mikeg3's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/219640/comments http://seekingalpha.com/article/159056-too-big-to-fail-has-gotten-much-bigger?source=feed#comment-654093 654093 Mon, 31 Aug 2009 00:03:52 -0400 http://seekingalpha.com/article/156345-disparity-in-bank-asset-valuations?source=feed#comment-632669 632669
When can C buy back the government shares?]]> Mon, 17 Aug 2009 05:01:09 -0400
When can C buy back the government shares?]]> http://seekingalpha.com/article/133178-the-stress-test-cliff-notes?source=feed#comment-477828 477828 The truth is that the major BHC's own going businesses. When the recession ends, they will do OK. During the recession, their fire-sale net worth is negative. Come to think of it, even during normal times a megabank could not quickly sell all their assets for enough to cover all their liabilities.
So the banks' game plan now is to batten down the hatches and wait out the recession, while keeping their polical bases covered and talking a good game on lending.
If the banks all do this successfully, how will we ever get out of the recession (think Japan 1990's)?
Answer 1:
We click our shoes together three times and repeat after me: "There's no place like home".
Answer 2:
We nationalize and resell like mad creating smaller banks run by small bank managers who have no experience whatsoever with addressing trillion dollar problems. This mainly enriches the shorts and convinces long term investors to never buy shares again in a company subject to Fed supervision.
Answer 3:
We pump so much money into the economy that jobs recover. Once jobs recover, foreclosures of owner-occupied houses return to normal. Fact: most actual homeowners with underwater mortgages do not mail in the keys unless they lose their income. Once the supply of houses stabilizes and the deficit spending fires up inflation, housing prices start to rise. This creates a buying panic among families and speculators looking to buy at the bottom. Only then do the bank assets become liquid again and MTM works. Of course, there will still be losses, but they will be quantifiable and the megabanks can earn their way out of the hole in a transparent manner.
Do I believe this? Yes.
Am I sure? Absolutely not.
Answer 4:
A really big war breaks out (guess where) and three problems are solved in rapid succession: A) Unemployment B) Declining GNP C) Humans overpopulating planet Earth.
]]> Sun, 26 Apr 2009 11:21:13 -0400 The truth is that the major BHC's own going businesses. When the recession ends, they will do OK. During the recession, their fire-sale net worth is negative. Come to think of it, even during normal times a megabank could not quickly sell all their assets for enough to cover all their liabilities.
So the banks' game plan now is to batten down the hatches and wait out the recession, while keeping their polical bases covered and talking a good game on lending.
If the banks all do this successfully, how will we ever get out of the recession (think Japan 1990's)?
Answer 1:
We click our shoes together three times and repeat after me: "There's no place like home".
Answer 2:
We nationalize and resell like mad creating smaller banks run by small bank managers who have no experience whatsoever with addressing trillion dollar problems. This mainly enriches the shorts and convinces long term investors to never buy shares again in a company subject to Fed supervision.
Answer 3:
We pump so much money into the economy that jobs recover. Once jobs recover, foreclosures of owner-occupied houses return to normal. Fact: most actual homeowners with underwater mortgages do not mail in the keys unless they lose their income. Once the supply of houses stabilizes and the deficit spending fires up inflation, housing prices start to rise. This creates a buying panic among families and speculators looking to buy at the bottom. Only then do the bank assets become liquid again and MTM works. Of course, there will still be losses, but they will be quantifiable and the megabanks can earn their way out of the hole in a transparent manner.
Do I believe this? Yes.
Am I sure? Absolutely not.
Answer 4:
A really big war breaks out (guess where) and three problems are solved in rapid succession: A) Unemployment B) Declining GNP C) Humans overpopulating planet Earth.
]]> http://seekingalpha.com/article/132903-pre-payments-reducing-value-of-mortgage-backed-securities?source=feed#comment-475360 475360 Fri, 24 Apr 2009 06:10:59 -0400 http://seekingalpha.com/article/131611-the-terminator-banks?source=feed#comment-468201 468201 BTW, Pandit is the CEO, not the CFO.]]> Sun, 19 Apr 2009 09:02:29 -0400 BTW, Pandit is the CEO, not the CFO.]]> http://seekingalpha.com/article/128390-exclusive-big-banks-recent-profitability-due-to-aig-scam?source=feed#comment-444814 444814 Mon, 30 Mar 2009 05:12:26 -0400 http://seekingalpha.com/article/128390-exclusive-big-banks-recent-profitability-due-to-aig-scam?source=feed#comment-444813 444813 If the CDS contracts are valued realistically, the unwind trades are at fair value.]]> Mon, 30 Mar 2009 05:11:17 -0400 If the CDS contracts are valued realistically, the unwind trades are at fair value.]]> http://seekingalpha.com/article/127705-pandit-s-letter-to-citi-shareholders-lame?source=feed#comment-439256 439256
The interesting question is why TCE replaced Tier 1 capital as the Fed's metric of bank health. I think that was just following the crowd, but it wasn't Citi's decision.]]> Wed, 25 Mar 2009 07:19:48 -0400
The interesting question is why TCE replaced Tier 1 capital as the Fed's metric of bank health. I think that was just following the crowd, but it wasn't Citi's decision.]]> http://seekingalpha.com/article/120705-bank-nationalization-it-s-just-plain-wrong?source=feed#comment-390192 390192 www.nytimes.com/2009/0...]]> Mon, 16 Feb 2009 07:47:19 -0500 www.nytimes.com/2009/0...]]> http://seekingalpha.com/article/120705-bank-nationalization-it-s-just-plain-wrong?source=feed#comment-390184 390184 Given time, the banks will earn their way out of the problem and housing prices will stabilize and begin to rise. Inflation, sure to follow the multi-trillion dollar deficit spending, will speed up the process.
Examples from socialist countries do not apply to the US. If the price of government help is nationalization, few companies will ask for help next time and few investors wil risk their capital in an industry where the house closes out the game while there are still chips on the table.
As for moral hazard, even here in Texas there are penalties short of capital punishment.]]> Mon, 16 Feb 2009 07:35:51 -0500 Given time, the banks will earn their way out of the problem and housing prices will stabilize and begin to rise. Inflation, sure to follow the multi-trillion dollar deficit spending, will speed up the process.
Examples from socialist countries do not apply to the US. If the price of government help is nationalization, few companies will ask for help next time and few investors wil risk their capital in an industry where the house closes out the game while there are still chips on the table.
As for moral hazard, even here in Texas there are penalties short of capital punishment.]]> http://seekingalpha.com/article/119859-geithner-s-complex-plan-won-t-fix-the-problem?source=feed#comment-383480 383480 Wed, 11 Feb 2009 06:45:47 -0500 http://seekingalpha.com/article/119230-feds-should-leave-wells-fargo-well-alone?source=feed#comment-380274 380274
I guess that will be Kovacevich's defense in the Citi/Wachovia trial: "Sheila Bair made me do it".

