Grenville

This information is a bit dated but the securities are probably the same: From the 9/30/10 NAIC filing for ORH (assume other subs have similar positions) KFT TRS NOT: 151mln USB TRS NOT: 152mln WFC TRS NOT: 242.7mln The total return swaps are equivalent to their original common stock positions. The Swaps are with Citibank Canada and probably help net out their exposure to Citibank because their TRS short positions on the Russell & S&P are with Citibank

You guys will get a kick out of this. I don't really understand the mechanics of why but Redbox is using debit fees to explain away their price increase! "Redbox is making an announcement about its prices today, and we want to make sure that you hear it from us first. Starting on Monday, October 31, the daily rental charge for DVDs will change to $1.20 a day.* The price change is due to rising operating expenses, including new increases in debit card fees. Daily rental charges for Blu-ray™ Discs and video games won't change.** Additional-day charges for DVDs rented before 10/31 won't be affected, either. In order to make the transition easier, Redbox will discount the first day of all online DVD rentals to $1.00 from 10/31 through 11/30. Additional rental days will be $1.20.*** If you have any questions, please visit redbox.com/pricechange. There, we've provided additional information. This marks our first price change in more than eight years as we work hard to keep prices low for our customers. "

Bonds up big and it looks like premiums are growing from a first glance. Reinsurance combined was 146.7 bringing the consolidated to 107.5. Book is at 403.

There was a nice tidbit I on the Q3 CC regarding the fee. Basically they are trying to cover cost from customers who don't have a meaningful relationship with BAC in terms of accounts or assets with the banks. They also laid out a number of ways customers can avoid the fees: direct deposit, significant level of savings with the bank or other relationships like mortgages. They don't mind losing the business of those that incur the fees because the business is not a net positive for the bank. This is what was said on the call, I'm not a customer of BAC so I can't speak to actually knowing how one avoids the fees.

Very interesting. I hope Berkowitz puts out some information on the reasoning.

Sanjeev, Thanks for the answer. I'm all for maximizing what we can raise for the foundation.

What percentage of the cost for each option goes to the foundation or do the numbers exclude the contribution to the foundation?

How are you guys getting comfortable with the derivative risk on Wells Fargo's balance sheet? Perhaps this quote from the 2009 annual report will help answer your question. ...all banks are not created alike. We’re not a hedge fund disguised as a bank. We’re not a proprietary trader (which produces no customer benefit) disguised as a bank. Nor are we simply a mortgage company or an investment broker or an insurance broker or a credit card company. What we are at our heart is community-based, and relationship-oriented. We serve our customers online, on the phone or at our ATMs, and we welcome them into our 10,000 stores. We greet them on neighborhood sidewalks. We have breakfast with them at the neighborhood diner. We serve alongside them on local chambers, Rotary, nonprofit boards, at community events. We worship with them in churches, synagogues, mosques and temples. Many of our customers know our tellers by their first names, and we know them by theirs. We want our banking stores to be more than just storefronts, but like community centers where neighbors meet. Best Regards, Kevin I appreciate both your replies. I need to sit down and reread the derivative thread and think about the inherent risks. Also I'll go through the annuals soon. Most of the derivative exposure came through the Wachovia acquisition. Thanks for the quote in the 2009 annual!

How are you guys getting comfortable with the derivative risk on Wells Fargo's balance sheet?

I avoid tobacco companies since their returns comes at the expense of people's health.

Thanks!

Awesome, thanks for posting!

I have attached the bankruptcy proceeding documents between Lehman and BoA. They are pretty interesting reads. Thanks for the tip dwy000. One is a summary by the individual managing the derivatives settlement for the debtors and the other is the settlement details with BoA and Merrill. The haircuts on their claims are quite large and with three years passed hopefully all the other counter parties agree to the framework settlements. One question, the documents refers to primary and guarantee derivative claims. What's the distinction between the two? The attachments were found here: http://chapter11.epiqsystems.com/LBH/docket/Default.aspx?rc=1 Declaration_of_Daniel_Ehrmann_in_Support_of_-_Declaration.pdf Motion_to_Approve__Debtors_Motion_fo_-_Motion_to_Approve.pdf

Great info! I was looking through ORH Q3 2010 NAIC report and I found that one of the Russell Index total return swaps is with Wells Fargo for about 201 million notional. I figured Wells Fargo would avoid business with a firm like Fairfax where Fairfax could go directly to one of the big derivative banks like Citibank or JP Morgan. Maybe Wells Fargo has a similar opposing swap with another customer. Or its an opportunity to grow more products with Fairfax...

I found the answer in ORH's Q3 2010 NAIC report. The CPI bets then were mainly with two counterparties: Citibank Canada and Deutche Bank. There is one contract with JP Morgan.

Any thoughts on this lawsuit in regards to the Merrill Acq and the lack of disclosure about losses. It seems to have more teeth and require a much larger settlement. "A $50 Billion Claim of Havoc Looms for Bank of America" http://www.cnbc.com/id/44700101

You might find your answer in the annual statutory report. Here's the relevant page from ORH annual statutory statement (which is publicly available, and I've got with the kind help of Odyssey's team). Unfortunately I don't have the same data for FFH. ORH CDS Thanks Username for attaching the CDS page. Do you happen to know who the counter party is on their CPI Bets?

The detail and scenarios are very helpful. Thank you for taking the time to share your experience. Plenty to consider and think about. I did have a follow up. Do the banks like WFC and BAC organize the derivative related business to reside in a subsidiary that is isolated from the rest of the subsidiaries and the retail side of the bank? Ie, if things did go bad, they could put the whole thing in runoff? Or do they treat the derivative side of their business as something like their regular operations and want to avoid hurting their reputation (reputation risk)? Fairfax has a non stated policy of standing behind their subs even though they are isolated in terms of risk.

dwy000, Thank you for your response. It gives me plenty to think about.

I have moved this thread to a new topic to make it easier to find in the future. Here is the link to the thread:

I would like to understand this risk better because it's making me hesitant to invest in the major banks. In terms of the interest rate and currency derivatives, I agree the notional amounts tend to over estimate the exposure. However, banks like Wells Fargo are writing a decent amount of credit protection. They mitigate some of this risk with purchased credit protection for some of the their written exposure but not all of it. They are sticking themselves in the middle of the derivative chain instead of following the insurance approach where they just act like brokers. The exposure to credit derivatives looks like it will continue to grow along with all the other exposure through interest rate, fx, and commodities at the banks. Why do you think a similar event like AIG where they can't come up with collateral won't happen at another bank or someone in the derivative web defaults upsetting the balance? I want to understand how people are getting comfortable with this growing (what I think) is a big risk in the major banks. I also attached WFC latest annual derivative exposure to credit protection sold and purchased. Credit_protection_sold__purchased_WFC_2010_AR.pdf