Too big to fail? Another hit soon for U.S. taxpayers? Wells Fargo’s $17 billion in junk energy loan exposure

From Zero Hedge
Submitted by Tyler Durden
January 17, 2016

When Wells Fargo reported its Q4 earnings last week, the one topic analysts and investors wanted much more clarity on, was the bank’s exposure to oil and gas loans, and much more color on its energy book over concerns that Wells, like most of its peers, was underestimating the severity of the upcoming shale default wave.

And while the company’s earnings call indeed reveals that things are deteriorating rapidly in Wells energy book, perhaps an even bigger concern for Wells investors, which just happens to be the largest US mortgage lender, should be what is going on with its mortgage book. The answer: nothing. In fact, at $64 billion in mortgage applications in the quarter, this was not only a major drop from Q3, but also the lowest since the first quarter of 2014.

Needless to say, without significant growth in Wells’ mortgage pipeline and originations, there can be no upside to Wells Fargo stock, meanwhile one can kiss the so-called housing recovery goodbye for the final time, because now that the US Treasury is cracking down on criminal and money laundering “all cash” buyers, we fully expect the housing industry to grind to a near halt in the coming 2-3 quarters.

That covers the lack of upside. As for the substantial downside, here are the key parts from Wells Fargo’s conference call discussing the bank’s energy exposure.

First: how big is Wells’ loan loss allowance for energy:

 We’ve considered the challenges within the energy sector and our allowance process throughout 2015 and approximately $1.2 billion of the allowance was allocated to our oil and gas portfolio. It’s important to note that the entire allowance is available to absorb credit losses inherent in the total loan portfolio.

Then, from the Q&A, how much is Wells’ total loan exposure, its fixed income and equity exposure toward energy:

I would use $17 billion as outstandings  for energy loans. And for securities, I would use, call it, $2.5 billion which is the sum of AFS securities and non-marketable securities.

In other words, a 7% loan loss reserve toward energy, perhaps the highest on all of Wall Street.

Then, here is the breakdown by services:

 We’re focused on the whole thing. Half of  those customers – half of those balances represent E&P companies, upstream companies. A quarter of them represent oilfield services companies, and a  quarter of them represent pipelines and storage and other midstream activity. And it excludes what I would describe as investment grade sort of diversified larger cap companies where we don’t view the credit exposure as quite the same.

But the “downside risk” punchline was the following exchange with Mike Mayo:

<Q – Mike L. Mayo>: What percent of the $17 billion is not investment grade?

<A – John R. Shrewsberry>: I would say most of it. Most of it.

<Q – Mike L. Mayo>: So most of the $17 billion is non-investment grade.

<A – John R. Shrewsberry>: Correct.

To summarize: $17 billion in oil and energy exposure, which has a modest $1.2 billion, or 7%, loss reserve assigned to it (the highest on the street mind you), and which is made up “mostly” of junk bonds.

Why could the be concerning? Well, one reason is that junk yields just surpassed the all time highs set just after the Lehman bankruptcy.

In retrospect we can see why the Dallas Fed told banks to stop marking assets to market.

As for Wells, Warren Buffett may want to take another bath in the coming days.

Source: Wells Fargo Q4, 2015 Conference Call

http://www.zerohedge.com/news/2016-01-17/wells-fargos-problem-emerges-17-billion-junk-energy-exposure

Posted under Fair Use Rules.

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Zero Hedge: U.S. Congresswoman Tulsi Gabbard co-authors bill to stop “illegal” war on Syria to oust Assad, says CIA ops must stop

The bill is HR 4108.

Global Research, November 22, 2015
Zero Hedge 21 November 2015

Last month, US Congresswoman Tulsi Gabbard went on CNN and laid bare Washington’s Syria strategy. 

In a remarkably candid interview with Wolf Blitzer, Gabbard calls Washington’s effort to oust Assad “counterproductive” and “illegal” before taking it a step further and accusing the CIA of arming the very same terrorists who The White House insists are “sworn enemies.” 

