Iran hacks Bank sites?

Websites at Wells Fargo Latest Hit by Attack

Excerpt:

Cyberattackers disrupted websites operated by Wells Fargo WFC & Co. Tuesday, continuing a string of attacks that started last week at J.P. Morgan Chase JPM & Co. and Bank of America Corp. BAC ... Sitedown.com received 330 complaints about the Bank of America outage and nearly 1,000 complaints about J.P. Morgan's problems over the past week. Jeff Herdell, who runs sitedown.com, said the Wells Fargo complaints were significant because the company rarely experiences problems with its websites. A Wells Fargo spokeswoman confirmed that some customers were having problems logging in on Tuesday but said the San Francisco-based company was working to resolve the issue. She added that the outage was a systems problem and that no customer-account information was compromised. The scope of the disruption has raised eyebrows. "The amount of bandwidth that is flooding the websites is very large, much larger than in other attacks, and in a sense unprecedented," said Dmitri Alperovitch, chief executive of CrowdStrike, a private security firm investigating the attacks.

Lieberman: Blame Iran for Cyber Attacks on Bank of America, Chase

Excerpt:

Iran likely orchestrated the cyber attacks that impacted the websites of Bank of America and J.P. Morgan Chase last week in retaliation for U.S. economic sanctions on the country, Sen. Joe Lieberman told C-SPAN. The comments from Lieberman, who is chairman of the Homeland Security and Government Affairs Committee, stand in contrast with online claims from a group that claimed responsibility for the attacks and cited anger over a recent YouTube video mocking Islam. “I don’t believe these were just hackers,” Lieberman said on Friday evening while appearing on C-SPAN. “I believe this was done by Iran and the Qods force, which has its own developing cyber attack capacity. And I believe it was in response to the increasingly strong economic sanctions that the United States and our European allies have put on Iranian financial institutions.” According to Reuters, the hacking of websites and networks at BofA began in late 2011 and escalated this year.

Comment: screen shot from: sitedown.co

Global Finance: World’s 50 Safest Banks

Global Finance: World’s 50 Safest Banks

Comment: Some highlights. Note the Canadian banks:

• Royal Bank of Canada (RY)
• Toronto-Dominion Bank (TD)
• Scotiabank (BNS)
• Bank of Montreal (BMO)
• Canadian Imperial Bank of Commerce (CM)
• JPMorgan Chase (JPM)
• U.S. Bancorp (USB)

Not on the list: Wells Fargo. I'm surprised because I regard Wells Fargo as better bank than J P Morgan. Article

Fed TARP bucks come with "strings"

Some Banks, Citing Strings, Want to Return Aid

Excerpt:

Financial institutions that are getting government bailout funds have been told to put off evictions and modify mortgages for distressed homeowners. They must let shareholders vote on executive pay packages. They must slash dividends, cancel employee training and morale-building exercises, and withdraw job offers to foreign citizens.

As public outrage swells over the rapidly growing cost of bailing out financial institutions, the Obama administration and lawmakers are attaching more and more strings to rescue funds.

The conditions are necessary to prevent Wall Street executives from paying lavish bonuses and buying corporate jets, some experts say, but others say the conditions go beyond protecting taxpayers and border on social engineering.

Some bankers say the conditions have become so onerous that they want to return the bailout money. The list includes small banks like the TCF Financial Corporation of Wayzata, Minn., and Iberia Bank of Lafayette, La., as well as giants like Goldman Sachs and Wells Fargo.

They say they plan to return the money as quickly as possible or as soon as regulators set up a process to accept the refunds. On Tuesday, Signature Bank of New York announced that because of new executive pay restrictions in the economic stimulus package, it notified the Treasury that it intended to return the $120 million it had received from the government only three months ago.

Other institutions like Johnson Bank of Racine, Wis., initially expressed interest in seeking bailout funds but have now changed their minds. Bank executives told The Milwaukee Journal Sentinel that one reason they rejected the government money was to avoid any disruption in the bank’s role in the local community, including supporting the zoo or opera company if they chose to.

One of the biggest concerns of the banks is that the program lets Congress and the administration pile on new conditions at any time.

The demands to modify mortgages or forestall evictions are especially onerous, some bank executives and experts say, because they could prompt some institutions to take steps that could lead to greater losses.

Comment: "social engineering" indeed! Meanwhile did the Wells CEO get a raise or not? (snapshot from Google reader)

Wells Fargo CEO pay up 10 percent in 2008

Wells Fargo CEO's pay falls 21 percent in 2008

Obama's trash talking the banks!

Bankers to Obama: Stop trashing us

Excerpt:

The American Bankers Association has a message for the president: Stop talking trash about banks.

In his unofficial State of the Union address Tuesday night, Barack Obama said that it's "unpopular ... to be seen as helping banks right now, especially when everyone is suffering in part from their bad decisions."

In a letter to the White House, ABA CEO Edward Yingling says bankers across the country were "disappointed and concerned" with rhetoric like that.

"Mr. President, of the over 8,000 banks in this country, very few ever made a single subprime loan, and they did not engage in the highly leveraged activities that brought down Wall Street firms," Yingling said.

Yingling referred the president to statements made by Rep. Barney Frank (D-Mass.), the powerful chairman of the House Financial Services Committee, in which he said that the toxic mortgage lending that sparked the current crisis was done by mortgage brokers and others not subject to the strict rules that govern commercial banks.

"Mr. President, the failure to distinguish between Wall Street and the thousands of FDIC-insured banks across the country undermines the confidence in our banking industry, the industry which is the foundation on which our economic recovery must be built," Yingling said.

Credit crisis: the pain is unlikely to end soon!

Banks Are Likely to Hold Tight to Bailout Money

Excerpt:

Since mid-2007, when the credit crisis erupted, the country’s nine largest banks have written down the value of their troubled assets by a combined $323 billion. With a recession looming, the pain is unlikely to end there. The problems that began with home mortgages, analysts say, are migrating to auto, credit card and commercial real estate loans.

...
Every corner of the economy goes through cyclical ups and downs. But the banking downturn has acted with ferocious speed to erase past profits.

In the case of the nine-largest commercial banks — Citigroup, Merrill Lynch, Bank of America, Morgan Stanley, JPMorgan Chase, Goldman Sachs, Wells Fargo, Washington Mutual and Wachovia — profits from early 2004 until the middle of 2007 were a combined $305 billion. But since July 2007, those banks have marked down their valuations on loans and other assets by just over that amount.

More:

Millions owe more on their homes than homes are worth

Excerpt:

... an estimated 12 million American mortgage holders now owe the bank more than their homes are worth. And with housing prices still sliding and the credit crunch worsening, the number of so-called upside-down mortgages is expected to rise to record levels.

Within a year, Moody’s Analytics predicts, a whopping 30 percent of all U.S. mortgage holders will owe more on their homes than they are worth. In some California communities, according to real estate service firm Zillow.com, negative equity already is the norm.

The effects of this are many.

The risk of default rises — and it’s good to recall that it was people defaulting on their home loans last year that set much of the current economic crisis in motion. Home equity lines of credit — even for people who pay their mortgages faithfully — will be harder to come by. And woe to those who lose a job or get sick.

“If you have some kind of disruption to your income and you can’t make your mortgage payment, it’s going to be very hard for you to refinance or anything like that,” said Mark Zandi, chief economist for Moody’s. “This was the bedrock of most people’s savings, their home.”

Comment: I saw something on an investment TV show yesterday ... the commentator said something to this effect: "credit to the economy is like alcohol at a party". In essence, if you want to have a fun party you need booze (I dispute this but let's go with this analogy for a minute) ... in the same way the US economy has been pumped up (high if you will) on credit. The after effect of a drunken binge is a terrible hangover ... well the after effect of this credit binge is a recession. Our economy is "hung over". I just hope someone does not vomit on me!

