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We shld start saving right about now..

Well these here are the expenses we needed done..

Jobs bill approved

The U.S. House approved a $154 billion economic-aid package and a $290 billion increase in the legal limit on government borrowing as the chamber wrapped up its legislative business for the year.

via Bloomberg

The house voted these measures in with a narrow vote and the senate is expected to oppose the jobs bill
Once the senate is done, that makes the complete $1.1 T including the defense spending below and starts the jobs giveaway..i hope recovery.gov can track this one.

Isn’t a $1.1 trillion too much?

Wow, it might add up to a little more

This $1.1 trillion bill is not using the leftover funds from TARP at all. And sorry to sound like a tired donkey on the wrong crop, but keeping stakeholders happy with extra cash is going to come back to someone discussing your Rassmussen reports.

In the Fat Cat Bankers interview,

In the interview, which was conducted last week for CBS’s “60 Minutes,” Mr. Obama was asked about Wall Street banks that had recently recovered enough to repay government loans, but once again planned to give large bonuses to employees. News of the bonuses has has only fueled continuing anger over the bank bailouts.

“They don’t get it,” Mr. Obama said. “They’re still puzzled why is it that people are mad at the banks. Well, let’s see. You guys are drawing down ten million, twenty million dollar bonuses after America went through the worst economic year that it’s gone through in decades, and you guys caused the problem.”

Lawrence H. Summers, the White House chief economic adviser, said on ABC’s “This Week” Sunday that bankers “need to recognize that they’ve got obligations to the country after all that’s been done for them, and there is a lot more they can do.”

There is a reason why this comes here. Obama meets the bankers tonight to discuss their ‘special responsibility’ that presumably ties in with his own fiscally prudent self. And he is signing of $1100 billion at the year end himself. With an extra $650 billion for

The bankers will probably tell him his funds are safe now that BofA and Citi are well on their way, In fact BofA is now out of the purview of Federal supervision, leaving only 6 like Citi and AIG in their grasp. The Financial regulatory bill has more than 12 months to go in the Senate, notwithstanding the approval by the House.

These are the pork projects for the FBI and the CIA over 3000 of them

This still leaves the $650 billion defense bill that includes action to raise the $12.1 trillion ceiling of US debt and proposals to save the job market. This includes the savings from TARP funds as of today. In the five bills included in the sign off piece, FBI gets $7.9 billion, a $680 million increase over 2009; the Veterans Health Administration budget goes from $41 billion to $45.1 billion; and the National Institutes of Health receives $31 billion, a $692 million increase.

All but three Democrats voted for the bill, while all but three Republicans opposed it. And as any other year end appropriation, this will be fodder for the GOP that indulged itself with a much bigger ticket every other year. More importantly, Obama needs to steer the debt and the fiscal deficiti back on track and make jobs from the petty cash he has left including this $1.1 T ( that’s just another trillion) all funded from Chinese purchase of treasuries. Hoo boy, bad end to the year!, but probably in the normal course of affairs. It is probably more a ‘Fat Cat Armed Forces’ vs the ‘Fat Cat Intelligence’ and others waiting for the annual dole. Economics and the Economy never sung the same notes, let alone the same song.

Actually, the bill has quite a few saving graces and is more than justfied. My fellow bloggers should be able to see the woods and the trees both without shaking up the snow flurries. Here are the details from Reuters:

Following are details on some items in the legislation:

* Includes $1.11 billion, a 14 percent boost, to allow the Securities and Exchange Commission to hire 420 workers to oversee investments and financial markets. The agency has faced questions about its effectiveness after it failed to catch a $65 billion scheme perpetrated by Bernard Madoff.
* Provides $824 million for the Small Business Administration, a 26 percent increase, to support new lending to small businesses. Further efforts to encourage small-business growth could pass Congress in the coming weeks as part of an effort to bring down U.S. unemployment, which stands at 10 percent nationally.
* Requires General Motors Co and Chrysler to submit to binding arbitration to determine whether auto dealerships they have tried to close should be reopened.
* Includes a 50 percent increase to fight fraud in entitlement programs such as Social Security and Medicare. Lawmakers say this could save $48 billion over the next 10 years.
* Provides $2.5 billion for high-speed rail intercity rail projects, on top of $8 billion signed into law earlier this year as part of the economic stimulus bill.
* Includes nearly $1.5 billion for new nonmilitary aid to Pakistan, proposed by Obama as one tool to combat extremism there.
* Has no money for an infrastructure bank requested by the Obama administration to finance large-scale transportation projects. Lawmakers said the $5 billion project was too complex to handle through a spending bill.
* Reduces economic, governance and security aid to Iraq by 30 percent; keeps levels to Pakistan and Afghanistan roughly the same.
* Prevents the government from doing business with U.S. companies that have moved headquarters overseas to reduce their tax bills.
* Prevents the Export-Import Bank from providing loans to oil companies that do business with Iran.

[Tag Onomics, 2008, 2009, Banks, Reform, Banking, Crisis, Meltdown, TARP, Healthcare, Health]

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Financial regulatory reform: A new paradigm for Banking is yet far

The new reforms

OTC derivative are a $450 trillion industry and after the reforms are passed, the only knowledge public would be where one of the biggies is on at least one side of the transaction. No banker is basing his price on your swaps to what the other bank did..they are but only to probably engage you with themselves next time ( and that is not shopping for discounts as you would either)

Everyone is still paying the bankers more and then you find the price on record for only the bigger deals as the registered biggies typically will have a minimum ticket size to waste their resources on. Also, these regulations are myopic in that the dealmakers and advisors are able to buy/sell insurance against/for the deal in a matter of minutes after each such deal. None of Goldman Sachs or AIG are anyways paying for the deal. I do not want to sound negative but you must know the facts and during its passage in the Senate thru 2010 you just might.

What Hank Palson started and what Lehman’s Fuld would claim now, would come back uglier and bigger next time. When the Oversight Council points out to another Bear next time, the counterparties of that Bear will hold significant mileage as that drama unfolds. In a market there are two parties to each deal, and here there are many inter-connected deals that can solve or create the problem, to put it simply and then when an Oversight council meets a Greenberg will come up and demand his way for knowing how the Council works.

MANAGING SYSTEMIC RISK

* Establishes inter-agency Financial Services Oversight Council, with staff and funding, chaired by Treasury secretary
* Council can tighten regulatory screws on firms that are in distress or judged to pose a threat to financial stability
* Council members include Federal Reserve, Securities and Exchange Commission, Commodity Futures Trading Commission, Federal Deposit Insurance Corp, other bank supervisors
* Firms’ debt-to-equity ratio can be capped at 15-to-1, credit exposure to unaffiliated companies limited to 25 percent of capital stock, among balance-sheet strengthening steps
* Firms can be ordered to hold contingent capital, or long-term hybrid debt convertible to equity in emergencies
* In extreme cases, firms can be ordered to restructure, restrict executive pay, sell businesses, or otherwise break up
* Treasury secretary must approve order to divest more than $10 billion in assets; president, more than $100 billion
* Risky firms must undergo annual “stress tests” and submit “living wills” on how firms could be unwound quickly
* For first time, Federal Reserve monetary policy subjected to audits by congressional watchdog

SENATE OUTLOOK: Senate bill proposes stronger inter-agency council, smaller role for Federal Reserve in managing risks

DEALING WITH TROUBLED FIRMS

* In emergencies, FDIC can back debts of solvent firms, up to $500 billion, drawing on Treasury borrowings, fees to firms
* FDIC can liquidate insolvent firms through bankruptcy or orderly receivership, like FDIC now dismantles failing banks
* Fully secured creditors in FDIC dissolutions can have up to 10 percent of their claims treated as unsecured claims
* “Systemic dissolution fund” of $200 billion helps pay for FDIC actions, drawn from fees charged to firms with more than $50 billion in assets, and Treasury borrowings
* Fees paid by banks into FDIC’s existing Deposit Insurance Fund become risk-based, cutting small banks’ fee burden
* In financial emergencies, Fed can extend loans to a wide variety of businesses up to a total of $4 trillion

