texalope

This Rally Smells Fishy to Me

I disagree. Banks borrow short and lend long. They are making money every day. Retailers business is improving. Housing has improves. Check out the recent Hovanian conference call. Looking in the rear view mirror will not make money for you. In 2007 the people looking through the windshield made money. The same holds true today.

Stress Tests: Banks vs. Bond Insurers

Tom , I too own MBIA. The stock seems to go down daily. Do you have any thoughts on why the market is so negative on this company.

The CEO claims adjusted book value is $40. As I write theis the stock is at $2.67.

There is something seriously wrong. It seems like a competitor would snap this up.

Stress Tests: Banks vs. Bond Insurers

Excellent post. Thank you.

Can Banks Spell 'Nationalization?'

One of the reasons I have only invested in the US is the stability of our political system.

I could never trust foreign governments to seize my investment for any number of reasons.

I have money invested in banks and suddenly I hear calls for nationalization.

Government nationalization is a slippery slope. What's next- commodity businesses, oil companies, shipping companies, communications companies.

How can we expect to have capital formation when we do the same thing as Russia.

What Should the 'Aggregator Bank' Do with All Those Troubled Assets?

The time has come for our government’s financial brain trust to nationalize the insolvent banks.

First the hypothetical math for an insolvent bank;

Good assets 100
Bad Assets 20 (really worth 10 or less)

Total Assets 120

Liabilities 110

Net Worth 10 (really worth 0 or negative depending on bad asset market value)


If the government buys the bad assets for 20 and makes the bank solvent the taxpayer will eat the loss. If the government buys the bad assets for 10 or less the bank is insolvent.

Since these institutions are too big to fail I believe we need to nationalize them. Shareholders will be wiped out (unfortunately).

The government will do a workout over time, reduce the size of these institutions so they are no longer too big to fail and ensure that our regulatory system does not allow institutions to become too big to fail.

The other option would be for the government to take a common equity position in these institutions and allow them to do their own workout while regulating to make sure that “too big to fail” is removed from our financial vocabulary.

In my opinion, the same people that brought us this disaster at these companies should not be the ones to stay in power. That’s why I favor nationalization.

Either way, lets face the problem and move on as a nation.

Financials Future Still Uncertain

Fannie and Freddie are really troubling. As part of their mandate the government requires them to take on some mortgages that are riskier to fulfill their social responsibility. The market kills the stock making a capital raise all but impossible due to shareholder dilution. Paulson then comes up with the" bazooka in his pocket plan" promising taxpayers that if he has to use it the shareholders will be wiped out. He contends that he favors private shareholders investing in the GSE's. Yet, what shareholder in his right mind would invest in these businesses under the threat of being wiped out by the secretary of treasury under the guise of protecting the taxpayers. As a shareholder who lost a tremendous amount of money, it's frustrating to see 200 government auditors from OFHeo swarming over the GSE's books and saying their capital exceeds regulatory requirements by 20%,. Then the Treasury secretary says he;s sent in auditors to reexamine these same books- It's pathetic. Where were these regulators and the treasury secretary last year when the share price was still 70. All the issues were known then and discussed. Our entire government is in reactive mode. THey don't get in front of any issue. This is pathetic. Are these really the best leaders we can find?
The same can be said for the late to the party SEC. All of a sudden after massive destruction of value they decide to enforce short sale rules- and they only apply it to 19 companies. What about eliminating shorting on the uptick rule. I'm not saying that shorts are wrong. I'm only saying that the same way I'm required to buy stock that really exists, a short should be required to sell stock that really exists. What is wrong with that?