[uNkNowN ElEmEnt]

CIBC Shares Slide Further on Subprime Hedge Woes
Fri Dec 7, 2007 6:02pm EST Email | Print | Share| Reprints | Single Page | Recommend (-) [-] Text [+]
powered by SphereBy Lynne Olver

TORONTO (Reuters) - Shares of Canadian Imperial Bank of Commerce (CM.TO: Quote, Profile, Research) continued to slide on Friday, a day after the bank admitted that its credit positions tied to U.S. subprime mortgages were too large and it may face "significant" losses on hedged positions.

A slew of analysts cut their price targets or recommendations on CIBC stock.

The bank, Canada's fifth-largest, revealed that it has exposure to billions of dollars worth of hedged derivatives linked to U.S. mortgage-backed securities, including deteriorating subprime mortgages.

"We believe that CIBC's stock will remain cheap relative to peers while the environment surrounding U.S. residential lending and financial guarantors remains clouded," RBC Capital Markets analyst Andre-Phillippe Hardy said in a research note on Friday. Hardy cut his CIBC price target to C$95 a share, from C$105.

CIBC shares were down 3.2 percent at C$79.71 on Friday afternoon, on the heels of a 5.4 percent tumble on Thursday, when details about the bank's subprime exposure and potential losses overshadowed its quarterly results.

http://www.reuters.com/article/bankingF ... 8620071207

[auscanman]

More great news!

[Denny]

It seems that banks in particular have been badly caught in this fiasco, notably Citibank.

I was talking to my older uncle who happened to be a loans officer with a Detroit bank back in the 50's and 60's. He mentioned that the law, not just shareholder presssure, then put the onus on bankers themselves to ensure the integrity of their capital structure. For instance, mortgage loans could only go to a maximum of 80% of appraised value. One had to use high interest second mortgages to go beond that, which did not impair the banks ability to extract their share of the first mortgage value on foreclosure.

Bank inpectors from the state were empowered to take stock of the bank cash status and loan portfolio, at any given moment, and in the event that illiquidity prevailed, to pull the switch and enforce these provisions with legal penalties, including fines and/or jail time for bank officers. If you've seen the caricature of the bank inspector in the old movie "Its a Wonderful Life" you get the idea.

Today, it should be so much easier with computers and high level financial education to scrutinize borrowers. For instance, my uncle, who rose to approve industrial capital loans only had high school education. I suspect today a loan officer with the approval right to millions of dollars would have an MBA.

But, instead we see the bail out mentality prevail. In one way or another, I see the central banks playing with interest rates and loan margin requirements to inflate the problem away. And, this is not the first time, it echoes the S&L fiasco of the erarly 90's. By this strategy, the penalty for bankers incompetence ends being paid by all of society, most notably by those who are careful savers. That is not fair.

What about punishing, by criminal law, the incompetent bankers and the fraud artist appraisers? Would that not carry a big signal to gamers in the future?

As it stands, we have a form of socialism for the rich developing. The bank officers and executives of today make relatively much higher incomes than of the old. My uncle used to drive an Oldsmobile, not a Cadillac. For that kind of income, bankers should carry more responsibility to their depositors and investors, and the rest of society, not less.

[roccman]

If the fed reserve was publically traded Ben would be in handcuffs today.

[Kylon]

The solution is to save outside this country.

If your dumb enough to actually keep your savings in American dollars, instead of good investments, hard assets, or stable foreign currency, then your asking to be screwed by the system.

Only when all of the savers, and everybody else decides they want to be payed in foreign stable currency and/or real goods or investments, will the bankers be shut down. And only then if they move when necessary their currency if it becomes unstable.

That's the only way to shut down the parasitic bankers.

[Twilight]

$this->bbcode_second_pass_quote('Denny', 'A')s it stands, we have a form of socialism for the rich developing.