When hurricane Katrina hit New Orleans in 2005, thousands upon thousands of people lost their homes to the flood that followed. Many, I am sure got the proverbial at least you have your life, or we can, we will rebuild. But as you pass through the parishes today, you still see the evidence of that faithful day. And that fact that many of the people of this exceptional city never returned to the complete destruction that is the city post Katrina.

The economy sucks. We all know this. Yet we all tell each other that it will get better. We say this in part because America has gone through a few recessions and even a depression and every time we did, we came out better then when we went in. We also believe this because our government keeps telling us things are looking up. The tides seem to be turning.

But I am start to get the feeling every much that either a) they’re lying to us, or b) they’re just that stupid. I started out believing that they are lying to us, then as the crisis continued, I truly began to believe that maybe, just maybe they are that stupid, and I felt that if they are stupid there is a chance that thing will get better.

But now, who knows. Between the price of oil, food and everything other then Victoria Secret going up. The fact that 9.4% of our neighbors are out of work, and yet another Country to possibly go to war with it seems that we need to fundamental change directions and figure out that its going to mean to be an American in this new millennium.

Breakdown:

·          Rate of job losses in the United States slowed significantly in May

·          345,000 jobs lost in May 2009

·          Smallest number of monthly job losses since September 2008

·          Six million jobs have now disappeared since the recession began in December 2007

·          14.5 million people are now unemployed

·          Manufacturers cut 156,000 jobs, \

·          Construction cut 59,000 jobs – improvement over last months 108,000 jobs

“But in a sign of the recession’s worsening toll, the unemployment rate climbed to 9.4 percent, its highest point in 26 years. The rate — a measure of jobless people looking for work — rose more than expected, partly because more people were resuming the hunt for a job.”

“Job losses likely to pile up through the rest of the year as the country’s labor market bottomed out.”

Read Article: Joblessness Hits 9.4%, but Losses Slow

The economy is getting better, but people are still losing their jobs, and banks are still going bankrupt. At least we are told it’s getting better. They need someway to keep the engines running on Wall Street.

Although BankUnited is a regional player, it’s still somewhat of a larger bank, with nearly 14 billion in assets, and a large number of outlets. When a bank this size goes belly up, it brings some major concerns to the market. What’s different here is that private investors have stepped in riding a white horse to save the bank, after the last minute. It will be interesting to see how the investors position themselves as possible takeover targets come up. The investor group will inject an additional $ 900 million into the bank; bring its tangible common equity to 8% of assets.  

Breakdown: BankUnited

·          Worth nearly $13bn by assets

·          Closed by federal regulators in the biggest US bank failure of 2009

Breakdown: Investor Group

·          Blackstone Group

·          The Carlyle Group

·          Centerbridge Partners

·          WLRoss & Co

“The auction, conducted by the Federal Deposit Insurance Corporation, was the second of a troubled US bank during the credit crisis. Earlier, a group including JC Flowers, hedge fund manager John Paulson and Dune Capital won the bidding for IndyMac’s assets.”

Breakdown: The Deal

·          Deal includes a loss-sharing agreement on $10.7bn of the bank’s $12.8bn in assets

·          Government will take 80% of the first $4bn in losses

·          95% of any remaining losses

·          Federal government receives warrants, share of any future upside

·          Investors will put $900m of equity into the bank

·          Bringing tangible common equity up to 8% of assets

·          Giving the bank the ability to make acquisitions

·          Will be run by John Kanas, former chief executive of North Fork

·          Winning group has talked to regulators for almost four months

“Regulators have worried that sales of troubled banks to private capital should not look overly generous. Those fear were fed when Chris Flowers, founder of private equity firm JC Flowers, said the investor group that bought IndyMac’s assets had all the upside for the failed California bank, while the government had all the downside. Calls to Mr Flowers were not returned.”

