Reinko

Goldman Sachs Raids the Cookie Jar

Ah that leveraged stuff, wonderfull...

When a bank is leveraged 25 fold with respect to market cap and (borrowed or invester) assets, then just a 4% decline gives rise to a total wipe out of all market cap.

This explains that 'just a tax dispute' in 'just a segment of the leveraged department' gives rise to 50% less dividend and dillution of outstanding shares...

There are many ways to measure leverage but market cap to assets is one of my favorites because the banks are constantly telling that they are working on the leverages, but when stock value declines those leverages are still climbing...

Welcome to the world of Alan Greenspan!

Research Zeitgeist: Bank Capitalization Concerns Heat Up

And I forgot to mention that most US commercial bank reserves are not borrowed reserves;

They have negative real reserves and positive borrowed reserves, see the second column in the next file:

www.federalreserve.gov.../

The real reserves are now 130 billion US$ in the negative and what exactly the value of the pledged collateral is is not known right now.

Ha! In the past the Federal Reserve always did put a price on the pledged collateral but they now have programs where the primary dealers are placing a price on the pledged collateral...

All in all it still looks like the entire financial sector is sinking deeper and deeper.

In case how you want to see how all this pledging of collateral works on a day to day basis you can go to:

www.newyorkfed.org/mar...

In the last row you can find some links that track the daily details of the five 'providing liquidity' programs in place until now.

Research Zeitgeist: Bank Capitalization Concerns Heat Up

Also of interest since the latest Z1 release of the Federal Reserve is out:

Total debt of the US financial sector still above one US GDP while the financial sector as a whole picked up about 200 billion US$ Q on Q in new debt in Q1 2008.

Compared with the first quarter after the credit crisis broke out (over 500 billion US$ new debt in Q3 2007) we see the credit crisis actually works: New debt availability is still on the decline and so the profits of the entire financail sector will follow suit.

Source:

www.federalreserve.gov...

Since it is anybodies guess how the financial sector is going to pay back the 16 trillion of outstanding debt, let alone pay for the interest on it, we aren't out of the woods yet.