VP of Common Sense

Big Banks in Trouble: Huge Mortgage Write-Downs Seem Inevitable

I wish people would stop claiming a "borrower" is "walking away" when he or she has a zero down, interest only loan. That person was NEVER an owner, they were a renter. Why is it so surprising that they act like a tennant?

Stress Testing: What's Your Bank's AQ?

In my opinion this test might as well be called a transparency test. The banks that the market "understands" are valued more highly that those that the market does not. For example, almost all of us agree that Citi has ginormous skelatons in the closet that we have yet to see. Collectively we are so sure of it that their stock price has been hammered.

Anyway, my guess is that the best opportunities for an investor lie in the middle group, be it long or short.

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

On the flipside, 1.44 quadrillion is unpayable, so the world banking system would simply colapse if that debt load was called in...

Added Debt Won't Rescue the Great American Ponzi Scheme

According to the OCED numbers our debt load is about 9th of 30 relative to GDP, and before someone says "but look at the total amount", income is generally considered relevant to how much one is allowed to borrow. Regardless, it appears that 50% more government debt will not lead immediately to anarchy.

Otherwise, yes we have overspent. Yes, we will need to pay it back. But no, I don't believe there is any reason to take advantage of the credit bubble bursting to intentionally collapse the economy for some so-called moral reason. If that's what you believe, why are you on the internet? You should be hard at work on that bunker in the backyard with the spam, water and ammo. You also should have no debt and no investments other than gold. If that is not the case then you unfortunately NEED our wretched immoral economy to stagger onward until you're free and clear.

Our government services are about what one should expect given the relatively low tax rates that we have. In order for health care, infrastructure, education, debt reduction etc. We are going to need to cut spending as soon as possible (war, space program, no-bid government contractors, etc.) and increase taxes. I have more friends than I can count from europe, asia, and canada, tax rates are very much related to services. If you have traveled the world, made friends with the natives, talked to them about their services and tax rates, and still believe otherwise, please share. If you're a GWBush-esque american with no passport who simply doesn't like paying taxes, put a sock in it.

Our gas tax is a joke, as are our cigarette/alcohol taxes in most of the USA. Want better roads and lower medicare/medicaid costs? DUH! Health care related tort reform wouldn't hurt either. Some say a higher gas tax would unfairly target the poor, whereas I think the poor should be driving eight year old civics and corrollas.

The article claims: "In the aggregate, the same is true for Western economies. Their debt loads are now so huge, they are simply unpayable." The author did a much better job explaining Madoff's scheme than giving any explanation of exactly how the western world's debt load is unpayable. And then 25 people post something to the effect of "hear hear, you da man!". Every day on this site an article (or articles) is posted with massive leaps of faith in between the facts and the conclusions. THINK! Find those holes, make people explain them. The alternatives to not thinking are pretty simple: pollyanna optimism or bunker/ammo/spam pessimism.

Sorkin's Questions to Bank CEOs, Answered

Felix, good article.

Sorkin's Questions to Bank CEOs, Answered

1. Citi, BofA, etc. are insolvent, they screwed up big time and if the "solution" involves those banks not making a significant profit for 20 years (while they pay off / write down their massive losses) so be it. The common shareholder is already toast.

2. Why does everyone keep dumping on Pandit? The guy was handed a flaming bag of poop and told to make the best of it. It could be worse, see J.Thain. And although Thain personified entitlement, he was also handed a flaming bag of poop. Come on people, blame the actual culprits.

3. Continuing on number 1, I suggest that the 14 banks with 100 billion or more in assets/liabitiies should be allowed to move their so called "toxic assets" to the goodwill/intangible assets portion of the balance sheet. However, goodwill/intangible assets would then be subject to a 5% (the exact number is debateable) annual depreciation. Thus no net profit for many years. Again, the common shareholder jumped off the ledge a while back anyway. Those same banks have no interest in selling the asset's anyway, so creating a market for said assets via TARP is a line of crap.

4. Geithner's new plan ($3t?): not a bottomless pit, just facing up to reality. Frankly it may be bigger than that. When millions of people borrow hundereds of thousands of dollars (each) that they cannot repay it creates a big f'ing problem. Whenever someone tells me how big the bailout it, I say consider England's as a percentage of GDP. Not eye opening enough? Try Iceland.

5. Before you dump on Geithner, consider he was also handed a bag of flaming poop. Does anyone really think that he was responsible for the shoddy underwriting standards that led to this? At the end of the day the assumption that real estate would go up forever, rigged appraisals, and everything else below the underwriting part of the food chain would have been irrelevant if the underwriting had not failed so miserably. People who make anywhere near the per capita income can't buy $400k houses, nor should they be bailed out so that they can stay in the home that they contributed no equity to purchase. The banks lended money to people who had no way of paying it back, period. How is this so hard to understand?