Read Article: Private equity consortium wins BankUnited auction

FDIC: FDIC Bank Closing Information for BankUnited, FSB

There is an All State Insurance commercial currently running on televisions in the United State that talks about how the company was created in the middle of the great depression, and how they have been around for the 7 or so recession since. The actor in the commercial says that when the fear subsides, and the economy starts up again a funny thing happens. Hope.

The question is, is this a false start. The general numbers are still down. New housing starts are down to there lowest leaves. 10 out of 19 banks needed to raise more capital. The two largest automakers in the world are declaring bankruptcy, and unemployment is reaching levels not since in generations.  

Are we just over optimistic, or have been become so use to contunited growth, that with out it, we can not survive. What scary is at want point does hipper inflations start? If we don’t increase the money supply, can we deal with all the bills we have pilled up?

Experts are saying that “stocks have moved up too quickly from their March lows, there is one undeniably healthy thing about this surge: Investors are not nearly as afraid about the economy as they were a few months ago.”

Breakdown: CBOE Volatility Index (VIX)

·          Market barometer Measuring expectations of risk and turmoil

·          Created in 1993

·          Changes to its methodology made in 2003

·          Commonly look at as a gauge of fear

·          Rule of thumb, the higher the level of the VIX, the more panicky the investors

·          Last Bull Market, 2002 to 2007 – range of between 10 and 20

“VIX closed below 30 for the first time in more than eight months”

VIX has not been this low since the investment bank Lehman Brothers went bankrupted. After which the VIX peaked near an all-time high of 90 in late October. Investors feard the demise of AIG and the possible nationalization of large banks like Citigroup and Bank of America.”

“As long as the VIX doesn’t get too low, then there is a good chance that this recent rally is actually the start of a new bull market and not merely a temporary blip in the bear market.” The VIX around 27 is still historically high and therefore not a sign of too much exuberance.

“If the VIX gets too low, it could be indicative that good news is already reflected in stock prices. Then you would have to begin to ask yourself what other news could drive stocks higher that investors haven’t already discounted.”

“A low VIX isn’t necessarily a positive,” Roberts said. “It could mean that people are getting comfortable and that might set us up to more shocks in the system. Investors might not be factoring bad news into the equation.”

Read Article: Who’s afraid of a big bad bear?

In banking size does matter, and when a big bank fails it has the potential of taking down the whole economy as many experts say the failure of Lehman Brothers did in 2008. But much of the American banking system is built on smaller, community banking institutions rather then the mammoths of Wall Street like Citibank and Bank of American. What happens if these 7,900 smaller banks fail? What happens to the communities they serve, and the families they employee.

Breakdown: Capital Needs

·          Small/Medium-sized banks must raise $24bn to meet the capital standards

·          10 of the largest 19 US financial institutions need additional capital

·          Identifying a $74.6bn combined shortfall

“Since this month’s release of the tests for the 19 largest banks, regulators and investors have increased their focus on the next tier of lenders, amid concerns some of them might struggle to survive if the economy worsens.”

Breakdown: Stress Test Results

·          200 banks below the 19 largest financial would result in capital shortfalls for 38% of the institutions

·          Leading to a deficit of around $16.2bn in common equity

·          Applying similar criteria to the remaining 7,700 banks in the US would result in a further $7.8bn capital deficit

·          The banks have to repay a combined $27bn in aid

“US Treasury does not intend to extend the stress tests beyond the 19 top institutions. Analysts say that the public release of the government’s test methodology and capital adequacy philosophy means that the tests’ standards will become a model for the rest of the US banking system.”

Read Article: Smaller US banks need additional $24bn

What do you do when you when don’t make enough money to cover your monthly expenses. You use your credit card. You also us it for that nice 46 inch TV, but we’re not judging. Well as most people are aware, American has had a 20+ year love affair with there credit cards.

Every bank issues them. You can get anything from your favorite sports team, to a picture of your pet dog on them. And for a long time even dead people where getting pre-approved applications for cards. But as the 2008/09 crises has hit the banking sectors the hardest, the providers of credit cards are preparing for the largest defaults they have seen in decades.

