Comments on: New Wall Street Gimmick: "Ring Fencing" Dead Assets http://www.nakedcapitalism.com/2008/04/new-wall-street-gimmick-ring-fencing.html Sat, 21 Nov 2009 23:52:37 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Anonymous http://www.nakedcapitalism.com/2008/04/new-wall-street-gimmick-ring-fencing.html#comment-6356 Anonymous Fri, 04 Apr 2008 11:08:00 +0000 http://www.nakedcapitalism.com/2008/04/new-wall-street-gimmick-ring-fencing-dead-assets/#comment-6356 France has proceeded that way some years ago with the Credit Lyonnais miss.<br/><br/>All suspects assets were taken in a special "defeasence" structure, specially set up to liquidate bad investments and debt.<br/><br/>But it was "only" 30 bn euros... France has proceeded that way some years ago with the Credit Lyonnais miss.

All suspects assets were taken in a special “defeasence” structure, specially set up to liquidate bad investments and debt.

But it was “only” 30 bn euros…

]]> By: Anonymous http://www.nakedcapitalism.com/2008/04/new-wall-street-gimmick-ring-fencing.html#comment-6323 Anonymous Thu, 03 Apr 2008 19:44:00 +0000 http://www.nakedcapitalism.com/2008/04/new-wall-street-gimmick-ring-fencing-dead-assets/#comment-6323 Best Buy also announced that it holds troubled auction-rate securities. These are AAA/Aaa-rated bonds collateralized by student loans guaranteed 95 percent to 100 percent by the U.S. government. Unfortunately, the market for these securities collapsed in recent times, which made them virtually impossible to sell on the open market without taking a substantial loss.<br/><br/>Normally, companies are required to write-down the value of these securities to this new value, but Best Buy reclassified the investments as non-core, which allowed them to forego that requirement. <br/><br/>We're all Non-core now. Best Buy also announced that it holds troubled auction-rate securities. These are AAA/Aaa-rated bonds collateralized by student loans guaranteed 95 percent to 100 percent by the U.S. government. Unfortunately, the market for these securities collapsed in recent times, which made them virtually impossible to sell on the open market without taking a substantial loss.

Normally, companies are required to write-down the value of these securities to this new value, but Best Buy reclassified the investments as non-core, which allowed them to forego that requirement.

We’re all Non-core now.

]]> By: cactus http://www.nakedcapitalism.com/2008/04/new-wall-street-gimmick-ring-fencing.html#comment-6307 cactus Thu, 03 Apr 2008 14:04:00 +0000 http://www.nakedcapitalism.com/2008/04/new-wall-street-gimmick-ring-fencing-dead-assets/#comment-6307 I'm with a. In the end, the only hope there is of saving Jim Cayne's retirement package, which from what I can tell seems to be the big priority in this mess, is for the taxpayer to take over the problem. We've slowly inched our way toward that particular endstate. I’m with a. In the end, the only hope there is of saving Jim Cayne’s retirement package, which from what I can tell seems to be the big priority in this mess, is for the taxpayer to take over the problem. We’ve slowly inched our way toward that particular endstate.

]]> By: S http://www.nakedcapitalism.com/2008/04/new-wall-street-gimmick-ring-fencing.html#comment-6304 S Thu, 03 Apr 2008 12:50:00 +0000 http://www.nakedcapitalism.com/2008/04/new-wall-street-gimmick-ring-fencing-dead-assets/#comment-6304 LEH total assets rose last Q. When confronted with the question, they lob out some mumbo jumbo about match book, lower net leverage etc (with changing definitions). When pressed they say it is clearly a focus going forward and they hope to wind down the balance sheet - but don;t want to sell at "firesale" prices. Sounds a lot like the De long argument. Optimism knows no bounds for some. No doubt, the I banks, now with their Fed hall monitors, are looking to dump these on taxpayers. No doubt a gov't entity takes the other side - hoping to have lost in the next few years. Going back to De long, it begs the question of curing the system to prepare it for what: a return to risk seeking behavior. If anything curing the problem hurts the valuation picture going forward and opens the Pandora’s box as to what these franchises are worth. Opco has been most vocal about this point and she was right on the dividends and she is right about the value of leveraged entities. LEH total assets rose last Q. When confronted with the question, they lob out some mumbo jumbo about match book, lower net leverage etc (with changing definitions). When pressed they say it is clearly a focus going forward and they hope to wind down the balance sheet – but don;t want to sell at “firesale” prices. Sounds a lot like the De long argument. Optimism knows no bounds for some. No doubt, the I banks, now with their Fed hall monitors, are looking to dump these on taxpayers. No doubt a gov’t entity takes the other side – hoping to have lost in the next few years. Going back to De long, it begs the question of curing the system to prepare it for what: a return to risk seeking behavior. If anything curing the problem hurts the valuation picture going forward and opens the Pandora’s box as to what these franchises are worth. Opco has been most vocal about this point and she was right on the dividends and she is right about the value of leveraged entities.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/04/new-wall-street-gimmick-ring-fencing.html#comment-6297 Anonymous Thu, 03 Apr 2008 08:40:00 +0000 http://www.nakedcapitalism.com/2008/04/new-wall-street-gimmick-ring-fencing-dead-assets/#comment-6297 Yves, what did happen in the end with the Monolines? I understand that some got a small capital injection and then the credit rating agencies just let them get away with it. When will those chickens come home to roost?<br/><br/>This idea looks just the same - as FT Alphaville mentions, this is just PR. Something small might happen and everyone will keep their heads in the sand. I still can not quite believe equity markets' reactions to UBS' huge write-offs! Have you seen the Hang Seng recently? Can you imagine the bull market when Citi and Merrill give us their next bundle of fun? Yves, what did happen in the end with the Monolines? I understand that some got a small capital injection and then the credit rating agencies just let them get away with it. When will those chickens come home to roost?

