Category Archives: Banks

NY Fed May Demand Reports From Europe Banks – Bloomberg


NY Fed May Demand Reports From Europe Banks

By Meera Louis – Oct 2, 2011

The Federal Reserve Bank of New York may ask foreign lenders for more detailed daily reports on liquidity as the U.S. steps up monitoring of risks from Europe‘s sovereign debt crisis, according to two people with knowledge of the matter.

Regulators held informal talks with some of the largest European lenders about producing a “fourth-generation daily liquidity” or 4G report, according to the people, who asked for anonymity because communications with central bankers are confidential. The reports may cover potential liabilities such as foreign-exchange swaps and credit-default swaps, said one person. The U.S. has already increased the number of examiners embedded in these banks, the person said.

Concern is growing that European lenders may falter as Greece teeters on the brink of default. U.S. Treasury Secretary Timothy F. Geithnerhas warned that failure to bolster European backstops would threaten “cascading default, bank runs and catastrophic risk” for the global economy.

“The Fed is trying to understand what the pressure points are in terms of liquidity and potential risks that are imposed by foreign banks to domestic institutions in our financial system,” said Kevin Petrasic, an attorney at the Washington- based law firm of Paul, Hastings, Janofsky & Walker LLC. “There is a little bit more sense of urgency as a result of what’s going on in Europe.”
Liquidity Risk

U.S.-based money funds, which buy short-term commercial paper, have been shunning securities issued by some banks based on the continent, and European Central Bank Governing Council member Yves Mersch said Sept. 28 that liquidity shortages pose the main risks to the region’s banking system.

Jack Gutt, a spokesman for the Federal Reserve Bank of New York, declined to comment. The largest European bank holding companies by assets in the U.S. include units of Deutsche Bank AG (DBK), HSBC Holdings Plc. (HSBA) and Banco Bilbao Vizcaya Argentaria S.A., according to Fed data. Duncan King, a spokesman for Frankfurt- based Deutsche Bank, Thaddeus Herrick, a spokesman for Spain- based BBVA and London-based HSBC’s Rob Sherman said they couldn’t comment.

U.S. banks are starting to provide a 4G report and they are being phased in this month, said Karen Shaw Petrou, managing partner of Washington-based Federal Financial Analytics Inc. Some Europeans are asking U.S. counterparts for information on how to prepare the report even though there has been no formal request from the Fed so far, one of the people said.
Avoiding a Squeeze

“The report requires rapid and in some cases daily data on a banks’ assets, liabilities and potential claims to measure the degree to which the bank could be caught in the classic borrow- short, lend-long squeeze,” Petrou said. “The 4G is one of the tools to reveal liquidity risk.”

The forms aren’t public, according to Petrou, and the New York Fed declined to provide a copy.

Euro-zone banks and other institutions were more than $350 billion in debt to the Fed’s emergency-lending facilities at one point during the2008-2009 financial crisis, according to data compiled by Bloomberg News. The analysis was based on Fed documents released earlier this year after court orders upheld Freedom of Information Act requests by Bloomberg LP, the parent company of Bloomberg News, and News Corp.’s Fox News Network LLC. Fed lending to these entities totaled more than $100 billion on an average day.
Swap Contracts

Regulators lack access to data on foreign institutions operating in the U.S. that would allow them to “make informed judgments about the adequacy of such firms’ capital and liquidity buffers,” William C. Dudley, president of the Federal Reserve Bank of New York, said in a Sept. 23 Washington speech.

U.S. prime money-market funds cut their exposure to euro- zone bank deposits and commercial paper, or short-term IOUs, to $214 billion in August from $391 billion at the end of last year, according to JPMorgan Chase & Co. data. The funds are rationing their credit to European banks because of concerns that financial institutions will take large losses if a euro- zone nation defaults.

Credit-default swaps allow bondholders to buy protection against losses if an issuer doesn’t pay its debts. The contracts can entitle the holder to face value if the borrower defaults. Lawmakers and regulators have blamed misuse of swaps and lack of disclosure for helping to trigger the 2008 financial crisis.

