ensure that MBIA pays valid claims on insurance it issued on defaulting bonds

TO BE NOTED: From Reuters:

"Banks sue MBIA over $5 billion restructuring

Wed May 13, 2009 9:53pm EDT

NEW YORK (Reuters) - A group of major banks including Citigroup Inc, JPMorgan Chase & Co and Barclays Plc has sued MBIA Inc, charging that the bond insurer illegally restructured its operations by moving $5 billion of assets and leaving a key unit effectively insolvent.

The group of around 20 financial institutions and affiliates are seeking to ensure that MBIA pays valid claims on insurance it issued on defaulting bonds, but did not put a value on such claims.

MBIA, along with rival bond insurer Ambac Financial Group Inc, suffered huge losses in the recent financial turmoil as they were hit by claims on insurance policies they issued on repackaged debt, which turned out to be more risky than they assumed.

A spokesman for MBIA, which reported a profit of $697 million last quarter, declined comment on the lawsuit, which was filed on Wednesday in New York State Supreme Court.

The company's shares fell 9 percent in after-hours trading to $5.16, after falling more than 7 percent in regular trading on the New York Stock Exchange.

In the suit, the banks charge that MBIA acted illegally when it created a new municipal-bond insurance business earlier this year, making it free of its contractual obligations to policyholders.

As a result of moving $5 billion in assets, the banks said in their court documents, that MBIA Insurance -- the operating unit which pays claims -- is now "effectively insolvent" with no means of paying claims.

The banks claim that MBIA could instead have used its own cash to strengthen the balance sheet of MBIA Insurance, but it chose to spend more than $900 million repurchasing its own stock and debt and lending money to its asset management business. As a result, the suit claims MBIA executives will benefit while policyholders are left facing losses.

Other major banks party to the suit include units of: ABN Amro, BNP Paribas; HSBC, Bank of America Corp, Morgan Stanley, Royal Bank of Canada, Societe Generale, UBS AG and Wachovia Bank.

(Reporting by Bill Rigby; editing by Carol Bishopric)"

Favorable conditions for proprietary trading, such as the introduction of quantitative easing, also helped

TO BE NOTED: From Reuters:

"Investment banks work to sustain Q1 bonanza

Tue May 12, 2009 7:31am EDT

By Steve Slater - Analysis

LONDON (Reuters) - A bonanza for most investment banks in the first quarter will be hard to sustain as margins compress, but the winners from the crisis reckon profits will stay strong as they grab business from troubled rivals.

HSBC, Europe's biggest bank, this week joined a raft of firms reporting record investment banking profits during the first quarter, on the back of buoyant fixed income and currency trading.

With bad debts rising fast, the investment banking recovery arrived just in time to protect fragile balance sheets and revive confidence among investors, helping send U.S. and European bank shares soaring.

"We'd rather own wholesale banks than commercial banks because we think the revenue environment is more supportive for wholesale banks," said Jon Peace, analyst at Nomura.

"The commercial banks are starting to see the acceleration in non-performing loans, and that's going to be more of a drag."

The banks taking most advantage have included JPMorgan Chase and Goldman Sachs in the United States and Barclays, BNP Paribas and Credit Suisse in Europe.

All say they won a bigger slice of a bigger pie. And even if volumes ease back and attractively wide bid/offer spreads narrow to more normal levels, as is widely expected, those banks expect to outperform.

One reason is they are moving into abandoned territory. Bear Stearns has gone for good. Lehman's business has been taken over. Others, notably Bank of America/Merrill Lynch, Citigroup and Royal Bank of Scotland, are pulling back as they restructure and cut risk.

Switzerland's UBS and Morgan Stanley were among the few banks to fall short of expectations for their investment bank profits. UBS followed up its miss by ditching the head of the business as it strives to get back on track.

GO WITH THE FLOW...

The banks winning business have warned not to expect this year's run rate to be four times the first quarter, however.

"It (the strong Q1) was based on a mix of things and some are more sustainable than others. For the 'winner' banks we've assumed that the full-year run rate may be about three times the first quarter," Peace said.

"The reality is it's a unique period of time with interest rates having come down so significantly and that will work through the system," HSBC CEO Michael Geoghegan said. "After that it will be the players who have the market share capability," he said, citing capital strength as a key factor.

The Q1 growth was spearheaded by strong fixed income, currencies and commodities (FICC) business.

Banks may have been battered in the first quarter to leave many in need of taxpayer help, but capital markets activity recovered from the worst of the turmoil in the previous quarter.

