cryptogon.com

The assets of four banks have been sold to healthier rivals at a combined discount of $107 million this year, the Federal Deposit Insurance Corp. said. The FDIC had to offer a discount just once in 2008, when it engineered 25 bank takeovers.

Buyers for banks are in short supply after last year, when regulators closed the most lenders since 50 were shuttered in 1993. RBC Capital Markets analyst Gerard Cassidy predicts as many as 1,000 more will collapse within five years. The result may be a buyer’s market in which the FDIC will lay out even bigger sums to get rid of seized banks.

“There are situations where the government will write you a check to complete a deal,” said Peter Stanton, president of closely held Washington Trust Bank. “There is always value in there if you are willing to go in and work for it.”

Stanton’s bank, based in Spokane, received a discount of $7.6 million from the FDIC on Feb. 13 as it took over Pinnacle Bank of Beaverton, Oregon. Washington Trust, seeking to expand in Oregon, submitted an offer after five days of studying Pinnacle’s loans, Stanton said in a telephone interview. His bank is assuming $72 million in assets and $64 million in deposits.

Last year, the biggest bank failures didn’t include discounts. JPMorgan Chase & Co. paid $1.9 billion in September for the assets of Washington Mutual Bank, the largest U.S. savings and loan.

Compensated for Risk

The U.S. Securities and Exchange Commission on Tuesday charged Stanford and two executives of Stanford Group Co with an $8 billion fraud.

Mexican authorities detained one of Stanford’s private planes as part of the investigation, which has been ongoing since last year, ABC reported citing unnamed officials.

Officials said checks found inside the plane were believed to be connected to the Gulf cartel, reputed to be Mexico’s most violent gang, ABC reported.

ABC cited authorities as saying that Stanford could potentially face criminal charges of money laundering and bribery of foreign officials.

“Now,” as one 23-year-old Kabul shopkeeper, Qand Mohmadi, put it, “we think America is supporting both the Taliban and the Afghan government. That’s what everyone says.”

Indeed, the rumor of U.S. support for the Taliban is virtually ubiquitous in Kabul. And absurd as it might sound after a year in which American and other Western troops suffered record casualties in fighting with insurgents, many Kabul residents say they see at least a kernel of truth in the story.

“We don’t know for sure why they are doing it,” said Daoud Zadran, a middle-aged real estate broker. “Politics is bigger than our thoughts. But maybe America wants to build up the Taliban so they have an excuse to remain in Afghanistan because of the Iranian issue.”

Byzantine political conspiracy theories are nothing new in a region with little tradition of transparent government and where the arrival of international troops in 2001 was preceded by a long history of shadowy meddling by Western powers.

Still, the emergence of the rumor in what is easily Afghanistan’s most prosperous and best-educated city reflects a growing sense that the country is again sliding into chaos.

A public opinion survey released this month underscored plummeting public confidence in Afghanistan. Just 40 percent of those surveyed said they felt the country was heading in the right direction, down from 77 percent in 2005. Only 32 percent of Afghans said the U.S. was doing a good job in the country, compared to 68 percent three years ago, according to the poll.

The poll, conducted by ABC News, the BBC and ARD German TV, also showed falling support for the government of Afghan President Hamid Karzai. In 2005, 80 percent of Afghans said they supported the Karzai regime, but just 49 percent say the same thing now.

Meanwhile, a coordinated assault by Taliban gunmen and bombers that left at least 20 dead in Kabul on Wednesday again demonstrated that insurgents have been able to pierce the capital’s relative calm.

“People see that America is so strong and they wonder — why can’t it wipe out the Taliban?” said Col. Najeeb Ullah Samsour, one of Kabul’s district police chiefs, though he added that he personally gave little credence to the rumor of U.S. support for the insurgents.

“People are saying that for six or seven years we have all these international troops, but everything is getting worse … security, the economy, everything. So they think America must be supporting the Taliban.”

Security in Kabul remains ahead of most of the country, with the insurgency strongest in the south and the east.

