Posts in month: September, 2008

Two days after Barclays, the British bank, failed to reach a deal that would have salvaged Lehman Brothers, it moved closer to its prize on Tuesday, striking a tentative agreement to buy the broken investment firm’s core capital markets businesses for $1.75 billion — far less than Lehman had hoped for.

The accord, announced late Tuesday, could save 8,000 to 10,000 Lehman jobs and allow Robert E. Diamond Jr., the president of Barclays, to attain his longtime goal of expanding his bank’s reach in the United States.

“If you want to transform yourself from a minor player into a major firm, this is the time to do it,” said Roger Nightingale, a global strategist at Pointon York in London. “It’s so difficult to do that in an ordinary period.”

The deal, which also includes Lehman’s Midtown Manhattan headquarters building and two data centers — accounting for $1.5 billion of the deal’s value — must be approved by a judge overseeing Lehman’s bankruptcy proceedings. Barclays said it expected to raise $1 billion in equity to support the deal.

Lehman, staggered by losses on its commercial and residential real estate assets, filed for bankruptcy protection of its holding company Monday morning.

Barclays is taking on Lehman’s large fixed-income trading operations, while avoiding a purchase of the large portfolio of toxic real estate assets that forced Lehman into bankruptcy, people involved in the process said.

Lehman is still trying to sell the bulk of its investment management division by Thursday or Friday. Two private equity groups, Bain Capital and Hellman & Friedman, are seen as the most likely buyers. Read more »

Lehman Brothers was founded in 1850 by two cotton brokers in Montgomery, Ala. The firm moved to New York City after the Civil War and grew into one of Wall Street’s investment giants, despite period brushes with death. On Sept. 14, 2008, the investment bank announced that it would file for liquidation after huge losses in the mortgage market and a loss of investor confidence crippled it and it was unable to find a buyer.

Lehman’s slow collapse began as the mortgage market crisis unfolded in the summer of 2007, when its stock began a steady fall from a peak of $82 a share. The fears were based on the fact that the firm was a major player in the market for subprime and prime mortgages, and that as the smallest of the major Wall Street firms, it faced a larger risk that large losses could be fatal.

As the crisis deepened in 2007 and early 2008, the storied investment bank defied expectations more than once, just it had many times before, as in 1998, when it seemed to teeter after a worldwide currency crisis, only to rebound strongly. Read more »

I’ll start with the good news.

The largest bank failure in the history of the U.S. was handled smoothly by the teamwork of the government and the private sector. The system worked!

Let’s explore this a bit further: Since the 1930s, depositors in commercial banks, savings banks and credit unions have been protected by government deposit insurance. Beginning in 1980, the insured amount has been $100,000 (although only the effort and bother prevents anyone from spreading any larger amount across two or more banks). The Federal Deposit Insurance Corporation covers banks; a separate agency covers credit unions.

When a bank is insolvent–when its assets don’t cover its liabilities (which are largely deposits)–the FDIC takes control. The owners are wiped out, since their equity position is negative. Senior management is dismissed. Unsecured creditors are unprotected.

The FDIC then usually finds an acquirer–a solvent bank–to take over the deposit liabilities and the assets of the failed bank. The insured depositors are kept whole; their deposit claims are now the obligations of the acquiring bank.

If the acquirer takes all of the assets, the FDIC writes a check to the acquirer for the negative equity “hole” so that the acquirer is getting a “balanced” (assets equal liabilities) deal. In some instances the acquirer declines to take some of the assets, so the FDIC writes a bigger check and those hard-to-value assets become the property of the FDIC, which eventually liquidates them.

In the WaMu transaction, JPMorgan Chase (nyse: JPM – news – people ) won the auction that the FDIC held among potential acquirers earlier in the week. JPMorgan Chase assumed all of WaMu’s deposit obligations–uninsured as well as insured. These deposits totaled about $188 billion. It also absorbed all of WaMu’s net assets, which were mostly residential mortgages and mortgage-backed securities. Some of WaMu’s assets had been pledged to secured creditors (such as the Federal Home Loan Bank System, which lent WaMu around $60 billion) who could immediately grab collateral that satisfied their claims. The net assets acquired by JPMorgan Chase had a nominal value of around $240 billion. Implicitly, there was also “brand name” value that JPMorgan Chase acquired, since WaMu had an extensive branch network and a good reputation in many states where JPMorgan was absent but longed to expand.

In this resolution, the FDIC didn’t pay anything to induce JPMorgan Chase to absorb WaMu. Indeed, JPMorgan Chase paid the FDIC $1.9 billion.

So, the good news is that the system of deposit insurance worked smoothly, as did the FDIC resolution of a large troubled bank. There was only a small “run” of depositors withdrawing their money from WaMu branches earlier in the week. The FDIC moved in Thursday night, rather than waiting until Friday night (as it usually does). It probably feared that the depositor run would get worse on Friday, and it didn’t want images of depositor lines outside WaMu branches in newspapers, newscasts and Web sites over the weekend. Read more »

Financial crisis is attacking American and the news said WaMu is the biggest bank bankrupts in American history. If financial attacks Banks institution, the financial storm also attacks costumers and borrower (American who have loans, mortgage, and any loans from Bank, or other financial institution). Financial crisis does it but we have to thank that Financial Institution also does helping us; to bring us back to healthy financial. We worry about our loans, our home equity loan otherwise we need them to escape us from financial storm.

Talking about Mortgage Loans, we know well, most of us put our home as collateral in Banks to get fresh financial for our daily life or our business. We also have mortgage loans for our new home. We fight force to buy new home with cash, get fresh money for business or financial plan but we can’t so Mortgage Loans become very helpful to realize our new home.
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For more generally about Loans and line of credit;
Many lenders (creditor) will approve our loans (in bigger scale of loans) if we include our home as collateral. Sometimes they only believe and approve our application with home as collateral, if we have no collateral such as credit card, financial plan, and balance statement if we have business, bad credit history and risks. Through American Fast Mortgage, you will meet your lenders as soon as possible. You just tell your amount money to borrow and give hove certificate as collateral; approval will comes easier and fastest.
Conclusion
Now, American Financial goes to down. They are suffer because bad credits. But the story isn’t end. To rebuild the fresh situation, American Fast Mortgage is near with American, try to help any American to escape from Mortgage, Loans and also try to help people to get new loans with home as collateral.

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