“Experts predict that millions of Americans will not be able to pay off their debts, leaving a gaping hole at ailing banks still trying to recover from the housing bust.”

Breakdown: Stress-Test Results

·          19 biggest banks could expect $82.4 billion in credit card losses, by end of 2010

·          Federal regulators call a “worst case” economic situation

·          Regulators published losses only on credit cards held on bank balance sheets.

·          $82.4 billion figure did not reflect another element in their analysis:

·          billions of dollars tied to credit card are held off their balance sheets

·          A portion of losses will be absorbed by outside investors

Breakdown: Unemployment Breaches 10%

·          Many economists predict it to get worst

·          Rate of uncollectible balances at some banks could far exceed that level

·          American Express and Capital One Financial, Expect 20% of balances to go bad this year

·          Bank of America, Citigroup and JPMorgan Chase, about 23% are expected to sour

Breakdown: Vastly Understate

·          Regulators’ loss rate was applied to their entire credit card business

·          Card losses could reach $141.5 billion by 2010

·          It could top $186 billion for the entire credit card industry

“(T)he peak unemployment level that regulators used to drive their loss estimates is roughly what current rates are on track to reach. That suggests that if the unemployment rate gets much worse, credit card losses could be worse than what regulators projected.”

Breakdown: Job Losses

·          Unemployment rate reached 8.9% as the economy shed 539,000 jobs.

“The unemployment rate and the rate of credit card charge-offs, or uncollectible balances, have been aligned because consumers who lose their jobs are more likely to miss payments.”

Breakdown: Write-offs

·          Banks wrote off an average of 5.5% of their credit card balances in 2008

·          Average unemployment rate was 5.8%.

·          End of the year, rate of credit-card write-offs was 6.3%

“Experts predict that the rate of credit-card losses could eventually surpass the jobless rate because of the compounding effects of the housing crisis and lackluster consumer confidence. Shortly after the technology bubble burst in 2001, credit card loss rates peaked at 7.9 percent.”

Breakdown: Prior Recessions

Unlikely to be able to extract equity from their homes

Or draw down retirement accounts to help pay off their debts

“After writing off about $45 billion in bad debts during 2008, credit card lenders are bracing for the worst year in the industry’s history. Not only are losses spiraling, but also lawmakers are on the verge of passing a set of tough new consumer protections that could have a devastating effect on profits. This week, the Senate is expected to take up the Credit Cardholders Bill of Rights after the measure passed in the House with a strong bipartisan vote of 357 to 70.”

Breakdown: Average American

Household have with nearly $8,400 of credit card and other revolving debt.

Read Article: Banks Brace for Credit Card Write-Offs

For most people on Main Street, looking at Wall Street today, its almost trying to figure out what side is tails on a double side coin. Who the hell knows what’s going on? On one hand the government is saying that there are banks out there that are in good standing. But other banks need around $75 billion dollars of additional capital to survive a worsening economy. That money is expect to come either throw private channels or by converting already barrowed government aid into common equity. But people that’s still $75 billion dollars.

Wall Street was up today on news that job loss are slowing down, but we have almost 14 million people out of work, with most analysts expecting additional 2 million loses this year, and 20 million totals before its all said and done.

How can this be good for the economy? Whybanksfail does not see anything improving until we start to add jobs. Not lose them.  

Breakdown: April Numbers

·          Bureau of Labor Statistics

·          Economy lost 539,000 jobs

·          Unemployment rate at 8.9 %

·          Pace of job losses starting to level-off

·          13.7 million American unemployed

“The economy, while still bleeding hundreds of thousands of jobs, is starting to lose them at a slower pace, offering the latest hint that the recession is bottoming out.”

Breakdown: Last four months

·          Jobs vanished at a rate of more than 650,000 every month

·          741,000 jobs lost in January

“But some 17 months into one of the worst downturns since the Depression, many businesses have already cut their own costs to line up with lower revenue. And economists said employers were likely to cut fewer and fewer jobs over the rest of the year as tax cuts and stimulus spending wash through the economy.”

