Thursday, September 25, 2008

Can It Just Keep Getting Worse?

Fan, meet shit. Shit, meet fan. From this morning's news:

BEIJING, Sept 25 (Reuters) - Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions to prevent possible losses during the financial crisis, the South China Morning Post reported on Thursday.

The Hong Kong newspaper cited unidentified industry sources as saying the instruction from the China Banking Regulatory Commission (CBRC) applied to interbank lending of all currencies to U.S. banks but not to banks from other countries.

While I'm not eager to see the economy meltdown from the Big Shitpile into...um...a steaming lava-like mass of shit, and I completely oppose the 700 billion 1.2 trillion 1.8 trillion dollar bailout (and counting) I cannot for the life of me see that this is going to help.

Of course, Wall St. rejoices now that you and I are on the hook for that money.

UPDATE: As of this afternoon, Reuters has released a new article here, which softens the tone of the original somewhat to make it sound as if we are still trading with Chinese banks, but just that American financial firms are having minor difficulties:

U.S. and some other foreign banks were finding it more difficult to borrow money from the market because of concern about the health of the global financial system.

Some Chinese banks have temporarily stopped offering new lending to U.S. banks, in yuan and other currencies, three traders said.

However, they said foreign banks were not being excluded from trade completely and that the market was not panicking.

However, the South China Morning Post sounds a little more ominous below (sorry no link, but I'm not subscribed to the SCMP). The timing of these articles seems really suspicious and I wonder if they are just added pressure on Congress to pass that f*cking bailout plan....

Mainland lenders ordered to halt interbank deals with US firms
Jane Cai and Adam Chen in Beijing
Sep 25, 2008
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Mainland regulators have told domestic banks to stop lending to United States financial institutions in the interbank market in a bid to prevent possible losses during the financial crisis, industry sources said yesterday.

The ban from the China Banking Regulatory Commission (CBRC) applied to interbank lending of all currencies to US banks but not to banks from other countries, a source said.

The CBRC was not available for comment yesterday.

The decree appears to be Beijing's first attempt to erect defences against the deepening US financial meltdown after the mainland's major lenders reported billions of US dollars in exposure to the credit crisis.

Lending transactions on the mainland interbank market totalled 10.65 trillion yuan (HK$12.17 trillion) last year, according to the People's Bank of China.

In the first eight months of this year, transactions totalled 10.11 trillion yuan, up 104 per cent from a year earlier.

At the end of last year, the mainland interbank market had 717 members, including banks, securities companies and trust companies.

Another banking source said the CBRC issued the ban after obtaining data about the exposure of mainland banks to bonds issued by bankrupt Lehman Brothers Holdings.

Top officials said they were keeping a close watch on the crisis and warned mainland financial institutions to be cautious in their daily business and overseas expansion.

"The international transaction volume of Chinese banks is not big. Those concerning subprime loans are probably lower than US$10 billion," deputy central bank governor Ma Delun wrote this week in the China Business Post, a PBOC-affiliated newspaper.

But the deteriorating situation in the US has shocked top officials.

Mr Ma said that among the unexpected developments was the effect the crisis was having on normal assets, not just problematic assets; its impact on the whole credit market, not just single products; and its effect on Europe and other nations, not only the US.

The exposure of seven listed mainland banks to bonds related to Lehman Brothers totalled US$721 million.

Mainland banks had US$9.8 billion in exposure to US subprime loans at the end of last year and US$25 billion to Fannie Mae and Freddie Mac by June 30.

More as it unfolds...

2 comments:

pygalgia said...

Glad to see you post. Not so glad about the news. We're getting even more fucked by the hour.

Justin said...

" Fan, meet shit..." haha that's funny.

What was it, 3 weeks ago, we were saying, "well if the economy doesnt collapse..." no such luck.

Ya, this is an enormous cluster fuck. Wall Street may not have to political leverage to get bailed out. People have rebelled--- popularly and spontaneously against the "common sense" proposal as cable tv and poltiicans said it was. Congress is getting swamped by constituent anger over this.

Then we dont even know if the bailout will work, or backfire, as your post implies...China may tell our broke asses to go fuck ourselves...

...I think what is agreed upon though is that the shit has hit the financial fan. We may have to build another global money system and all the challenges that represents...wow.