‘Enormous Bank Losses’ Lie Ahead…Carlyle’s Rubenstein Says

Posted on May 12th, 2008 in Daily Stock Market / Economic News - The Real Story

We all know the banks want to push out their write-downs and losses as long and far as possible.  Most assume they are lying with every word they speak, but accept what they say as gospel, quarter after quarter. For the past nine months, I have heard commentators on Bubblevision say ‘this is the Kitchen Sink quarter’. Q1, 2008 was no exception. This line of thinking has lead to yet another stock market rally and renewed optimism that ‘the housing and credit crisis’ are over’.

I guess where they all come from (a little Island where apartments cost $25 million) most have several kitchens with many sinks. But, where most of us come from, this has become an absolute joke, if not a crime. 

Every few months since April 0f 2007 the real estate and mortgage collapse has suddenly gone away, and the light at the end of the tunnel shines as bright as can be. Financial stocks begin to soar with many of them getting back to 2006 levels, when money was cheap, all credit was rated AAA (or at least traded as if so), and there were more revenue streams than most CEO’s knew even existed.  Then one day the ‘right’ piece of news breaks and everything spirals back to Earth as another crisis unfolds suddenly.

But, what most fail to realize is that it is not a new crisis, but the same old crisis that never went away. It is funny how stock market participants truly believe that the tape dictates economic reality. Haven’t you learned by now, after almost a year and a half of financial stocks falling from the sky any given Monday, that there has been one constant; that the housing market, the mortgage market and the overall credit markets keep getting worse.

It is no wonder there is a crisis of confidence, when you hear banks lie month after month, quarter after quarter. The new fad is for banks to take gains on their liabilities being written down like Lehman did in March. As a matter of fact, DJ reported today that ‘MBIA’s loss would have been $7.1 Billion if it were not for a $3.6 Billion gain on the drop of its own credit guarantees’.  Morgan Stanley and Goldman Sachs revealed similar ‘gains’ in their recent earnings reports. CONTINUED…

They have all done this i n the past but now the ‘gains’ (actually losses) have become massive. If not for the $600 million Lehman took in Q1, which allowed them to post nearly a $500 million profit, they might not be around right now. These are not quality earnings. This is a sham. Given earnings reports such as these, who can trust anything they say?

Well, here is a little ditty from the Carlyle Group’s Rubenstein, just released. He talks about ‘enormous losses not yet realized for the bank’ and where this is all headed. He says, ‘it will take at least a year before all losses are realized, and some financial institutions may fail’. Hey, that is FOUR MORE KITCHEN SINK QUARTERS!  Moving right along he says ‘the sovereign wealth funds are not likely to jump into the fray again to bail out these institutions’ and ‘many financial institutions aren’t going to be able to survive as independent institutions’. There is much more where this came from. I could add to his report by mentioning the $5.5 TRLLION in Level 2 and 3 assets not yet marked appropriately in most cases.

Now, the pumpers will say ‘how can you believe a guy who was leveraged 25:1 in the mortgage bond arena and who just got crushed. ‘ In my opinion, that is the very person you should listen to. He has had to accept reality the hard way.

Don’t misunderstand this post…I have no problem when stocks soar based upon solid fundamentals. But in the past year all of the speculation and cheer-leading about ‘the end of the housing crisis’ that comes along every few months backed up by the major financial television channels, hurts the longs the most. 

You hear over and over again by certain TV personalities about ‘shorts getting crushed’ in short squeezes and how happy they are about this. But, in reality there are very few shorts in the market compared to longs. When that certain news hits and the market decides to come back to Earth in a very short period of time once again, the longs that are all piled into the same financial stocks are the ones will that get hurt the most. These are the very people the TV personalities say they are trying to help!

Maybe for once with respect to the financials, the market actually has it right for a change. Just like it did when the tech bubble burst. – Best, Mr Mortgage

Other Bank ‘Hide the Insovency’ Stories Below

David Eihnhorn’s Speech on the Brokers – A Must Read!