“I think people feel they’re pretty secure in the city,” said U.S. Army Col. Chris Morgan, commander of Afghan Regional Security Integration Command—Kabul. “But nowhere in Afghanistan is completely safe, and you don’t have to go far outside Kabul to feel some tension.”

According to a study released in December by an influential British think tank, three of the four major routes leading to Kabul have been “compromised” by the Taliban, “closing a noose around the city and establishing bases close to the city from which to launch attacks inside it.”

The report, by the International Council on Security and Development, charted a dramatic rise in Kabul attacks, including kidnapping of Afghans and foreigners, bomb attacks and assassinations.

In recent interviews with Kabul residents, many blamed the lack of progress on Karzai, who is seen as increasingly weak and isolated ahead of this year’s planned presidential elections.

“I see no positive progress since the beginning of the Karzai government, even though we have support from all these other countries,” said one resident, Habib Rahman. “We see hundreds of promises every night on the TV, but we see nothing in reality.”

From a tarp-covered stall on a street corner, Mohmadi said he too saw little progress.

“There’s no jobs,” he said. “I graduated from the 12th grade, and now you see I am selling candy bars by the side of the road.”

Many blamed corruption, with some seeing the U.S. or at least western companies in league with pilfering Afghan officials.

“This government is so corrupt that if Osama bin Laden and Mullah Omar were crossing the street together right outside, no one would call the police because they know the police would just take a bribe to let them go,” Rahman said.

But there’s also another theory about bin Laden.

FAA spokeswoman Arlene Salac says investigators examined the metal and determined it is made of cast iron, which is not used in airplanes. She says it’s up to local authorities to determine where the object came from.

Owner Al Smith was fork-lifting a sofa onto a wooden storage platform around 10 a.m. at his moving company when he heard a sound he thought was a bomb.

A piece of warm metal the size of a brick came crashing through the roof just steps from where he was standing. It splintered a wooden beam and crashed into a shelf.

Smith tells WCBS radio that no one was injured. He plans buy a lottery ticket, saying it’s his lucky day.

He says the metal is about the size of a brick and came crashing through the roof around 10 a.m.

Under the plan adopted in principle by the governing board of the L.A. Department of Water and Power, homes and businesses would pay a penalty rate — nearly double normal prices — for any water they use in excess of a reduced monthly allowance.

The five-member board plans to formally vote on details of the measure next month.

The rationing scheme is expected to take effect in May unless the City Council acts before then to reject it — a move seen as unlikely since Mayor Antonio Villaraigosa called for the measure under a water-shortage plan last week.

The only other time such penalty pricing was imposed to force conservation in the nation’s second biggest city was a rationing system put into effect for a year starting in March 1991, at the height of California’s last statewide drought.

That measure cut citywide water use by about 25 percent, DWP spokesman Joseph Ramallo said.

The DWP board also voted unanimously to restrict lawn sprinkler use to two days a week, as urged by the mayor. Outdoor irrigation accounts for 40 percent of residential water use in the city, DWP officials say.

Some customers arrived in Antigua by private jet and were driven up the lushly landscaped driveway of the bank’s headquarters, only to be told that all assets have been frozen pending an investigation by Antiguan banking regulators.

“I don’t know what to think. I have my life savings here,” said Reinaldo Pinto Ramos, 48, a Venezuelan software firm owner who flew in by chartered plane from Caracas Wednesday with five other investors to check on their accounts. “We’re waiting to see some light.”

Banking regulators and politicians around the region are scrambling to contain the damage after the U.S. Securities and Exchange Commission filed civil fraud charges against the billionaire on Tuesday. Regional Director Rose Romero of the SEC’s Fort Worth office called it a “fraud of shocking magnitude that has spread its tentacles throughout the world.”

Specifically, U.S. regulators accused Stanford, two other executives and three of their companies of luring investors with promises of “improbable and unsubstantiated” high returns on certificates of deposit and other investments. They asked a federal judge to freeze all three companies’ U.S. assets and to seek the repatriation of any of their assets overseas.

That would include the $7.2 billion managed by the Antigua-based Stanford International Bank, which has affiliates in Mexico, Panama, Colombia, Ecuador, Peru and Venezuela. Also frozen were assets of Houston-based Stanford Group Company and Stanford Capital Management.

