More scary news on banks (business week)

Investors breathed a sigh of relief on Mar. 11 when the Federal Reserve offered to lend troubled banks as much as $200 billion in Treasuries. Still, the Fed's lifeline won't fix the root of the housing market's problems—falling prices and rising defaults. So it is unlikely to save mortgage lenders from the next wave of losses, those buried deep in the minutiae of balance sheets.

A closer look at the books of big lenders reveals several weak spots that haven't yet shown up in the financial results. At many banks, bad loans are piling up faster than the amount of money they're setting aside to cover them. Meanwhile, housing lenders booked income on vulnerable exotic loans and mortgage securities before they collected the money—paper gains that may be reversed through writedowns. Plus the values of some troubled loans, which have been trimmed modestly so far and shown up in previous losses, could still be overstated......

Moishe is a fan of bottom feeding, vulture investing, whatever you want to call it opportunity is everywhere - this is when you make money!

From Portfolio.com

Société Générale is struggling to put the effects of a $7 billion trading scandal behind it.

The giant French bank went to the market today to raise nearly $8 billion in stock. But it is having to do so at a steep discount—39 percent below its closing stock price on Friday. A discount of as much as 30 percent had been expected.

"The price is very low," Pierre Flabbee, an analyst with Kepler Equities in Paris, told Reuters. "The feedback from the market cannot have been very encouraging."

Société Générale's experience may be a bad omen, says Douglas A. McIntyre on the blog 24/7 Wall St. "It also speaks volumes about what will happen if big U.S. money center banks and brokerage houses have to go back to the market for money this year," he says.

But Pierre Briançon on Breakingviews.com says the SocGen sale was no fire sale—"more a recognition of reality."

The price of the stock sale, he says, is less than seven times earnings for Société Générale this year. That gives it a multiple roughly that of the stock price of its larger rival, BNP Paribas.

Sounds like the banks are going to be fire selling loans

This should help find a bottom for this debt and hopefully get the capital markets moving again

From Wall Street Journal today -

A widening array of financial-market problems threatens to trigger a new phase in the global credit crunch, extending it beyond the risky mortgages that have cost banks and investors more than $100 billion in losses and helped push the U.S. economy toward recession.

In the past few days, low-rated corporate loans -- the kind that fueled the buyout boom of recent years -- have plummeted in value. As a result, banks are expected to try to unload some of those loans this week at fire-sale prices.

Nervous buyers also have retreated in recent days from the market for securities backed by student loans and municipal bonds, roiling some corners of the short-term money markets. Similarly, investors have recoiled from debt backed by commercial real estate, such as office buildings.

DANG! Harry Macklowe giving buildings back to lenders

From Wall Street Journal:

Troubled New York real estate titan Harry Macklowe has reached a tentative agreement with his lender to turn over effective control of seven Manhattan office buildings he triumphantly acquired less than a year ago for $7.2 billion, according to a people familiar with the matter.

Mr. Macklowe borrowed $5.8 billion from Deutsche Bank to acquire the buildings in a highly leveraged transaction during the height of the real estate frenzy early last year. The debt is scheduled to come due on Feb. 9. But with the real estate debt ...