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????

Thain Calls Lewis a Liar: BofA Saga Continues

David, while most people will probably take issue with your statements below (I myself have some problems with them), I would like to agree that Lewis may NOT have been entirely self-motivated.

See the articles here:
blogs.wsj.com/deals/20.../

and here:
blogs.wsj.com/deals/20.../

This helps give a balanced view here.

Nevertheless, Lewis does not look good in all of this. My main point still remains: he probably did not have shareholder value top of mind when he did either Countrywide or Merrill. And now BofA shareholders are paying the price. It is irrelevant whether he was self-serving in the MAC clause case - I think he was. What is more problematic is that Lewis' actions reflect an empire-building mentality that is now at odds with a world that is deleveraging. This has cost shareholders plenty.


On Apr 29 04:56 AM David White wrote:

Lewis seem like a genuine person. He was clearly pressured into the deal. It was not just out of fear for his job though. He is a good economist. He knew that Merrill Lynch could not be allowed to fail. He let Paulsen and Bernanke talk him into it with the assurance that they would bail him out, if Merrill Lynch lost too much money.

Obviously this is a loser deal in the short term. However, BAC's stock price would likely have fallen considerably in sympathy with the other banks and due to its Countrywide acquisition. To say the stock price fell due solely to the Merrill Lynch acquisition is ludicrous.

Don't overlook the reality that the Merrill Lynch acquisition will likely be a big money maker for BAC in the long run. M.L. has historically been a very solid company. It will likley return to high profitability soon, if it hasn't already.

German Banks Loaded with Toxic Paper

Positroll, you state the facts well. I would agree with your sentiments. Although I would give myself an out if the economic situation does not stabilize as it is seems to be doing right now.

Thanks for the contribution.

German Banks Loaded with Toxic Paper

Postitroll, you make a valid point regarding the security underlying mortgage assets in Places like Germany versus the U.S. and regarding the size of the bubble. I would like to add two points.

First, Germany never participated in the bubble, yet the German banks did through their investments in U.S., Eastern European, Irish or Spanish securities markets. Depfa and the Land Banks come to mind here.

However, it should also be noted that we are probably talking about nominal dollars of assets at book value here. These numbers being bandied about in no way reflect the magnitude of eventual writedowns that will be taken - this is probably an order of magnitude less - as you suggest.