Breakdown:

·          Economy has now shed 5.7 million jobs since the recession began in December 2007

·          Most of those coming in the last five months

·          March was revised upward Friday to 699,000, from 663,000

“Many economists expect businesses to cut an additional two million jobs before the economy begins growing again and the unemployment rate begins to ebb, probably sometime in 2010.”

What effect can 20 million unemployed or underemployed workers have on a fragile economy? The unemployment rate is already as high as the Obama administration believed it would be at the end of the year, and it is all but certain to climb even higher.”

Breakdown:

·          27% of unemployed people have been out of work for more than six months

·          Number of people who can find jobs in five weeks or less is dwindling

Read Article: U.S. Jobless Rate Hits 8.9%, but Pace of Losses Eases

US Government Federal Regulators are preparing to release the results of the much talked about Stress-Test, which are designed to give the country an understanding of were the nations banks stand, and what they might look like if the ongoing crisis continues or worsens.

Regulators have pushing banks to use common shares to bolster their “tangible common equity,” a measure of capital. Regulators are placing greater emphasis on the resources that a bank has at its disposal than the more traditional measure of “Tier 1” capital.

Bank of American

Regulators told BOfA that it needs $33.9 billion in capital to withstand any worsening

“If the bank is unable to raise the capital cushion by selling assets or stock, it would have to rely on the government, which has provided $45 billion in capital through the Troubled Asset Relief Program.”

Breakdown: Game Plan

·          Could convert non-voting preferred shares into common stock

·          Making government one of the bank’s largest shareholders

Executives at the bank believe the requirements should be less and have sparred with the government over the amount

Bank of America says they have plenty of options to raise the capital on its own before it would have to convert any of the taxpayer money into common stock.

“The government’s determination that Bank of America doesn’t need as much capital as it has already received from taxpayers is an indication that even some of the most troubled banks may not need more government money than has been allocated to them.”

Citigroup

Has allowed the Government to convert investment into common stock

Arrangement worked out between the Treasury and Citigroup earlier this year

Treasury received mandatory convertible preferred shares (Preferred Shares)

Those shares can  be converted to voting shares at the will of the government

Citigroup is expected to need to raise capital as insurance against any further downturn in the economy.

The government told the bank it would need $50 billion to $55 billion in capital, a requirement that would force it to raise $5 billion to $10 billion in new capital

Read Article: Bank of America Needs $33.9 Billion Cushion, U.S. Says

As the size of the nation’s debt grows to levels never seen before, Wall Street is starting to sound the alarms, saying that we need to keep the debt growth in check, or suffer a longer recession. Private firm will not be able to compete with the government in spending, washing away their ability to create wealth. We are also putting greater obligations on future generations to replay today’s debt.

As Tax revenues were continue to decrease, 14% in the first half of the fiscal year, the government will be forced to look for other ways to fund operations, and keep the country open for business. The question is how much can the United State afford to barrow before it collapses under its own weight.

Breakdown: Unprecedented Spending

·          Bank bailouts

·          Detroit rescues

·          Health care overhaul

·          Stimulus plans

Breakdown: Yield

·          10-year Treasury notes rose to its highest level since November, to 3.17%

·          Investors are demanding larger returns

·          Low by historical standards – Averaged about 5.7% in the late 1990s

As the economy stays in recession, for the first six months of the current fiscal year, federal deficit is running at $956.8 billion or about one seventh the gross domestic product (GDP). These levels have not been seen since World War II.

The debt which is held by the public is expected to go from 41% of GDP in 2008 to 51% in 2009, and will peak at 54% in 2011 at which point it is expected to declining the following years.“For all of 2009, the administration probably needs to borrow about $2 trillion.”

“Congressionally mandated debt ceiling of $12.1 trillion will most likely be breached in the second half of this year.”

