the U.S. banks receiving bailout money, and that he would not put taxpayer money into a "black hole.">> Too late, it's already gone!

To: MythMan who wrote (384395)	4/20/2009 5:21:58 PM
From: Giordano Bruno	Respond to of 436258

JP Morgan Sees $400 Billion More In Bank Losses Posted by Tyler Durden at 11:08 AM A report by JP Morgan analyst Matthew Jozoff is putting the spotlight back on the banks, where lately everything has been seen as rosy to quite rosy. Jozoff disagrees and in fact sees another $400 billion in losses as a result of the continuing credit deterioration, and very likely major new capital infusions needed. Says Jozoff: We find that TALF 2.0 is likely to benefit securities with the least amount of writedowns and lowest haircuts —fixed rate bonds and long-reset hybrids should have the most upside. We estimate that banks will experience about $400bn more in losses, and stress tests will reveal the need for more capital for certain institutions. Among other things Jozoff points out is that banks will need to set aside an additional $215 billion in reserves against holdings of $2.1 trillion in residential loans not packaged into securities. As banks have taken only $85 billion in loss allowances as of Q4 2008, and Jozoff estimates the total expected residential losses at $300 billion (based on 12-16% losses on the total number mentioned above), banks will be hard pressed to fund this capital deficiency, especially now that each and every bank is rushing to repay the TARP that "it never needed in the first place." Continues Jozoff: We expect that total losses could reach $1.3 trillion. Banks so far have taken writedowns and losses of $920bn, so they are roughly 70% through with total losses. Capital raised to date ($900bn, much of which came from governments worldwide) has been close to the amount of losses realized to date. Given the amount of losses still to come, we believe the system will need more government capital (although healthier institutions may not need more and may try to raise capital from the private sector). Bank earnings will also be a source of capital and some estimate that over the next two years, the largest institutions can see around $200bn of earnings (pre-tax, pre-provisions). Going forward, the bulk of bank losses will come from loan books and less from securities portfolios, which have already gone through large writedowns. Most bank loans are not required to be marked-to-market, but, rather, reserves are set aside for expected loan losses to be realized in the next year or so. That is why reserve coverage ratios (reserves vs non-current loans) have plunged. In other words non-current loans are growing at a faster pace than reserves have built-up. Even though banks don’t have to reserve for total cumulative losses today, the question is how much more reserves will they need over the next few years to cover loan losses. In the case of residential loans, if total expected losses are $300bn and banks have set aside $85bn in reserves for these loans, we estimate that there could be over $200bn left to go, or about half of total projected losses across all assets. Regardless of the validity of earlier "leaked" stress tests, this is likely a major sticking point for the administration which is currently beating its head on how to sweep these potential large future losses under the rug.