Credit Suisse Plans More Job Cuts

It's the deleveraging, and it's not going to end anytime soon.

Look at the s&p 500 and the weighting of financial firms over the years. Pre crisis it became very heavily weighted. This is what's called a necessary rebalancing. Wall Street is the heart of the national economy, pumping blood. But any heart that gets big and bloated is usually a sign of an impending medical condition.

yep, most banks still have to right size

So RS, you agree...bullish for Manhattan RE!

Wall Street layoffs are not a plus. Never have been. Never will.

Not the only factor , but an important one no doubt. We'll see.

The biggest dangers now are political - not financial or economic. The economy plods along; de-leveraging is happening. There is far more danger to Credit Suisse and Manhattan real estate in Greece than there is here.

If Papandreau is successful in getting his referendum scheduled - in January! - the world will not have an economy by then, and we will all be bankrupt. The Dow will be approximately at 1,000; there will be no bank lending, and the only thing that will be safe is money under your pillow.

The ECB is not empowered like the Fed to be the lender of last resort, so you will essentially see the entire banking system collapse, because the prime minister of Greece wants to keep his job.

That's the problem. A thousand people at Credit Suisse means nothing. The Greek that Roared is the problem.

Fortunately, I think it will be resolved. But I thought they'd be smart enough to resolve Lehman before letting it go under, and I was wrong there, too. So we'll see how this plays out over the next few days.

?

A lot of rich Greeks might move to NY.. Would not shock me. We could see several hundred( not a negative considering the annual volume of the high end market)

not to riverside blvd.

"If Papandreau is successful in getting his referendum scheduled - in January! - the world will not have an economy by then, and we will all be bankrupt. The Dow will be approximately at 1,000; there will be no bank lending, and the only thing that will be safe is money under your pillow."

Perhaps that is exactly Papandreau's plan. He is angry over how the EU has treated Greece, so what better way to get revenge than to crash their economies?

"A lot of rich Greeks might move to NY.."

That assumes they are still rich by the time they have the referrundum.

I personally welcome a Greek default. In one day, wealth inequality will be wiped out. All those traders can look forward to living in tents at Zucotti.

"If Papandreau is successful in getting his referendum scheduled - in January! - the world will not have an economy by then, and we will all be bankrupt. The Dow will be approximately at 1,000; there will be no bank lending, and the only thing that will be safe is money under your pillow."

Clearly citizens of a country should have a say to decide for themselves whether a default is better to one bailout after another. So asset holders, suck it up!

True, you might not be able to sell for a while and your net worth is going to suffer meanwhile... But it's called democracy. There's nothing more democratic than a referendum, that's why it's frequently used in Switzerland. What's do you want? A pro-asset holders dictator?

They're already here - just in Astoria.

This is a very serious issue; you should read the European papers to see how the world has reacted to this. Irate is an understatement.

If it's not resolved in the next few days, Credit Suisse will not exist anymore. The entire eurozone would very quickly collapse, and take the world economy with it.

Fortunately, I think it's temporary. Not the Hank Paulsen "No government money to Lehman" spiel. Papandreau apparently didn't tell anybody of his "plan," but it's not going very far. I would expect the Fed tomorrow to provide support for the Europeans, and there is a new head of the ECB.

It must be resolved quickly, because if it's not - don't worry about it. There won't be an economy in a week.

But doesn't destroyig the economy have some benefits? First, you eliminate income inequality. And second, you can rid the world of free market capitalism. The only way your going to have a fair and equitable Socialist economy is to collapse the system. Yes, it will be ugly, but it is necessary.

"So asset holders, suck it up!"

Nice one, but it won't be just the asset holders; the entire world economy will freeze again, just like it did in 2008, but this time there will be no way to reflate it.

Democracy is a good thing, but you don't let prisoners decide where they're going to sleep, and Greece is right now a prisoner, and its "democracy" threatens to collapse the world.

It is that serious.

Relax steve. Destroying the economy is not so bad. It's like knocking down a condemned house and replacing it with a better one.

"Papandreau apparently didn't tell anybody of his "plan," but it's not going very far."

those that think a country should deal with its insolvency by delegating decision making 100% were surprised. but papandreau is not to blame for those unrealistic expectations.

let's face it, the deal was a band-aid to greece so that german and french banks will be helped. germany has to get done with the ring-fencing of the banks exposed, that doens't mean the Greeks should submit to debt-servitude or austerity packages that produce more pain than outright default.

it's up to you to buy the doom and gloom that creditors want everybody to buy: "the world is going to end if i have to take losses on my bad investments"... hey steve, i have a bridge to sell you!

when you remove one card from a house of cards, what happens?

If Greece defaults, then other countries will likely do the same.

The gloom and doom is, for the most part, being peddled by the bankers who want to impose Austerity on as may countries as they can. The Greek people should say no and vote down the referrundum.

does this house of cards have a window in the shower?

>
Socialist
11 minutes ago
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But doesn't destroyig the economy have some benefits? First, you eliminate income inequality. And second, you can rid the world of free market capitalism. The only way your going to have a fair and equitable Socialist economy is to collapse the system. Yes, it will be ugly, but it is necessary.

