Tom Jacobs

Bloomberg vs. the Fed: Secrecy and Moral Hazard

1. The Fed remits its operating balance (profit) each year to the US Treasury. For every $ not remitted, taxes must be higher. By definition any funds spent by the Fed on anything that take away from this equation is money that must be made up by taxpayers.

2. As significant balances such as transaction accounts and amounts above the FDIC insurance limit are uninsured, traditional runs are still a problem. Just examine what led the FDIC to move on WAMU and Wachovia.

How CDS Spreads Affect Equity

You should probably differentiate between levels of seniority when you do your comparison. Two firms with CDS at the same level of seniority, etc. Further, the CDS spread is effectively Probability of Default * Loss in the event of default, so adjusting for loss in event of default, CDS is a proxy for default likelihood, etc. Thanks for the post.

FDIC Regulation: Reason for Alarm

Thanks to Alan for making the point on the differing means of government handout. The Wells Fargo deal will actually cost us more as taxpayers than the proposed Citi offer, an unclear conclusion from the link shared by Alan. The original story along with the unconstitutional nature of the administrative law change enabling Wells to proceed was broken by the Washington Post:

www.washingtonpost.com...

Memo to Congress: Please Stop Obsessing Over Bank Execs' Bonuses

I agree with the majority of the posters - you are in left field with your losing top people due to reduced compensation argument. If things are bad enough to accept billions in taxpayer funds at well below market costs (recognize that the 5% they will pay on the preferred is well below the 10-15% effective yields their preferred issues were at prior to the announcement) NO BONUSES SHOULD BE PAID. If it were a "take the capital and retain the bonus money within the firm for more capital or be Nationalized" choice I am sure they would give up the bonuses rather quickly. However these are highly paid gamblers used to getting whatever they want. Just consider how long it took AIG to figure out that they shouldn't be taking junkets after they were bailed out for a temperature check of these individual's priorities and expectations.