John Lounsbury

If Goldman Is Selling, Are You Buying?

There is a lengthy discussion of this topic today at Zero Hedge www.zerohedge.com/arti...

More Goldman Outrage

Janet Takavoli has a clear opinion that Viniar was lying pragcap.com/goldmans-l...

Is Obama Forcing Citigroup to Downsize?

bbro - - -

You may disregard my last post. I have found some numbers and will work with them. Thanks for the dialog.

I'm not cutting you off, just don't feel I am quite as adrift as I was.

Is Obama Forcing Citigroup to Downsize?

bbro - - -

How do the non-loan assets of the banks enter into the picture? What about the SIVs (off the books assets)? Won't these effect the "real" pre-provision ratio?

I don't know how these non-loan assets were included in the stress tests, but a quick look through the process document I have makes me believe that was attempted but it's not clear how effectively.

I also don't yet know what assets were included in the Washington Blog graph I linked.

This discussion is proving to be of great value to me.


On Oct 28 08:28 AM bbro wrote:

> IN the second quarter of 2009 there were 6.7 trillion loans.and<br/>127
> billion in preprovision earnings....at that level theoretically the
>
> system would able to withstand a jinormous chargeoff rate of 7.5%!!!

Is Obama Forcing Citigroup to Downsize?

bbro - - -

I have reviewed all my stress test reference material and can not find the 4.65% per year you quoted? Can you provide a link so I can add the source to mt "library"/


On Oct 27 04:45 PM bbro wrote:

> Read it... stress test had much higher levels....4.65% a year

Is Obama Forcing Citigroup to Downsize?

bbro - - -

If you are open to some history that you might not have seen, read this article from Washington Blog out today: seekingalpha.com/artic...

Is Obama Forcing Citigroup to Downsize?

Edward - - -

Sorry. I forgot to say that this was a well conceived and written article (for an "ignorant" guy).

Is Obama Forcing Citigroup to Downsize?

Edward - - -

You wrote:

"Let’s concentrate on Citi because I have written a lot about their asset sales over the last year. They are the big bank which is truly deleveraging the most. They are selling everything they can to raise cash."

Based on my analysis (published seekingalpha.com/artic... and seekingalpha.com/insta... ), Citi is bleeding cash like a drunken billionaire in Las Vegas. In the past six quarters, C has lost more than $22 billion after proceeds from asset sales are removed from reported earnings. The only way Citi is surviving is by selling assets.

Is Obama Forcing Citigroup to Downsize?

bbro - - -

Have you considered that the prospects could be worse than the previous worst history? What was the leverage condition of banks in the previous worst situation? What was the off-balence sheet asset sutuation? I join the author in questioning the adequacy of the Stress Tests.

It is not ignorant to consider all possibilities.


On Oct 27 04:04 AM bbro wrote:

> The Stress test were not bogus. It is incredible how you are contibuting
> to the ignorance of the populace. There is a wealth of information
> in there. The loan loss assumption was the worst two year
> commercial loan loss rate in history. Check it out....
> www.federalreserve.gov...
>
>
> Study your economic history.....

Cramer's Mad Money - When the Facts Change...(10/23/09)

Maxe - - -

Perhaps Cramer is riding on the coattails of Doug Kass, another Real Money contributor who called for a market bottom within three days on March 2. He missed by two days, but still stood by the call on March 6. www.thestreet.com/stor...

Doug reiterated his position on March 9 and before the market opened on March 10. www.thestreet.com/stor...

Again after the market closed on March 10, www.thestreet.com/stor...

Doug continued to make bullish calls until late July, when he started to counsel caution. www.thestreet.com/stor...

His bearishness has increased since, as he has been recommending a mix of long and short positions.

I have not followed Doug historically, to my regret. I will pay attention in the future.


On Oct 25 09:35 AM Maxe Paul wrote:

> Surely this article is a joke?
>
> Cramer called the bottom now?
>
> Cramer called many false bottoms, (my favourite was the one on bear
> Stearns at $50!) and never managed to call a top ever?
>
> I am the only person who called the exact bottom, so far.
>
> Here is my comment two weeks before the bottom seekingalpha.com/autho...
>
>
> Here is my prediction on March 3 seekingalpha.com/autho...
>
>
> Seriously, show me the transcript where Cramer "called the bottom"?
>
>
> Cramer, you are a complete stooge.....again!

