contd.... Dexia bank gets $9.2B bailout from governments, shareholders

FSA quit asset-backed investments last month after setting aside $936 million in the second quarter and securing a $5 billion unsecured line of credit from Dexia to cover potential losses that will now be converted into a lower-risk credit facility.

Dexia will also inject up to $500 million to cover any extra losses at FSA exceeding the $316 million recognized at the end of June. That caps Dexia's liability for the unit and prevents it selling off investments cheaply.

Dexia was also hurt by the collapse of U.S. investment bank Lehman Brothers, saying it expects that to cause it 350 million euros ($512 million) in losses
...

Dexia bank gets multi-nation $9.2B bailout
Tuesday September 30, 11:12 am ET
By Aoife White, AP Business Writer
Dexia bank gets $9.2B bailout from governments, shareholders


BRUSSELS, Belgium (AP) -- Dexia became the second Belgian bank this week to get a government and shareholder bailout Tuesday when Belgium, France and Luxembourg said they would inject almost $9.2 billion to keep it afloat.
Dexia's CEO Axel Miller -- who immediately stepped down -- said the bank had no real option to asking for state help because "our feeling was clearly that this week is going to be very tense on the market and we might be ... one of the banks that might be put under pressure."

Dexia, a French-Belgian specialist in lending to local governments that ran up huge losses in its U.S. operations, closed nearly 30 percent lower Monday -- triggering emergency talks with government officials.

This came barely two days after Belgium, the Netherlands and Luxembourg moved to save Fortis bank on Sunday, pumping 11.2 billion euros ($16.4 billion) after its shares shrank by a fifth Friday. Traders saw the bank as overleveraged.

Markets clearly welcomed the bailout, with Dexia's share price rallying nearly 8 percent in Paris trading and Fortis rising 9 percent in Amsterdam on Tuesday afternoon.

Dexia said the extra money would allow it remain "one of the better capitalized banks in Europe" even if market volatility further devalues securities, equities and other products it holds.

Belgian authorities and Belgian shareholders said in a statement that they would invest 3 billion euros in the bank, while the French government and its investment arm CDC -- which holds just over 10 percent of Dexia -- will invest another 3 billion euros. Luxembourg will add 376 million euros.

For Dexia, the Belgian and French investments come as a capital increase that will issue new shares at $9.90 each, while the Luxembourg government will get newly issued convertible bonds.

In return, the bank promised to improve the way it is run -- with Miller and chairman Pierre Richard saying they would resign and governments demanding "significantly" better corporate governance.

Miller said the company had been hit by "very nervous markets" and was partly a victim of Fortis' troubles.

"I don't know of many instances recently where investors have been found willing to put additional equity in banks," he told reporters.

"We couldn't have foreseen just a week before last weekend that a major Belgian bank would be bailed out or that you'd have over the course of one single weekend signals that three, four, five banks across Europe were starting to have problems," he said.

He said banks needed an urgent response from U.S. authorities debating how to proceed after the U.S. House rejected a $700 billion plan to buy up bad debt to unfreeze lending.

"The management of the crisis has at times been a little chaotic and the markets just don't accept that," he said. "It's time for regulators globally to get together to find some kind of global solutions to a situation where banks essentially are not lending to each other anymore."

Belgium is splitting its share of the bailout between the federal and regional governments, with 1 billion euros ($1.43 billion) each from the federal state, the three Belgian regions combined and shareholders Gemeentelijke Holding NV, Arcofin CV and Ethias.

The French government will invest 1 billion euros, with its state investment arm Caisse des Depots et Consignations injecting 2 billion euros. This will give France a 28-percent stake in Dexia which is the main lender to French local governments.

Dexia ran into trouble with its U.S. bond insurance unit FSA, which was hit hard by the subprime housing crisis, which saw loans made to people with poor credit drop sharply in value on worries that borrowers could not make costly repayments. Holders of bonds based on those mortgages suffered heavy losses.

contd.....

Mitsubishi UFJ buys 21 pct stake in Morgan Stanley
Monday September 29, 9:40 am ET
Morgan Stanley gets $9 billion stock investment from Mitsubishi UFJ of Japan


NEW YORK (AP) -- Japan's Mitsubishi UFJ Financial Group says it is investing $9 billion in Morgan Stanley for a 21 percent stake in the U.S. investment bank.
Mitsubishi UFJ said Monday it will buy nearly 10 percent of Morgan Stanley's common stock for $3 billion, and $6 billion in preferred stock.