What happens to the union pension funds and retiree health benefits?

"The gloom and doom is, for the most part, being peddled by the bankers who want to impose Austerity on as may countries as they can. The Greek people should say no and vote down the referrundum."

bingo! iceland did that, they showed the banks the middle finger and are recovering. the irish were the ultimate bank/creditor victim and will have to apologize to their future generations for years/decades to come. which side are you on steve?

when layoffs come, always best to be first---you get the best package by far.

yeah, but Ireland and greece are both in crummy shape. Ireland has 14% unemployment and Greece is at 17%.

One of my favorite things about destroying the whole financial system is that it gives you the perfect excuse to nationalize all the banks.

Maybe socialist, but I haven't stocked up on enough cans of soup to last me that long, and I have accounts receivable of about $50k that I'd like to get paid before the revolution: that will buy me 25,000 cans of Campbell's soup and not a few boxes of crackers. I'll have to let my cats roam the street in search of New York rats for food, though, as it'll come down to me vs. them.

In fact, they could make a meal or two, if worst comes....

I don't think it will come to that but I don't know how bad things will have to get before they get good again. From press reports there are a lot of very angry people and a lot of people are working very hard to undo this damage.

The stress is already being seen in interbank lending rates, up to their highest since August 2010. A default would mean the collapse of the world financial system.

Don't try to be smart going short stocks - I did that in 2008, and the short funds fell just like the long ones, because they couldn't execute deals: no one will be willing to lend stocks, for fear that they won't get them back for years. (Lehman, fyi, is still in bankruptcy in London, and its creditors haven't gotten paid.)

A scenario like that is completely possible. Now, where I do agree with you is that the leverage of the 2000's and products like credit default swaps made things much worse, but for the time being we're stuck with them. For the time being we just have to fix the present problem.

And it's a biggie!

Steve, your plan is to eat your cats?

"iceland did that"

Iceland isn't a eurozone country - that is the problem. It also has a population of about 350,000. More people live on my block than live in Iceland.

This isn't a problem with Greece's banks - it's a problem with Greece's sovereign debt. I fully agree that more needs to be done to get them out of it, but I also fully agree that they are just as much to blame for getting themselves into it.

This crisis would be far worse than Lehman or any of the earlier, thank you financial deregulation crises we've had since 1998 or so. I agree with Socialist that the financial system is a Ponzi scheme, but it always has been. That's why the Depression-era controls were put into place, and the world was happy for 50 years.

I will say that while the stock market reaction was abrupt, the volume hasn't been significant: look at volume during a real panic and you'll see that today is nothing like that. Markets were due for a fall anyway, but this a good warning. I certainly don't think it's time to panic; just get ready for more.

Unless this doesn't get resolved this week, in which case we're screwed.

steve, were you one of those that thought a nuclear bomb shelter was needed back during the cold war?

Steve is still practicing air raid drills.

"were you one of those that thought a nuclear bomb shelter was needed back during the cold war?"

Nope - I always wondered why my grandparents' building in the Bronx had one, though.

I do, however, remember Lehman very well, and I know a thing or two about banking, and the problem is counterparty risk: if your counterparty doesn't pay you, you can't pay your counterparty. It is a Ponzi scheme in the sense that banks take in deposits and make loans, thereby creating money. If enough people don't pay back their loans, people will not get their deposits back.

That's why banks stopped lending after Lehman; they were afraid they wouldn't get their money back. The problem with Greece isn't Greece; it's Italy and Spain. They are too big to fail, but once a panic sets in, it's hard to stop it.

That's why banks stopped lending after Lehman; they were afraid they wouldn't get their money back.

No. That's not correct.
The world discovered the emperor wasn't wearing any clothes. The value of all that debt held by the banks(assets) which offsets it's liability(deposits) was discovered to be sorely lacking. The result(equity) was too small probably negative. Translated this means the banks were discovered to be technically insolvent. This is why Bank America trades at a mere fraction of book value. The only thing holding these firms together is being able to borrow from the Fed which doesn't care and feels the need to keep the dance going. Then you have bank customers who are in aggregate over-leveraged and in no need of leveraging up to buy new cars, take vacations or buy a new boat.

>columbiacounty
about 12 hours ago
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what part of bankruptcy is fun?

Is bankruptcy a raw subject for columbiacounty?

You need to take a course in banking, Riversider: remember, you think that money is made in exploding stars.

What you are describing is partially true, but it is what led to the counterparty risk. You will remember that ALL borrowing and lending stopped after Lehman, including the commercial paper market, which has nothing to do with banks. That is when the Fed - rightfully, this time - stepped in and started to act as lender of last resort to corporations: the commercial paper market funds payrolls for the most part, and there was a real danger that no one would be paid.

All companies were simultaneously thrown into the same pot, regardless of their balance sheet. BofA, in fact, was in good shape before the misguided purchase of Countrywide; JPM had no reason to borrow from the discount window, but the Fed forced them to.