Indeed, first-quarter revenues were boosted by the rebound of positions that lost money in October and December. Favorable conditions for proprietary trading, such as the introduction of quantitative easing, also helped.

"Taken together, these features of the most recent quarter lead us to believe that the profits seen in investment banking in Q1 2009 are likely to be unsustainable at anything like first quarter levels," analysts at Credit Suisse said last week.

January was one of the strongest months ever, helped by pent-up business from the previous quarter and the U.S. bailout of insurer AIG feeding through. Activity remained decent in February, March and April, banks have said.

Profits were fueled by wider spreads across fixed income and a lot of high grade debt issuance and high trading volumes.

Banks are keen to tap into this and other "flow" business, which is based on strong client relationships and regarded as more sustainable, and can be less capital intensive.

BNP's fixed income revenue more than trebled to 2.9 billion euros; Barclays Capital's income doubled as U.S. business was transformed by its Lehman Brothers deal; Credit Suisse's fixed income trading net revenues swung from a loss to $3.5 billion on record rates and FX business; and Deutsche Bank debt revenues rose almost three-fold.

RBS, which is shrinking its investment bank, plans to stay in less risky areas and its GBM profits almost doubled in the first quarter on the back of a 105 percent jump in credit markets income, a 93 percent jump in rates revenue and a 65 percent rise in currencies.

Banks were aided by a big drop in writedowns on risky assets, but there were still sizeable hits as legacy positions get managed down.

Banks may be through the worst of the writedowns on these assets, but it is unclear how long, or how fat, the tail will be. Barclays, Societe Generale, RBS and Commerzbank last week unveiled a combined writedown of $12 billion on assets.

(Editing by Andrew Callus)"

Citigroup insists that its Asian business is critical to the company’s overall health

TO BE NOTED: From the FT:

"Asian challenge for western banks

By Sundeep Tucker

Published: March 22 2009 22:30 | Last updated: March 23 2009 03:08

How much will stricken western banks, now answerable to domestic taxpayers, be able to continue flexing their muscles in Asia?

The question is being raised across the region, still a relative bright spot, as aggressive competitors try to pinch market share from rivals that have traditionally used balance-sheet strength to expand lending or to provide investment banking services.

The likes of Citigroup and Royal Bank of Scotland in commercial banking, and Merrill Lynch and UBS in investment banking, have consistently been among the region’s strongest operators.

However, Citigroup, UBS and RBS have each recently received unprecedented levels of financial support from the US, Swiss and UK governments respectively. Merrill Lynch has been taken over by Bank of America, itself now shored up by the US taxpayer.

The financial woes of the affected banks have played into the hands of rivals, which are questioning their ability to lend to companies and to underwrite equity and debt offerings.

Among those in relatively better financial health are banks with large retail deposit bases, including Australia’s leading banks and the likes of Standard Chartered and HSBC.

Domestic players in countries such as South Korea and India are also seeking to profit from the decision by stricken banks to curtail lending in some markets.

“There is no way the likes of Citigroup and RBS can continue to lend in Asia in the fashion that they were doing,” says a senior executive at a well-capitalised western bank.

“We are seeing a rise in business because of this.”

However, banks such as Citigroup and RBS are fighting hard to retain market share and claim that they are refocusing Asian operations on more profitable clients and products.

RBS is withdrawing from retail and commercial banking in Asia Pacific, and plans to scale back its wholesale banking footprint to the region’s largest financial centres.

In an interview with the Financial Times while on an Asian tour last week, Sir Philip Hampton, RBS chairman, insisted that the bank remained committed to wholesale banking in the region, and pledged that its 800 core clients “will have access to a substantial balance sheet”.

Sir Philip added: “We are now strongly capitalised and have a strategy to remain in core markets where we have a competitive advantage. A key part of that is Asia Pacific.”

He said continuing to serve clients in the region would generate value for the UK taxpayer.,

Asian central banks hold about 75 per cent of the world’s currency reserves, and Sir Philip said that RBS would continue to help manage them, for instance by trading US Treasuries.

Likewise, Citigroup insists that its Asian business is critical to the company’s overall health, not least because it had to support multinational clients that plan to invest in the region.

“We continue to commit capital to key clients and are also helping them to access the capital markets,” said Farhan Faruqui, head of global banking for Citigroup in Asia Pacific. The bank has this year advised on the largest Hong Kong initial public offering as well as several large rights issues and corporate bonds.

