Bank of America Sees Higher Losses; Banks Have "Enormous Unrecognized Losses"

More losses at Bank of America. How unusual.

The only bottom we are seeing is the bottom of the barrel which we as a nation are scraping to maintain an unsustainable economy burdened by parasitical corporations that is on its last legs. Anyone who does not 'get this' by now is sucking hard on the bong pipe of government and Wall Street propaganda.

"``Based on information I see,'' it will take at least a year before all losses are realized, and some financial institutions may fail, Rubenstein said at a breakfast meeting of the Institute for Education Public Policy Roundtable in Washington. He didn't name any companies."

Banks Have ENORMOUS Unrecognized Losses - Carlyle Group's Rubinstein

It appears that the banks are recognizing their losses at the rate at which the Fed can monetize them while hiding the effects on the broader economy. They are manipulating economic indicators and information in the process.

The issue in this web of deceit 'for our own good' is that some are being set up for serious personal losses while a privileged few insiders are being set up for enormous personal gains. It is happening now. It is integral to the process of inequality and croney capitalism.

THAT is the moral hazard with having a centrally controlled economy, under the command of "benevolent economists," that liberal academic economists seem to fantasize about so often at times like these. Power corrupts. Integrity is not incidental to good governance. These fellows need to go back and learn the lessons of the schoolyard. The rule of law matters, because after you have knocked it down, you may not stand up easily in the cold winds that will blow unimpeded after it has gone.

Bank of America Sees Higher Losses on Home Equity
By David Mildenberg

May 13 (Bloomberg) -- Bank of America Corp., the second- biggest U.S. bank, widened its forecast of home-equity loan losses beyond projections offered last month, adding to evidence that more consumers are falling behind on the debts.

The bank expects losses to top 2.5 percent of its $118 billion in loans linked to home values, Liam McGee, president of the Charlotte, North Carolina-based company's consumer and small business division, said at a conference in New York sponsored by UBS AG. The bank previously projected a loss rate of between 2 percent and 2.5 percent.

Bank of America, the nation's largest credit-card issuer, is also seeing a ``recent sharp increase'' in spending on necessities by its credit-card customers. That has curbed retail, travel and entertainment purchases, McGee said. Economists and bankers have said the economy may be teetering near a recession as consumers struggle with job losses and gasoline prices topping $4 a gallon.

McGee said Bank of America expects the economy, measured by real gross domestic product, will shrink in the second quarter. The bank had $184 billion of credit card debt outstanding at the end of the first quarter and about a 20 percent market share.

The bank's $4 billion purchase of Countrywide Financial Corp., the largest U.S. home lender, remains ``on track'' to be completed in the third quarter, McGee said. Bank of America expected ``bumps on the road'' during the transaction, he said.

``There is a lot of talent there that will help us grow our business,'' he said, noting that home lending will join consumer deposits and credit cards as key businesses for Bank of America.

To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net

Last Updated: May 13, 2008 09:16 EDT

Key US Equity Index Charts and the Dollar

Looks like it might be showtime.

JPM Receives a Wells Notice

J. P. Morgan Receives Wells Notice from the SEC

NEW YORK, May 12 (Reuters) - JPMorgan Chase & Co (JPM) said on Monday that it received a notice from federal regulators indicating that one of its units may face an enforcement action related to "the bidding of various financial instruments associated with municipal securities."

Last month, Bear Stearns Cos (BSC), which JPMorgan is buying, also got a notice from the U.S. Securities and Exchange Commission indicating possible civil charges, stemming from anti-competitive activity relating to bidding for municipal securities.

It was unclear whether there was any relationship between the two investigations. (Reporting by Christian Plumb; editing by Carol Bishopric)

JPM Warns on Earnings and Revenues Due to US Recession, IndyBancorp Halts Payments on CDO's Putting AFN's Dividend in Question

File these under "the bottom is in for financials - NOT"

JPMorgan Expects Banking, Cards to Post Lower Profit
By Elizabeth Hester

May 12 (Bloomberg) -- JPMorgan Chase & Co., the third- biggest U.S. bank, will post lower earnings from investment banking and credit cards this quarter as the U.S. recession gets under way,Chief Executive Officer Jamie Dimon said.

JPMorgan is seeing lower revenue growth in its credit-card business and will probably have to set aside more money to cover bad loans in that unit, as well as in retail and investment banking, Dimon said today at a conference in New York sponsored by UBS AG.

``The recession is just starting,'' Dimon said. ``I don't know if it will be mild or severe.'' The chances of it being ``pretty bad'' are about one in three, the 52-year-old CEO said.

JPMorgan has posted about $10 billion of writedowns and losses since the beginning of last year, compared with more than $40 billion at bigger rival Citigroup Inc. Dimon said the capital markets crisis sparked by last year's collapse of the subprime mortgage market is about 75 percent over.

In home lending, New York-based JPMorgan expects to lose $200 million to $250 million in the second quarter related to subprime mortgages. Losses in prime mortgages, those made to people with the highest credit rating, could increase to about $100 million for the quarter, the bank said....

IndyMac Bancorp (IMB) Deferral Impact on Alesco Financial Inc.

PHILADELPHIA, May 12 /PRNewswire-FirstCall/ -- Alesco Financial Inc. , a specialty finance real estate investment trust, announced today that IndyMac Bancorp disclosed this morning that it will defer making the interest payments on IMB's trust preferred securities, including those in AFN's portfolio.

AFN holds a portion of the equity interests in eight collateralized debt obligation, or "CDO," transactions which include trust preferred securities issued by IMB. As previously disclosed, IMB's securities represent an aggregate of 2.43% of the total pool of collateral in those eight CDOs. This collateral represents approximately $2.1 million in aggregate interest payments per quarter to the eight CDOs, of which AFN's proportionate share is approximately $1.5 million or about $0.02 per diluted AFN common share per quarter.

AFN is in the process of reviewing the impact of the IMB deferral on its portfolio. AFN currently expects that IMB's deferral will trigger the over-collateralization tests in five of the eight CDOs for a period of time. Once an over-collateralization test is triggered in a CDO, AFN will no longer receive current distributions of cash in respect of its equity interests in the CDO until sufficient cash flow is paid to senior debt holders in the CDOs to cure the over-collateralization tests.

IMB did not disclose how long it expects to defer its payments. AFN currently expects that, even if IMB does not resume making payment, and assuming no additional deferrals, the five affected CDOs will recommence making equity distributions within three to eight quarters. For the year ended December 31, 2007, and the quarter ended March 31, 2008, the five CDOs which AFN expects to trigger over-collateralization tests contributed $30.1 million, or 36%, and $8.2 million, or 41%, respectively, of AFN's adjusted earnings for such periods. AFN's adjusted earnings will continue to include this income even though AFN will not receive corresponding cash distributions until the over-collateralization tests have been cured. (uh, what if they are NEVER cured? Is this GAAP in action? No reserves, not even a caution in the footnotes on income from CDOs that are taking dives in the market daily? What is this called, Marked-to-Maybe? - Jesse)

At April 30, 2008, AFN had available unrestricted cash of $120 million, including cash generated by previously-disclosed gains on credit default swaps. This cash would be sufficient to allow AFN to maintain its first quarter 2008 dividend rate for the remainder of 2008, even after giving effect to the trigger of the over-collateralization tests described above. The payment of future dividends is, however, subject to the review and approval of AFN's board of directors, and there can be no assurance that AFN's board will determine to maintain the first quarter dividend rate.

As discussed on AFN's earnings call last week, AFN is reviewing a number of strategies for the company, including whether to continue to maintain its REIT qualification. Any change in strategy could impact the level of future dividend payments.