“The fallout threatens catastrophic and immediate consequences” for the twin-island nation of Antigua and Barbuda, said Prime Minister Baldwin Spencer. It also could rattle the economies of smaller nations throughout the region.

Stanford, 58, has a personal fortune of $2.2 billion, according to Forbes magazine. He owns a home in St. Croix, in the U.S. Virgin Islands, and operates his businesses from Houston and Antigua, where his companies and charity have had such a prominent role that the islands’ government knighted him in 2006.

SEC spokesman John Nester said the agency does not know where Stanford is. James Sullivan, the U.S. marshal for the Virgin Islands, said agents are monitoring his “extensive holdings” in St. Croix, including a boat he sometimes he docks there, but could not say whether he is currently in the territory. He does not currently face any charges requiring his presence in court.

“As of right now, all we are doing is an ongoing investigation to monitor his holdings, for lack of better term, and we are not actively pursuing him,” Sullivan told The Associated Press.

Stanford also has been a major political player in the U.S., where some congressmen quickly announced they would donate his campaign contributions to charity.

The Stanford Financial Group, through its political action committee and employees, has contributed $2.4 million to political candidates, parties and committees in the U.S. since 1989, with nearly two-thirds going to Democrats, according to the Center for Responsive Politics, a group that tracks campaign spending.

Most of that cash flowed during the 2002 election cycle, when Congress was debating a financial services antifraud bill that would have linked the databases of state and federal banking, securities and insurance regulators. The bill ultimately died in the Senate, where the biggest recipients have been Sen. Bill Nelson, D-Fla. ($45,900); Sen. John McCain, R-Ariz. ($28,150); Sen. Chris Dodd, D-Conn. ($27,500); and Sen. John Cornyn, R-Texas ($19,700). Rep. Pete Sessions, R-Texas also received $41,375.

Stanford and his wife Susan also donated $931,100 of their own money, with 78 percent going to Democrats, including $4,600 to President Barack Obama’s presidential campaign last May 31. Records show $2,300 of that was returned on the same day.

Governments across the region took a variety of actions Wednesday to protect local investors who’d deposited money with Stanford-linked institutions.

Colombia suspended the activities of Stanford International Bank’s local brokerage Wednesday to protect “clients and investors.” Panama occupied Stanford bank branches following a run on deposits, which its banking agency described as an isolated “consequence of decisions adopted by foreign authorities.”

Assets at the bank’s four Panama branches, which reportedly held $200 million in deposits at year’s end, are held largely in liquid, fixed-income investments that can more easily be converted into cash to cover deposits if necessary, the bank said.

In Venezuela, banking regulator Edgar Hernandez said the government was considering a bank request for help after a $26.5 million run on deposits removed about 12 percent of the holdings at Stanford Bank SA in Caracas.

“We suggested an open intervention” by the government, including the possibility of the government or a state-run bank depositing funds to prop up the bank, Hugo Faria, one of the bank’s directors, told The Associated Press.

In Mexico, where the Stanford Fondos unit manages about $50 million for some 3,400 clients, a note posted on a shuttered office door in the capital’s wealthy Polanco neighborhood announced that all accounts “are temporarily frozen.”

“We don’t have any other information at this time, you will be contacted in the future with more details,” the note said.

Karina Klinckwort, 38, had rushed to the office Wednesday: “Everything I have is with them, everything that my husband, may he rest in peace, invested is with them.”

In Antigua, hundreds of depositors lined up outside the Stanford-controlled Bank of Antigua, many clutching portable radios to listen to financial news.

“People have to come to get their money,” said electrician Rasta Kente.

Regional regulators warned that panicking will only make things worse.

“If individuals persist in rushing to the bank in a panic they will precipitate the very situation that we are all trying to avoid,” said K. Dwight Venner, governor of the Eastern Caribbean Central Bank.

Five-year credit default swaps on Japanese sovereign debt climbed to a record 130 basis points on Wednesday, equivalent to a cost of $130,000 a year to protect $10 million of debt, traders said.