Tellingly, the latest Dealogic investment banking revenues tables are still for 2009, comprising loans, equity and debt offerings and merger advisory services, are dominated by UBS, BofA/Merrill and Citigroup.

However, analysts believe that the real test for the stricken banks will come in the next few years and that the success of their Asian footprint will depend on their ability to retain key staff and government support for lending policies.

Copyright The Financial Times Limited 2009"

alleged that they had been misled to believe the minibonds were as safe as bonds

TO BE NOTED: From the FT:

"HSBC and BNY Mellon sued over ‘minibonds’

By Justine Lau

Published: March 13 2009 18:44 | Last updated: March 13 2009 18:44

A group of investors has sued HSBC and Bank of New York Mellon, alleging that the banks failed to protect Hong Kong buyers that bought into complex derivative instruments known as “minibonds” linked to the now defunct Lehman Brothers.

The class-action lawsuit filed in New York calls for $1.6bn of collateral held by HSBC and BNY Mellon to be released to investors. Minibonds have lost most of their value since the collapse of Lehman.

According to the complaint, HSBC is the issuer, trustee and custodian of the minibonds, while BNY Mellon is custodian of some assets held by the products.

The complaint named Lehman as one of the defendants. The class action was filed by the US law firm Coughlin Stoia, which also represented a group of Enron investors.

“The trustee failed to protect the collateral backing the minibonds. The issuer failed to execute the terms of the deal so that the promised high-quality collateral would be purchased and safeguarded, and also failed to give notice of negative information about the derivatives underlying the minibonds,” according to the complaint.

HSBC said it was the trustee of the minibonds, but not the issuer. The bank said it did not know whether it was a custodian.

“Any suggestion that we were involved with the design or selling of the minibonds is wrong. We were the trustee and we provided services on that basis,” HSBC said.

BNY Mellon declined to comment.

About 34,000 investors in Hong Kong bought HK$13.9bn (US$1.79bn) worth of the Lehman minibonds from 23 local banks and brokers.

The products were sold for at least five years before the US bank filed for Chapter 11 bankruptcy protection last year.

The minibonds were also sold in Singapore, although this class action focuses on Hong Kong.

Controversy surrounding the minibonds has sparked an outcry in Hong Kong, as angry investors, mostly retirees and pensioners, alleged that they had been misled to believe the minibonds were as safe as bonds.

“Although these minibonds were marketed as low-risk, safe and secure, in reality they were backed by numerous credit default swaps and synthetic collateralised debt obligations – the kinds of toxic financial instruments that are at the heart of the current financial crisis,” the complaint said.

Peter Chan, chairman of the Allied Victims of Lehman Products in Hong Kong, said the lawsuit was a “milestone”, adding: “We have suffered a lot in the last few months. I hope this would bring us closer to an end.”

Some minibond holders in Hong Kong have filed court cases against individual banks in the territory, which does not have a class action suit system.

Hong Kong’s legislative council has formed a special committee to investigate the issue and any mis-selling, while the Securities and Futures Commission, the market regulator, is also looking into it.

In January, Sun Hung Kai Investment Services, a local broker, agreed to refund HK$85m to more than 300 buyers in full for their losses on the minibonds."

"We are not taking the post down, but this disclaimer stands: viewer beware."

A controversial but revealing post on Alphaville:

"Bank picture du jour( DOESN'T KEDROSKY HAVE THIS PATENTED? ) Posted by Neil Hume on Jan 21 12:36.

A caveat - We have received a slew of complaints in the comments and more than one email about this picture. One reader notes, for instance, that the graphic “just happens to make JPM look like the best bank by far. Represented correctly by area, things are not quite so clear cut between JPM and santander/HSBC.”

Points well taken. We are not taking the post down, but this disclaimer stands: viewer beware.Hat Tip JP Morgan (Click to enlarge).

This entry was posted by Neil Hume on Wednesday, January 21st, 2009 at 12:36 and is filed under Capital markets. Tagged with JP morgan."

Any graph can be misread or misleading.

"As the crisis has worsened, the institutions have come to rely almost entirely on government help. "

Can you say "predictable"? This is why we should have adopted the Swedish Plan. We're basically buying the banks, and allowing them to continue showing us how incompetent they are. From the Washington Post:

"Bank Losses Complicate U.S. Rescue
Pressure Grows on Obama to Allocate More Money for Distressed Financial Firms

By David Cho, Binyamin Appelbaum and Lori Montgomery
Washington Post Staff Writers
Thursday, January 15, 2009; A01

A new wave of bank losses is overwhelming the federal government's emergency response, as financial firms struggle with the souring U.S. economy, the rapid deterioration of global markets and the unexpectedly high costs of shotgun mergers arranged by federal officials last year.