A currency swap is a contract in which one party borrows one currency from another, and simultaneously lends another to the second party. Foreign-exchange swaps are used to raise foreign currencies for financial institutions and their customers, such as exporters and importers as well as investors.

Currencies and their related derivatives are among the most actively traded markets in the world, with average daily turnover reaching $4 trillion as of September 2010, Bank for International Settlements estimates.

To contact the reporter on this story: Meera Louis in Washington at mlouis1@bloomberg.net

To contact the editors responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net; Rick Green at rgreen18@bloomberg.net

http://www.bloomberg.com/news/2011-10-02/new-york-fed-may-demand-europe-s-banks-produce-more-details-on-liquidity.html

Bank of America’s Mortgage Problem Seems Far Worse Than Expected


Bank of America’s Mortgage Problem Seems Far Worse Than Expected

CNBC.com | August 05, 2011 | 04:33 PM EDT

Bank of America badly underestimated how much it would have to pay Fannie Mae and Freddie Mac for troubled home loans.
In a filing Thursday, Bank of America [BAC 8.17  -0.66 (-7.47%) ] said the cost of buying back mortgages from Fannie and Freddie is already as high as high as $7.8 billion.
Earlier this year it had estimated that it would only have $3 billion of additional claims.
The bank has been buying back mortgages that didn’t live up to the contractual representations and warranties it made when selling the mortgages. Many of them were originated by Countrywide Financial, the lending business Bank of America bought in 2008.
“Notably, in recent periods we have been experiencing elevated levels of new claims, including claims on default vintages and loans in which borrowers have made a significant number of payments (e.g., at least 25 payments), in each case, in numbers that were not expected based on historical experience,” the bank said in an SEC filing.
“Additionally, the criteria by which the [government-sponsored enterprises] are ultimately willing to resolve claims have become more rigid over time,” the bank said.
The filing was first reported by Bloomberg.
Questions? Comments? Email us atNetNet@cnbc.com
Show Entire Article

Sent from a wireless device.

>Spain backtracks on China investment claim


>

What fools they look like, but then again, this is nothing new for Zapatero

Spain backtracks on China investment claim

By Miles Johnson in Madrid
Published: April 14 2011 13:57 | Last updated: April 14 2011 13:57
The Spanish government has been forced into an embarrassing reversal after claims that Spain had secured up to €9bn in investment in its troubled savings banks from China were denied by Beijing.
Spanish government officials said an “error of communication” had led to claims that China Investment Corporation, one of the country’s sovereign wealth funds, was considering the €9bn investment after José Luis Rodríguez Zapatero, Spain’s prime minister, met Chinese leaders this week.
“China has said it will continue to buy Spanish government debt, and is interested in participating in the restructuring of the savings banks, but it is too early to name specific amounts of investments,” the Spanish government said.
Mr Zapatero is on an official visit to China and Singapore to meet Asian investors to promote Spain’s government debt and financial sector.
A CIC official earlier told Reuters that reports in the Spanish media of the investment were false. CIC is known to no longer have available funds to invest abroad, and the €9bn ($13.5bn) figure would dwarf its largest previous investment which was a $5bn stake in Morgan Stanley made in 2007.
The admission of error came as Spain’s central bank was finalising its approval of plans submitted by the country’s regional savings banks, known as cajas, to raise new capital to meet a €15bn shortfall that has shaken investor confidence in the stability of the Spanish economy.
The previously little-known and privately held cajas were left gasping for new capital after loans made during Spain’s property bubble began to sour and its economy fell into recession.
Tough economic reforms led by Mr Zapatero’s socialist government, including freezing civil service pay and slashing Spain’s budget deficit, have helped the country partially regain the confidence of financial markets after some investors had started to view Spain as being at risk of following Greece, Ireland and Portugal into taking European Union rescue funds.
The interest investors demand to hold Spanish government debt over German bonds has fallen sharply since the start of the year.
On Thursday, however, after the confusion over Chinese investment in the cajas and ahead of the finalisation of their own capital raising plans, the spread between Spanish and German 10-year debt rose by 9 basis points to 190bp.
Spain’s outreach to China for investment comes after the prime minister of Qatar said in February that his country would invest €300m in Spanish banks after expressing confidence in the Spanish economy during a visit to Madrid.
Since then there have been no further details about which institutions Qatar would invest in, nor what form any investment would take.