SENATE OUTLOOK: Senate bill proposes paying for dissolutions of troubled firms after the fact

SUPERVISING BANKS, SECURITIZERS

* Office of Thrift Supervision abolished and its operations merged into Office of Comptroller of the Currency
* Lenders must retain 5 percent of credit risk of loans securitized for sale onto secondary debt market

SENATE OUTLOOK: Senate bill proposes more radical bank supervisor centralization, similar securitization reform

REGULATING OTC DERIVATIVES

* Over-the-counter derivatives go through clearing and exchanges or equivalent facilities where possible
* Swaps not cleared centrally must be reported to swap repository or to regulators
* “End users” of swaps, such as airlines and agribusinesses, can be exempted from central clearing
* Regulators can set position limits on swap trading and on security-based and commodity-based derivatives
* Financial firm clearinghouse stakes capped at 20 percent

SENATE OUTLOOK: Senate has competing bills, main bill has narrower end user exemptions than House

More ‘critique’

However, the basics look fine with a cap of Debt Equity of 15-1, making everyone a scheduled bank ( earlier), asking for provisions of contingent capital, and getting the Fed reserve a more focussed role rather than everything. “Stress Tests” and “Living Wills ” have already been around, the top global banks share these within the bank and whether they will ever be made public for their impact is a matter of conjecture. Especially as it might not be prudent to discuss risk policies threadbare in the public domain and as always, you would need to provide the banks to cnduct their businessuniquely per their positioning with their clients.

Solvent debt contracts can be saved by FDIC probably even today. The $500 billion tab helps them discover the FDIC address a little sooner, but unlikely it will happen the weekend they are still solvent. Doesn’t work like that when you have to eject from a jet fighter on fire, never. Some respite for secured creditors, that should have just brought down

PROTECTING INVESTORS, CURBING PAY

* SEC standards for brokers and investment advisers harmonized, mandatory investor-broker arbitration curbed
* SEC’s budget doubles, enforcement powers strengthen
* Investors get annual, nonbinding votes on executive pay, while pay plans encouraging excessive risk can be prohibited

Managing performance pay is going to be a herculean effort for the new Oversight Council, in its mandatorily advisory role, but the CFPRA from Dodd is a clear winner…Retail Banking ( Cards, Loans and Mortgages ) is something easy to tackle and where America would be watching it everyday and if that itself turns around this bill would have brought US back to the rails.

CREATING CONSUMER WATCHDOG

* Consumer Financial Protection Agency (CFPA) created to regulate mortgages, credit cards, other financial products
* Fed, other existing agencies stripped of consumer protection duties, which would go to CFPA
* Exempted from CFPA oversight are auto dealers, retailers, accountants, tax preparers, real estate agents
* States can have tougher rules than CFPA, but federal regulators can block state laws in some circumstances
* Banks with less than $10 billion in assets need not have full-scale CFPA exams, but must follow agency’s rules

The above, along with measures in the CARD bill however will face significant opposition from Moneycenter banks. The regulators will have to cap interest rates further and also tackle the Bankers’ flights of fancy with overdraft charges that have been hiked recently and interest rates on credit cards that have been hiked recently.. once the profits are in, more focussed regulatory action is plausible against the rampant malpractice

Last but not the least, getting Hedge Funds, Credit rating agencies and regulators would be even tougher now, and this start could not have gone any further at this point either. It’s anyone’s guess where that might lead us and the only way to find out would be to let them come out and show what they would be playing. the Oversight committees and other regulators will have to sit in on the verdict till 2012

REGULATING HEDGE FUNDS, CREDIT RATING AGENCIES

* Hedge funds, private equity firms, offshore funds must register with SEC, while venture capital firms and funds with less than $150 million in assets exempted

