Another day, another $17bn

News that UBS, the major investment bank, has had to follow Citigroup in raising new capital in a hurry, will have added to the CFO concerns I describe below. Massive subprime losses have forced both banks to raise a combined $24.5bn in the past fortnight. Both had previously said that their losses would only be modest.

According to the Financial Times, ‘strong forces are pushing up banks’ demand for capital’. It suggests they are no longer being able to ‘sit on’ bad debts, and that as a result, ‘pressure on bank capital is starting earlier than in previous downturns’. As a result, it believes that Citi and UBS rushed ‘to get in first’, before market conditions become more difficult next year.

Tonight the Fed will have another attempt at waving a magic wand to make these mounting worries go away. To judge by the Duke University survey, chemical industry CFOs, and their professional colleagues, are obviously not over-impressed with the success record so far.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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