Copyright The Financial Times Limited 2011.

FT.com / Europe – Spain backtracks on China investment claim

var addthis_config = {“data_track_clickback”:true, ui_header_color: “#000”, ui_header_background: “#F4F3EF”, services_compact: ‘ twitter, facebook, blogger, delicious, email, google, live, favorites, gmail, hotmail, yahoomail, digg, technorati, newsvine, myspace, googlebuzz, linkedin, more’}; var addthis_localize = {share_caption: “Compartir”};

>BANCO DO BRASIL EYES US LENDER


>BANCO DO BRASIL EYES US LENDER
By Samantha Pearson in São Paulo and Andres Schipani in MiamiPublished: April 11 2011 19:08 | Last updated: April 11 2011 19:08
Brazil's biggest bank by assets and profits is poised to become the first in the country's history to acquire a US retail bank, as surging profits and a strong local currency pave the way for international expansion, according to people close to the negotiations.
State-owned Banco do Brasil is in advanced talks to buy Eurobank, a regional lender based in Miami, for an undisclosed amount according to people close to the negotiations. Acquiring the bank, which has three branches in Florida, would give Banco do Brasil a vital foothold in the US market as well as access to lucrative money remittances from the state's Latin American residents. Banco do Brasil later confirmed it had begun talks with the bank.
This article can be found at:
http://www.ft.com/cms/s/0/6596d610-6463-11e0-a69a-00144feab49a,_i_email=y.html
"FT" and "Financial Times" are trademarks of The Financial Times.
Copyright The Financial Times Ltd 2011

>Financial Times: Goldman made multiple trips to Fed window


>

Goldman made multiple trips to Fed window 
April 01 2011 1:38 AM GMT


By Justin Baer in New York

Goldman Sachs turned to the Fed’s discount window on multiple occasions following its conversion to a bank holding company at the height of the financial crisis
Read the full article at: http://www.ft.com/cms/s/0/ea97d2f6-5bee-11e0-bb56-00144feab49a.html

.