It doesn't take much to bring down the whole financial system; see Long-Term Capital Management for background. One or two firms, large enough, can cause the whole thing to collapse. When the Fed let banks collapse in the Depression, it just made tings work.

Greece - the topic - is actually insignificant. They can't pay their debts, true, but the problem is manageable. What is not manageable is Spain and Italy, which though able to service their debts easily are being lumped into the same pile.

"That's why banks stopped lending after Lehman; they were afraid they wouldn't get their money back."

"No. That's not correct. "

Uhhhh...RS, the end result of your convoluted explanation is that YES, banks were afraid to lend to each other and other financial firms...because they were afraid they wouldn't get their money back.

Wait a minute....Steve you are long SSO but are saying the DOW could be at a 1000 next week?

"Steve you are long SSO...."

No, I'm not long SSO. Eddie Wilson is long SSO. I have never had a position in SSO.

"but are saying the DOW could be at a 1000 next week...."

I said in a disaster that it possible; I didn't say it's probable.

So when you said you were going long on Oct 26th, triple long, what did you buy? What are you currently holding long?

Isn't the risk/reward for being long right now terrible if it is possible that the DOW could be at 1000 next week.

Uhhhh...RS, the end result of your convoluted explanation is that YES, banks were afraid to lend to each other and other financial firms...because they were afraid they wouldn't get their money back.

you are confusing solvency with liquidity

Triple-long? I was being facetious.

"you are confusing solvency with liquidity"

Okay. I can't wait. Please do explain this one, Riversider, because where I come from, "solvency" is your ability to pay your debts, and "liquidity" is, uhm, your ability to pay your debts.

Liquidity is an ability to pay one's debts as they come due. Solvency is when you have negative equity which refers to the balance sheet.

In 2008 we had a liquidity crisis. Banks couldn't convert assets to cash. Imagine you have no Cash , no
assets and need $20,000 to fund a new business expense. You are insolvent.

So what are you long? Just saying going long doesn't mean much.

OMG, RS! Where do you think liquidity comes from if not a balance sheet?

In fact, solvency is the ability to pay current liabilities with current assets, and it has nothing to do with equity. Liquidity is actually a related cash-flow concept - the ability to pay your debts as they come due.

You make no sense. You just said: "In 2008 we had a liquidity crisis. Banks couldn't convert assets to cash. -> You are insolvent"

So by not being liquid you are insolvent. Agreed. Also agreed - you just contradicted yourself, and you don't know what you're talking about.

Moreover, that wasn't quite what happened, but in effect it is counterparty risk: nobody will lend you money because nobody trusts they will get it back. Nobody will accept your collateral because they're not sure whether they will be able to execute it.

In 2008 we had a counterparty crisis. Banks had plenty of cash - they just wouldn't cough it up. Normally banks do not need to liquidate assets to pay their liabilities; they fund their liabilities through cash flows, not asset sales.

You really have no idea what you're talking about.

"Liquidity is an ability to pay one's debts as they come due. Solvency is when you have negative equity which refers to the balance sheet."

I understand this concept all too well. Why would a bank not want to lend or provide credit to an insolvent customer or counter-party? Because they are afraid they would not get paid.

You mean, Jason, COUNTERPARTY RISK?

It seems that poor RS - gold standard advocator that he is - believes that banks had to liquidate assets to pay their bills, and they couldn't. Of course that is entirely not true, but it's hard to get through to monetarists.

liquidity risk can be systemic. Nobody believes funds will be available in the market. On the other hadn if individual institutions are insolvent nothing will fix it.

Keep on trying, RS - eventually you'll think of something.

If nobody things funds will be available in the market, that is Market Risk.

"On the other hadn if individual institutions are insolvent nothing will fix it."

...And...they DEFINITELY will not be able to pay there creditors.

Actually, if an institution is insolvent, a loan will let them pay their creditors.

Sorta like Greece getting loans to pay its loans.

> "but are saying the DOW could be at a 1000 next week...."
> I said in a disaster that it possible; I didn't say it's probable.

So, let me get this right... Steve screamed short at 10300, dow ended up 200 points higher a few months later. Then, we have possibly the biggest month gain of all time (I don't remember exactly where it ended, but it was at least close), and steve yelled "I'm BUYING" after the Greek rescue and the resulting market jumps...

then the dow drops a few hundred points after... and he's yelling about Dow 1000 again.

Amazing... Steve tries to play both sides... and still end up painfully wrong.

Obama just left for Europe. ANy chance he will get tough, pin the PM of Greece on a wall, and tell him to accept the bailout deal "or else"?

"or else" what?

Obama will bring job-killing policies to Greece and ruin their economy?

> Obama just left for Europe. ANy chance he will get tough, pin the PM of Greece on a wall, and tell him to accept the bailout deal "or else"?

fat chance! he just left cause Michelle wanted another super expensive trip. just like the one that cost us millions for just herself and one of her kids in Spain for just 2 days... oh how cute the mom-daughter bonding moment that provided so much stimulus to the suffering Spanish economy.