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Wednesday 4 February 2009
Singapore, Investor in UBS, Citigroup, Says Worst Yet to Come
Singapore, whose state-owned funds invested about $24 billion in UBS AG, Citigroup Inc. and Merrill Lynch & Co. in the past 14 months, said the worst of the credit crunch is yet to come.
Singapore, Investor in UBS, Citigroup, Says Worst Yet to Come
By Shamim Adam and Haslinda Amin 29 January 2009
(Bloomberg) -- Singapore, whose state-owned funds invested about $24 billion in UBS AG, Citigroup Inc. and Merrill Lynch & Co. in the past 14 months, said the worst of the credit crunch is yet to come.
The world’s biggest banks still have toxic assets on their balance sheets, which are clogging up their ability to lend, Singapore Finance Minister Tharman Shanmugaratnam said in an interview with Bloomberg Television yesterday. The finance ministry oversees Government of Singapore Investment Corp. and Temasek Holdings Pte, each managing more than $100 billion.
Banks are still focusing on replenishing capital “and estimates of the extent of bad assets on their books are still on the upswing,” he said. “We haven’t seen the worst yet.”
Bank losses worldwide from U.S.-originated bad assets may reach $2.2 trillion, the International Monetary Fund said yesterday, more than the $1.4 trillion it predicted in October. U.S. President Barack Obama’s administration and federal regulators are considering setting up a “bad bank” that would absorb illiquid assets from otherwise healthy financial firms.
Governments across Europe have injected capital into banks to ensure that lending to companies and consumers doesn’t freeze up. European Union regulators yesterday approved France’s plan to increase its funding for recapitalization of banks including BNP Paribas SA and Societe Generale SA to 11 billion euros ($14.5 billion), from an initial proposal for 10.5 billion euros.
Ireland’s government last month said it would invest 2 billion euros in Allied Irish and Bank of Ireland, the country’s biggest lenders.
‘Foot the Bill’
“It’s right that governments are focusing on recapitalization in the West and they’re trying their best to incentivize new lending,” Shanmugaratnam said. “It’s too early to say how successful this will be. Governments have to take more risk, and that means taxpayers have to be willing to foot part of the bill.”
The IMF report released yesterday signalled that writedowns and losses at banks totalling $1.1 trillion so far are only half of what’s to come. Losses on that scale would leave banks needing at least $500 billion in fresh capital to restore confidence in their balance sheets, the fund said.
Singapore’s leaders have defended the performance of the city’s state-owned investment companies after a plunge in the value of their stakes in Citigroup, Merrill Lynch and other global banks.
GIC, which manages the country’s reserves, invested about $18 billion in UBS and Citigroup since December 2007. Temasek, which has a $130 billion portfolio, increased investments in Merrill Lynch and Barclays Plc as the credit market collapsed in 2007 and 2008.
‘Well Diversified’
Temasek was the biggest shareholder in Merrill Lynch before the securities firm was taken over by Bank of America Corp. It is also the largest shareholder of banks including London-based Standard Chartered Plc and Singapore’s DBS Group Holdings Ltd., and has holdings in India’s ICICI Bank and other lenders in Indonesia, South Korea and Pakistan.
Temasek and GIC remain “well diversified” enough in their portfolios to offer the long-term returns the government seeks, Shanmugaratnam said.
“We would be very worried if global banks comprise a large proportion of the portfolios of GIC or Temasek, or for that matter, any of the highly vulnerable industries globally,” the minister said. “But these are diversified portfolios.”
Performed ‘Credibly’
Temasek and GIC have performed “credibly by international standards,” he said. Temasek had an average 18 percent annual return on investment since its inception in 1974. GIC said in September that annual returns in the past 20 years averaged 7.8 percent in U.S. dollar terms, compared with about 6 percent for the MSCI World Index.
GIC last year also said it’s boosting investments in emerging markets, private equity and other asset classes to raise returns after cutting back stocks and holdings in developed nations.
