Lilguy

The Coming Consequences of Banking Fraud

While there may be a grain (or two) of truth in this article, it is so full of opinion and color that it loses just about all credibility. So many words, so little substance.

I'm a lot less conspiratorial, a little more analytical (& balanced), and maybe a little more optimistic (tho not by much) than Mr. Kim.

Bank Asset Values a Lingering Problem

There is nothing going on in the federal government nor in the financial industry that intends to provide a more transparent look at the fair value of financial enterprises. Indeed, the opposite is occurring. As several above have noted, the abandonment of mark to market accounting was a key federal (led by Congress) foisted on the public. Nothing the Fed has done has led to a clearer understanding of the bad assets it has taken off of bank books (Maiden Lane I-III), Geithner PPIP program was meant to hide the true value of bad assets as was the so-called "stress tests"--which were publicly intended to give the American public "confidence" in the banks.

While I'm not one generally for conspiracy theories, the fact of the matter is the results of all the industry, regulator, Congressional, and Administration (Bush & Obama) initiatives has been to make it more difficult to understand the health of the American financial industry. Until we acknowledge their problems, we will not be able to cure them.

Chrysler's Lenders: When Banks Have No Reputation Left to Lose

And if I remember right, experts keep saying "things won't get better until we trust the banking system."

Right!

Citi's Earnings Leave Much Room for Concern

There is nothing in the Citi quarterly report that should give any investor any confidence in the strength or growth of this firm.

Not only does it fail to mention writedowns in any consequential way (including the changes in FASB valuation of assets), but it totally ignores the fact that the bulk of its revenues are gifts from the American taxpayer via the Fed and Treasury.

Would you invest (not trade) in a company dependent on the good graces of the USG, notwithstanding Timmy's desire to keep all the TBTF banks operating?

Not a basis for corporate or economic growth in my book.

Bring in the Antitrust Division (on Banking)

I agree absolutely with Dr. Johnson's analysis. If the banks are "too big to fail" for the sake of our financial system and economy, then they are too big to exist.

I know it will would be difficult to show outright collusion--two Ibank CEOs negotiating prices or turf or whatever to the exclusion of others--but the effects of their actions has been to corner the financial system market. Moreover, they appear to have done so in a fraudulent manner with vastly over-priced assets misleadingly sold to unwary investors.

Some CEOs and other senior executives need to go to jail, and their banks split up (just like ATT a generation ago) or dissolved to avoid the TBTF potential. We all are better served by a more competitive banking environment.

What is most irksome at the moment is that Treasury & the Fed are actually facilitating and financing the the centralization of banking system thru deals such as JPM-BearStearns and BAC-Wachovia-ML. This is precisely the wrong direction to go.

Goldman's Hubris

You have to hand it to GS, they are smart. They are also greedy frauds, liars, schemers, and sociopaths.

...but they are smart!

Goldman Sachs One-Upped Wells Fargo in Accounting Shenanigans

The key question is whether BAC and MS can two-up WFC & GS. Given the absurdity--and transparency of the absurdity--of what we've seen so far, I can hardly wait for the mythical accounting reports.

Goldman: Is It Really This Good?

If ol' Uncle Sam hadn't funnelled billions of taxpayer dollars through AIG to GS (captured in FICC), we wouldn't be having this conversation about GS' profits. Combine that flow with the missing month, and GS is in the hole on an operating basis, forget about a balance sheet "as reported" earnings, including writedowns on their bad assets.

Why It's Better to Bail Out Borrowers than Banks

The roughly 7:1 ratio of USG & Fed commitments of financial aid to the financial sector (Wall Street) vs. debtors (Main Street businesses & consumers) ($9.3T vs. $1.3T) shows who has influence--access and money--in Washington. It does not reflect either a rational, cost-effective, fair, or equitable use of taxpayer funds. It is merely a reflection of who owns our political system. Money means more than votes.

And mainstream Main Street businesses and households do not. They will continue to go bankrupt--and households homeless--for years while Summers, Geithner, & Bernanke try to make the banks and bankers whole at taxpayers' expense.

The U.S. Banking System's Terrifying Balance Sheet

Wobatus--Nice analogy--it got me thinking about its accuracy. There are a few significant differences, however, between your circumstances and those at the bank.

First, the bank's toxic assets are supposed to be valued at market price because they are trading assets (with a view to making a capital gain--LOL!), not ones they intend to hold until maturity. In contrast, while you may sell your home & pay off your mortgage ahead of time, it sounds as if you are quite willing to let it roll until it's paid off.

