Plus, no less than eight of B of A's big borrowers have filed for bankruptcy, and 15 leveraged loans totaling $4.5 billion now pose a credit risk to B of A.
I'm not talking peanuts: Sunbeam recently defaulted on loans totaling $1.7 billion. Xerox owes $750 million that is likely to go into default as well.
And get this: For the first time in 10 years, banking industry profits dropped last year. Profits dropped $417 million at Bank One Arizona ... fell $778 million at first USA Bank ... and a plummeted a staggering $2.8 BILLION at First Union!
- Some major US banks have no choice but to make new loans to FAILED companies: Why? Because they can't afford to let their debtors fail.
Case in point: J.P. Morgan Chase & Co. loaned steel maker LTV Corp $600 million over the past few years. But times have been tough for the company, and so LTV filed for bankruptcy - and asked the bank to loan it ANOTHER $225 MILLION!
Care to guess what the bank did? I'll tell you: It gave LTV the financing deal - despite the fact that the company was going under!
Talk about throwing good money after bad!
- $400 billion in venture capital loans are headed for the dumpster: According to recent testimony from Fed Governor Laurence Meyer, banks are now holding the bag for up to $400 billion in venture capital deals-and many of them aren't worth the paper they're printed on:
- Chase Manhattan made $1.3 billion in revenues from private equity in 100 different dot-com firms in the fourth quarter of 1999. That's 76% of its total fourth quarter income of $1.7 billion.
- Wells Fargo, another Internet fan, had revenues of $721 million on private equity (compared with total profits of $970 million).
- J.P. Morgan - $313 million in revenues (out of $509 million in total profits).
- Fleet Financial, First Union, and Bank of America each recorded revenues of over $200 million from venture capital.
- Bank One just warned that it's commercial loan losses would double, to $1.2 billion in part because of its telecom exposure.
Now, with thousands of telecoms, small dot-coms, and other Internet companies dropping like flies, this -- plus the $25 billion in junk bonds in US bank portfolios -- is a recipe for a banking catastrophe.
The commercial real estate house of cards is collapsing: The tech stock disaster is leaving a mountain of vacancies in its wake. The end of the Internet euphoria put a lot of companies out of business. They pulled out of leases and left gaping holes that landlords are scrambling to fill.
In San Francisco's South of Market district - formerly home to many tech startups - available sublease space has skyrocketed 275% in the last six months and rents in commercial buildings have already fallen by 40%.
Even more ominous: one study projects that 80% of the remaining dot-com companies in the Bay area will collapse in the next year. Result: Another 4 million square feet of office space will become vacant.
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