One of the World’s Biggest Banks is About to Fail! – Wall Street Underground

By Nick Guarino | August 22, 2008

Along with Fannie Mae and Freddie Mac that guarantees a trillion-dollar loss in mortgages!

Despite the incredible spin, government promises of intervention and even the SEC prohibiting short selling of banking stocks, the banks, brokers and mortgage-issuers are seeing their stock prices continue to plunge.

In fact, I expect another major financial institution to be taken over by government any day now. On my list of “dead men walking” — institutions up for grabs — are Fannie Mae, Freddie Mac, Lehman Brothers and CitiGroup.

Of course, the pending collapses are not spoken about openly in polite circles. But don’t be fooled. Behind the scenes, Treasury officials are quietly shopping around deals to governments around the world – and with no takers!

So far, the Koreans, despite enormous pressure, said so sorry, Charlie, and the Chinese and Arab sovereign funds — burnt so badly in previous government bailouts of financial institutions — have all backed away. And it you think it’s just crazy, paranoid Nick who is predicting a wipe-out of a major bank, you haven’t been paying attention:

“We’re not just going to see mid-sized banks go under in the next few months, we’re going to see a whopper, we’re going to see a big one, one of the big investment banks or big banks.” -- Kenneth Rogoff, Professor of Economics at Harvard University and chief economist at the International Monetary Fund, 2001 to 2004.

So it’s up to dead broke Uncle Sam to give the illusion of solvency to these institutions deemed “too big to fail.” Government officials are talking about emergency loans from Treasury and a “take-under” like we saw with Bear Stearns — with the usual wipe out of shareholders, of course.

The deep, dark secret, though, is that things are getting worse – and at more and more institutions — as more loans go bad and more derivatives default. The government is literally in triage: Who do you bail out and who do you let fail? There is simply not enough money on this green earth to bail everyone out.

Everyone is shitting bricks hoping the spit and bubble gum they have used to plug the gapping craters in their balance sheets hold a little bit longer. I hope you understand what I’m saying. These mega-banks in the big glass towers are having to juggle their finances like an unemployed steelworker with bills to pay. They’re literally taking out loans to pay their bills and to keep their creditors from foreclosing… but they’ve already burned through every credit card they own, tapped out every relative and have been refused by every bank in town. That’s what it’s like. Only instead of thousands of dollars, it’s BILLIONS.

“The U.S. is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say ‘the worst is to come”
– Rogoff

It’s pitiful, really. These Wall Street investment bankers are all out there praying that they can hang on long enough, hiding massive losses, and that there will be some kind of miraculous turnaround that will save their careers. Instead, they continue to hemorrhage cash as their losses become bigger and bigger. Won’t the trusting mutual fund masses be shocked when they learn that their retirement funds are really chock full of derivatives and are now worthless? It’s pretty sad out there when you look at it.

Would-be real estate moguls living some kind of sick Donald Trump wet dream are getting wiped out with every new foreclosure and now their banks, mutual funds, money market funds and stock market accounts are all suffering losses that will only get worse.

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