“I’m comfortable with the actions both Temasek and GIC have taken early in this crisis to reduce risk, to move into more liquid asset allocation and to prepare for opportunities in this downturn,” Shanmugaratnam said. “We’ve got to make sure we maintain that record of prudent investments for the portfolio as a whole, diversifying risks, and being prepared for crises from time to time.”
Straits Times deleted Bloomberg TV’s interview with Tharman after publishing it
By Eugene Yeo February 1, 2009
In the afternoon at 5pm, the Straits Times online published a Bloomberg TV’s interview with Finance Minister Tharman as its TOP STORY. However half an hour later, the article has mysteriously disappeared and is nowhere to be found.
The Straits Times “Breaking News” usually keeps its “top studies” and recycle them to other categories after a while. I have checked all categories and was unable to find the article.
The interview was actually published by Bloomberg on 29 January 2009 in which Mr Tharman revealed that Temasek and GIC have invested a total of about $24 billion in UBS AG, Citigroup Inc. and Merrill Lynch & Co. in the past 14 months.
This amount is more than the $20.5 billion “Resilience Package” unveiled by the Budget lately which was financed by dipping into our precious reserves.
With the shares of Merrill Lynch and Citigroup plunging more than 70% now, it is unlikely that Singapore is able to recoup their initial investment any time soon.
The obvious question that comes to mind is: If Temasek and GIC did not invest so much money to bail out these distressed U.S. banks last year when even savvy investors like Bank of America are keeping their hands off, will we need to dip into our reserves ?
The Straits Times editors must have thought of this as a sensitive topic and censor the article almost immediately after it was published. Unfortunately in this modern era, it is becoming harder for the mainstream media to conceal information as the news is already available on the internet.
Doesn’t the Straits Times think that this is an important national issue which ought to be made known to the public ? Shouldn’t Singaporeans know that our SWFs have ploughed in more than $24 billion last year to “invest” in U.S. banks ? Are the authorities afraid that they may have to answer embarrassing questions from the public if this was revealed ?
I am surprised no MPs have brought up the question of our failed investments in U.S. banks in Parliament two weeks ago. Don’t Singaporeans deserve to know what is happening to their CPF savings ?
Interesting comments from John Mauldin’s weekly commentary on the Bernie Madoff Ponzi Scheme:
And speaking of things that should not be, yesterday I was talking with a few fellow money mangers on a conference call when the news came that Bernie Madoff had been arrested and his fund was missing at least $17 billion, and maybe losses were as much as $50 billion. This is so very, very tragic, as it is not just large investors with well-diversified portfolios who lost here. Many smaller investors around the world had significant sums of money with Madoff. Far too many were not as diversified as they should have been. Some of the stories already surfacing are of horrific personal losses to investors and retirees who have no way to come back from such losses.
The fact that Madoff will spend the rest of his life in jail in no way compensates for the loss of so many people whose lives have been seriously impacted. It is just so terribly sad.
Madoff is a topic that comes up very often in alternative investment circles. I have been talking about his fund with friends at various conferences for almost a decade. “How does he do it?” we wondered. His fund posted steady 1-1.5% monthly returns since 1996, with only a few losing months in all that time. Supposedly he was doing something called split strike conversions. Some speculated that he was actually front-running trades in his market-making business. (Interestingly, regulators who looked at his market-making business never investigated the fund to see if he was doing just that, although I believe there were suggestions and other hints to them.) But arbitrage traders in the same arena could never figure out how he did it, and many were openly sceptical. Everyone, even the smartest trading shops, had losing months and quarters. But not Madoff. The fund was a complete black box and no one knew exactly what he did. Oddly, I have never met or known of anyone who has ever met a trader who came out of Madoff’s shop. I run into resumes of ex-traders at various other funds all the time. No one knew what he did, even employees in his (what seems to be legitimate) market-making business, which was walled off from his investment funds. This was a man who was once chairman of the Nasdaq Stock Market. He was trusted and looked up to.
There were signs if you looked for them. The lack of transparency, for starters. The fact that he did his own trades with his own firm and made commissions on them. There was no prime broker where the real assets could be seen. How do you run a $17 billion fund without a room full of traders? I have been on the trading floors of smaller funds, and there are scores of people. A fund that size should have a football field-sized trading floor. Even if it was computerized, there had to be programmers. And lots of them. And where were the geniuses who designed these programs? Jim Simons at Renaissance has hundreds of support staff for his operation. He is one of the best, and he has losing periods. The “auditors” of the Madoff fund was a firm that was located in one 13×18-foot room. For a $17 billion dollar fund? Really? Real audits take lots of manpower.
That being said, a lot of smart people invested in the fund. They trusted Bernie. And anyone who looked at those returns had to be a little tempted. After all, weren’t regulators looking at it? (The answer is no.)
Now we know how he made those returns. It was a Ponzi. Except this may have been larger than Enron and ultimately more damaging to more people than any scandal in the past. I remember writing a few years ago, in response to an article in Forbes about some minor hedge fund frauds, that all the losses of all the hedge fund frauds combined did not equal an Enron or WorldCom or just the plain old loss in a few larger companies in the Nasdaq in 2000-2002. I can’t say that now.
Note to my fellow alternative industry participants: There is going to be a rush by Congress to regulate hedge funds. The SEC tried to regulate hedge funds a few years ago but had to back away when the Supreme Court said they did not have the authority. When the stories come out over the next few weeks (and I have heard some that really cause me heartache), there will be hearings in Congress. Rules will be passed. Quickly. And they should be.
Instead of fighting regulation as many did last time, we should recognize that this is a war that cannot be won and bow to the inevitable and at least get a few benefits from regulation, like the ability to publicly post past performance (although given the carnage of late, that is not as attractive as when I suggested it a few years ago!). I am regulated by FINRA, the NFA, and the state of Texas. We have had an average of one audit a year by some regulator for the past five years. My firm is small and it does cost a lot, but it certainly does not keep us from operating and growing our business. And I must (grudgingly) admit it does keep us on our toes. So let’s sue for whatever terms we can in what should be recognized as a total surrender. And then move on.
Madrid (AFP) -- THERE are up to three million "direct and indirect" victims worldwide of the alleged fraud by US broker Bernard Madoff, according to a Spanish law firm that has filed a US lawsuit in the name of some of the victims.
"Our calculations are that at least three million people were affected by the Madoff affair, three million people who could be directly or indirectly affected by the case,'' Javier Cremades, the president of law firm Cremades & Calvo-Sotelo told a news conference.
The estimate is based on information collected from 30 law firms from around the world that are representing the victims of the alleged $US50 billion ($79.11 billion) pyramid scheme, he said.
The fallout from Bernard Madoff's alleged Ponzi scheme reverberated around the world as the list of investors facing losses widened. Among the biggest losers were charities, hedge funds, and banks in Europe and Asia. Below, see some of the most exposed investors and sort by the amount of potential losses.--Updated 01/28/09
HK mortgages in negative equity surge 326 pct in Q4
HONG KONG, Feb 2 (Reuters) - The estimated number of residential mortgage loans (RMLs) in negative equity in Hong Kong surged 326 percent in the fourth quarter to 10,949 cases as property prices fell, data from the Hong Kong Monetary Authority showed.
The aggregate value of RMLs in negative equity rose to HK$24.8 billion ($3.18 billion) at end-December from HK$6.0 billion at end-September, underscoring problems facing the territory's government and its many local and foreign banks as its economy slips deeper into recession.
The unsecured portion of these loans increased to HK$2.7 billion from HK$0.4 billion three months earlier.
The loan-to-value ratio of the RMLs in negative equity rose to 112 percent from 107 percent in late September.
Loans in negative equity mean the outstanding loan amount exceeds the current market value of the mortgaged property.
After a property market crash a decade ago, negative equity cases hit a record 106,000 cases in June 2003, depressing consumer confidence and spending and weighing on the property and banking sectors.
Property prices are widely expected to decline further this year as the global economic downturn deepens.
Feb. 3 (Bloomberg) -- A record 19 million U.S. homes stood empty at the end of 2008 and homeownership fell to an eight-year low as banks seized homes faster than they could sell them.
The number of vacant homes climbed 6.7 percent in the fourth quarter from the same period a year ago, the U.S. Census Bureau said in a report today. The share of empty homes that are for sale rose to 2.9 percent, the most in data that goes back to 1956. The homeownership rate fell to 67.5 percent, matching the rate in the first quarter of 2001.
The worst U.S. housing slump since the Great Depression is deepening as foreclosures drain value from neighboring homes and make it more likely owners will walk away from properties worth less than their mortgages. About a third of owners whose home values drop 20 percent or more below their loan principal will “hand the keys back to the bank,” said Norm Miller, director of real estate programs for the School of Business Administration at the University of San Diego.
“When you’re underwater and prices continue to fall, you tend to walk,” Miller said in an interview. “It’s a downward spiral that’s tough to stop because it feeds on itself. Foreclosures encourage other foreclosures and falling prices discourage buying.”
Obama’s Plans
The figures demonstrate the intensity of the U.S. housing crisis as President Barack Obama considers ways to help homeowners.
The Obama administration is considering government guarantees for home loans modified by their servicers, seeking to stem the record surge of foreclosures that’s hammering U.S. property values.
The proposal, which may also have taxpayers share in the cost of reducing mortgage payments, is aimed at shielding lenders from default after they loosen loan terms for struggling borrowers. Comptroller of the Currency John Dugan, who regulates national banks, said yesterday that “working out the details of it is still something that’s ongoing.”
Congress and the new president are grappling with how to repair the housing market as the recession enters its second year and unemployment rises. The U.S. economy shrank the most in the fourth quarter since 1982, contracting at a 3.8 percent annual pace, the Commerce Department said on Jan. 30.
Legal Wrangling
The U.S. had 130.8 million housing units in the fourth quarter, including 2.23 million empty homes that were for sale, the Census report said. The vacancy rate was 3.5 percent in urban areas and 2.6 percent in suburbs, the report said.
In addition, the report counted 4.1 million vacant homes for rent and 4.8 million seasonal properties.
“Wealth loss and housing in combination with loss in the equity market will have ripple effects,” said George Mokrzan, senior economist at Huntington National Bank in Columbus, Ohio. “The silver lining is that while home prices are coming down, incomes have stayed about the same, and in a lot of markets we’ll hit equilibrium this year. That’s a good sign for the long term.”
Most foreclosures are contained in the report’s “other” category, which includes homes tied up in legal proceedings as well as properties that are empty because the owner is renovating and living somewhere else, according to the Census Web site. There were 7.8 million homes in that category in the fourth quarter, up from 7.3 million a year earlier, the report said.
Bank Holdings
There were 2.22 million new foreclosures in 2008, an average of 6,090 a day, according to Washington-based Hope Now Alliance. Those resulted in 917,000 property sales, according to the group that represents 27 mortgage lenders and servicers.
U.S. banks owned $11.5 billion of homes they seized from delinquent borrowers at the end of the third quarter, according to the Federal Deposit Insurance Corp. in Washington. That’s up from $5.4 billion a year ago.
The U.S. housing market lost $3.3 trillion in value last year and almost one in six owners with mortgages owed more than their homes were worth as the economy went into recession, Zillow.com said in a report today.
The median estimated home price declined 11.6 percent in 2008 to $192,119 and homeowners lost $1.4 trillion in value in the fourth quarter alone, the Seattle-based real estate data service said.
7 comments:
Singapore, Investor in UBS, Citigroup, Says Worst Yet to Come
By Shamim Adam and Haslinda Amin
29 January 2009
(Bloomberg) -- Singapore, whose state-owned funds invested about $24 billion in UBS AG, Citigroup Inc. and Merrill Lynch & Co. in the past 14 months, said the worst of the credit crunch is yet to come.
The world’s biggest banks still have toxic assets on their balance sheets, which are clogging up their ability to lend, Singapore Finance Minister Tharman Shanmugaratnam said in an interview with Bloomberg Television yesterday. The finance ministry oversees Government of Singapore Investment Corp. and Temasek Holdings Pte, each managing more than $100 billion.
Banks are still focusing on replenishing capital “and estimates of the extent of bad assets on their books are still on the upswing,” he said. “We haven’t seen the worst yet.”
Bank losses worldwide from U.S.-originated bad assets may reach $2.2 trillion, the International Monetary Fund said yesterday, more than the $1.4 trillion it predicted in October. U.S. President Barack Obama’s administration and federal regulators are considering setting up a “bad bank” that would absorb illiquid assets from otherwise healthy financial firms.
Governments across Europe have injected capital into banks to ensure that lending to companies and consumers doesn’t freeze up. European Union regulators yesterday approved France’s plan to increase its funding for recapitalization of banks including BNP Paribas SA and Societe Generale SA to 11 billion euros ($14.5 billion), from an initial proposal for 10.5 billion euros.
Ireland’s government last month said it would invest 2 billion euros in Allied Irish and Bank of Ireland, the country’s biggest lenders.
‘Foot the Bill’
“It’s right that governments are focusing on recapitalization in the West and they’re trying their best to incentivize new lending,” Shanmugaratnam said. “It’s too early to say how successful this will be. Governments have to take more risk, and that means taxpayers have to be willing to foot part of the bill.”
The IMF report released yesterday signalled that writedowns and losses at banks totalling $1.1 trillion so far are only half of what’s to come. Losses on that scale would leave banks needing at least $500 billion in fresh capital to restore confidence in their balance sheets, the fund said.
Singapore’s leaders have defended the performance of the city’s state-owned investment companies after a plunge in the value of their stakes in Citigroup, Merrill Lynch and other global banks.
GIC, which manages the country’s reserves, invested about $18 billion in UBS and Citigroup since December 2007. Temasek, which has a $130 billion portfolio, increased investments in Merrill Lynch and Barclays Plc as the credit market collapsed in 2007 and 2008.
‘Well Diversified’
Temasek was the biggest shareholder in Merrill Lynch before the securities firm was taken over by Bank of America Corp. It is also the largest shareholder of banks including London-based Standard Chartered Plc and Singapore’s DBS Group Holdings Ltd., and has holdings in India’s ICICI Bank and other lenders in Indonesia, South Korea and Pakistan.
Temasek and GIC remain “well diversified” enough in their portfolios to offer the long-term returns the government seeks, Shanmugaratnam said.
“We would be very worried if global banks comprise a large proportion of the portfolios of GIC or Temasek, or for that matter, any of the highly vulnerable industries globally,” the minister said. “But these are diversified portfolios.”
Performed ‘Credibly’
Temasek and GIC have performed “credibly by international standards,” he said. Temasek had an average 18 percent annual return on investment since its inception in 1974. GIC said in September that annual returns in the past 20 years averaged 7.8 percent in U.S. dollar terms, compared with about 6 percent for the MSCI World Index.
GIC last year also said it’s boosting investments in emerging markets, private equity and other asset classes to raise returns after cutting back stocks and holdings in developed nations.
“I’m comfortable with the actions both Temasek and GIC have taken early in this crisis to reduce risk, to move into more liquid asset allocation and to prepare for opportunities in this downturn,” Shanmugaratnam said. “We’ve got to make sure we maintain that record of prudent investments for the portfolio as a whole, diversifying risks, and being prepared for crises from time to time.”