The problems are intensifying the pressure on the incoming Obama administration to allocate more of the $700 billion rescue program to financial firms even as Democratic leaders have urged more help for distressed homeowners, small businesses and municipalities. Senior Federal Reserve officials said this week that the bulk of the money should go to banks.( GOOD JOB )

Some Fed officials suggested that even more than $700 billion may be required, and financial analysts at Goldman Sachs and elsewhere say banks will have to raise hundreds of billions of dollars from public or private sources( IT WILL MAINLY BE PUBLIC ).

This year is expected to be worse for banks than last year, senior government officials and analysts say. The money from the first half of the rescue program helped banks replace most of the money they lost during the first nine months of 2008. But the firms are beginning to report fourth-quarter losses that are larger than analysts expected, and the economic environment continues to worsen quickly.( THE CALLING RUN COULD GET WORSE. GREAT. )

The markets got a taste yesterday of just how badly the year ended. European giant Deutsche Bank revealed an unexpected estimated loss of about $6.3 billion for the fourth quarter. HSBC, which has not yet raised capital during the financial crisis, may need $30 billion from investors, according to Morgan Stanley analysts.

Global stock markets reacted by plummeting, with financial shares falling the hardest. The Dow Jones industrial average dropped nearly 3 percent.

Meanwhile, Bank of America was on the verge of receiving billions more in federal aid to help it absorb( WE SHOULD HAVE DONE THIS ) troubled investment bank Merrill Lynch, whose losses had outpaced expectations, according to people familiar with the matter. That money would come on top of the $25 billion the government has already invested in Bank of America, including $10 billion specifically in connection with the Merrill Lynch deal.

Senior economic advisers to President-elect Barack Obama have said that restoring health to financial markets and the slumping economy requires the second half of the $700 billion rescue program as well as a massive stimulus package with a price tag approaching $850 billion.

On Tuesday, Federal Reserve chairman Ben S. Bernanke, suggested that more help for banks could be needed. "History demonstrates conclusively that a modern economy cannot grow if its financial system is not operating effectively," he said, adding that both the stimulus and the rescue package were essential to restoring health to financial firms.( HE'S CORRECT )

Yet it remained unclear yesterday whether Congress would approve the release of the last $350 billion in the program known as the Troubled Asset Relief Program, or TARP. Obama's transition team asked lawmakers to do so Monday, saying it was urgently needed. But Democrats are growing increasingly concerned about their ability to quickly deliver the money to Obama.

In the Senate, Republican support for release of the funds has evaporated in the face of public anger over the Bush administration's management of the program. With more than a handful of Democrats also opposed, Senate leaders scrambled yesterday to rally support.

The Senate is set to vote today on a resolution to block the release of the money.

Late yesterday, Lawrence H. Summers, Obama's top economic adviser, and Rahm Emanuel, Obama's incoming chief of staff, met with Senate Republicans to try to persuade them to come aboard. But even many Republicans who voted to create the bailout program in October now say they are unlikely to back the release of the money.

If Congress votes to block the cash, Obama has the power to veto the resolution, all but ensuring the money would be in place early in his administration. Some Republicans said they see no point in casting an unpopular vote simply to spare Obama the discomfort of issuing a veto against the Democratic Congress as one of his first acts as president.

"The Republican base hates this. So a lot of people are saying why anger the base in the name of good policy( TRY DOING WHAT'S BEST FOR THE COUNTRY CINCINNATUS ) when it's going to happen anyway?" said Sen. Robert F. Bennett (R-Utah), a senior member of the Senate Banking Committee, which was at the center of negotiations during the TARP's creation.

Republicans -- and many Democrats -- also say they are dissatisfied with Obama's pledges to dramatically reshape the rescue package to more directly assist distressed homeowners, small business and other consumers in search of credit, as well as to bolster oversight.

Republicans, in particular, want assurances that the money would be reserved to help ease the credit crisis in the financial system. They do not want the funds to go to other sectors, such as the faltering auto industry, which last month won a small share of the money from the Bush administration. That decision, said Sen. Bob Corker (R-Tenn.) turned the program into a "$350 billion slush fund."( IF THE MONEY IS JUST SPENT ON THE FINANCIAL SECTOR, IT WILL BE SEEN AS FAVORITISM AND CRONYISM, WHICH YOU SHOULD UNDERSTAND, SINCE YOU'RE AN EXPERT IN IT. )

After an hour-long meeting with Summers and Emanuel, many Republicans, even those who supported the TARP last fall, said they remained skeptical.