Good luck!]]> Sun, 08 Feb 2009 19:01:03 -0500
I guess that will be Kovacevich's defense in the Citi/Wachovia trial: "Sheila Bair made me do it".

Good luck!]]> http://seekingalpha.com/article/119230-feds-should-leave-wells-fargo-well-alone?source=feed#comment-380214 380214
BTW, gambling, like drinking, is a dangerous vice that is only legal because banning it is worse. Why would a bank be sending their folks to a gambling venue?]]> Sun, 08 Feb 2009 17:49:40 -0500
BTW, gambling, like drinking, is a dangerous vice that is only legal because banning it is worse. Why would a bank be sending their folks to a gambling venue?]]> http://seekingalpha.com/article/117753-nationalizing-bank-losses?source=feed#comment-372793 372793

On Feb 01 07:22 PM Yamu wrote:

> For anyone relying on home values to appreciate, have a look at this
> chart:
>
> static.seekingalpha.co...
>
>
> I am no expert on banking so I'll probably be totally off but what
> about letting the banks fail whilst at the same time covering deposits?
> Sure that should be cheaper?]]> Sun, 01 Feb 2009 19:31:06 -0500

On Feb 01 07:22 PM Yamu wrote:

> For anyone relying on home values to appreciate, have a look at this
> chart:
>
> static.seekingalpha.co...
>
>
> I am no expert on banking so I'll probably be totally off but what
> about letting the banks fail whilst at the same time covering deposits?
> Sure that should be cheaper?]]> http://seekingalpha.com/article/117753-nationalizing-bank-losses?source=feed#comment-372789 372789

On Feb 01 04:05 PM One Eyed Guide wrote:

> Real estate/housing being underwater is an old style problem that
> the banking system can easily handle over time. Banks have a derivative
> problem (as BigAl and Tom stated earlier). Mortgage backed securities
> can work thier way out over time but Credit Default Swaps (seekingalpha.com/symbo...)
> will wipe out anyone who issued them. The solution is to give bank
> creditors a haircut by allowing issuers to default on CDS's without
> penalty by simply returning the premium. Anyone (hedge funds, for
> example) who can't return the premium goes bust so you still clean
> out some of the real dead wood without destroying needed financial
> structure.]]> Sun, 01 Feb 2009 19:25:13 -0500

On Feb 01 04:05 PM One Eyed Guide wrote:

> Real estate/housing being underwater is an old style problem that
> the banking system can easily handle over time. Banks have a derivative
> problem (as BigAl and Tom stated earlier). Mortgage backed securities
> can work thier way out over time but Credit Default Swaps (seekingalpha.com/symbo...)
> will wipe out anyone who issued them. The solution is to give bank
> creditors a haircut by allowing issuers to default on CDS's without
> penalty by simply returning the premium. Anyone (hedge funds, for
> example) who can't return the premium goes bust so you still clean
> out some of the real dead wood without destroying needed financial
> structure.]]> http://seekingalpha.com/article/117753-nationalizing-bank-losses?source=feed#comment-372483 372483 The last "bad bank", the Resolution Trust Corporation, made money for the taxpayers once the economy recovered.. That's because the Fed's cost of carrying the bad paper was close to zero and housing prices eventually came back.
The term bankrupt is overused. No large bank has any trouble paying customers making withdrawals or paying bills. The issue is that if bank assets are valued at instant fire sale prices, they are out of compliance in their lawful reserves. Let the banks, or the bad bank, hold the paper until the economy recovers and the multi-trillion dollar problem goes away.
The only ones hurt will be the short sellers and other vultures.

]]> Sun, 01 Feb 2009 10:48:59 -0500 The last "bad bank", the Resolution Trust Corporation, made money for the taxpayers once the economy recovered.. That's because the Fed's cost of carrying the bad paper was close to zero and housing prices eventually came back.
The term bankrupt is overused. No large bank has any trouble paying customers making withdrawals or paying bills. The issue is that if bank assets are valued at instant fire sale prices, they are out of compliance in their lawful reserves. Let the banks, or the bad bank, hold the paper until the economy recovers and the multi-trillion dollar problem goes away.
The only ones hurt will be the short sellers and other vultures.

]]> http://seekingalpha.com/article/117326-where-s-the-nationalization-debate?source=feed#comment-369783 369783 Re: Bank Nationalization
Some writers disclose their holdings.
Care to do so?]]> Thu, 29 Jan 2009 09:51:55 -0500 Re: Bank Nationalization
Some writers disclose their holdings.
Care to do so?]]> http://seekingalpha.com/article/116073-dick-parsons-to-head-citi-s-board-the-insanity-continues?source=feed#comment-363772 363772 Fri, 23 Jan 2009 04:00:20 -0500 http://seekingalpha.com/article/116073-dick-parsons-to-head-citi-s-board-the-insanity-continues?source=feed#comment-363769 363769
Parsons' assignment is to avoid nationalization until the recovery in 2010. He has the contacts and credibility to do it. We hope he succeeds.]]> Fri, 23 Jan 2009 03:54:35 -0500
Parsons' assignment is to avoid nationalization until the recovery in 2010. He has the contacts and credibility to do it. We hope he succeeds.]]> http://seekingalpha.com/article/115409-no-rescue-or-bailout-can-save-the-dying-banks?source=feed#comment-360575 360575 Tue, 20 Jan 2009 04:35:41 -0500 http://seekingalpha.com/article/115351-banks-nationalize-cleanse-and-get-it-over-with?source=feed#comment-359853 359853
BTW,I notice in your profile that you didn't have a good experience as a banker. Which bank?]]> Mon, 19 Jan 2009 11:01:02 -0500
BTW,I notice in your profile that you didn't have a good experience as a banker. Which bank?]]> http://seekingalpha.com/article/98260-wachovia-for-free-citi-still-paid-too-much?source=feed#comment-271902 271902
At least the residual Wachovia will be solvent and positioned for success.]]> Thu, 02 Oct 2008 14:59:40 -0400
At least the residual Wachovia will be solvent and positioned for success.]]> http://seekingalpha.com/article/88669-probe-of-citigroup-et-al-could-hit-financial-etfs?source=feed#comment-220794 220794
Can you imagine the Governor of Michigan suing Ford or the Governator of California suing Disney?

No one expected these auctions to fail, but hindsight is a wonderful thing.]]> