Toxic debts could reach $4 trillion, IMF to warn

Toxic debts could reach $4 trillion, IMF to warn

(Source The Times)
Toxic debts racked up by banks and insurers could spiral to $4 trillion (£2.7 trillion), new forecasts from the International Monetary Fund (IMF) are set to suggest.
The IMF said in January that it expected the deterioration in US-originated assets to reach $2.2 trillion by the end of next year, but it is understood to be looking at raising that to $3.1 trillion in its next assessment of the global economy, due to be published on April 21. In addition, it is likely to boost that total by $900 billion for toxic assets originated in Europe and Asia.
Banks and insurers, which so far have owned up to $1.29 trillion in toxic assets, are facing increasing losses as the deepening recession takes a toll, adding to the debts racked up from sub-prime mortgages. The IMF's new forecast, which could be revised again before the end of the month, will come as a blow to governments that have already pumped billions into the banking system.
Paul Ashworth, senior US economist at Capital Economics, said: “The first losses were asset writedowns based on sub-prime mortgages and associated instruments. But now, banks are selling ‘plain vanilla' losses from mortgages, commercial loans and credit cards. For this reason, the housing market will play a crucial part in how big the bad debt toll is over the next year or two.”

Reshaping the Global Economy Download PDF
The crisis and the national responses to it have started to reshape the global economy and shift the balance between the political and economic forces at play in the process of globalization. The drivers of the recent globalization wave are being undermined, and the spirit of protectionism has reemerged.
http://www.imf.org/external/pubs/ft/fandd/2009/03/pdf/pisani.pdf

Citi: Pandit's Defense Boosts Wall Street

Citi: Pandit's Defense Boosts Wall Street
The bank CEO's talk of profits sparks a stock rally, but others still worry about Citi's toxic assets

(Source Business Week)
Strip away the billions of toxic assets and the billions more that the feds have pumped into Citigroup (C), and what you have is a dandy little bank that actually makes money. At least that was the upbeat takeaway from Citi's beleaguered CEO Vikram Pandit, who distributed a memo to employees late on Mar. 9 about the bank's bright prospects, despite the current $1-a-share price tag.
Pandit emphasized in the memo that the bank was adequately capitalized, had passed stringent self-imposed stress tests, and was profitable through the first two months of 2009, delivering its best performance since the third quarter of 2007. In coming weeks the Treasury Dept. will conduct its own stress tests of banks—assuming further deterioration in the economy, employment, and home prices—on which will hinge further U.S. assistance.

Citigroup has posted more than a year of losses, totaling more than $37.5 billion since it reported a $2.1 billion profit in the third quarter of 2007. Just two years ago, Citigroup was the world's biggest bank by market value, at about $270 billion. But its shares had plummeted from an all-time high of 55 to below 1 last week, for the first time ever, as investors continued to lose confidence in the government bank bailout. At that point, Citi's value had fallen to about $6 billion. Read Article...
http://www.businessweek.com/bwdaily/dnflash/content/mar2009/db20090310_761018.htm?chan=investing_investing+index+page_top+stories

The Toxic Assets, a developing story

The toxic assets (and the Rip-Off) is a developing story.

Nouriel Roubini - Is Purchasing $700 billion of Toxic Assets the Best Way to Recapitalize the Financial System? No! It is Rather a Disgrace and Rip-Off Benefitting only the Shareholders and Unsecured Creditors of Banks

Tuesday, 21 October 2008
Pension funds holding toxic assets
The FT delivered more bad news about pensions. According to some research undertaken by a consultancy called Create Research, around 8 percent of global pension fund assets are taken up by toxic assets such as CDOs, CLOs, ABS and SIBs. Around "$700bn" of these assets "could be toxic."
"There is about $400bn to $700bn of this toxic waste sitting on the balance sheets of pension funds, especially in Denmark, Germany, France, Sweden, Japan and the US."

The Law,
Download the document(pdf - 451 pages) from the House Commitee on Financial Services: Emergency Economic Stabilization Act of 2008