* SEC gets new oversight over credit rating agencies, which exposed to more investor lawsuits

MONITORING INSURERS

* Federal Insurance Office (FIO) set up to monitor insurance industry for first time, but not regulate it

* FIO cannot preempt state insurance laws except in limited circumstances, preserving state-level regulation

This regulation package is not going to work unless America wants it to work. And asking A service firm to not pay its employees from profits is unlikely to work after some time. But it has to be done over the next 2-3 years, this regulation itself may just be political fodder for 2010 from here. We bankers are the ones that know the products, the risk and the profits. And we are all in it together.

A special thanks to Kevin Drawbaugh and Leslie Adler for putting together the bill summary. Must have been a horrible weekend.

Banking regulation in India and China might influence global regulation more as bankers retract from multi tiered deals later on, but as of now it is the US example that is the important one for Europe and rest of the sinking world to fathom. European regulation has always been seemingly faster, higher and stronger on risk regulation but to no avail. Even the terms of the Competition commission in dealing with the monopolistic markets from new consolidation are a little touch and go and european banks in particular have more pain to follow as they stick to their ‘specially created isolated time warp’ for regulatory reporting and accounting that neither follows the US model nor shows any signs of resilience or realism.

Wells Fargo Settles Lawsuit Over Auction-Rate Securities – DealBook Blog – NYTimes.com

Wells Fargo said on Wednesday that it had agreed to buy back $1.4 billion in auction-rate securities it sold to investors before the market for those securities dried up last year.The decision settles a lawsuit brought against the firm by California’s attorney general for violating the state’s securities laws. Wells Fargo also agreed to pay the state’s expenses related to the lawsuit.The brokerage arm of the bank marketed the securities, which resemble corporate debt and whose interest rates were regularly reset by auctions, as an alternative to cash for years, even after analysts warned that the market could freeze up. In February 2008, banks stopped participating in the auctions and effectively locked up investors’ cash.The suit, brought by the California attorney general, Jerry Brown, contended that Wells Fargo routinely misrepresented, marketed and sold auction-rate securities as safe, liquid and cashlike investments, omitting material facts.“Wells Fargo convinced thousands of investors to purchase auction-rate securities with promises of robust returns and liquidity, but when the market collapsed, investors were left out in the cold,” Mr. Brown said in a statement. “Based on misleading advice, investors bought these risky securities. Now, retail investors and small businesses are finally getting their money back.”Under the terms of the settlement, Wells Fargo agreed to buy back at par value by April 2010 all auction rate securities purchased through its brokerage unit by investors before the market froze up.About half of the auction-rate securities sold by Wells, which is headquartered in San Francisco, were bought by California residents.

via Wells Fargo Settles Lawsuit Over Auction-Rate Securities – DealBook Blog – NYTimes.com.

This is apart from the hidden bonus in the healthcare bill over the redefinition of San diego and other California metros as rural etc costing $300 million to Obama’s administration. A good day for Californians!

A leg of tweets .. Holiday season in the US 2009 & Bank results

Barack Obama is learning testimonial marketing on the ground for healthcare, clunkers are away and superbowl is already 2/3rds sold with Red Sox and Cardinals falling away to give a sticky brand even with fat expenses for Yankees, Phillies and both the LA franchises ( Dodgers – NLCS and Angels – ALCS, for the newbies)

In Asia, IPL has taken root, Champions League has shown the other Cricket brands in the Commonwealth and probably US has a couple of teams switching from Soccer to T20 Cricket this time :)

Closer to where it hurts, Apple is redesigning Disney retail ( one last time?) IBM is riding god knows what hopscotch strategy, and Amazon and Walmart are getting ready for the holidays – some more would be shutting down this time in the face of retail discount wars…

Funding new infrastructure..a global imperative The new USA with new infrastructure « Obamanomics http://bit.ly/3kSJ2k
about 3 hours ago from HootSuite