In short, Gabbard all but tells the American public that the government is lying to them and may end up inadvertently starting “World War III.”

For those who missed it, here’s the clip:

That was before Paris.

Well, in the wake of the attacks, Gabbard has apparently had just about enough of Washington vacillating in the fight against terror just so the US can ensure that ISIS continues to destabilize Assad and now, with bi-partisan support,the brazen Hawaii Democrat has introduced legislation to end the “illegal war” to overthrow Assad. 

Gabbard, who fought in Iraq – twice – has partnered with Republican Adam Scott on the bill. Here’s AP:

In an unusual alliance, a House Democrat and Republican have teamed up to urge the Obama administration to stop trying to overthrow Syrian President Bashar Assad and focus all its efforts on destroying Islamic State militants.

Reps. Tulsi Gabbard, a Democrat, and Austin Scott, a Republican, introduced legislation on Friday to end what they called an “illegal war” to overthrow Assad, the leader of Syria accused of killing tens of thousands of Syrian citizens in a more than four-year-old civil war entangled in a battle against IS extremists, also known as ISIS.

“The U.S. is waging two wars in Syria,” Gabbard said. “The first is the war against ISIS and other Islamic extremists, which Congress authorized after the terrorist attack on 9/11. The second war is the illegal war to overthrow the Syrian government of Assad.”

Scott said, “Working to remove Assad at this stage is counter-productive to what I believe our primary mission should be.”

Since 2013, the CIA has trained an estimated 10,000 fighters, although the number still fighting with so-called moderate forces is unclear. CIA-backed rebels in Syria, who had begun to put serious pressure on Assad’s forces, are now under Russian bombardment with little prospect of rescue by their American patrons, U.S. officials say.

For years, the CIA effort had foundered — so much so that over the summer, some in Congress proposed cutting its budget. Some CIA-supported rebels had been captured; others had defected to extremist groups.

Gabbard complained that Congress has never authorized the CIA effort, though covert programs do not require congressional approval, and the program has been briefed to the intelligence committees as required by law, according to congressional aides who are not authorized to be quoted discussing the matter.

Gabbard contends the effort to overthrow Assad is counter-productive because it is helping IS topple the Syrian leader and take control of all of Syria. If IS were able to seize the Syrian military’s weaponry, infrastructure and hardware, the group would become even more dangerous than it is now and exacerbate the refugee crisis.

And make no mistake, Tulsi’s understanding of Washington’s absurd Mid-East policy goes far beyond Syria. That is, Gabbard fully grasps the big picture as well. Here’s what she has to say about the idea that the US should everywhere and always attempt to overthrow regimes when human rights groups claim there’s evidence of oppression:

People said the very same thing about Saddam (Hussein), the very same thing about (Moammar) Gadhafi, the results of those two failed efforts of regime change and the following nation-building have been absolute, not only have they been failures, but they’ve actually worked to strengthen our enemy.

Somebody get Langley on the phone, this woman must be stopped.

Here’s Gabbard speaking to CNN this week about Assad:

[CNN clip available on ZeroHedge]

So there’s hope for the US public after all.

Perhaps if the clueless masses won’t listen to “lunatic” fringe blogs or Sergei Lavrov, they’ll listen to a US Congresswoman who served two tours of duty in Iraq and who is now telling Americans that The White House, The Pentagon, and most especially the CIA are together engaged in an “illegal” effort to overthrow the government of a sovereign country and in the process are arming the very same extremists that are attacking civilians in places like Paris.

Good luck Tulsi, and thanks for proving that there’s at least one person inside that Beltway that isn’t either dishonest or naive.