"They probably haven't said quite enough yet for most Republicans," said Minority Leader Mitch McConnell (R-Ky.).

Lawmakers were initially swayed to vote for the bailout program in October because of evidence that some banks were in extreme trouble. At that time, the government pushed healthier banks to acquire faltering rivals.

Now the buyers, which included Bank of America, J.P. Morgan Chase and other major banks, are struggling to make the mergers work. The prices they paid seemed like bargains at the time, but losses have been greater than the banks expected.( GEE. THEY'RE SUCH EXPERT FORECASTERS. )

J.P. Morgan Chase will be the first of several major U.S. institutions to report earnings in coming days. Last year, it acquired two troubled firms, Bear Stearns and Washington Mutual. Analysts expect J.P. Morgan to report a narrow profit after a very tough year-end quarter.

Citigroup, which has received $45 billion in government aid, is expected to report a loss of more than $3 billion on Friday. The company also plans to announce that it will sell several major units to raise capital.

Bank of America, which reports earnings next week, has had enough capital to support its own operations but not enough to absorb Merrill Lynch's losses, according to two people familiar with the situation. Losses at Merrill Lynch have outpaced expectations since the merger was announced in September.

The banks closed the deal Jan. 1 after the Treasury Department committed( GUARANTEED ) in principle to making an additional investment, the sources said.

Bank of America and the Treasury declined to comment.

In total, banks raised about $456 billion in 2008, of which 41 percent came from the U.S. government, according to investment bank Keefe, Bruyette & Woods. But most of the money from private sources was raised in the first half of the year. As the crisis has worsened, the institutions have come to rely almost entirely( YOU THINK? ) on government help.

Staff writer Paul Kane contributed to this report."

If we had simply nationalized these banks, we would have saved ourselves money and aggravation. A hybrid plan pits the banks against the government, even as the money is handed over to the banks, who will continue to lobby for favors. Here's another obvious mess that people can't seem to see. Does anybody who favors the free market really believe that these banks believe in it, or would even be competent to do business in it? Please.

"Bernie Madoff has caused disproportionate pain in the Jewish community, prompting unedifying sneers on the blogosphere."

I can't say that I didn't see this coming. From Andrew Clark in the Guardian:

"It has been a fertile financial week for bigots. The astonishing scale of corruption allegedly unmasked at the offices of Wall Street fund manager Bernie Madoff has caused disproportionate pain in the Jewish community, prompting unedifying sneers on the blogosphere. ( I'M NOT SURPRISED. JEW HATERS LOVE USING BLOGS )

Madoff, who is thought to have lost $50bn of assets, recruited many of his private clients through informal social networks in New York, Florida and Los Angeles.

The sense of disappointment and betrayal is palpable – particularly among Jewish philanthropic organisations. Several charities have had to shut their doors overnight, including the Lappin foundation, which funded trips to Israel for children, and the Chais Family Foundation, which supports educational and health-related projects. ( I'VE POSTED ABOUT THIS )

The Los Angeles-based Jewish Journal noted that the saga gave "ammo to antisemites everywhere" and highlighted mocking comments posted on a popular financial website, Dealbreaker. Another Jewish blogger, Tvzee's Talmudic Blog, complained that he had had to "moderate out many racist comments" after writing about Madoff. ( SAD )

The wrecking impact of Madoff's fraud on Jewish philanthropy has a broad impact which extends far beyond any single religious community. Gary Tobin, president of the Institute for Jewish and Community Research in San Francisco, reckons Jewish philanthropy in the US is worth about $5bn annually.

The money is spent on everything from poverty relief to educational initiatives, bridge-building between religions and community centres – which are open to people from any faith.