Straits Times deleted Bloomberg TV’s interview with Tharman after publishing it
By Eugene Yeo
February 1, 2009
In the afternoon at 5pm, the Straits Times online published a Bloomberg TV’s interview with Finance Minister Tharman as its TOP STORY. However half an hour later, the article has mysteriously disappeared and is nowhere to be found.
The Straits Times “Breaking News” usually keeps its “top studies” and recycle them to other categories after a while. I have checked all categories and was unable to find the article.
The interview was actually published by Bloomberg on 29 January 2009 in which Mr Tharman revealed that Temasek and GIC have invested a total of about $24 billion in UBS AG, Citigroup Inc. and Merrill Lynch & Co. in the past 14 months.
This amount is more than the $20.5 billion “Resilience Package” unveiled by the Budget lately which was financed by dipping into our precious reserves.
With the shares of Merrill Lynch and Citigroup plunging more than 70% now, it is unlikely that Singapore is able to recoup their initial investment any time soon.
The obvious question that comes to mind is: If Temasek and GIC did not invest so much money to bail out these distressed U.S. banks last year when even savvy investors like Bank of America are keeping their hands off, will we need to dip into our reserves ?
The Straits Times editors must have thought of this as a sensitive topic and censor the article almost immediately after it was published. Unfortunately in this modern era, it is becoming harder for the mainstream media to conceal information as the news is already available on the internet.
Doesn’t the Straits Times think that this is an important national issue which ought to be made known to the public ? Shouldn’t Singaporeans know that our SWFs have ploughed in more than $24 billion last year to “invest” in U.S. banks ? Are the authorities afraid that they may have to answer embarrassing questions from the public if this was revealed ?
I am surprised no MPs have brought up the question of our failed investments in U.S. banks in Parliament two weeks ago. Don’t Singaporeans deserve to know what is happening to their CPF savings ?
December 13, 2008
Interesting comments from John Mauldin’s weekly commentary on the Bernie Madoff Ponzi Scheme:
And speaking of things that should not be, yesterday I was talking with a few fellow money mangers on a conference call when the news came that Bernie Madoff had been arrested and his fund was missing at least $17 billion, and maybe losses were as much as $50 billion. This is so very, very tragic, as it is not just large investors with well-diversified portfolios who lost here. Many smaller investors around the world had significant sums of money with Madoff. Far too many were not as diversified as they should have been. Some of the stories already surfacing are of horrific personal losses to investors and retirees who have no way to come back from such losses.
The fact that Madoff will spend the rest of his life in jail in no way compensates for the loss of so many people whose lives have been seriously impacted. It is just so terribly sad.
Madoff is a topic that comes up very often in alternative investment circles. I have been talking about his fund with friends at various conferences for almost a decade. “How does he do it?” we wondered. His fund posted steady 1-1.5% monthly returns since 1996, with only a few losing months in all that time. Supposedly he was doing something called split strike conversions. Some speculated that he was actually front-running trades in his market-making business. (Interestingly, regulators who looked at his market-making business never investigated the fund to see if he was doing just that, although I believe there were suggestions and other hints to them.) But arbitrage traders in the same arena could never figure out how he did it, and many were openly sceptical. Everyone, even the smartest trading shops, had losing months and quarters. But not Madoff. The fund was a complete black box and no one knew exactly what he did. Oddly, I have never met or known of anyone who has ever met a trader who came out of Madoff’s shop. I run into resumes of ex-traders at various other funds all the time. No one knew what he did, even employees in his (what seems to be legitimate) market-making business, which was walled off from his investment funds. This was a man who was once chairman of the Nasdaq Stock Market. He was trusted and looked up to.
