Kamis, 05 April 2012

Bank downgrades coming , Egan - Jones cuts US credit rating and Brian Sack hits the road in somewhat sudden , somewhat vague and somewhat curious fashion....

http://www.zerohedge.com/news/bank-downgrade-forward-calendar


Bank Downgrade Forward Calendar

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A major potential negative catalyst for financials globally is rapidly approaching as 114 banks are on review-for-downgrade by Moody's across 16 countriesWhy do we care so much about ratings given their historical credibility? Ask James 'Jimmy-boy' Gorman of Morgan Stanley who is currently begging cap-in-hand to Moodys not to downgrade his empire bank, since he knows (and so it seems does the CDS market) that, as the FT notes, a downgrade could also force the bank to provide additional collateral to back its vast derivatives business - where it acts as one of the largest counterparties. In Europe, the fun heats up in the next few weeks as first Italian banks (4/16), then Spanish banks (4/23) and then Austrian (4/30) face from 1 to 4 notch downgrades and the potential to lose their short-term (funding-/CP-related) Prime-1 top rating, implicitly raising funding costs (and liquidity concerns) even further.

and potentially even more serious, banks that face loss of P-1 short-term rating...

and....

http://www.zerohedge.com/news/egan-jones-downgrades-us-aa-aa-outlook-negative


Egan Jones Downgrades USA From AA+ To AA, Outlook Negative

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A few weeks ago when discussing the imminent debt ceiling breach, and the progression of US debt/GDP into the 100%+ ballpark, we reminded readers that in February S&P said it could downgrade the US again in as soon as 6 months if there was no budget plan. Not only is there no budget plan, but the US is about to have its debt ceiling fiasco repeat all over as soon in as September. Which means another downgrade from S&P is imminent, and continuing the theme of deja vu 2011, the late summer is shaping up for a major market sell off. Minutes ago, Egan Jones just reminded us of all of this, after the only rating agency that matters, just downgraded the US from AA+ to AA, with a negative outlook.
From Egan Jones:
Inflection point - when debt to GDP exceeds 100%, a country's financial flexibility becomes increasingly strained. For the first time since WWII, US debt exceeds 100%. From 2008 to 2010, debt rose a total of 23.6% while GDP rose a total of 1.6%. Unfortunately, with an annual federal budget deficit in the area of $1.4T, debt is likely to reach $16.7T as of the end of 2012 while assuming GDP grows 2.5%, total GDP is likely to reach $15.7T. Therefore, as of the end of 2012, debt to GDP is likely to be in the area of 106%. Assuming the federal deficit for 2013 remains at $1.4T and GDP growth is 2.5%, the total debt will rise to $18.1T and GDP will rise to $16.1T, resulting in debt to GDP of 112%. In comparison, France's and Italy's debt to GDP are 81% and 117% respectively. Regarding efforts to address budget problems, the Super Committee was seeking spending cuts of $1.5T over 10 years or merely $150B per year, and was a failure. Obviously, the current course is not enhancing credit quality.

Without some structural changes soon, restoring credit quality will become increasingly difficult. Yields on 10-year treasury notes have fallen to their lowest since early Feb 2010 with US Federal Reserve's aggressive purchases of US Treasuries. A concern is the rise in interest rates placing higher pressure on the US's credit quality. Excess growth of money supply (i.e., debt monetization) harms creditors and ultimately, the economy. Weak debt reduction efforts force a neg. watch.



and.,,,,, another rat......jumps ship....



Brian Sack Is Out

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The New York Fed's Brian Sack, better known by everyone as the head of the Plunge Protection Team, is gone.
NEW YORK—The Federal Reserve Bank of New York today announced that Brian Sack, executive vice president and head of the Markets Group, is resigning from the Bank effective September 14, 2012.

Mr. Sack will remain in his current position as head of the Markets Group and Manager of the System Open Market Account (SOMA) until June 29, 2012, to help ensure a smooth transition. The New York Fed has started the search process for Mr. Sack's replacement.

"Brian's service to the Bank over the past three years has been critical to our response to the financial crisis and the country's economic recovery," said William C. Dudley, president and chief executive officer of the New York Fed. "I accepted his resignation with great regret and wish him well."

Mr. Sack will step down as head of the Markets Group and SOMA Manager on June 29, 2012. He will then be placed on leave until September 14, 2012, during which he will have limited contact with the Bank and no access to Bank information, including FOMC and supervisory materials.

Mr. Sack joined the New York Fed as head of the Markets Group in June of 2009.
and let's just ask the obvious questions - why is Brian Sack stepping down on June29th and being placed on leave until Sept 14th.... during which time he allegedly will have limited contact with the Bank and no access to Bank Information ? Why not just cut the cord June 29th in toto  or Sept 14th - why the slow motion departure ? And what is the reason , where is he going to work next , why wasn't a replacement already lined up , is this a sign QE 3 and / or Operation Twist is DOA  ?

So farewell, Brian Sack

The man who did the Fed’s buying will – by coincidence – leave the NY Fed pretty much the minute Operation Twist finishes in June.
NEW YORK—The Federal Reserve Bank of New York today announced that Brian Sack, executive vice president and head of the Markets Group, is resigning from the Bank effective September 14, 2012.
Mr. Sack will remain in his current position as head of the Markets Group and Manager of the System Open Market Account (SOMA) until June 29, 2012, to help ensure a smooth transition. The New York Fed has started the search process for Mr. Sack’s replacement.
“Brian’s service to the Bank over the past three years has been critical to our response to the financial crisis and the country’s economic recovery,” said William C. Dudley, president and chief executive officer of the New York Fed. “I accepted his resignation with great regret and wish him well.”
Mr. Sack will step down as head of the Markets Group and SOMA Manager on June 29, 2012. He will then be placed on leave until September 14, 2012, during which he will have limited contact with the Bank and no access to Bank information, including FOMC and supervisory materials.




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