>John Paulson’s Interview With The Financial Crisis Inquiry Commission


>

John Paulson’s Interview With The Financial Crisis Inquiry Commission
Courtesy of zerohedge.com
Description: http://feedads.g.doubleclick.net/~a/PXYKT80O_G58AtnxN_TohOTCkN8/1/di
John Paulson, of the eponymous uber-hedge fund did an hour-long interview with the Financial Crisis Inquiry Commission.  I listened to it (thanks to NYT Dealbook, although not sure where they got it from), and really, I got a kick out of it even though I think my carpal-tunnel is really flaring up now.  Anyway, without further ado, here’s what the man behind the Greatest Trade Ever has to say about the Financial Crisis…
Description: http://stonestreetadvisors.wordpress.com/wp-includes/js/tinymce/plugins/wordpress/img/trans.gifWhen asked what he saw, when, and why he decided to get short, he said “First thing we noticed was that real estate market appeared very frothy, values rose very rapidly, which led me to believe real estate markets were over valued.”  That’s pretty simple/straightforward, no?  I think it’s pretty interesting that he said the 3 homes he’s bought were all out of foreclosure, and they’d increased in value 4-5x over a 2-3 year period through ~’2005.  Apparently the impetus for the research that led to The Trade was literally staring him in the face every time he got home from work!
He explained his approach, and the way he put it makes me really think the guys who didn’t leave their trading desks & “never saw the bubble/crash coming” really had their heads buried in the sand deeper than I previously thought.  As Paulson said, “Credit markets were very frothy, very little attention paid to risk, spreads were very low, we thought when those securities correct, it could present opportunities on short side.”
Their research approach was pretty straight-forward: Focus on subprime, where they were amazed at how low quality the underwriting was, and how low the credit characteristics were on the loans.  They found the average FICO  was around 630, and over half of the loans were for cash-out refi’s, which were based on appraised, not sales prices (so “value” could be manipulated).  For many of these loans, LTV was very, very high, 80, 90, 100% with many of them concentrated in California (no surprise there).  Close to have of the mortgages they looked at were of the stated-income, no-doc variety.
Those who did report incomes had D/I ratios of > 40% before taxes and insurance.  80% of them were ARMs, so-called 2/28’s with teaser rates around 6-7% for those first 2 years, but after they reset, the rates were L+ 600bps which at the point would have doubled the interest rate on these loans, and Paulson & Co thought there was very little – if any – chance borrowers would be able to afford the higher payments.
Once the rates reset, the only thing these borrowers could do would be to sell, refinance, or default.  These were people spending > 40% of their gross income on their mortgages already, once the rate jumped up after the teaser period, they expected that many borrowers would simply default, and the price of the RMBS into which these loans were securitized would fall drastically, while the price of the protection (CDS, etc) Paulson bought on them would skyrocket.
Paulson & co also went much further in their analysis, well-beyond what many of those on Wall Street were doing.  In May, 2006, they researched growth of 100 MSA‘s and found that there was a correlation between growth and the performance of subprime loans originated within them.  As growth rates slowed, defaults rose.  From 2000-2005, they found that with 0% growth, there’d be losses of around 7% in the mortgage pools.
When they looked at the structure of the RMBS they found the average securitization had 18 separate tranches and that the BBB level only had 5.6% subordination, essentially, once losses surpassed that point, the tranches would become impaired, and if they reached 7% losses (what Paulson thought would happen once home price appreciation only slowed to 0%), the entire tranch would get wiped-out entirely.
By mid-2006, home prices not only had slowed to 0% but were actually decreasing, albeit slowly, only about 1%.  Even still, demand from institutional investors was so great, spreads tightened to 100bps. Why?  Because as Paulson went on to explain, institutional investors were buying up the BBB tranches (the lowest investment grade ones) in hoards.
While he didn’t say it, I will (for the umpteenth time!): This is what happens when institutions effectively outsource credit research to the Ratings Agencies, even though many had/have internal credit analysis groups (ahem IKB ahem).  They buy the highest-yielding security you can find that meets your investment guidelines, which meant that for many, they could only buy securities deemed by the brain trusts at the Ratings Agencies as “Investment Grade.”
Paulson started their credit fund in June, 2006, and as he explained, it wasn’t really as simple as it may seem. Historically – going back to about WWII – the average loss on subprime securities was 60bps, nowhere near what Paulson & Co expected was about to happen.  As he said “according to the mortgage people, there’d never been a default on an investment grade (IG) mortgage security.”  These same people were also of the mindset that they’ll NEVER get to the levels where the BBB tranches are impaired let alone wiped out completely.   These were also the same people who said that not since the Great Depression there hadn’t been a single period where home prices declined nation-wide.  These same people thought, worst case, home price growth would drop to 0% temporarily and then return to growth, just like before.

