Merrill May Turn to Singapore Fund for Cash Help
According to WashintonPost.com:
NEW YORK — Singapore’s state-owned investment fund is considering a $5 billion investment in Merrill Lynch, according to a report Friday, potentially providing the nation’s biggest brokerage firm with much-needed cash as it deals with billions of dollars in credit losses.Merrill Lynch was in advanced talks with Temasek Holdings about a capital infusion to help cushion the investment bank from credit-market related losses, the Wall Street Journal reported. Merrill Lynch would become the latest major financial services firm to turn to an overseas firm for cash to bail it out of huge losses related to the subprime mortgage crisis.
Merrill Lynch shares closed up $1.04, or 1.9 percent, at $55.54 on hope the cash infusion would help cushion any further losses linked to the credit turmoil. Merrill has already taken $7.9 billion in write-downs from bad bets on risky mortgage-backed securities.
A spokeswoman for Merrill Lynch declined to comment. Telephone calls to Temasek were not answered.
Global banks have written down an estimated $105 billion this year from exposure to mortgage-backed securities, and a string of deals involving infusions from state-owned sovereign funds, mostly from Asia and the Middle East, has been announced in recent months.
Temasek’s board has given preliminary approval for an investment into Merrill, according to the report, which cited unnamed people familiar with the situation. Pricing, timing and regulatory issues remain to be negotiated, the report said.
A deal with Temasek may not happen yet, the report said, adding that Merrill may be in discussions with other government investment funds besides Temasek.
Analysts have predicted that Merrill’s mortgage write-downs may double with another $8 billion or more in the fourth quarter. Merrill’s third-quarter write-downs led to a loss of $2.3 billion.
Government-sponsored investment vehicles in the Middle East and Asia have invested about $25 billion in Wall Street since the mortgage crisis began this summer. Morgan Stanley on Wednesday announced a $5 billion investment from China’s government-controlled investment vehicle to help replenish its capital. In October, Bear Stearns agreed to a $1 billion investment from China’s government-controlled Citic Securities. Citigroup received a $7.5 billion capital infusion from the investment agency of the Abu Dhabi government last month. UBS last week announced that Government of Singapore Investment, the city-state’s other state investment fund, is investing $9.75 billion for a 9 percent stake in the Swiss banking company
Read the full report at WashintonPost.com
- I do not know how to comprehend the risk involved in this bail out funding, this my secure us some kind of trust and confidence in Singapore Capital management and if the bets are right on the mark…then Temasek might get a windfall.
However, the fundamental problems with the subprime crisis might be deeper than most may think. First ask the question why nobody likes to buy U.S. Properties? Is it because it’s dirty? Filled with Ghost? No, it’s because the transportation networks is damaged big time. There is almost zero public transport connecting from the suburbs to the city only long super highways that requires the need of privately owned vehicles and that increased the use of oil.
When the oil prices increased over the years, the cost of living in U.S. increases to a point that their pay no longer give them a good sustainable living then suddenly that mortgage’s interest rates hike up after the promotional period is over and they no longer can service the repayment and bankrupted.
The pending foreclosure sale of the house by the bank may sound like a solution for the bank to make back the money however there had been cases that the debt are sold by other interbank loan with bundles so complicated that they had conveniently left out the deeds of those houses!
Houses foreclosure had also priced much less then the valuation of the house when it was bought hence there will also be loss even if it’s sold. The problem is there is not much takers for such homes as it’s very expensive to service the loans and live in there as the cost of living is too high!
If this spread out to the credit card and corporate loans industry then the crisis will be a national level. United States National Debts had reached unseen levels!…what is the problem here?
Are we going down with United States? Yes, No? Time will tell if this pending bail out will be seen as a profitable bargain or the most riskiest investment ever taken.