There were signs if you looked for them. The lack of transparency, for starters. The fact that he did his own trades with his own firm and made commissions on them. There was no prime broker where the real assets could be seen. How do you run a $17 billion fund without a room full of traders? I have been on the trading floors of smaller funds, and there are scores of people. A fund that size should have a football field-sized trading floor. Even if it was computerized, there had to be programmers. And lots of them. And where were the geniuses who designed these programs? Jim Simons at Renaissance has hundreds of support staff for his operation. He is one of the best, and he has losing periods. The “auditors” of the Madoff fund was a firm that was located in one 13×18-foot room. For a $17 billion dollar fund? Really? Real audits take lots of manpower.
That being said, a lot of smart people invested in the fund. They trusted Bernie. And anyone who looked at those returns had to be a little tempted. After all, weren’t regulators looking at it? (The answer is no.)
Now we know how he made those returns. It was a Ponzi. Except this may have been larger than Enron and ultimately more damaging to more people than any scandal in the past. I remember writing a few years ago, in response to an article in Forbes about some minor hedge fund frauds, that all the losses of all the hedge fund frauds combined did not equal an Enron or WorldCom or just the plain old loss in a few larger companies in the Nasdaq in 2000-2002. I can’t say that now.
Note to my fellow alternative industry participants: There is going to be a rush by Congress to regulate hedge funds. The SEC tried to regulate hedge funds a few years ago but had to back away when the Supreme Court said they did not have the authority. When the stories come out over the next few weeks (and I have heard some that really cause me heartache), there will be hearings in Congress. Rules will be passed. Quickly. And they should be.
Instead of fighting regulation as many did last time, we should recognize that this is a war that cannot be won and bow to the inevitable and at least get a few benefits from regulation, like the ability to publicly post past performance (although given the carnage of late, that is not as attractive as when I suggested it a few years ago!). I am regulated by FINRA, the NFA, and the state of Texas. We have had an average of one audit a year by some regulator for the past five years. My firm is small and it does cost a lot, but it certainly does not keep us from operating and growing our business. And I must (grudgingly) admit it does keep us on our toes. So let’s sue for whatever terms we can in what should be recognized as a total surrender. And then move on.
Three million Madoff fraud victims
February 04, 2009
Madrid (AFP) -- THERE are up to three million "direct and indirect" victims worldwide of the alleged fraud by US broker Bernard Madoff, according to a Spanish law firm that has filed a US lawsuit in the name of some of the victims.
"Our calculations are that at least three million people were affected by the Madoff affair, three million people who could be directly or indirectly affected by the case,'' Javier Cremades, the president of law firm Cremades & Calvo-Sotelo told a news conference.
The estimate is based on information collected from 30 law firms from around the world that are representing the victims of the alleged $US50 billion ($79.11 billion) pyramid scheme, he said.
Madoff's Victim List
The fallout from Bernard Madoff's alleged Ponzi scheme reverberated around the world as the list of investors facing losses widened. Among the biggest losers were charities, hedge funds, and banks in Europe and Asia. Below, see some of the most exposed investors and sort by the amount of potential losses.--Updated 01/28/09
HK mortgages in negative equity surge 326 pct in Q4
HONG KONG, Feb 2 (Reuters) - The estimated number of residential mortgage loans (RMLs) in negative equity in Hong Kong surged 326 percent in the fourth quarter to 10,949 cases as property prices fell, data from the Hong Kong Monetary Authority showed.
The aggregate value of RMLs in negative equity rose to HK$24.8 billion ($3.18 billion) at end-December from HK$6.0 billion at end-September, underscoring problems facing the territory's government and its many local and foreign banks as its economy slips deeper into recession.
The unsecured portion of these loans increased to HK$2.7 billion from HK$0.4 billion three months earlier.
The loan-to-value ratio of the RMLs in negative equity rose to 112 percent from 107 percent in late September.
Loans in negative equity mean the outstanding loan amount exceeds the current market value of the mortgaged property.
