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Wall Street Breakfast: Must-Know Newsby SA Editor Rachael Granby- Bank trio becomes duo. Wells Fargo (WFC) will become the largest U.S. bank by branches with its bid for Wachovia (WB), after Citigroup (C) withdrew from compromise negotiations late yesterday on concerns about the quality of some of Wachovia's assets. Wells Fargo, with a bid valued at $11.4B, expects the purchase to be completed by the end of the year, and denies it will have to absorb assets shakier than originally thought.
- Government considers next steps. As the financial crisis continues to worsen, the U.S. government is considering two dramatic steps to turn around, or at least slow, the damage: guaranteeing billions of dollars in bank debt and temporarily insuring all U.S. bank deposits. The moves, which would mark the government's most extensive intervention to date, are in discussion stages only.
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Latest Comments628 Comments
Can a Sustainable Recovery Rally Happen Soon?
Last Thursday Was the Bottom - It's Time to Get Back in
Hedging Gas Consumption with U.S. Gasoline Fund
Gas at 4.11 (over 4.50 in my area of California) and gas at 1.90 are both extremes. Buy UGA when gas starts to go up and you will be happy down the road.
Will Baby Boomers Start Selling Their Homes for Liquidity?
Understanding Synthetic Bonds
In your example, the CDS seller (Fred) has 100% collateral (the $100M of treasuries). As long as those are locked down (Fred can't go sell them during the CDS term -- is that true?), the CDS buyer is fully protected and we have a legitimate deal. From what I've read about CDS, this is not always the case. CDS are basically insurance, but there doesn't appear to be any requirement that the CDS seller actually be able to pay up in case the insured loss occurs. Am I understanding that correctly? Without assurance that the CDS seller can actually make good on the protection he's offering, how can anyone trust that instrument?
You also mentioned that you could sell your interest in Fred. How would that work? What happens to your $100M of treasuries securing payment? Do they go with the sale, or does the buyer have to provide that protection, or did the collateral just go away? From what I've read, this is another big problem with CDS. If I sell you a CDS, apparently I can then sell my obligation to someone else, without your permission or even knowledge, and apparently with little or no guarantee that he can meet the obligation I undertook and am now selling to him. How do you know that you're really covered in that scenario?
Here Comes a Consumer Killer
In Search of the Next Reserve Currency
By the time you add back all the hidden and deferred costs, we spend close to $1 trillion per year on "defense". We've been doing that (in today's dollars) for the last 60 years. Do you really think we have gotten $60 trillion of benefit from our various wars, incursions, and meddling in other countries' affairs?
U.S. Stocks Look Like They're Still Headed Lower
Actually, Now Is a Good Time to Enter Emerging Markets
In the six months to 11/19/08, RSX lost 82%.
Actually, Now Is a Good Time to Enter Emerging Markets
Last Thursday Was the Bottom - It's Time to Get Back in
No, that doesn't make sense.
Did Citi Suffer a Run on Deposits?
Oil Guesses Are Wrong Again, Contango Grows
The jest of what I say -- jist
Stocks: Is the Tide Turning?
Housing Prices Will Probably Recover in Next 48 Months