Banks face "systemic margin call," $325 billion hit: JPM

[Spectre]

Banks face "systemic margin call," $325 billion hit: JPM

By Walden Siew

Sat Mar 8, 2008 9:23am EST


NEW YORK (Reuters) - Wall Street banks are facing a "systemic margin call" that may deplete banks of $325 billion of capital due to deteriorating subprime U.S. mortgages, JPMorgan Chase & Co (JPM.N: Quote, Profile, Research), said in a report late on Friday.

JPMorgan, which sent a default notice to Thornburg Mortgage Inc. (TMA.N: Quote, Profile, Research) after the lender missed a $28 million margin call, said more default notices and margin calls were likely. The Carlyle Group's mortgage fund also failed to meet $37 million in margin calls this week.

"A systemic credit crunch is underway, driven primarily by bank writedowns for subprime mortgages," according to the report co-authored by analyst Christopher Flanagan. "We would characterize this situation as a systemic margin call."

The credit crisis that began about a year ago will likely intensify after Friday's weak February U.S. employment report "that most definitely signals recession," JPMorgan said.

Indeed, corporate bond spreads widened to a new record on Friday, surpassing levels seen in October 2002 during a boom in bankruptcies following the dot-com crash. U.S. employers cut payrolls in February for a second consecutive month, slashing 63,000 jobs, the biggest monthly job decline in nearly five years, the U.S. Labor Department reported on Friday.

"The weak February employment report points to an economy in recession," JPMorgan said.

The JPMorgan report included a revised bleaker forecast for subprime-related home prices. The bank now sees prices falling 30 percent, from its prior 25 percent forecast. Those prices have declined 14 percent since mid-2006, JPMorgan said.

The U.S. jobs results also came after the Federal Reserve expanded the amount of its short-term auctions to $100 billion in total in the central bank's latest effort to ease credit concerns. Ongoing concerns about bond insurers, known as monolines, and their effort to save their top ratings also are weighing on market sentiment.

(Editing by Eric Beech)


http://www.reuters.com/article/ousiv/idUSN0832645120080308

[sid]

Look on the bright side:  The unemployment rate remains very low and is dropping on top of that.

[37]

Look on the bright side:  The unemployment rate remains very low and is dropping on top of that.

Hey, the service sector didn't fall as much as they expected...and that helped the market, for one day. 

Here's my prediction for mid to late march...Jobs will go up, especially the service sector.  That will help break the fall, along with everyone spending their tax returns.  But, it will only be the seasonal workers going back to work...resort/golf/recreation...plus students getting summer jobs. 

But still, no one will be buying houses.  And when people aren't paying their mortgage, they aren't paying their inflated property tax either.  Watch municipalities scramble when they no longer have the funding to support their payroll.  Services will be cut, and fees will go up.  Plus, the police are going to be out collecting their funding through the issuance of citations.  They'll be cracking down on speeding and seatbelts.

This is a very scary article Spectre has posted...

[thadividedsky]

unemployment is much much higher than the feds are leading us to believe. Unemployment benefits last only so long then yer dropped, once yer dropped, yer not even a statistic anymore. They report 63,000 were cut in feb alone, how many unemployed people lost their benefits in feb? we don't know. I personaly know allot of people who've been without a job for months and some have recently been dropped from unemployment. As for the service sector, it won't rise 1 bit here. All the service jobs are taken here now and places like mcdonalds, burger king, wendys, KFC and other fast food places have stopped hireing. I've noticed signs outside all those establishments that say sorry for raising prices, but they have no choice since everything's getting more expensive. I've also noticed allot of for sale signs for both houses and automobiles. In fact, there's this 3 story house in the town next to me that I drive by every day to and from work that hasn't been finished for the last 3 years. The company I work for has been laying people off for the last 2 years and our work force keeps getting smaller. Lately the CEO's passed out a questionare asking if we'll take autoparts in exchange for labor. I said hell no, either they give me cash, check or gold/silver. They're indebted to me when I give them my labor, so they need to use money, not parts. Autoparts aren't legal tender, so they have no choice but to pay me in what I determine is acceptable, gold, silver, cash or check. I prefer silver. I talked to a friend in the real estate market and she said that they can't even auction houses away for cheap. I told her I'll take a house with allot of land for $10,000, she laughed and was like "that'll never happen". Well I got news for her, when the economy crashes, she'll be beggin for that $10,000 and I'll only offer $2,000. She's a friend, but since she dosn't wanna help me get a house with allot of land for cheap, Im not gonna help her make money till she's desperate. All the laughing and making fun of me by friends and family have basicly made me say f**k them all if they don't wanna believe me. They'll believe me sooner or later. I got a question for yall, how come the USDX hasn't moved in 2 days? Is this normal? I'm used to seeing it active regardless of weather it's a weekday or the weekend. Thanks in advance.