After a property market crash a decade ago, negative equity cases hit a record 106,000 cases in June 2003, depressing consumer confidence and spending and weighing on the property and banking sectors.
Property prices are widely expected to decline further this year as the global economic downturn deepens.
Record 19 Million U.S. Homes Stood Vacant in 2008
By Kathleen M. Howley
Feb. 3 (Bloomberg) -- A record 19 million U.S. homes stood empty at the end of 2008 and homeownership fell to an eight-year low as banks seized homes faster than they could sell them.
The number of vacant homes climbed 6.7 percent in the fourth quarter from the same period a year ago, the U.S. Census Bureau said in a report today. The share of empty homes that are for sale rose to 2.9 percent, the most in data that goes back to 1956. The homeownership rate fell to 67.5 percent, matching the rate in the first quarter of 2001.
The worst U.S. housing slump since the Great Depression is deepening as foreclosures drain value from neighboring homes and make it more likely owners will walk away from properties worth less than their mortgages. About a third of owners whose home values drop 20 percent or more below their loan principal will “hand the keys back to the bank,” said Norm Miller, director of real estate programs for the School of Business Administration at the University of San Diego.
“When you’re underwater and prices continue to fall, you tend to walk,” Miller said in an interview. “It’s a downward spiral that’s tough to stop because it feeds on itself. Foreclosures encourage other foreclosures and falling prices discourage buying.”
Obama’s Plans
The figures demonstrate the intensity of the U.S. housing crisis as President Barack Obama considers ways to help homeowners.
The Obama administration is considering government guarantees for home loans modified by their servicers, seeking to stem the record surge of foreclosures that’s hammering U.S. property values.
The proposal, which may also have taxpayers share in the cost of reducing mortgage payments, is aimed at shielding lenders from default after they loosen loan terms for struggling borrowers. Comptroller of the Currency John Dugan, who regulates national banks, said yesterday that “working out the details of it is still something that’s ongoing.”
Congress and the new president are grappling with how to repair the housing market as the recession enters its second year and unemployment rises. The U.S. economy shrank the most in the fourth quarter since 1982, contracting at a 3.8 percent annual pace, the Commerce Department said on Jan. 30.
Legal Wrangling
The U.S. had 130.8 million housing units in the fourth quarter, including 2.23 million empty homes that were for sale, the Census report said. The vacancy rate was 3.5 percent in urban areas and 2.6 percent in suburbs, the report said.
In addition, the report counted 4.1 million vacant homes for rent and 4.8 million seasonal properties.
“Wealth loss and housing in combination with loss in the equity market will have ripple effects,” said George Mokrzan, senior economist at Huntington National Bank in Columbus, Ohio. “The silver lining is that while home prices are coming down, incomes have stayed about the same, and in a lot of markets we’ll hit equilibrium this year. That’s a good sign for the long term.”
Most foreclosures are contained in the report’s “other” category, which includes homes tied up in legal proceedings as well as properties that are empty because the owner is renovating and living somewhere else, according to the Census Web site. There were 7.8 million homes in that category in the fourth quarter, up from 7.3 million a year earlier, the report said.
Bank Holdings
There were 2.22 million new foreclosures in 2008, an average of 6,090 a day, according to Washington-based Hope Now Alliance. Those resulted in 917,000 property sales, according to the group that represents 27 mortgage lenders and servicers.
U.S. banks owned $11.5 billion of homes they seized from delinquent borrowers at the end of the third quarter, according to the Federal Deposit Insurance Corp. in Washington. That’s up from $5.4 billion a year ago.
The U.S. housing market lost $3.3 trillion in value last year and almost one in six owners with mortgages owed more than their homes were worth as the economy went into recession, Zillow.com said in a report today.
The median estimated home price declined 11.6 percent in 2008 to $192,119 and homeowners lost $1.4 trillion in value in the fourth quarter alone, the Seattle-based real estate data service said.
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