The rate is triple the level of 43 basis points traded in late January.

“The recession is very deep, and uncertainty about the political situation may continue to support this widening trend,” a fund manager at a Japanese asset management firm said.

But traders say the market is quite illiquid and dominated by foreign investors such as hedge funds.

Japanese players do not believe the government would default on its debt and seldom buy protection for their holdings of Japanese sovereign bonds.

“What overseas investors are concerned about is Japan’s very high ratio of public debt to gross domestic product,” said Koei Takahashi, a senior credit analyst at Nomura Securities.

Japan’s public borrowing amounts to nearly 800 trillion yen ($8,679 billion), about 1.5 times its GDP.

Japan’s economy shrank 3.3 percent in the final three months of 2008, its worst quarterly contraction since the 1970s, dragged down by a reliance on exports and by soft domestic demand.

In an interview, Mr Greenspan, who for decades was regarded as the high priest of laisser-faire capitalism, said nationalisation could be the least bad option left for policymakers.

”It may be necessary to temporarily nationalise some banks in order to facilitate a swift and orderly restructuring,” he said. “I understand that once in a hundred years this is what you do.”

Mr Greenspan’s comments capped a frenetic day in which policymakers across the political spectrum appeared to be moving towards accepting some form of bank nationalisation.

“We should be focusing on what works,” Lindsey Graham, a Republican senator from South Carolina, told the FT. “We cannot keep pouring good money after bad.” He added, “If nationalisation is what works, then we should do it.”

Speaking to the FT ahead of a speech to the Economic Club of New York on Tuesday, Mr Greenspan said that “in some cases, the least bad solution is for the government to take temporary control” of troubled banks either through the Federal Deposit Insurance Corporation or some other mechanism.

The former Fed chairman said temporary government ownership would ”allow the government to transfer toxic assets to a bad bank without the problem of how to price them.”

But he cautioned that holders of senior debt – bonds that would be paid off before other claims – might have to be protected even in the event of nationalisation.

The brash, 58-year-old financier’s whereabouts remained unclear on Wednesday, a day after the U.S. Securities and Exchange Commission accused him of operating a fraud centered on the sale of certificates of deposit from his Antiguan affiliate, Stanford International Bank Ltd (SIB).

The scheme has drawn comparisons with the alleged $50 billion fraud by Wall Street veteran Bernard Madoff.

Two police officers stood watch at the Bank of Antigua as at least 600 people stood in a line stretching around a street corner, despite assurances from regional monetary authorities that the bank had sufficient reserves.

“I’m worried and I’d like to get my money out,” said Andrea Lamar, 28, who joined the line with a friend on a street popular with tourists in the state capital, St. John’s.

Bank of Antigua, with three branches in the tiny twin-island state of Antigua and Barbuda, is part of Stanford’s sprawling global business interests but is separate from SIB, the offshore affiliate at the heart of fraud charges lodged by U.S. regulators.

The six-nation Eastern Caribbean Central Bank posted a statement at Bank of Antigua saying many depositors had started to withdraw funds, “causing some anxiety,” but that the bank had sufficient reserves.

“If individuals persist in rushing to the bank in a panic, they will precipitate the very situation that we are all trying to avoid,” the statement said.

Antigua’s prime minister, Baldwin Spencer, said in a televised address to the nation late Tuesday that the charges against Stanford could have “catastrophic” consequences for the nation, but he urged the public not to panic.

A similar scene played out in Caracas, where hundreds of Venezuelans lined up to pull their money out of Stanford’s offices. Local officials tried to ease concerns.

“We can say in good faith that Stanford Bank Venezuela is a healthy bank without any type of problem to announce,” said Edgar Hernandez Behrens, the head of Venezuela’s banking regulator, Sudeban.

A Venezuelan official estimated that people in that country have invested about $2.5 billion in Stanford.

In a civil complaint, the SEC said SIB sold $8 billion in certificates of deposit “by promising high return rates that exceed those available through true certificates of deposits offered by traditional banks.”

“We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world,” said Rose Romero, regional director of the SEC’s office in Fort Worth, Texas.