Apple is not going to ruffle anyone as Windows 7 brings $MSFT back into the game (by the by, just to wake up your senses before dinner ..)
about 5 hours ago from HootSuite

Two-thirds of Superbowl AD inventory was sold/booked even before Week 1 of NFL..and there is six more months for the “new” network CBS
about 6 hours ago from HootSuite

Dow 10K definitely took its time coming! G’night all
about 13 hours ago from HootSuite

Gas sales ( At pump) down 25% from last year ( US, September 2009)
about 16 hours ago from HootSuite

car sales dropped 10% in september “After Clunkers” shock, October shd indicate holiday season
about 16 hours ago from HootSuite

$GLD up above $107..can it cross $115?
about 16 hours ago from HootSuite

Why is $CI getting such a great buy rating? One can’t believe the industry’s whitepaper of all things! The fool’s in goop http://ow.ly/un4a
about 16 hours ago from HootSuite

I am not so sure I got any follow up report of InBev’s amusement parks’ sale? A $2 billion business..
about 16 hours ago from HootSuite

Goldman Sachs $GS scored pretty much lower in Securities services and investment banking income in June ..a start of a bad trend? #Q3results
about 16 hours ago from HootSuite

The 0.9 t Balance sheet of GS could easily grow to $1.5 t by tonight :) as 713 billion is just investments with MTM 2b upped after reval !!!
about 18 hours ago from HootSuite

Will $GS follow $JPM into the emerging markets, and expand globally? $GS earnings could far exceed expectations of $4.24, JPM likewise
about 18 hours ago from HootSuite

$JPM Treasury and Custody Portfolio of $16 trillion likely to grow along with fee services of investment bank.. Buy to USD 60-65 in 2009
about 19 hours ago from HootSuite

And after receiving the Nobel Peace Prize! RT @barackobama humbled.
about 19 hours ago from HootSuite

Sign here! RT @barackobama Health reform just took a huge step—but the insurance lobby is.. Urge Congress to pass reform: http://u.nu/6jhi3
about 19 hours ago from HootSuite

$JPM reports restructuring with Jes Staley taking over as CEO at the $1.9 billion richer investment bank, Mary C Erdoes takes over at AMC
about 20 hours ago from HootSuite

$JPM reported a further $2 billion added to loan reserves and $3.7 billion in extra charge offs in retail, Credit card losses of $700 m
about 20 hours ago from HootSuite

$JPM and $GS results of $3 billion profit may look very different if unrealised gains on their fixed income portfolio are not included
about 20 hours ago from HootSuite

$OIL at $75 looks precarious, $FXE looks well done at 1.50 Can equity look subdued after the banks have published “rosy results”?
about 20 hours ago from HootSuite

If the Chargers win today, they will likely meet the Blues for the next KITA motivation #clt20
about 20 hours ago from HootSuite

Welcome @hotshotsin to the Advantage zyaada fold @zyakaira @zyaada
8:13 AM Oct 14th from web

Gyancafe follows http://advantages.us/brands for updates on Sports Marketing, IPL and social media #clt20
7:48 AM Oct 14th from HootSuite

By @zyakaira Cape Cobras meet Victoria Bushrangers in the Super League Kickoff #CLT20 Sad day for Wayamba and Sussex #clt20
7:48 AM Oct 14th from HootSuite

By @boutred :ask for analysis CIT debt swap struggles, bankruptcy looms: NEW YORK (Reuters) – CIT .. http://bit.ly/9hApR @zyaada
7:47 AM Oct 14th from HootSuite

Wonder how soon we can extend the IPL club brands to Cape Cobras and the Sydney Blues ( sponsor the SA/CA teams) #CLT20 #ipl

Blackrock launches new Bundling? | FT.com

zyakaira notes: Just more old wine..I just prefer all markets on ECNs with afterhours trading..you mean they need a platform to sit and match trades internally before going to market! UGGGHH!