"I know the antisemitic websites are picking this up – they love Jewish cabals and conspiracies," says Tobin. "But for most of the world, the antisemitic reaction will be minimal. This is a philanthropic and charitable tragedy – it's more sad than anything else." ( AN OPTIMIST )

The Wall Street Journal noted that older Jewish investors put so much faith in Madoff that they jokily nicknamed him "the Jewish bond". Lawyers for Madoff's victims say that in a close-knit community, people put a disproportionate amount of trust in a small number of individuals. Ross Intelisano, a class-action lawyer based in New York, says: "We've been talking to a lot of direct investors. This is a rare case in which a lot of investors we've spoken to had all their money with one firm." ( TERRIBLY SAD )

Many have lost everything overnight. Arnold Sinkin, a retired carpet-fitter in Florida, lost the nest egg of nearly $1m he built up with his wife, Joan. ( AWFUL )

"We started out by giving $5,000 to him [Madoff] in the 1970s," said Joan Sinkin. "At the time, $5,000 for us was really a huge amount. I think we probably had about $1.75 left in the bank once we'd given it to him."

The septuagenarian couple's retirement planning crashed to earth when Madoff's alleged fraud materialised last week. They will be selling their apartment in New York City and relying on their children for financial help. ( GOOD LUCK FRIENDS. AND YOUR CHILDREN DESERVE KUDOS )

On an institutional level, the impact goes far beyond any single community. Banks as far afield as Japan, Switzerland and Spain are suffering Madoff-related losses, not to mention Britain's HSBC and Royal Bank of Scotland. Even Hampshire County Council somehow managed to stick part of its pension fund in Madoff's business (although everybody says he was choosy about whose money he accepted).

In New York, one secular charity destroyed by Madoff's apparent corruption is the JEHT Foundation, which stands for "justice, equality, human dignity and tolerance". Since 2000, the charity has promoted reform of the criminal justice system to try to reduce the rate of incarceration in the US, handing out $25m to $30m annually. ( I'VE POSTED ABOUT THIS A FEW TIMES BECAUSE I WANT THE DEPTH OF PAIN THIS KIND OF CRIME CAUSES TO BE UNDERSTOOD )

The funds of JEHT's donors, Jeanne and Kenneth Levy-Church, were managed by Madoff and have evaporated overnight. The foundation's director, Robert Crane, has the shattering task of shutting down the charity. ( WOW )

"We're going to cease existence at the end of January," Crane told me. "All of our 24 people will lose their jobs."

It's a pretty dismal situation – and Madoff ought to be ashamed. ( HE OUGHT TO BE IN JAIL )

"It's devastating not only for us but for the people we support," says Crane. "In the areas we operate, there aren't a huge number of other funds, which makes the impact even worse." ( PATHETIC )

"All were looking for gains this year, and their targets at the start of the year are far above where the S&P 500 is currently trading."

This isn't fair, really, but if you're going to pretend that you can predict the future better than anyone else, it shouldn't be unexpected. I guess when you're wrong, as I told John Gapper, it's better to be gloriously wrong. From Bespoke:

"Bloomberg recently surveyed market strategists for their 2009 S&P 500 price targets, and collectively, they're looking for a gain of 21.8% from the index's current price level. As shown below, UBS is the most bullish of the group with a year-end 2009 price target of 1,300 (a 47.2% gain). UBS was the most bullish last year as well with a 2008 price target of 1,700. Goldman and Strategas are the second most bullish this year with price targets of 1,100. Credit Suisse has a target of 1,050 (for mid-year '09), Citi and HSBC are at 1,000, and Merrill Lynch is at 975. Merrill is the least bullish strategist of those surveyed, but they're still looking for a gain of 10.4% from current levels.

For those looking for direction from these strategists, their 2008 projections should be noted. All were looking for gains this year, and their targets at the start of the year are far above where the S&P 500 is currently trading.

Interested in more in-depth market analysis from Bespoke? Subscribe to Bespoke Premium and start receiving our closely followed reports today.

We're Going Swedish!

Wow. Check this out:

U.S. May Take Ownership Stake in Banks

By EDMUND L. ANDREWS and MARK LANDLER

Published: October 8, 2008

"WASHINGTON — Having tried without success to unlock frozen credit markets, the Treasury Department is considering taking ownership stakes in many United States banks to try to restore confidence in the financial system, according to government officials.

Treasury officials say the just-passed $700 billion bailout bill gives them the authority to inject cash directly into banks that request it. Such a move would quickly strengthen banks’ balance sheets and, officials hope, persuade them to resume lending. In return, the law gives the Treasury the right to take ownership positions in banks, including healthy ones.

The Treasury plan, still preliminary, resembles one announced on Wednesday in Britain. Under that plan, the British government would offer banks like the Royal Bank of Scotland, Barclays and HSBC Holdings up to $87 billion to shore up their capital in exchange for preference shares. It also would provide a guarantee of about $430 billion to help banks refinance debt."

Read the rest