Breakdown: Interest Payments

·          Interest payments to more than quadruple in the next decade

·          $806 billion by 2019 from $172 billion next year

Read Article: Worries Rise on the Size of U.S. Debt

The end of Chrysler nears, at least before it is reorganized in bankruptcy court, at which point it may reemerge as concern owned mostly by its unionized worker force and the Italian car maker Fiat, better known to some Americans as Fix It Again Tony.

“The American automaker Chrysler will file for bankruptcy on Thursday, an Obama administration official said. The White House said President Obama and members of the auto task force would address the fate of the company at noon.”

Breakdown: Debt-Holders

·          Last-minute efforts to win-over recalcitrant Chrysler debt-holders failed

·          Administration had the “full support of Chrysler’s key stakeholders”

·          Administration was frustrated with the holdout creditors.

Breakdown: Holdouts

·          Holdout lenders, primarily distressed-debt hedge funds

·          Bought portions of Chrysler’s $6.9 billion of bank debt at a discount

·          Likely to argue that they have the first claim to the carmaker’s assets

·          Would see greater recovery in a liquidation

·          They contend would yield about $.65 on the dollar

·          Treasury Department would have given the creditors $.33 on the dollar

“If all 46 lenders do not agree to the new offer, and a bankruptcy filing occurs, the lenders will be forced to accept the $2 billion they were originally offered or fight in court for a higher amount.”

“People briefed on the negotiations said that while it seemed certain Chrysler would survive and avoid liquidation, it was not yet clear whether it would have to be placed into bankruptcy to sort through any unresolved issues with creditors.”

Breakdown: Prolonged Battle

Bankruptcy filing could lead to a prolonged battle in court

Company’s lenders, dealers and parts suppliers across the country

Government would need to provide financing for the company to operate

Read Article: Final Effort to Avert Chrysler Bankruptcy Falls Short

As Chrysler works against the government clock, it seems as they have come up with a plan that might keep the automaker out of bankruptcy court. Chrysler’s unsecured creditors have reached a preliminary agreement with the Treasury Department and United Auto Works which will change the ownership structure of the company, and keep them making cars.  

The only question that we at Whybanksfail have is, with the UAW and Fiat taking control of the company, what will Cerberus Capital Management get, and what about Daimler AG.

The understanding that WBF has is that Cerberus owned 80.1% and Daimler has the remaining 19.9%, however Cerberus never paid anything to Daimler, it simply stepped in to take over debt, and Daimler already has write their remain ownership stake to zero. So the true value of the company today is the $2 billion dollars that large unsecured debt owners have agreed to, and the value of the secured debt. How does Cerberus make money??? Because you know they will.

It would be very interesting to see how this all plays out in a few months. WBF still feels the best solution here is bankruptcy. It will let us see what’s really under the covers.

Breakdown. Debt Deal

·          $6.9 billion in unsecured debt

·          Debt owners include Citigroup, JPMorgan Chase, and hedge funds

·          All debt to be canceled in exchange for $2 billion in cash

The two sides had been far apart in negotiations ahead of a Thursday deadline, but they have significantly narrowed the gap in recent days.

Breakdown: Union Deal

·          Chrysler reached deal with the United Auto Workers

·          Union would own a 55% stake in the newly reorganized automaker

·          Italian automaker Fiat and US government would likely own the rest

·          The agreement with the UAW must be ratified by union members

·          UAW agreement relieves portion of $10 billion owed to retiree health fund

Read Article: Deal Is Set on Chrysler Debt That May Avert Bankruptcy

The Supreme Court will hear arguments today that could change the way big banks are regulated. The case, “Cuomo v. The Clearing House Association” tries to figure out who has the right to regulate national banks, federal or state governments, when it comes to the mortgage business 

“The case began four years ago, when Eliot Spitzer, New York’s attorney general at the time, questioned why some national banks seemed to be making a disproportionate number of high-interest home mortgage loans to black and Hispanic borrowers.”