BlackRock, the asset manager poised to become the world’s largest money manager with $3,000bn under management, is preparing to create its own global trading platform – a move that could challenge the business at the heart of many Wall Street groups.

BlackRock plans to develop a “new world-class global trading platform across the firm”, according to an internal memo seen by The Financial Times. It has appointed Minder Cheng, who is joining BlackRock as part of its acquisition of Barclays Global Investors, to oversee its development.

The platform will “fully realise the cost efficiencies and trading opportunities across all asset classes as we become one of the largest trading operations in the world”, the memo states.

Once BlackRock’s acquisition of BGI is completed sometime in December, the group will have about $3,000bn in assets under management.

The plan is still in its early stages, but its outlines are already clear. If some BlackRock clients are selling a security and others are buying, the group can “cross” those trades internally without going through Wall Street. BlackRock does not intend to take any fees for this service, since the whole point is to save its clients money, according to people familiar with the plan.

“Why pay such a large bid-offer spread?” another person familiar with the plan said, referring to the price gap between buyers and sellers. “The large volume gives BlackRock the opportunity to bundle trades.”

The plan will probably be first introduced for trading in stocks, where pricing is more transparent than in fixed income.

BlackRock executives have insisted that their plan is not meant to marginalise Wall Street, adding that the firm will still depend on banks to provide liquidity. But the new platform does serve as a sign that the buy side is increasingly flexing its muscles when it comes to paying fees to trade securities that often have very small margins and rely on large volumes to achieve profitability.

The high costs of developing new technology have hindered other attempts to develop such platforms. But BlackRock Solutions has been a pioneer in developing technology, which generally has been the province of the sell side. But now that is no longer an obstacle, these people add.

via FT.com / Companies / Financial Services – BlackRock to launch trading platform.

China’s bold new 2009

Energy

Chinese Petro Corp CNPC ($PTR) is going ahead with $30 billion in loans to finance acquisitions despite the failed CNOOC bid in 2007, planned destinations being Argentina ( YSF Repsol) Brazil and Russia after state level discussions earlier in 2009 in Brazil and Russia.

PetroChina recently acquired a 45.5% stake in Singapore Petroleum from Keppel Corp. for 1.47 billion Singapore dollars ($1.02 billion). And it also signed a $41 billion liquefied natural gas deal with Exxon Mobil Corp. (NYSE:XOM) to import the LNG from the Australia-based Gorgon LNG project

Also CNPC’s pocket from this loan is a total of $50 billion including its Cash reserves, while its purchase in Libya has already been stopped by local state officials and the Repsol purchase is only $15 billion..

Aviation

Boeing Co. (BA) expects orders from Chinese airlines to account for around 40% of its forecast of 8,960 commercial jet orders from Asia over the next 20 years, a senior Boeing executive said Wednesday. ( zyakaira niotes: this estimate is already 2 years behind, with all this heave ho on, and no aircrafts having sold)

Randy Tinseth, Boeing’s vice president of marketing for its commercial aircraft division, told this WSJ report that China will grow at 8.6%, NA at 2.5% and the intra-Europe market to grow 3.4% annually, as measured in revenue passenger kilometers, a key metric for gauging passenger revenue.

Tinseth said the recent economic downturn has prompted some airlines to defer deliveries of new aircraft. For 2008, Boeing recorded 100 deferrals, mostly from North American customers.

Tinseth said the number of deferrals this year is “something greater than” the 2008 number, but declined to elaborate. The Energy news here is courtesy TheDeal and silobreaker

State Money

While state-owned China Development Bank financed CNPC, the $300 billion China Investment Corp (SWF) is moving in to purchase distressed real estate in the US with the help of the US government

Commodity Derivatives and the excessive lending

Meanwhile Foreign banks continued to suffer in China and probably move faster to N11 and North American Markets as Chinese Aviation and Oil companies continued to threaten 100% default on Commodity derivatives because prices have dropped sharply and new loan growth has slowed down after a state wide change in policy closing down the long term fund window on stimulus and planning to save its economy from spiralling bad debt

Other MNCs like Unilever continue to plan far a longer innings at the cost of profits according to the new Chinese edition of WSJ

AIG’s Taiwan Life Unit

zyakaira notes: The Taiwan Life unit: The recent laundry list of asset sales planned by AIG see here continues to find conflict of interest in almost each of its deals, as AIG remains the buck stopper of the entire industry’s claims good or bad..

