On Feb 21, 12:08*pm, F. George McDuffee gmcduf...@mcduffee-
associates.us wrote:
distr o trimmed to rec.crafts.metalworking

On Sat, 21 Feb 2009 03:20:26 -0500, "Ed wrote:

snipAnd they're worried that the banks still
have enough poison hidden, off the books, that they can bring down any
bailout anyone could conceive.

snip
-----------------
Indeed, with good reason, and the market over the last few days
is pricing their stocks accordingly. *From what anybody can tell
Chase, Citigroup and BoA are classic zombie banks by any
rational/objective accounting standards [i.e. "mark to market"
asset valuation]. A "burn-down" evaluation is even worse.

Every time another layer is peeled back, more rotten assets are
exposed. *Its not so much that there are no "assets," its just
these are not worth anything.

One example is the large amount of unsecured GM and possibly
Chrysler/Cerberus paper all three are carrying at face value on
their books. *Thus the more progress GM makes on "restructuring
their debt" [code for stiffing their creditors for the most part
and paying them off with worthless stock for what little remains]
the worse it is for these banks. *As there is no way to avoid
writing down the assets when this occurs, this will be a direct
hit on tier 1 capital, which will most likely put the banks below
the minimum regulatory requirement, as is the case anyhow with
"mark to market."

No one knows, not even the banks themselves, how much CDS
counter-party exposure they have on GM/Chrysler loans in addition
to the direct exposure because they can't tell until some one
shows up with a derivative contract and a defaulted GM/Chrysler
note for payment as so much more CDS was written than the debt
outstanding. GM Chrysler are most not likely open about their
debt either, for example how much is GM still on the hook for
Delphi, GMAC, ResCap, Diatech Funding, etc. etc. *Just because
the accountants managed to get the debt off the books doesn't
mean its gone and doesn't need to be repaid.

The banks "off the books" enterprises with horrendous liabilities
such as the "special investment vehicles" and conduits continue
to surface both here and particularly abroad [far, far away from
the regulator's prying eyes], and other claims such as "the good
as cash auction rate securities" continue to mount.

Run, don't walk to the nearest exits.... Whats that -- you say
you'r a tax payer and you can't get out....

Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

Again a good discussion.

I compare the "no lending" situation to a card game.

You know that you are holding a toxic hand of garbage...and know that
your opponents hold at least as bad a hand or worse.

Now would you lend any money to the other players knowing the
likelihood that you lose it?

Of course you wouldn't.

What you will do is hold on to your money and borrow any money your
government...err...I mean your Republican friends...could get for you.

And then hope that you are the last bank standing....

TMT