Morgan Stanley, along with Goldman Sachs Group Inc., had been one of the two remaining independent Wall Street investment banks until the two recently applied to become commercial banks that take deposits.

Wall Street is in a state of upheaval after poor investments in mortgage-backed securities that have led the U.S. government to propose a $700 billion rescue plan for the nation's banks.



...

contd... Fortis reshaped by government bailout

The deterioration in the bank's portfolio is noteworthy, since few European banks have gone as far in revealing such woes, and analysts fear they will eventually have to do so.

Dierckx said he personally thought the CDOs were worth more, but conceded that this is their current market value.

Fortis' key misstep was participation in a three-bank consortium led by Royal Bank of Scotland PLC that acquired ABN Amro in a euro70 billion ($102.5 billion) deal that was the largest takeover in the history of the banking industry.

"If you look at some of the decisions that were taken in the past, then you can say that probably they were done at the wrong moment," Dierckx said.

...

Now another fall Fortis bailout
Fortis reshaped by government bailout
Monday September 29, 10:19 am ET
By Toby Sterling, AP Business Writer
Belgium, Netherlands, Luxembourg pour billions into troubled bank Fortis


AMSTERDAM, Netherlands (AP) -- Shares of troubled bank Fortis NV slid again Monday despite a euro11.2 billion ($16.4 billion) government bailout, amid growing signs European banks have been hit harder by the U.S. financial crisis than they have been willing to admit.
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Belgium, the Netherlands and Luxembourg agreed late Sunday to the cash injection to avert a run on Fortis, taking a 49 percent stake in exchange and demanding Fortis resell the share of ABN Amro it bought a year ago -- the very decision that brought about all its troubles.

Insolvency fears caused the company's shares to tumble more than 20 percent Friday to their lowest level in 15 years. After a short-lived rally at the open Monday they fell again, and were down 6.9 percent to euro4.83 ($6.93) in Amsterdam -- less than a fifth of what they were worth before the ABN buy.

At the same time Fortis was thrown a lifeline and a bailout agreement appeared near in the U.S., bank shares around Europe were groaning under a raft of bad news.

Germany's second largest commercial property lender Hypo Real Estate Holding AG announced it had received an emergency line of credit from other banks estimated at between euro25 billion and euro30 billion ($37 billion to $44 billion); Britain announced the nationalization of lender Bradford & Bingley, taking over its 50 billion pound ($91 billion) mortgage and loan portfolio; and shares in French-Belgian bank Dexia SA, a lender to local governments, fell nearly 30 percent on speculation it is preparing an emergency share issue.

Fortis, with headquarters in Brussels, Belgium, and Utrecht, Netherlands, is Belgium's largest retail bank, while ABN Amro is the largest in the Netherlands.

It paid euro24 billion for its share of ABN in October 2007, and said prior to Sunday's bailout it needed to raise around euro5 billion ($7.3 billion) in cash to maintain financial ratios as it integrated ABN's Dutch retail operations next year.

Fortis had insisted it could meet that shortfall by selling other assets, but analysts were increasingly skeptical as there are few buyers in the market and many sellers.

Traders too, appeared to think the bank was over-leveraged. The bank's total market capitalization is around euro12.1 billion ($17.5 billion) -- half what it paid for ABN.

Nout Wellink, the head of the Dutch central bank, said the U.S. financial crisis was partly to blame.

"What is happening in the U.S. has most certainly had an impact on the financial sector in the rest of the world," he told reporters. "Due to rumors, I have to say, Fortis became a bank in a special position."

Fortis said Monday it would be left with excess capital of euro9.5 billion ($13.8 billion) after its transformation. However it noted that to the extent ABN Amro's retail operations fetch less than euro12 billion ($17.4 billion), capital would be depleted.

"I am very happy to have this solvency," Fortis CEO Filip Dierckx said at a news conference in Brussels on Monday.

He declined to set a deadline for the ABN stake sale, and declined comment on a buyer. Belgian Finance Minister Didier Reynders has named ING Groep NV and BNP Paribas SA as interested.

Fortis said it expected to write down euro5 billion ($7.3 billion) worth of value destroyed in the third quarter, including eye-catching losses on its derivatives portfolio.