Merrill’s Level 3 Assets Surge Nealry 70% in Q1

11 Responses to “‘Enormous Bank Losses’ Lie Ahead…Carlyle’s Rubenstein Says”

  1. […] Read the rest of this great post here […]

  2. Liar liar pants on fire. They are buying time as usual, and hoping for a miracle. They are taking losses by small increments and trying to convince everybody that the troubles are contained. 320 B. What a fairytale indeed ! You can’t be impressed and stay amazed at how stupid and moronic investors are. These morons will probably bid up the prices of the financial sector again by 15%. Meanwhile banks are diluting like crazy their shareholders every single day. It’s really fascinating to see these stupid creatures called bulls.
    Bulls = no brains whatsoever.

  3. I guess our “ethical” Fed and Treasury and our very “intelligent” president and our absolutely “honest” congress are all trying hard to get the good times back – you know easy money and credit for anyone with a pulse. What they are missing is that their actions shame us to the rest of the world. We are acting as a third world nation that is powerful enough with guns and bombs to impose its might on anyone who refuses to play by our terms. If the “good times” ever come back it is because stupidity and greed in this world abound. If you can rationalize what is going on you should rightfully bear little or no tolerance for any nonsense currently going on in the markets and the actions taken by the governing bodies to bail out the banking industry. What happened to the gold standard?

  4. 600$ check for anything on two legs or four legs with a pulse. Did they send some checks to dogs,cats, cows and bulls too, this time? Can I have one ? Wouf! Wouf! Rubenstein should know what he is talking about. His kaput hedge fund bought some of the “good quality” that turned into junk like a pumpkin at midnight. Waiting for Prince charming Obama or McCain after the elections ? Everything will go real real bad after the elections. Meanwhile they keep up with appearances, smile and they stay happy and positive. Hourra ! Hourra ! the crisis is over !

  5. […] mr mortgage says ” ‘Enormous Bank Losses’ Lie Ahead…Carlyle’s Rubenstein Says “ […]

  6. Somebody should inform CNBC there missing the big picture! The only realist on that show is Rick Santelli.

  7. CNBC is a tool of Wall Street to suck in amateurs to buy at the top, just when they should be selling. The FED is also in denial of the true depth of the credit and economic problems.

  8. Just lie and make believe and If you can’t, make war. I am really happy to learn that the yesterday the crisis was finished and there is no inflation in the US. Sometimes I think that the USA like a sophisticated kleptocracy soviet style USSR.

    OK. We know all that. Apparantly the market does not seem to care. Do they have an obligation to recognize their losses ? And when will this happen ?

    It’s evident the banks are presently trying to pump the stock markets. When will they be dumping the manure ?

  9. Another 35 billion of losses must be added very soon to bad subprime loans. There are rumours that ING is hiding big losses. Hong Kong Shangai banking is hiding 30 billion also. How can this be allowed ? Stupid bankers. They think that the losse will go away ?

    Read this it’s really funny. It ain’t finished.
    5,900$ and 10,000$ houses in Atlanta.


  10. Oupps!

    Funny error indeed. Bankers are trying to hide an atomic bomb attack on real estate.


    10,000$ for a house ? 1929 all over again.

  11. Listen can somebody please just tell it as it really is?
    Its sickening year after year quater after quater.
    Notice that every 5 to seven years a big bank ‘out of the blue’ posts a massive loss. All they are doing is on purpose buying futures or assets which they know every well at the current year is a bad investment. Then they write off the loss against massive profits usually drawn from natural resources and exclusive licencing or mining operations for 5 to seven years. Then the cycle starts again.

    Futures increase, assets begin to grow in value and they have the previous depreciation loss to claim against all profits.
    Money for nothing and chicks for free.

    If the humble family was given the same benifits by all governments as Corporations there would be no poverty in the world. But no everybody wants to pretend to be stupid as if on purpose and remain in their igorance.
    Everybody wants to rock the boat but nobody wants to kick the ball.
    Hollywood is created as a scam all in the name of almighty ‘arts’ with Governments giving 100percent back to corporations for every cent back and even 200 percent in early cases.
    If families were given this benifit yes ‘Families’ I think is more important than ‘The arts’ dont you think?

    But no we are all so smart arn’t we? the cycle continues as people in families are dieing watching the television and the stocks of companies go up and down all the different colours and ringing bells as if these are the answer to all life and the universe and everything but its all part of a devilish and ugly sham to steal individuals right and access to natural resources, lands and their ‘birth right’ to oportunities.
    So may God himself curse you banks and corporations and all those who cleverly designed this anti-christian system to destroy families and especially steal the joy from a child even as he is coming from his own mothers womb.

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