The hope is that whatever decision the court makes, the language of the ruling will have the appropriate wording so that any future regulatory frame work that is put in place, has a good chance for project customers from bad bank policy’s

Breakdown: 

•  Attempting to enforce anti-discrimination laws
•  Ran up against federal precedent
• Rended to leave regulation of national banks to the Treasury Department
• And Office of the Comptroller of the Currency
• Consortium of banks sued Mr. Spitzer
•  So did the Office of the Comptroller of the Currency 

Read Article: Justices to Hear Arguments on Bank Regulation

The FDIC will take another hit this week, in the tune of $700 million caused by the collapse of 4 regional banks bringing the annual total failure to 29.

“Banks in a bind: The recession has left regional banks reeling, with cash-crunched consumers struggling to pay off their loans.”

The number of banks which have failed in 2009 now totals to 29, four more than the 25 that failed all of last year. The additional 4 failures will cost the Federal Deposit Insurance Corp.’s deposit insurance fund $698.4 million.

Georgia now has 10 bank failures, the most bank closures of any state since the crisis intensified at the start of last year.

Breakdown: First Bank of Idaho

·          Ketchum, Idaho

·          First bank based in Idaho to fail in more than 20 years

·          FDIC appointed receiver by the Office of Thrift Supervision

·          $374 million in deposits

·          $488.9 million in assets

·          Most deposits acquired by U.S. Bank of Minneapolis

·          U.S. Bank paid a 0.55% premium for the deposits

·          U.S. Bank will not assume $112.8 million in brokered deposits

·          Agency will pay brokers directly for the amount of their funds

·          U.S. Bank acquired about $17.8 million in First Bank’s assets

·          Remaining assets will be retained for later disposition

·          Cost to FDIC deposit insurance fund $191.2 million

Breakdown: American Southern Bank

·          Kennesaw, Ga

·          Shut down by Georgia Department of Banking and Finance

·          FDIC was named the receiver

·          Total assets of $112.3 million

·          Total deposits of $104.3 million

·          Bank of North Georgia takes over deposits at a premium of 0.003%, except brokered accounts

·          Cost to FDIC deposit insurance fund $41.9 million

Breakdown: Michigan Heritage Bank

·          Farmington Hills, Mi

·          Shut down by state regulators

·          FDIC was named the receiver.

·          Total assets of $184.6 million

·          Total deposits of $151.7 million

·          Level One Bank takes over deposits at a premium of 1.16%, except those from brokers

·          Level One agreed to purchase $46.1 million in assets

·          Cost to FDIC deposit insurance fund $71.3 million

Breakdown: California: First Bank of Beverly Hills

·          Calabasas, Ca

·          Shut down by State regulators

·          FDIC named the receiver

·          But the FDIC was not able to find a buyer for the local bank

·          Total assets of $1.5 billion

·          Total deposits of $1 billion.

·          Cost to FDIC deposit insurance fund $394 million

Read Article: Bad year for banks: Failures surpass ‘08

We have been hearing a great deal about stress test this week. These are the test the Obama administration announced a few months ago, that will test the financial health of American banking and financial institution. This week we had encouraging news from many of the banks themselves, that first quarter numbers have been very good, and that banks seem to be positioned well, giving hopes that the crisis will loosen in the second half of 2009.

However, there is very little public knowledge of how the stress test have been cared out, and what exactly they are measuring, or what the government is considering the worst case scenario for the economic crisis.

What’s more is how will wall street handle the out come of the test. What will happen if Goldman Sachs passes with flying colors, yet Citibank or Bank of American does not? Will there be a run on Citi or BofA. Will the stock prices of these two companies fall to zero, or close to it. While the price of GS sky rockets. There is great straighten in big the only one around.

The most scary part of all this, is that its never been done before. What will the normal persons on main street reaction be?

Breakdown:

·          Regulators scheduled face-to-face meetings on Friday with nation’s biggest banks

·          Preliminary results of the stress tests.

·          Banks to have until Tuesday to dispute findings

·          Federal officials to disclose the final results on May 4

·          Banks to release findings specific to their institution

“The stress tests are expected to certify which banks are healthy enough to start paying back the government bailout funds they accepted and which need additional capital.”