Bloomberg reports that Morgan Stanley’s (NYSE:MS) private equity fund pulled out of the bidding group Chinatrust Financial Holding Co. is leading. So is Chinatrust still in the bidding?

The sale of the unit is expected to bring in about $2 billion, but it could have trouble hitting that price target as the unit is under as much financial pressure as its parent. Nan Shan was forced to raise $1.45 billion in a rights offer last year to avoid slipping below a regulatory capital requirement as unprofitable policies eroded its reserves.

So who else is in the bidding for the unit?

Carlyle Group, which joined Fubon Financial Holding Co.

Cathay Financial Holding Co.

China Strategic Holdings Ltd. may have joined Primus Financial Holdings Ltd.

Binding offers are due for submission on Aug. 28, according to the reports. – Maria Woehr

via Morgan Stanley, ChinaTrust to drop AIG unit bid? (Dealscape – Private capital).

AIG sells fast to make $80b

AIG (used earlier)AIG is in quite a turn having to sell most of its profitable Asian and other International Insurance and Investment Management Businesses ( also see here)

While it announced the division of its businesses into AIA + Alico in Life in Asia, Chartis for Property & Casualty and the Domestic US insurer, it has not gone much further. Till date it has sold the following:

1. Energy & Infrastructure Assets for $1.9 billion : A power generation plant operated by First Energy, a tax equity interest in a Texas wind farm and two lease equity interests in rail car portfolios. Earlier the AIG financial products unit sold an interest in Tenaska Marketing Ventures, its interest in two volumetric production payment transactions and its stake in three Spanish solar power plants

2. Hong Kong based Consumer Finance Unit for $627 million

3. AIG Systems Solution, its IT Outsourcing Unit sold to Mphasis (800 staff would have easily netted $35-50 million but not more than $75 million with all premium) which is likely small change of Rs 225 crores

4. It has earlier sold its Canadian Life subsidiary for $308 million and its Aircraftleasing business ILFC is expected to fetch less than $2.2 billion (assets worth $7 billion)

5. Its Life Insurance Premium Finance business was sold to Wintrust Financials (Ill.) for upto $740 million

According to Businessweek in a report published on Sept. 23, 2008, the Credit Suisse Group (CS) put an aftertax value on AIG’s assets at anywhere from $94 billion to $122 billion. The final tally will depend on how big a “distressed discount” it will face.

It is trying to sell the following for which deals are in process:

A. AIG Investments ( see article here) Earlier proposed to be bought by Franklin Templeton and Temasek, they are still being tracked by Crestview partners and Religare Enterprises of the erstwhile pharma major Ranbaxy. This sale will net at least $300 million, while AIG is likely holding out for $500 million for $80 billion AUM. AIG Investments has lot of fresh investments in Africa and Latin America (private Equity funds)

B.  The Global Real Estate Management Business with $12.4 billion in assets and $5.2 billion likely has suitors for $9 billion including the AIG and TARP advisors Blackstone(BX) and Blackrock. According to the dealcom, the Japanese HQ itself is worth $1 billion

C. The AIA and ALICO IPOs could net $25 billion including purchases by Benmosche’s erswhile Metlife, for which Benmosche will have to clear conflicts of interest ( by staying away from negotiations?) . Benmosche owns about 2.5 million diluted equity ( incl options ) of Metlife

D. Private Equity boutiques like Lightyear have shown interest in AIG advisors. Surprisingly, no such interest from the PE firms has come in AIG Global Investments. AIG ADvisors includes AIG Retirement Advisors ( Sage, FSC and Royal Alliance) which has lost 1 in 6 of their Advisors. As is the norm, most of the first bidders including Warburg Pincus have retreated, and the situation is very tense

