Edward Harrison

Big Surprise: Most Big Banks Lack Capital

As with your coment on another article, I am pointing out downside risk. My baseline scenario had assumed that the large banks will earn enough money to make up for any potential writedowns and build adequate risk capital over time.

I am now more concerned that a double dip would jeopardize this.


On Nov 24 04:51 AM bbro wrote:

> Here we go again....Mr Harrison doesn't specify what charge off rates
>
> he thinks will occur for that matter neither does S&P. He keeps
> quoting 1931...well chargeoffs were 1.2 %. Using the two worst years
>
> were 1933 and 1934 the chargeoff were 3.1% and 3.4%...The adverse
>
> stress test had 4.5% for 2 years. Tangible common equity is not the
>
> only proxy for judging health but it certainly is one of them. Preprovision
> earnings is very important in this environment. Why doesn't Mr. Harrison
> discuss that????

More on Greed, Regulation, Lehman, The Financial Industry

Good point about definition. I will take that up directly in a post on Goldman. My answer to that here is that I don't want the government to define what is excessive and what is not excessive in finance, sports, music, television or anywhere else.

This is one reason I take a 'neutral' stance on the greed issue. My definition of excess may be vastly different than someone else's. I will say in this post on Goldman that there are other ways to attack so-called excessive compensation.


On Oct 16 06:55 AM chap08 wrote:

> Edward, I agree with you and what Roger Bootle had to say in your
> previous post. I disagree with the Austrians. As Bootle said:
>
> "These people are dangerous. The idea of letting the financial system
> implode and then waiting for the market to bring spontaneous, healthy
> revival out of the wreckage might read well on the pages of a book,
> but in the real world it would bring human misery on a gigantic scale.
> In today's society, people simply will not tolerate it. If that is
> what the market system is about then they will have none of it; and
> rightly so."
>
> Of course "people ... having none of it" is what has happened a number
> of times in history. It's called socialist, or national socialist
> revolution. I'd prefer that didn't happen here. As you said "a perfectly
> free market is a fiction". It is a fiction from the pages of the
> same book that Bootle was talking about. Consequently, we need regulation.
>
>
> As for greed, I believe that you need to do more thinking. I happen
> to agree that "greed is not good" but the statement is NOT self evident.
> The problem lies in defining "excessive", as in "excessive wealth".
> What is excessive? What is too much? Does Warren Buffett have more
> wealth than he needs? Of course he does. So why don't people think
> of him as greedy? Is America greedy - do we have an excess of material
> wealth? Does the rest of the world get by on less? Do our system
> and society promote greed but call it something else? I'm not sure
> that there are definitive answers.