*  *  *

From Gabbard

“Here are 10 reasons the U.S. must end its war to overthrow the Syrian government of Assad:

  1. Because if we succeed in overthrowing the Syrian government of Assad, it will open the door for ISIS, al-Qaeda, and other Islamic extremists to take over all of Syria.  There will be genocide and suffering on a scale beyond our imagination.  These Islamic extremists will take over all the weaponry, infrastructure, and military hardware of the Syrian army and be more dangerous than ever before.
  2. We should not be allying ourselves with these Islamic extremists by helping them achieve their goal because it is against the security interests of the United States and all of civilization.
  3. Because the money and weapons the CIA is providing to overthrow the Syrian government of Assad are going directly or indirectly into the hands of the Islamic extremist groups, including al-Qaeda affiliates, al-Nusra, Ahrar al-Sham, and others who are the actual enemies of the United States.  These groups make up close to 90 percent of the so-called opposition forces, and are the most dominant fighters on the ground.
  4. Because our efforts to overthrow Assad has increased and will continue to increase the strength of ISIS and other Islamic extremists, thus making them a bigger regional and global threat.
  5. Because this war has exacerbated the chaos and carnage in Syria and, along with the terror inflicted by ISIS and other Islamic extremist groups fighting to take over Syria, continues to increase the number of Syrians forced to flee their country.
  6. Because we should learn from our past mistakes in Iraq and Libya that U.S. wars to overthrow secular dictators (Saddam Hussein and Muammar Gaddafi) cause even more chaos and human suffering and open the door for Islamic extremists to take over in those countries.
  7. Because the U.S. has no credible government or government leader ready to bring order, security, and freedom to the people of Syria.
  8. Because even the ‘best case’ scenario—that the U.S. successfully overthrows the Syrian government of Assad—would obligate the United States to spend trillions of dollars and the lives of American service members in the futile effort to create a new Syria.  This is what we have been trying to do in Iraq for twelve years, and we still have not succeeded.  The situation in Syria will be much more difficult than in Iraq.
  9. Because our war against the Syrian government of Assad is interfering with our being one-pointedly focused on the war to defeat ISIS, Al-Qaeda, and the other Islamic extremists who are our actual enemy.
  10. Because our war to overthrow the Assad government puts us in direct conflict with Russia and increases the likelihood of war between the United States and Russia and the possibility of another world war.”

*  *  *

Oh, and if you needed another reason to like Tulsi, here’s a bonus 40 second clip for your amusement…

15 nuclear reactors at grave risk in Ukraine, with update

Source: Energoatom

Update, November 13:

A company in South Africa is now refusing to send more coal to Ukraine. A shipment of 500,000 tons of coal was delivered to Ukraine already, but 1 million tons was ordered. Ukraine is now attempting to find another company to supply coal, but so far, there has been no deal.

Source:http://www.uacrisis.com/sar-refuses-to-deliver-more-coal-to-ukraine/

Update, September 7, 2014:

The Kiev regime is buying 1 million tons of coal from South Africa due to the coal shortage in Ukraine. Prime Minister Yatsenyuk said on September 3 that the first ship was being loaded. [1]

 

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August 25, 2014

This site has a map of where the reactors are in Ukraine. Those reactors are all across the country.
http://www.world-nuclear.org/info/Country-Profiles/Countries-T-Z/Ukraine/

Coal supplies 40% of the power in Ukraine. On Aug. 19, ZeroHedge reported that Ukraine had less than 3 weeks of coal left because of the US-backed war against the Ukrainian people.

Now, the supply is down to less than 2 weeks.

50% of coal mines are closed due to the war. Coal production is way down. Supply roads have been destroyed.
http://www.zerohedge.com/news/2014-08-19/ukraine%E2%80%99s-next-crisis-economic-disaster

Why is that important?

Nuclear reactors rely on grid power to keep reactor cores and fuel rods cool.

If the electric grid goes down, reactors have to rely on generators.