Second, and more importantly, the value of the toxic assets on the bank's balance sheet helps determine how much (or "little") it can loan as a reserve against bad loans. Right now, the low values of these assets (well, at least until FAS 157 was revised) limits the ability of the banks to lend money and thereby make money--and get that flow of funds you have. This not an issue for you because your income is not determined by the value of your home/mortgage.

Appreciate the useful comparison, however. Just don't try to loan money based on the value of your house! And good luck on an RE market comeback.

Bail Out for Dummies - Part I

...and, so, remind me again: Why is this financial system worth saving if it is essentially bankrupt? Why are these banks "too big to fail" if, as it appears, they have already? Why are we putting America in such deep hock to save these frauds and fools?

I would note that, just last week (3/31), Bloomberg had an article detailing all the measures of the US Government to stimulate the economy. The programs together total commitments of $12.8 trillion. Wall Street's share of that is some $9.3 trillion. Main Street's share--money for the other 300 million of us--is a mere $1.3 trillion while the USG has set aside $2.5 trillion to cover the bad bets of the GSEs and likely funding needs of the FDIC. (Nothing like covering the bad debt of the USG with more debt guaranteed by the "full faith and credit" of the USG!)

Does any of that seem as wrong-headed to the rest of you as it does to me? What about the 5 million newly unemployed since the recession began? What about the 48,000 business failures last year--up from 28,000 in 2007--and the projected 62,000 such failures this year? What about the projected 1.5 million personal bankruptcies this year? ...and that doesn't even touch the massive damage to household wealth from decimated house values, depleted 401Ks, and overwhelming debt.

What the hell is the Administration (& its predecessor) and the US Congress doing??

The U.S. Banking System's Terrifying Balance Sheet

...and, so, remind again: Why is this financial system worth saving if it is essentially bankrupt? Why are these banks "too big to fail" if, as it appears, they have already? Why are we putting America in such deep hock to save these frauds and fools?

I would note that, just last week (3/31), Bloomberg had an article detailing all the measures of the US Government to stimulate the economy. The programs together total commitments of $12.8 trillion. Wall Street's share of that--as reflected in Mr. Durden's article & Mr. Salmon's commentary--is some $9.3 trillion. Main Street's share--money for the other 300 million of us--is a mere $1.3 trillion while the USG has set aside $2.5 trillion to cover the bad bets of the GSEs and likely funding needs of the FDIC. (Nothing like covering the bad debt of the USG with more debt guaranteed by the "full faith and credit" of the USG!)

Does any of that seem as wrong-headed to the rest of you as it does to me? What about the 5 million newly unemployed since the recession began? What about the 48,000 business failures last year--up from 28,000 in 2007--and the projected 62,000 such failures this year? What about the projected 1.5 million personal bankruptcies this year? ...and that doesn't even touch the massive damage to household wealth from decimated house values, depleted 401Ks, and overwhelming debt.

What the hell is the Administration (& its predecessor) and the US Congress doing??

America's Banks: Are They Really Insolvent?

Such a broad brush, shallow look at the US banking system doesn't explain anything, certainly not whether the system is insolvent.

My own view, in a nutshell, is that the vast majority of US banks are not insolvent, but a few of the most important--starting with Citigroup and BAC--probably are. Unfortunately, because of their global reach, their insolvency indirectly affects the solvency of many US and other banks worldwide.

NTL, I do not think the USG (and US taxpayers) either can nor should try to cover the losses of these banks with little prospect for getting their money back, much less a return on their investment. I believe we must nationalize and bankrupt the insolvent ones, suffering the damaging effects to their counterparties, and then create solvent banks from what's left and spin them off in IPOs (not privately-held banks). Otherwise solvent banks would be eligible for USG aid to counter the effects of their exposure to the bankrupted US banks.

Why Is Everybody Selling as Buffett Is Loading Up?

If I could get the deals that Warren has, I would invest too. Unfortunately, I don't have billions sitting around in my mattresses.

This capital enables him to get extremely good deals--at the front of the line in terms of preferred shares, earning interest at rates unheard of for the "common man," and having an option to buy stocks below at or below current market prices when the long-term expectation (& Warren's only concern) is that they will go up.

About the only way I can get that deal is to invest in BRK!

Financial Stocks Trading Near Book Value

Price-to-book usually is valued at the company's stated book value or maybe an independent analyst's assessment.

None of that matters. What matters is how the company's counterparties see the book value and, more importantly, risk. If it looks bad, margins to up, liquidity shrinks, and insolvency follows--unless you can arrange for a bailout from your friends.