The company said that it has written down 78 percent of the value of the "collateralized debt obligations," or CDOs, it wrote itself. CDOs are packages of loans such as mortgages, bundled and sold like bonds.

contd.....

contd... Citigroup to buy Wachovia banking operations

But the government's proposed $700 billion bailout plan could prove to be the deal's silver lining.

While the plan broadly aims to prevent banks from profiting on the sale of troubled assets to the government, there is an exception made for assets acquired in a merger or buyout, or from companies that have filed for bankruptcy.

This detail could allow Citigroup to sell toxic mortgages and other assets it gained from Wachovia for a higher price than the bank actually paid for them.

The Wachovia deal caps a wave of unprecedented upheaval in the financial sector in the past six months that has redefined the banking industry, starting with the government-led forced sale of Bear Stearns Cos. to JPMorgan in March.

The failure of IndyMac Bancorp in July reignited investors' fears about the stability of the financial sector, which led to the eventual takeover of struggling mortgage lenders Fannie Mae and Freddie Mac.

Earlier this month, officials seized both Fannie and Freddie, temporarily putting them in a government conservatorship, replacing their chief executives and taking a financial stake in the mortgage finance companies.

After U.S. regulators made it clear that they would not bail out struggling investment bank Lehman Brothers Holdings Inc., rival Merrill Lynch & Co. arranged a hasty deal to be bought by Bank of America Corp. for $50 billion in stock.

Lehman Brothers was subsequently forced to declare bankruptcy, the largest ever in the United States. Investor concerns quickly turned to American International Group Inc., the nation's largest insurer. Staving off a failure that could have sent shock waves throughout the global markets, the federal government injected an $85 billion emergency loan into the insurer.

Just days later, the government seized Seattle-based Washington Mutual, marking the largest bank failure in U.S. history. WaMu's deposits and assets were acquired by JPMorgan for $1.9 billion.

These events have now culminated in extraordinary moves by the federal government to try to fix the financial crisis that began more than a year ago. Lawmakers are to vote Monday on an unpopular $700 billion plan to rescue troubled financial companies.

Wachovia's problems stem largely from its acquisition of mortgage lender Golden West Financial Corp. in 2006 for roughly $25 billion at the height of the nation's housing boom. With that purchase, Wachovia inherited a deteriorating $122 billion portfolio of Pick-A-Payment loans, Golden West's specialty, which let borrowers skip some payments.

This summer, Wachovia reported a $9.11 billion loss for the second quarter, announced plans to cut 11,350 jobs -- mostly in its mortgage business -- and slashed its dividend. Wachovia also boosted its provision for loan losses to $5.57 billion during the second quarter, up from $179 million in the year-ago period.

AP Business Writers Jennifer Malloy Zonnas and Madlen Read in New York contributed to this report.



...

AP
Citigroup to buy Wachovia banking operations
Monday September 29, 10:15 am ET
By Sara Lepro, AP Business Writer
Citigroup will buy Wachovia's banking operations; FDIC says Wachovia did not fail


NEW YORK (AP) -- In the latest byproduct of the widening global financial crisis, Citigroup Inc. will acquire the banking operations of Wachovia Corp. in a deal facilitated by the Federal Deposit Insurance Corp.
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Citigroup will absorb up to $42 billion of losses from Wachovia's $312 billion loan portfolio, with the FDIC covering any remaining losses, the government agency said Monday. Citigroup also will issue $12 billion in preferred stock and warrants to the FDIC.

The deal greatly expands Citigroup's retail outlets and secures its place among the U.S. banking industry's Big Three, along with Bank of America Corp. and J.P. Morgan Chase & Co. But it comes at a cost -- Citigroup said Monday it will seek to sell $10 billion in common stock and slashed its quarterly dividend in half to 16 cents to shore up its capital position.

The agreement comes after a fevered weekend courtship in which Citigroup and Wells Fargo & Co. both were reportedly studying the books of Wachovia, which suffers from mounting losses linked to its ill-timed 2006 acquisition of mortgage lender Golden West Financial Corp.

Wachovia, like Washington Mutual Inc., which was seized by the federal government last week, was a big originator of option adjustable-rate mortgages, which offer very low introductory payments and let borrowers defer some interest payments until later years. Delinquencies and defaults on these types of mortgages have skyrocketed in recent months, causing big losses for the banks.

The FDIC asserted Monday that Wachovia did not fail, and that all depositors are protected and there will be no cost to the Deposit Insurance Fund.