This idea looks just the same – as FT Alphaville mentions, this is just PR. Something small might happen and everyone will keep their heads in the sand. I still can not quite believe equity markets’ reactions to UBS’ huge write-offs! Have you seen the Hang Seng recently? Can you imagine the bull market when Citi and Merrill give us their next bundle of fun?

]]> By: a http://www.nakedcapitalism.com/2008/04/new-wall-street-gimmick-ring-fencing.html#comment-6293 a Thu, 03 Apr 2008 07:26:00 +0000 http://www.nakedcapitalism.com/2008/04/new-wall-street-gimmick-ring-fencing-dead-assets/#comment-6293 "It's an amazing bit if hubris if the industry thinks it can shove these assets onto taxpayers and carry on unimpeded."<br/><br/>I'm afraid I think they may just get away with it. Look at all the proposals at this stage by the really serious people. They all involve the government spending hundreds of billions if not trillions. What's another trillion? Especially when you're guaranteed lots of reelection funds from grateful Wall Street execs? “It’s an amazing bit if hubris if the industry thinks it can shove these assets onto taxpayers and carry on unimpeded.”

I’m afraid I think they may just get away with it. Look at all the proposals at this stage by the really serious people. They all involve the government spending hundreds of billions if not trillions. What’s another trillion? Especially when you’re guaranteed lots of reelection funds from grateful Wall Street execs?

]]> By: eh http://www.nakedcapitalism.com/2008/04/new-wall-street-gimmick-ring-fencing.html#comment-6282 eh Thu, 03 Apr 2008 05:39:00 +0000 http://www.nakedcapitalism.com/2008/04/new-wall-street-gimmick-ring-fencing-dead-assets/#comment-6282 It's MLEC, The Sequel. But expect the swine to keep trying; after all, they've got the BSC/JPM 'bailout' precedent going for them. It’s MLEC, The Sequel. But expect the swine to keep trying; after all, they’ve got the BSC/JPM ‘bailout’ precedent going for them.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/04/new-wall-street-gimmick-ring-fencing.html#comment-6281 Anonymous Thu, 03 Apr 2008 05:29:00 +0000 http://www.nakedcapitalism.com/2008/04/new-wall-street-gimmick-ring-fencing-dead-assets/#comment-6281 Yves,<br/><br/>Good write-up. It's worth underscoring that RTC came about as a result of deposit insurance, not government concerns over `mispriced' assets `a la De Long. I was at FDIC at the time, and I can tell you that much of the opposition to RTC came from politicians ``friendly'' with Federal S&Ls and with bankrupt developers who continued to get their loans rolled by their insolvent lenders. These folks wanted FSLIC to remain underfunded so the party could continue; they didn't want an RTC with the cash to shut them down. Anyway, I've recently seen a few self-serving references to RTC as a supposed precedent for a bail-out of the Street, and I expect to hear more in the comings months as the hogs grow leaner.<br/><br/>Steve Yves,

Good write-up. It’s worth underscoring that RTC came about as a result of deposit insurance, not government concerns over `mispriced’ assets `a la De Long. I was at FDIC at the time, and I can tell you that much of the opposition to RTC came from politicians “friendly” with Federal S&Ls and with bankrupt developers who continued to get their loans rolled by their insolvent lenders. These folks wanted FSLIC to remain underfunded so the party could continue; they didn’t want an RTC with the cash to shut them down. Anyway, I’ve recently seen a few self-serving references to RTC as a supposed precedent for a bail-out of the Street, and I expect to hear more in the comings months as the hogs grow leaner.

Steve

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