Why would “the mortgage people” expect anything else?  From their desks on the trading floors in Manhattan, Stamford, London, and everywhere else, things looked just peachy!  Spreads were tightening, demand for product was up, and more importantly, so were bonuses!  As far as they knew, the mammoth mortgage finance machine they’d created, based on their complex models and securities was working perfectly…
Paulson also made a distinction missed by many if not most: Everyone was looking at nominal home price appreciation, but real appreciation numbers were much different.  Going back 25+ years using real growth rates, they found that prices had never appreciated nearly as quickly as they had from 2000-2005, and that this trend was unlikely to continue for much longer, i.e. there would be a correction and then mean reversion.  Their thought was that once this correction came about, because of the poor mortgage quality and questionable assumptions/structures in mortgage securities, losses would be much worse than estimated.
Paulson was intent to make one distinction, one that must have been the cause of at least some frustration (followed by fantastic jubilation), that they did their own analysis, they weren’t really trying to attack “the mortgage people’s” views specifically.  Instead, they were trying to understand the conventional wisdom and understand why they had contrary viewpoints.  As myself and countless others have pointed out over the years since, the mortgage industry (I guess we’ll stick with calling them “the mortgage people?”) brushed Paulson off as “inexperienced, as novices in the mortgage market, they were very, very much in the minority…Even our friends thought we were so wrong they felt sorry for us…”
The mortgage people didn’t see any problems because there’d never been a default, except for one manufactured housing (mobile home) deal in the early 1990’s in California.
“The Ratings agencies – Moody’s – wouldn’t let you buy protection on securities from a particular state, because they ensured that the pools were geographically diversified, so they were essentially national pools, although California loans had the highest concentrations therein the pools correspond to the level of home sales in each state.”
What I found surprising from the interview is that Paulson actually praised the mortgage underwriting/originating practices of the big established banks like Wells Fargo and JP Morgan, which he said generally had the best underwriting standards and controls.  The worst were from the New Centuries and Ameriquests, eclipsed in their lax standards only by the mom & pop type shops who were really just sales businesses who made money on the volume of product they originated and sold to Investment Banks like Lehman and Morgan Stanley that didn’t have their own origination network.
These smaller “rogue” mortgage originators were mostly private entities who weren’t under the same scrutiny of their larger, publically-traded “competition.”  Their sales teams were compensated purely on quantity of loans originated with little-to-no care for quality.  These were the guys who routinely falsified documents, appraisals, incomes, assets and/or encouraged borrowers to do the same.  These were the kind of places that made Countrywide’s standards and controls look almost honorable by comparison.
The FCIC then asked Paulson about the infamous ABACUS debacle.  Paulson’s tone when responding to questions from the FCIC here was so, so, awesome; you could hear it in his voice, like he wanted to just say “are you guys freaking kidding me?  Seriously?!?!  REALLY?!??!” every time they asked him about how CDO’s got made.  He basically said (paraphrasing) “If ACA and IKB or Moody’s didn’t like the ~100 subprime reference securities we helped pick for the deal, they could have…not bought the deal or – get this – replaced them with ones they liked better…I couldn’t have gone short if they hadn’t gone long, they agreed on the reference portfolio, it got rated, boom, done”  It sounded like he just wanted to say something like “Hello morons?!  This is how Finance works, HELLOOO!!!”
