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Not there yet, but coming soon to a Main Street near you... Wait until credit lines are tapped out.
Porsche, Sprint Unsettle Banks With Rush for Credit (Update1)
By Pierre Paulden and Shannon D. Harrington
March 18 (Bloomberg) -- Citigroup Inc., JPMorgan Chase & Co. and the rest of the banking industry face a new drain on their capital.
Borrowers from Sprint Nextel Corp. to Porsche Automobil Holding SE to MGIC Investment Corp. are drawing on credit lines. JPMorgan analysts say it's the start of a trend that may force banks to raise as much as $40 billion to keep an adequate cushion against potential losses.
Companies are scrambling for cash at one of the worst times for the financial services industry. The world's biggest firms have taken $195 billion in writedowns and losses on securities tied to subprime mortgages, and the 10 biggest U.S. banks have the lowest capital levels in at least 17 years, according to Credit Suisse Group. The tapping of credit lines may be enough to grind new lending to a halt, said David Goldman, a senior portfolio strategist at London-based hedge fund Asteri Capital.
``The capital of the financial system has imploded,'' Goldman, a former head of debt research at Bank of America Corp., said in an interview on Bloomberg Radio in New York last week. ``They have commitments to make loans, which they are being called out on, and their capital is bleeding to death.''
...
`Vicious Cycle'
Borrowers will be more inclined to tap credit lines as banks tighten their lending standards, according to Kevin Murphy, a money manager who oversees investment-grade and emerging-market bonds at Boston-based Putnam Investments, which has $65 billion in fixed-income assets.
``It's a vicious cycle,'' he said. ``The more that they tighten the lending standards, the more there will be certain stresses in the financial market. Any sort of unfunded commitments they've put out are likely to be called on.''
...
By Pierre Paulden and Shannon D. Harrington
March 18 (Bloomberg) -- Citigroup Inc., JPMorgan Chase & Co. and the rest of the banking industry face a new drain on their capital.
Borrowers from Sprint Nextel Corp. to Porsche Automobil Holding SE to MGIC Investment Corp. are drawing on credit lines. JPMorgan analysts say it's the start of a trend that may force banks to raise as much as $40 billion to keep an adequate cushion against potential losses.
Companies are scrambling for cash at one of the worst times for the financial services industry. The world's biggest firms have taken $195 billion in writedowns and losses on securities tied to subprime mortgages, and the 10 biggest U.S. banks have the lowest capital levels in at least 17 years, according to Credit Suisse Group. The tapping of credit lines may be enough to grind new lending to a halt, said David Goldman, a senior portfolio strategist at London-based hedge fund Asteri Capital.
``The capital of the financial system has imploded,'' Goldman, a former head of debt research at Bank of America Corp., said in an interview on Bloomberg Radio in New York last week. ``They have commitments to make loans, which they are being called out on, and their capital is bleeding to death.''
...
`Vicious Cycle'
Borrowers will be more inclined to tap credit lines as banks tighten their lending standards, according to Kevin Murphy, a money manager who oversees investment-grade and emerging-market bonds at Boston-based Putnam Investments, which has $65 billion in fixed-income assets.
``It's a vicious cycle,'' he said. ``The more that they tighten the lending standards, the more there will be certain stresses in the financial market. Any sort of unfunded commitments they've put out are likely to be called on.''
...
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