E. Chartis carved out of all of AIG’s P&C business desires to sell a 20% stake through IPO

F. The Taiwan Life unit: The recent laundry list of asset sales planned by AIG see here continues to find conflict of interest in almost each of its deals, as AIG remains the buck stopper of the entire industry’s claims good or bad.. also this unit (Nan Shan was out of cash earlier last year)

Though some of the initial deals have gone well, each of these deals seem likely to be pie in the sky w.r.t valuations and AIG faces a challenging task ahead.

On the other hand it has been stuck with proposals to sell $20 billion worth of AIA and ALICO Life Insurance in Asia, and another 20% in its restructured Chartis business (P&C) and is not likely to get a price that will pay off the expected debt out of the $80 billion outstanding. They have however made proprietary profits to pay off $2.67 billion in the 2nd Quarter, which is not much considering its global assets in life are $560 billion !!

references via thedeal.com

Tarnished Citigroup Looks Like It Could Shine Again – WSJ.com

Citigroup has been garnering investor interest amid optimism on Wall Street that the worst is over for the beleaguered banking company.

Citi shares have been pounded in the past two years, falling to around $3 from $55 because of heavy losses and a huge increase in its shares outstanding as a result of a $58 billion preferred-stock exchange offer designed to shore up the company's equity capital base.

Citi stock is down 50% this year alone, while J.P. Morgan Chase shares have risen 20%, to a recent $38, and Goldman Sachs has surged 90%, to a recent $162.

The Worst Is Past

The bullish case for Citi is that it has put concerns to rest about its viability and capital adequacy.

And, based on tangible book value, a conservative measure of shareholder equity, its stock looks inexpensive. (Book value is the value at which assets are carried on a company's balance sheet — or the value of a company if it sold off all its tangible holdings.)

Citi has been trading at about 70% of its book value of $4.30 a share, pending completion of the preferred exchange offer that probably will boost its share count to 23 billion from the current 5.5 billion.

In contrast, J.P. Morgan and Goldman fetch about 1.6 times tangible book; Wells Fargo commands twice its book value.

“Citi is the one stone that investors haven't turned over,” says John McDonald, a banking analyst at Sanford Bernstein who carries a price target of $4 on Citi shares.

via Tarnished Citigroup Looks Like It Could Shine Again – WSJ.com.

Europe Issues New Bank Guidelines – BusinessWeek

Europe Issues New Bank Guidelines

zyakaira notes: These common rules specify stress tests for the 30 that have received state aid. Also they emphasize the fact that this aid must stay on the books to be of any value and not immediately used to save falling/defaulted bonds. All in all, it looks good on paper and barring any unforeseen bickering by the nation states individually as BoE and maybe a few others may prefer, these would set a nice denominator. From my side I would recommend that the best and worst case be not used to skew results and be used in a fair range, which should be eminently possible in 6 months

BW:

To even out different requirements imposed on banks that have received government aid, the European Commission has set forth common rules

The European Commission laid out new guidelines for banks receiving government support on Thursday (23 July) in order to avoid distortions of competition within the sector.

Since the fall of Lehman Brothers last September, roughly 30 banks within the EU have received state aid to keep them afloat on condition that a restructuring plan be submitted within six months.

But banks will have five years to implement their plans, an indication that the commission still considers the current climate extremely difficult.

Philip Lowe, the commission’s director-general for competition, said the guidelines were “the ultimate stage in restoring health to the banking sector…which is done by returning individual institutions to viability without state aid.”

He cautioned that state aid could not be provided so that banks could continue with a “failed business model.”

Instead, the restructuring plans must take account of “the present state of and future prospects of financial markets, reflecting best-case and worst-case assumptions,” say the guidelines, which will remain in place until 31 December 2010.

via Europe Issues New Bank Guidelines – BusinessWeek.