From nuclear expert Arne Gundersen:

the most likely type of a nuclear accident is caused by a loss of offsite power.  That is what happened at Fukushima:  the power system AROUND the plant broke down.  If that happens, not only will the plant not have power, but the street lights won’t work.  According to the [Nuclear Regulatory Commission], the street lights DO work.  Not only that, but your home lighting won’t work and your radio and TV won’t work.  But according to the NRC, you will be able to contact the outside world by phones or by radio or by television.   …remember the most likely cause of a nuclear accident is loss of offsite power and that has NEVER been part of an emergency plan, assuming that all of that does not work.

http://fairewinds.com/content/white-house-nrc-recommend-50-mile-fukushima-evacuation-yet-insist-us-safe-only-10

If there are brownouts or blackouts, will backup generators function and keep functioning to keep the reactor cores and fuel rods cool?

Generators aren’t maintained, and they break, like at Fukushima. They’re not built to do the work required. They must come on full power immediately and last for days, weeks, or months until grid power is restored. If generators do miraculously work, how will they be fueled until coal production resumes if roads are impassable? How will coal production resume if miners are fighting against Kiev militias, have evacuated, or have been killed?

Greg Palast writes:

A page from the notebook of an Emergency Diesel Generator expert, R.D. Jacobs, hired to monitor a test for a nuclear reactor’s back-up cooling system.

This is to record that on my last visit,….I pressed [a company executive] saying that we just did not know what the axial vibration of the crankshaft was doing to the [diesel] units. I was unable to impress him sufficiently.

The diesels were “tested” by turning them on for a few minutes at low power. They worked find. But R.D., a straight shooter, suspected problems. He wanted the motors opened and inspected. He was told by power company management to go to hell.

When we forced the plant builder [in Suffolk County, New York] to test the three Emergency Diesel Generators in emergency conditions, one failed almost immediately (the crankshaft snapped, as R.D.[Jacobs} predicted), then the second, then the third. We named the three diesels “Snap, Crackle, and Pop.”

…I knew that all these diesels were basically designed, or even taken from, cruise ship engine rooms or old locomotives. . I’m not an engineer, but I suspect a motor designed for a leisurely float n Bermuda is not fit for a life-and-death scramble. So, I asked [an industry insider], “They really can’t work at all, the diesels, can they?”

That’s when he introduced me to the phrase “crash start.”

On a ship, he explained, you would take half an hour to warm up the bearings, and then slowly build up to “critical” crankshaft speed, and only then add the “load.” the propeller…

That’s for sailing. But in a nuclear emergency, “the diesels have to go from stationary to taking a full load in less than ten seconds.”

Worse, to avoid having to buy additional diesels, the nuclear operators turbo-charge them, revving them to 4,000 horsepower in ten seconds when they are designed for half that output.

The result: snap, crackle, pop.

I learned that, at Fukushima, at least two of the diesels failed before the tsunami hit. What destroyed those diesels was turning them on. In other words, the diesels are junk, are crap, are not capable of getting up to full power in seconds, then run continuously for days….

”So, you saying emergency diesels can’t work in an emergency?”

“Actually, they’re just not designed for it.”

from Vulture’s Picnic, “Fukushima Texas” p. 294-297

Fukushima’s ongoing radiation is massively contaminating the air and ocean. See ENE News (www.enenews.com) for up-to-date information on that catastrophe. That radiation circles the world constantly. That’s from four explosions and three reactors that melted down and melted through.

Think Fukushima X 5.

Think Chernobyl X 15.

Even greedy and immoral oligarchs and American corporations, racist ultra-right Nazi thugs, and war-lusting Americans, cannot be that stupid or insane, can they?

This would doom life on earth. What planet are they planning to escape to in the event of such a disaster?

Get the word out now. Tell public officials: stop this foolish, immoral, and murderous American adventure now.

All of our lives are at stake.

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[1]

http://www.bdlive.co.za/world/europe/2014/09/03/ukraine-to-buy-1-million-tonnes-of-coal-from-sa
Ukraine to buy 1-million tonnes of coal from SA

Note: there is so much false information in this story, it is hopeful that the coal shipment is true and will get to Ukraine in time.