Re: The first step in measuring credit exposure in derivative contracts involves identifying those contracts where a
bank would lose value if the counterparty to a contract defaulted today. The total of all contracts with positive
value (i.e., derivatives receivables) to the bank is the gross positive fair value (GPFV) and represents an initial
measurement of credit exposure. The total of all contracts with negative value (i.e., derivatives payables) to
the bank is the gross negative fair value (GNFV) and represents a measurement of the exposure the bank poses
to its counterparties.

Re: During the fiscal third quarter, the Firm is expected to incur negative gross mark-to-market adjustments on assets of ($7.8) billion, including gross negative mark-to-market adjustments of
($5.3) billion on residential mortgage-related positions, ($1.7) billion on commercial real estate positions, ($600) million on other asset-backed positions and ($200) million on acquisition finance positions.

Yes, magicians really do saw their assistants in half.

The first step in measuring credit exposure in derivative contracts involves identifying those contracts where a
bank would lose value if the counterparty to a contract defaulted today. The total of all contracts with positive
value (i.e., derivatives receivables) to the bank is the gross positive fair value (GPFV) and represents an initial
measurement of credit exposure. The total of all contracts with negative value (i.e., derivatives payables) to
the bank is the gross negative fair value (GNFV) and represents a measurement of the exposure the bank poses
to its counterparties.

A bank’s net current credit exposure across all counterparties will therefore be the sum of the gross positive fair
values for counterparties lacking legally certain bilateral netting arrangements (this may be due to the use of
non-standardized documentation or jurisdiction considerations) and the bilaterally netted current credit
exposure for counterparties with legal certainty regarding the enforceability of netting agreements.
This “net” current credit exposure is the primary metric used by the OCC to evaluate credit risk in bank
derivatives activities. A more risk sensitive measure of credit exposure would also consider the value of
collateral held against counterparty exposures. While banks are not required to report collateral held against
their derivatives positions in their Call Reports, they do report collateral in their published financial statements.
Notably, large trading banks tend to have collateral coverage of 30-40% of their net current credit exposures
from derivatives contracts.
Net current credit exposure for U.S. commercial banks increased $53 billion in the third quarter to $252 billion.
At the end of the third quarter, legally enforceable netting agreements allowed banks to reduce the gross credit
exposure (GPFV) of $1.6 trillion by 84% to $252 billion in net current credit exposure

Money Moves
Given a lack of visibility into counterparty risk, many CFOs are scrutinizing how they are investing precious excess cash. Investor focus has shifted from yield to risk, says Sarah Jones, co-head of liquidity and investment products at JP Morgan Treasury and Securities Services.
Driving this is the discovery that short-term cash funds and even some money-market funds — an investment heretofore thought highly liquid — are exposed to structured investment vehicles (SIVs) that purchased toxic mortgage-backed securities and collateralized debt obligations. CFOs are shedding investments in funds with SIV exposure that don’t offer complete transparency or daily liquidity.
In August 2007, Ethan Manuel, treasurer at $800 million Mentor Graphics, had migrated the company’s short-term investments from asset-backed paper to money-market funds to maintain liquidity while gaining a bit on the return. He switched back to treasuries and commercial paper last November. “We went away from money-market funds, because we weren’t sure if there would be write-downs or liquidity concerns,” says Manuel. “Right now, we’re being very careful.” — K.M.K.

Taking the Measure of Your Banks
Given the rockiness in the financial sector, CFOs would be remiss if they didn’t question the stability of their banking partners. However, determining just how strong a specific bank is can take some doing.
To evaluate large banks’ capital adequacy, many analysts look at “tangible common equity,” a measure of net worth relative to assets, says Brent Christ, an analyst with Fox-Pitt Kelton. Tangible common equity, a non-GAAP measure, is common shareholders’ equity, less intangibles and goodwill. The ratio of TCE to assets (less goodwill and intangibles) is generally considered more healthy if it is at least 6 percent for smaller banks and 4 percent for larger ones, Christ says.

http://paradigmshiftpr.com/pedal…/ pedalingas.htm

It’s all about pumping up the value of collateral and helping the poor banks make things better… , however, this new game of hot potato and or musical derivatives is sorta like the subprime game we just played, but now that recess, I mean the recession is over we can soon go back out and play! It’s nice we have a substitute Congress, Senate, DOJ, Fed, SEC…

http://www.gillygaloo.net/docs/07_lyrics.htm

Re: The more we get together, together, together,
The more we get together, the happier we’ll be,
For your friends are my friends, and my friends are yours,
The more we get together, the happier we’ll be…

The more we sing together, together, together,
The more we sing together, the happier we’ll be,
For your songs are my songs, and my songs are yours,
The more we sing together, the happier we’ll be…

The more we clap together, together, together,
The more we clap together, the happier we’ll be,
For your beat is my beat, and my beat is yours,
The more we clap together, the happier we’ll be….

ML Press Release: di ytou think an analyst asked about thisor even brought up what happens on the flip side? no chance
“To a lesser
extent, net revenues were also impacted by net write-downs related to leveraged finance
and residential mortgage exposures, which were offset by a net benefit of $2.1 billion due
to the impact of the widening of Merrill Lynch’s credit spreads on the carrying value of
certain of our long-term debt liabilities.”

Expected BY WHOM? Not Yves. Not Mish. Not CalculatedRisk. Not Minyanville. Not Krugman. Not Roubini.

Et cetera, et cetera, and so forth. America is a banana republic right now. Not “like” a banana republic.. IS.

Thank your Republican lawmakers for making America into a footnote. McCain will continue the stupidity if you vote for him.

Sorry to deviate slightly into politics, but we stand no chance of turning this around until regulation is returned.. and Republicans don’t have the guts to pass the appropriate measures.

I ask this in all seriousness. Is their credibility really an issue, after all this? Shouldn’t they be genuinely, thoroughly discredited?