Federal Reserve Chairman Ben Bernanke, in a statement Monday, said he supports the "timely actions" taken by the FDIC "which demonstrate our government's unwavering commitment to financial and economic stability."

Treasury Secretary Henry Paulson also welcomed the sale of Wachovia to Citigroup, saying it would "mitigate potential market disruptions." Paulson said he agreed with the FDIC and the Fed that a "failure of Wachovia would have posed a systemic risk" to the nation's financial system.

"As I have said before, in this period of market stress, we are committed to taking all actions necessary to protect our financial system and our economy," Paulson said.

As details of its takeover unfolded, Wachovia shares plunged 91 percent to 94 cents. The stock had closed Friday at $10, down 74 percent for the year.

Now that a deal for Wachovia is complete, the most troubled of the nation's largest financial institutions have been dealt with. However, the FDIC estimated there were 117 banks and thrifts in trouble during the second quarter, the highest level since 2003. And that number is likely to have increased during the third quarter.

With the acquisition of Wachovia, Citigroup has reclaimed its title as the biggest U.S. bank by total assets. Including Wachovia, the bank now has assets of $2.91 trillion, as of June 30. That could change, however, as Citigroup shrinks its balance sheet, a decision Chief Executive Vikram Pandit made in May to rid the bank's books of risky debt.

In terms of current market capitalization, Bank of America Corp. remains the largest U.S. bank, followed by JPMorgan Chase & Co. in second and Citigroup in third place.

Just a short time ago, Citigroup was under the scrutiny of investors who worried about the possibility of its collapse given its massive exposure to mortgage-backed securities. The New York-based bank has not turned a profit for three straight quarters, and lost a total of $17.4 billion during that period after writing down its assets by about $46 billion. That's the most write-downs of any U.S. bank.

contd.....

I have noticed on my terminal that 52 week highs and lows Data has been washed off. No detail is available on the terminal as it seems the game now will start from the square root zero level again. Rupee depreciation is an eyewash as the currency trading cannot be started by showing the Dollar in weak position. Rupee will again appreciate gradually and may go the same level of 36-37 again in the medium term. Political parties too withdraws money from the market as and when the elections come. harish sharma...

Dear IFCIrocky, After this turmoil in US and the recent bailout package approved by senate and house of rep. we have not seen any rally in the DowJones. Instead more weakness is observed since henceforth we would see US companies posting negative numbers in the coming QTRs. Now the worriesome factors are whether this turmoil spreaded to europe or not or Japan is too critical or not.....? if this has contented only to US then emerging markets may start getting consoldation and value based equities would recover most especially PSUs banks. Moreover we are on the verge of higher interest rates and now inflation too is showing easiness. If our RBI start reducing rates in the next couple of months then our markets would recover the most and in rapid manner. Thereon we would see the De-coupling between the emerging economies and the devloped economies. Equities may take more time to gain the confidence of the investors that has been shaken badly. harish sharma Delhi 05102009. ...

contd.... Dexia bank gets $9.2B bailout from governments, shareholders FSA quit asset-backed investments last month after setting aside $936 million in the second quarter and securing a $5 billion unsecured line of credit from Dexia to cover potential losses that will now be converted into a lower-risk credit facility. Dexia will also inject up to $500 million to cover any extra losses at FSA exceeding the $316 million recognized at the end of June. That caps Dexia's liability for the unit and prevents it selling off investments cheaply. Dexia was also hurt by the collapse of U.S. investment bank Lehman Brothers, saying it expects that to cause it 350 million euros ($512 million) in losses ...