Ultimately, Who Benefits from Too-Big-To-Fail

Amit - - -Great article.

You gave an example:"...offers to "help" its issuing client by doing a bought deal, assuming the nonexistent underwriting risk by offering to give Company X IPO proceeds priced at $47 per share. Due to information asymmetry, Company X accepts this while the bank can now sell those shares to its institutional clients for perhaps $52 per share, pocketing a nice spread. In this instance both customers of the bank lose out."

This is standard operating procedure. This could not happen in a truly competitive environment. The spreads would be squeezed if all IPO transactions by the underwriter faced competition from other financial intermediaries. The underwriter should be guaranteed a small commission of 2-3% (that would be $1 to $1.50 in this case) and that cost would be shared by seller and buyer. With competition, the $5 spread illustrated might be no more than an average of $1. More important than the reduced cost (by about 1/2 in this example) would be the increased free market transparency of the entire transaction.

Of course, the argument will be made that we have reduced the compensation that the underwriter needs to motivate assumption of underwriting risk. I answer that with one question: How many underwritings have ever lost money? I have not done the research, but I expect it is a very small percentage. How about a guess of less than 1%? Someone who is more knowledgeable is welcome to provide a more correct number.

What will happen in my scenario is that billions of dollars that accrue annually to investment banks will, instead remain in what I call "the productive economy". The giant sucking sound I hear (does anyone else hear it?) will be diminished as money that has been removed from the production of goods and services by outsized bank profits (more than 40% of S&P 500 earnings at times in this decade) remain in the rest of the economy.

Imagine if the average compensation of the 20,000 plus Goldman Sachs employees would decline from more than $600,000 each to something only two or three times the national average. That would be in the range of $150,000 to $200,000 plus or minus. Would that be inadequate compensation for the value they add to the economic system? If 10% of the leaders in Goldman Sachs made over $1,000,000 each annually would that be under compensation for the value they add to the financial system? If 1% made over $5 million, would that be under compensation? It might be argued the numbers I quote still could be over compensation. But at least they would be closer to "earned" compensation. I say earned to mean compensation for value added to the financial system rather than value added to their bank accounts.

Goldman Sachs employees are being paid like athletes who have a very short viable career. And many Sachs employees do indeed act like athletes in terms of how long they stay with the firm. Some have a short (10-20 year) career and then "take the money and run" to other careers. Unlike athletes, whose careers are limited by injury and fading ability, the short careers at Goldman are by choice. Some go into politics, other government related positions and second career activities doing something they love. A spokesman for the firm would call this giving back. See www.bloomberg.com/apps...;sid=a8upOpH5Q3Tw . I would call it "taking more". In some cases more good results from the new "taking" than the original, but, in the case of government service, that can be debated. The questions about Paulson's lingering connections to Goldman Sachs are an example. See Felix Salmon's piece seekingalpha.com/artic... .

The arguments about the value of oligarchy are largely self serving. Once you create a monopoly, of course that monopoly and their accomplices will argue that disruption would be dangerous. They are entirely correct – it would be dangerous for them. What about the other 99% + of us? In your concluding statement, you state, “…it appears that preserving these types of institutions is the real economic risk.” Point, set, match.

Wasted Lessons from AIG

rockrimmon, wakeup call, User 501173 - - -

Ignore Reggie's analysis at your peril. The first time I read a Middleton post here I left a comment suggesting better proof reading. After looking further into what he has done, I wished I hadn't left that first comment. I know a lot of people who have written well polished articles that could help you go broke.

If a Bubble Bubble Bursts Off the Balance Sheet, Will Anyone Be There to Hear It?

Reggie - - -

Good reporting.

The banks even have a name for things they hide off the balance sheet - SIVs. The acronym stands for Special Investment Vehicles.

Mixed Outlook for Banks and Financials

The copy of this article on my Instablog has links to four earlier related articles at the end of the text. seekingalpha.com/insta...

Our Banks Are Nowhere Near Up to the Task of Serving Big Global Companies

James - - -

The entire argument supporting bank size being needed for international commerce is self-serving hogwash. I left a long comment on an article by Simon and won't repeat that rant here.

Keep the microscope on these absurdities.