The ABACUS conversation ended pretty awkwardly (as you might imagine), and then the FCIC moved onto asking Paulson about his Prime Brokerage relationships and what he thought about the Banks.  Interestingly (to me, at least), Paulson had much of it’s assets with Bear Stearn’s Prime Brokerage primarily because the way Bear was structured , the PB assets were ring-fenced from the rest of Bear’s assets in a separate subsidiary, so even if Bear went down, the PB assets would theoretically be safe.  The rest of Paulson’s assets were with Goldman’s PB.  When Bear’s Cioffi/Tanin-run internal hedge funds failed, Paulson saw that as the proverbial canary in a coal mine; they knew the crap that Bear, Lehman, and everyone else had on their books.  They didn’t pulled all of their cash balances from their prime brokers and set up a contra-account at Bank of New York, where, by the time Lehman went Bankrupt, they were holding most of their assets in Treasuries there.
Next, the FCIC asked him about regulators and banks and what people could (or, better, SHOULD) have done that might have prevented the crisis.  Paulson called out the Fed for not enforcing the mortgage standards that were already in effect.  He mentioned that pre-2000, no-doc loans were only given to people who could put 50% down and only represented about 1% of the mortgage market, but only a few years later, originators were “underwriting” NINJA loans with 100% LTV!
Paulson went on to explain how simple fixes, so-to-speak, just enforcing existing regulations like requiring income/asset verification, that homes were owner-occupied, and a downpayment, as low as 5% would have made a huge difference.  Most of the mortgages that failed didn’t have those characteristics.  Excessive leverage and poor understanding of the credit, problems Paulson also say brought down Bear and lehman.  They were leveraged (total assets: tangible common equity) on average, 35:1.  At that sort of massive leverage, a 3% drop in assets would wipe out every $ of equity!
Even if that ratio was brought down to 12:1 and you increase their capital ratio to 8%, the banks still couldn’t hold some of the riskier, more illiquid assets like Private Equity interests, equity tranches of CDO’s, lower-rated buyout debt from many real estate deals, and other assets that themselves were already highly-leveraged.  Adding further leverage to assets themselves already levered an additional 12:1 is just lunacy.  No financial firm should be able to do that, at max those assets should only be allowed to be levered 2:1 (similar to the max leverage for stocks due to Fed Regulation T).
He went on (this is pretty much verbatim, emphasis mine): “Under those scenarios, I don’t think either bank would default.  AIG FP was absurd and exemplified the derivative market where you can sell protection with zero collateral.  AIG FP Sold $500bn in protection with $5bn collateral, 100:1 collateral.  ACA was collateral agent, they were like 120:1 leveraged.  $50bn protection on $60mm collateral.  You have to hold collateral, we need margin requirements for both buying & selling protection.  It’s not the derivative itself that’s the problem, it was the margin requirements (or lack thereof).  We need something like Reg T (max 2:1 leverage at trade inception).  What these guys did would be like like buying $100 of stocks with $1 of equity, a tiny downward move is a huge loss of equity.  In all, these four things would have likely prevented the crisis:

  1. Mortgage underwriting standards, simple & logical
  2. Higher bank capital ratios
  3. Higher capital against risk assets
  4. Margin requirements against derivatives

Paulson was then asked about the Ratings Agencies and what role they played in the bubble/crisis.  Regular readers know where I stand on them & NRSRO regs, and no surprise, Paulson is similarly critical, particularly of the issuer-pays compensation structure, calling it the perverse incentive that it really is, despite whatever nonsense rhetoric RA executives say.
That, combined with being public (or part of public companies) and they were in this race to keep pace with their competitors, to keep up earnings growth with their derivatives business, which he called a “perverse economic incentive that may have led to their laxness in rating securities”
He went-on to explain this same – in the immortal words of Citi CEO Chuck Prince – “keep dancing while the music’s still playing” – incentive structure led the Banks to take similarly short-sighted actions as they struggled to keep up earnings, growth, and of course, bonuses.  At that point, the only way to do that was to grow their balance sheets, add more leverage to earn spread.  In Paulson’s words “Once things go up like that, you don’t see any downside, so at top of market they just weren’t looking at the downside, just upside, became more and more aggressive until they blew up.”
Paulson said the Fed certaintly could have cracked-down on lax-underwriting standards, eliminated negative-amortization loans, stated-income, 100% LTV, IO’s, etc where most of the problems developed.  On the banks and more broad financial services industry, he said “…people became delusional, ‘we can leverage AAA 100:1…’ if you had margin requirements against derivatives, AIG could have NEVER happenedIf they held higher equity against risky investments, they would have never defaulted. Constructively, that’s what Basel 3 says, 8% equity/capital and higher risk weightings for illiquid risky type assets.  I think adoption of those rules will lead to a safer financial system.”
When asked about the role of Fannie May & Freddie Mac, he pointed out the problem was largely similar to what brought down the banks and AIG: excessive leverage and poor oversight/underwriting. “They deviated from their underwriting standards as a way to gain share in alternate mortgage securities, of poor quality & higher losses.  Second, they were also massively leveraged 80-120:1 if you include on-balance sheet assets & guarantees which is way more than any financial institution should have.”
Yea, I think 120:1 leverage is just a wee bit more than prudent, just a bit though…
From this interview it seems painfully clear that those with whom the safety of the Financial System rested were in a deep coma at the helm, Bank executives, regulators, Congress, institutional money managers, all of them.   It’s clear that the nonsensical argument put-forward by Tom Arnold & Yves Smith that those who were shorting housing, subprime, etc were NOT IN ANY WAY, SHAPE, OR FORM remotely responsible for causing the crisis.  Institutional managers were not gobbling-up BBB-rated RMBS CDO tranches because shops like Paulson & Co were shorting them. Like I said before: they wanted the highest yield they could get away with holding!
As Paulson said, anyone who looked at the data he did should have noticed the impending doom, but apparently, either very, very few people did that type or analysis or they did and just, like Chuck Prince said, kept on dancing until the music stopped.
These traders thought tight spreads indicated safety, which is just wrong in so many ways.  These are the same morons who – thought they should know better – constantly confuse correlation with causation.  Low spreads may have been historically correlated with low default and loss rates, but low spreads do not cause low losses/defaults.  Spreads, like stocks, trade as a function of supply and demand, and all low spreads indicate(d) is that, as Paulson noted, institutional managers were swallowing up as much of these MBS and derivatives (for reasons I explained above), and, like a bunch of lemmings, all thought history would continue despite significant evidence suggesting this time, it was actually different.
One other thing that critics and the public at large probably doesn’t know is that Paulson & Co had a MASSIVE internal, independent research effort wherein they did crazy things like *gasp* look at loan-level data.  Imagine that!  This enabled them to hunt for CDO and other product that contained an inordinate amount of crap for them to short.  This same work also helped them to buy RMBS/CMBS etc when the market turned in 2008 and 2009. They had done the work, and knew what they were willing to pay once it was time to go long.
I’m not saying there’s anything necessarily wrong technical, momentum, and quantitative trading strategies.  There is, however, something very wrong, and very dangerous about relying on these strategies alone while ignoring fundamentals, as evidenced by the housing crisis.  Those who did the hard work like Paulson & Co. made the greatest trade ever, while those who ignored or were otherwise blind to the fundamentals got absolutely crushed.

Description: http://feeds.feedburner.com/~r/zerohedge/feed/~4/ZuLot83rMmA


View article…

JP Morgan confirms its dominant position in Copper


JP Morgan confirms its dominant position in Copper

Making the rounds this morning. Dominant position could be as high as 90% of LME Warehouse inventories!
JP Morgan confirms its dominant position in Copper
The head “raw materials” of JP Morgan acknowledged that his bank has invested $ 1.1 billion on stocks of copper on the London Metal Exchange
Copyright Reuters
Copyright Copyright Reuters Reuters

    *
      One speaker monopolizes the mysterious Copper LME
    
*
      Handling, there’s nothing to see on the copper

Ian Henderson, chairman of JP Morgan Global Resources, has strong convictions about the copper market. He confirmed on Tuesday morning in a meeting for investors in Paris that “JP Morgan had bought more than half of stocks of copper on the London Metal Exchange to $ 1.1 billion. A dominant position which has fueled speculation on the red metal, since it makes the physical metal CCAEC more difficult. In total, the bank now owns about 122,222 tonnes of copper.

For two weeks the market questioned the idendity the holder of these stocks. According to figures published by the London Metal Exchange, a player had between 50 and 79% of reserves in the marketplace, which has warehouses all over the world. Among the potential holders of the metal, the BlackRock fund and ETF Securities, working in prevalence of Exchange Traded Funds on copper, had been cited. The name of JP Morgan also circulated. This is the first time that the bank recognizes.

The manager explained this decision by solid fundamental reasons. “We met there is little the leaders of Codelco, the largest copper producer in the world with 12% market share. They explained that their production would have to be halved in five years,” says the specialist, who has over thirty-five years of experience in commodities. With $ 70 billion of assets under management, JPMorgan Global Resources is the first strike force in the world for raw materials.