Bank bloodbath

Nervous investors mull more potential bank failures

Excerpt:

Bank stocks were under intense selling pressure Monday as investors and analysts worried that worsening housing and credit problems could claim more banks after the failure of IndyMac Bancorp Inc.
Regional-banking shares led the decline in the financial-services sector on Monday. Among the biggest losers were National City Corp. (NCC:National City Corporation

National City shares were briefly halted Monday amid a panic-driven plunge before the company in a statement tried to quell what it labeled market rumors. "National City is experiencing no unusual depositor or creditor activity," the Cleveland-based bank said. Still, investors shrugged off the news and the shares were down more than 20% at last check.

Meanwhile, WaMu shares were off 30% in afternoon trading. Lehman Brothers analysts in a report Monday said WaMu could be forced to "substantially" boost its reserves to cover an estimated $28 billion of losses on the balance sheet, with $21 billion coming from mortgages. They said home prices and mortgage credit are showing no signs of stabilizing.

Comment: Wells Fargo announces 2nd QTR earnings tomorrow

Banks: 'still peeling back the onion'

Some Banks (Yes, Banks) May Be Back in Favor

Excerpt:

But how safe are big investment banks that stand knee-deep in the securitized mortgage crisis? Determined to avert a bank failure that could reverberate through the economy, the Fed has made available hundreds of billions of dollars — which may eventually come out of taxpayer pockets — in low-interest loans. Many big banks also benefited last week from a capital infusion as a result of the shares they were able to sell in the $18 billion initial public offering of Visa. Can investors now safely assume that the fever has broken?

Not quite, Mr. Ellison said. “The earnings prospects are still declining,” he said. “And loan growth won’t be there.”

He and other skeptics wonder whether more nasty surprises are to emerge from balance sheets. “Full disclosure only happens when things are good,” Mr. Ellison said. “Even now, we’re still peeling back the onion.”

But Richard Bove, a financial strategist at Punk, Ziegel & Company who was among the first to lower ratings on the banks last summer, now says he thinks the selling has gone too far. “ I personally believe that investors should dramatically overweight their portfolios with bank stocks,” he said.

Assets have been devalued and earnings reduced, but most banks — even those like Citigroup and Bank of America that have taken large write-offs — still have positive cash flow, he said.

Going strictly by the numbers, Derek Rollingson, manager of the quantitative ICON Financial fund, concludes that financial stocks are trading at 45 percent less than true value. “We’ve priced in all the bad news,” he said. “Has the market overreacted to the news? In the case of the financials, we would say yes.”

Comment: Wells Fargo announces earnings next Wednesday.

Banking results ... how bad will it be?

Banks' Dim 4Q Results Roll in Next Week

Excerpts:

When banks and brokerages roll out their fourth-quarter and full-year results over the next couple weeks, investors will try to figure out which are showing resilience, which are scrambling for lifelines, and when they can start buying again.

...
Robert W. Baird & Co. analysts said San Francisco-based Wells Fargo has extra cash to work with and is thus better positioned than many of its peers, but that it still faces problems in its consumer businesses. Its home equity portfolio is particularly worrisome.


Comment: Wells announces earnings on Tuesday. Next week should be interesting for investors.

The Hopeless Mortgage Freeze Plan

Bush Subprime Plan: Too Much or Too Little?

Excerpts:

What would the plan accomplish? The plan is limited and tries to help homeowners, not speculators. It specifically targets borrowers who have teaser rates that eventually reset to much higher rates. Typically the rates are low for the first two or three years and are known as 2-28s or 3-27s.

For these borrowers, a rate freeze would only prevent foreclosure in the short term. The freeze is voluntary for mortgage lenders, who have no real incentive to participate.

...
A mortgage happens to be a contract between a borrower and a lender. Do we really want to be in a position where the government changes the playing field and makes legislative changes to modify those contracts? Would it even be legal to do so? The implications of any government deal are far-reaching and need to be better understood.