Dexia bank gets multi-nation $9.2B bailout Tuesday September 30, 11:12 am ET By Aoife White, AP Business Writer Dexia bank gets $9.2B bailout from governments, shareholders BRUSSELS, Belgium (AP) -- Dexia became the second Belgian bank this week to get a government and shareholder bailout Tuesday when Belgium, France and Luxembourg said they would inject almost $9.2 billion to keep it afloat. Dexia's CEO Axel Miller -- who immediately stepped down -- said the bank had no real option to asking for state help because "our feeling was clearly that this week is going to be very tense on the market and we might be ... one of the banks that might be put under pressure." Dexia, a French-Belgian specialist in lending to local governments that ran up huge losses in its U.S. operations, closed nearly 30 percent lower Monday -- triggering emergency talks with government officials. This came barely two days after Belgium, the Netherlands and Luxembourg moved to save Fortis bank on Sunday, pumping 11.2 billion euros ($16.4 billion) after its shares shrank by a fifth Friday. Traders saw the bank as overleveraged. Markets clearly welcomed the bailout, with Dexia's share price rallying nearly 8 percent in Paris trading and Fortis rising 9 percent in Amsterdam on Tuesday afternoon. Dexia said the extra money would allow it remain "one of the better capitalized banks in Europe" even if market volatility further devalues securities, equities and other products it holds. Belgian authorities and Belgian shareholders said in a statement that they would invest 3 billion euros in the bank, while the French government and its investment arm CDC -- which holds just over 10 percent of Dexia -- will invest another 3 billion euros. Luxembourg will add 376 million euros. For Dexia, the Belgian and French investments come as a capital increase that will issue new shares at $9.90 each, while the Luxembourg government will get newly issued convertible bonds. In return, the bank promised to improve the way it is run -- with Miller and chairman Pierre Richard saying they would resign and governments demanding "significantly" better corporate governance. Miller said the company had been hit by "very nervous markets" and was partly a victim of Fortis' troubles. "I don't know of many instances recently where investors have been found willing to put additional equity in banks," he told reporters. "We couldn't have foreseen just a week before last weekend that a major Belgian bank would be bailed out or that you'd have over the course of one single weekend signals that three, four, five banks across Europe were starting to have problems," he said. He said banks needed an urgent response from U.S. authorities debating how to proceed after the U.S. House rejected a $700 billion plan to buy up bad debt to unfreeze lending. "The management of the crisis has at times been a little chaotic and the markets just don't accept that," he said. "It's time for regulators globally to get together to find some kind of global solutions to a situation where banks essentially are not lending to each other anymore." Belgium is splitting its share of the bailout between the federal and regional governments, with 1 billion euros ($1.43 billion) each from the federal state, the three Belgian regions combined and shareholders Gemeentelijke Holding NV, Arcofin CV and Ethias. The French government will invest 1 billion euros, with its state investment arm Caisse des Depots et Consignations injecting 2 billion euros. This will give France a 28-percent stake in Dexia which is the main lender to French local governments. Dexia ran into trouble with its U.S. bond insurance unit FSA, which was hit hard by the subprime housing crisis, which saw loans made to people with poor credit drop sharply in value on worries that borrowers could not make costly repayments. Holders of bonds based on those mortgages suffered heavy losses. contd.....

HI Look at the way US actions !! 700billions being released to protect rthe US Economy, Shorts are banned acrossed europe and US..Dow fell only 20-25% and our FM is sleeping and is not concerned with the fall of over 50%..What rthe hell is he doing? Waiting for PM to come and cry with him..How is Indian Economy safe in the hands of our great FM? Can anybody answer my anxiety? I hope bubbu and radhikaji harish sharms rewadind this post!!! Regards Naidu...

Mitsubishi UFJ buys 21 pct stake in Morgan Stanley Monday September 29, 9:40 am ET Morgan Stanley gets $9 billion stock investment from Mitsubishi UFJ of Japan NEW YORK (AP) -- Japan's Mitsubishi UFJ Financial Group says it is investing $9 billion in Morgan Stanley for a 21 percent stake in the U.S. investment bank. Mitsubishi UFJ said Monday it will buy nearly 10 percent of Morgan Stanley's common stock for $3 billion, and $6 billion in preferred stock. Morgan Stanley, along with Goldman Sachs Group Inc., had been one of the two remaining independent Wall Street investment banks until the two recently applied to become commercial banks that take deposits. Wall Street is in a state of upheaval after poor investments in mortgage-backed securities that have led the U.S. government to propose a $700 billion rescue plan for the nation's banks. ...

contd... Fortis reshaped by government bailout The deterioration in the bank's portfolio is noteworthy, since few European banks have gone as far in revealing such woes, and analysts fear they will eventually have to do so. Dierckx said he personally thought the CDOs were worth more, but conceded that this is their current market value. Fortis' key misstep was participation in a three-bank consortium led by Royal Bank of Scotland PLC that acquired ABN Amro in a euro70 billion ($102.5 billion) deal that was the largest takeover in the history of the banking industry. "If you look at some of the decisions that were taken in the past, then you can say that probably they were done at the wrong moment," Dierckx said. ...