Breakdown: The test

·          Some of 19 banks undergoing exam will need to raise fresh capital

·          For tests to be credible, not all banks can pass with flying colors

·          Banks will be given the chance to raise money from private investors first

·          Short timetable before the results become public make it increasingly likely that they will return to the government for money.

“Administration officials say that the banks may also be able to convert the government’s existing preferred share investments into common shares, which could lead to significant government ownership of some institutions.”

Read Article: Regulators to Meet With Banks on Friday on ‘Stress’ Tests

There are always winners and loser in any environment. However in the latest round of quarterly results it’s interesting to see who has fallen into want category. What’s doubly interesting is the fact that banks which did take on government help to purchase out asset of fail brothers seem to be making out much better then does that did not have the same opportunity.

The equalizing factor is they all took government TARP cash, and as some want to repay the funds, others are in it for the long haul as meeting numbers might become increasingly difficult given the on going expectations of employment.

What’s going to be interesting to see is why some banks are writing down the value of real estate and other assist as others are not.  We are not out of the woods yet folks, and I think we are entering the interesting point of the on going recession, or for some the depression.

Remember it’s a recession if your neighbor losses his job. It’s a depression if you loss yours.

Breakdown: Morgan Stanley

·          Bank lost $177 million, or 57 cents per share

·          Weak commercial real estate market hits revenue

·          Cuts dividend

·          Much bigger-than-anticipated loss

·          Revenue at equity sales and trading plunged 74% from a year ago

·          Paid $401 million in preferred dividends tied to the government

·          Reported a net loss to common shareholders of $578 million

·          Slashed quarterly dividend by 81%, to 5 cents from 27 cents,

·          Trying to conserve $1 billion in cash annually

Last quarter, Morgan Stanley posted a $2.3 billion loss.

Breakdown: Losses

·          $1 billion in losses on real estate investments

·          $1.5 billion of lost revenue tied to changes in the value of the bank’s liabilities

·          Revenue in equity sales/trading group plunged to $900 million from $3.4 billion a year ago

·          First-quarter revenue, which plunged 62% from a year ago to $3 billion.

“bank was the top performer in the merger-and-acquisition rankings during the quarter, and like its peers Goldman Sachs (GS, Fortune 500) and JPMorgan Chase (JPM, Fortune 500), made significant sums trading plain vanilla fixed income products in the interest rate, commodity and credit arenas.”

Read Article: Morgan Stanley suffers another loss

Recently Wall Street has been blushing with optimism, based largely on good returns from the American Banking sector. However many question have come up with regards to how those numbers where reached, and how the banks accounted for the large loans received via the Government bailout program, TARP. The program allowed the banks great freedom to do as they please with the money.

Breakdown: International Monetary Fund Estimates

·          Global Economic Downturn deepening

·          Confidence in the financial system still elusive

·          Financial institutions face losses of $4.1 trillion in holdings as a result of crisis

·          Banks are expected to shoulder about two-thirds of the write-downs

Breakdown: Losses in loans and securities originating

·          United States estimated at $2.7 trillion

·          Up from $2.2 trillion in January and $1.4 trillion last October

·          Europe estimated at $1.12 trillion

·          Japan estimated at $149 billion

Banks have raised about $900 billion in fresh capital since the crisis began, which is outweighed by $2.8 trillion in credit-related losses. The banks have already taken about one-third, or $1 trillion, of those write-downs, but there is a long way to go. If the economic engine does not start to pump demand up for goods and services, the losses will have to be booked at some point in the near future.

Breakdown: Uneven pace of the response to the crisis

·          US banks reported $510 billion in write-downs in 2008

            Face additional $550 billion in 2009 and 2010

·          Euro Zone, banks reported $154 billion in write-downs in 2008

            Face additional $750 billion

·          British banks reported $110 billion

            Face additional $200 billion

Read Article: I.M.F. Puts Losses From Crisis at $4.1 Trillion