Given that mortgages are a contract, there's a larger problem here. How do we get the two parties together to agree to these modifications? Mortgages are often repackaged and then sold off to investors. How would the government get all of these investors into a room to make this decision?
....

According to Countrywide, 58.3% of people face trouble because of lost income, another 13.2% have illness/medical problems, and divorce causes problems for 8.4%. Can a government plan really stop these problems? I think not.


Comment: 5 pages ... read it all. The key question (in my mind): "Do we really want to be in a position where the government changes the playing field and makes legislative changes to modify those contracts?". The answer is NO!

More below:

S&P Says Mortgage Freeze Plan May Cause Downgrades

Paulson's Plan to Punish the Public

Excerpt:

Remember, the only reason those teaser-rate loans were made in the first place was because lenders (and thus the investors buying the mortgages from the lenders) could count on a much larger, contractually guaranteed payoff in the future, when those interest rates were due to reset. Take away that payoff, and you take away any incentive to loan to borrowers of marginal credit quality. Usher in an era when government and banks reset loan rates at their whim, and you can be sure that investors will never again buy securities based on adjustable-rate mortgages.

If you think credit is tight now, just wait until you yank away potential returns from the people putting up the capital for all those loans.

And let's not forget that Paulson's plan introduces an incredible moral hazard. By rescuing greedy and naive borrowers from their mistakes, our government encourages others to take big, stupid, bankruptcy-inducing risks, secure in the knowledge that the government will bail them out when times get rough. That means trillions of dollars in capital will be ill-invested yet again, something that's much less likely to happen when speculators are made to suffer the consequences of their behavior.



Paulson Subprime Plan Offers Little Aid, Analysts Say

Excerpt:

The extent of home price declines and economic conditions will have a ``far greater impact'' on the rates of loan modifications and foreclosures, wrote UBS's Zimmerman, who is also based in New York.

``I think it's lip service and essentially not meaningful,'' said Michael Burry, president of Cupertino, California-based hedge-fund firm Scion Capital LLC, which manages about $1 billion. ``It will only help those who don't need to be helped.''

Mortgage Mess: Is Relief in Sight? Why Bush's bailout will leave many borrowers out in the cold.

Excerpt:

Under the terms of the deal, lenders are offering to freeze the interest rates and monthly payments for five years for subprime borrowers who fit a limited set of conditions. Borrowers must be current on the loan, the loan's interest rate may not yet have reset, and the lender must determine that the borrower lacks the capacity to afford the higher payment if the interest rate adjusted upward. According to a study cited by today's New York Times, Barclay's Capital estimates that just 12 percent of subprime borrowers will benefit from the interest-rate freeze.
...
By definition, someone who has taken out a subprime mortgage has either shown a history of having trouble managing his credit or did a less than stellar job of shopping for a mortgage. (On Tuesday the Wall Street Journal reported that many subprime borrowers could have obtained a regular mortgage but were steered into a higher-cost loan.) So it's not surprising if many of these borrowers have also made other poor financial decisions. The government's bailout plan is trying to deal with the mortgage mess in isolation. Helping people with more complicated financial problems is trickier, not unlike the challenge facing doctors treating patients who suffer from two or more diseases simultaneously.




Final comment: We need less government interference in the markets not more!

HSBC write-down

HSBC Takes $3.4 Billion Charge in U.S.

Excerpt:

LONDON (AP) -- HSBC Holdings PLC will take a $3.4 billion charge against third-quarter profits because of accelerating losses at its HSBC Finance Corp. mortgage business in the United States, the company said Wednesday.

That is $1.4 billion (960 million euros) more than expected based on first-half trends, and the bank said it was shutting another 260 branches in the U.S. consumer finance division.

HSBC warned that the subprime crisis could deepen and said further volatility as a result of the credit crunch was ''more than a remote possibility''

''There is the probability of further deterioration if the current housing market distress continues and further impacts the broader economy,'' the company said.

The 2.3 billion-euro charge follows last year's $10.6 billion bad debt exposure, which led to HSBC's first-ever profit warning.

Comment: HSBA.L ... trades on the NYSE as HBC

BAC $ 3 billion CDO write-down

Bank of America to write down $3B in debt

Excerpts:

Bank of America Corp., the nation's second biggest bank, said Tuesday it will take a $3 billion debt-related writedown in the fourth quarter and warned its losses could grow as the market wrestles with the fallout from the housing and mortgage-lending slump.

Speaking at an investor conference in New York, chief financial officer Joe Price added that the bank is also setting aside more money for potential losses but considers the losses "manageable."

Bank of America is the latest of several financial service companies to lower the value of its lending portfolio in the wake of the subprime lending crisis. Last week, crosstown rival Wachovia Corp. marked down the value of its loan-backed securities by about $1.1 billion.

Mortgage-related writedowns across the banking industry were more than $40 billion in the third quarter, and the fourth quarter could end up being worse. Along with Bank of America and Wachovia, Citigroup Inc. has said it will write down as much as $11 billion and Morgan Stanley anticipates a writedown of up to $6 billion in the fourth quarter.

...

The latest writedown at Bank of America involves the value of its collateralized debt obligations, which are complex instruments that combine slices of different kind of risk and are often backed in part by subprime mortgages—loans given to customers with poor credit history—as well as other loans.

Comment: More Subprime bite! So far: C, BAC, JPM, WB!

Bear market for banks

Fears intensify for prolonged turmoil

Excerpt:

Huw van Steenis, an analyst at Morgan Stanley, said: “The bear market for banks is unlikely to end until we get some clarity on the extent of the losses... in many cases we’ll not get real clarity until the full-year results next year.”

Frederic Mishkin, a Federal Reserve governor, admitted that although the central bank could use monetary policy to offset the macroeconomic risk arising from the credit squeeze, it was “powerless” to deal with “valuation risk” – the difficulty assessing the value of complex or opaque securities.

Comments: those "complex or opaque securities" are the "collateralized debt obligations" mentioned earlier.

Are bank stocks safe?

U.S. bank dividends called into question

Excerpt:

NEW YORK, Nov 2 (Reuters) - Fallout from the subprime mortgage crisis is raising questions about whether banks can maintain their common stock dividends, a key reason many shareholders invest in the sector in the first place.

A much-discussed analyst report this week questioning whether Citigroup Inc (C.N: Quote, Profile, Research) can afford its 54 cents per share quarterly dividend added the largest U.S. bank to a growing mix of lenders whose dividend-paying ability has been questioned.

Rising loan losses and debt write-downs and fears there will be more, have depressed bank stocks and driven up dividend yields, the ratio of the annual dividend to the stock price.



Citi board gathering for emergency meeting: WSJ


The stock dropped especially hard on Thursday, when analysts at CIBC sparked concern the bank may have to cut its dividend to preserve capital. See full story.
Prince has been under pressure to improve the bank's performance, even before the credit crisis this summer.

Two weeks ago, Citi reported a 57% drop in third-quarter net profit two weeks ago due to recent write-downs for bad loans and other credit issues.

Comment: You may think it doesn't matter, but if you invest in mutual funds or a stock index fund, major banks like Bank of America, Citibank, Wells Fargo, etc are in the mix! Subprime issue comes home to roost!

C vs WFC chart

FT: Banks hit again as credit fears spread

Excerpt:

Despite a surge in US employment growth last month, investors remained worried that banks and other financial institutions still faced heavy losses arising from the troubled US mortgage market and related securities.

Market expectations that the impact of these losses on the broader US economy could spur the US Federal Reserve to cut interest rates further drove the dollar down to a new low against euro. The dollar’s slide in turn helped drive gold to a 28-year high of more than $800 an ounce and oil above $95 a barrel.

Andrew Wilkinson, analyst at Interactive Brokers, said: “A daisy chain of market reports predicting continued writedowns and runaway credit losses” at the biggest banks and brokerage firms hit investor sentiment.

Comment: Could this also spur a major bank merger?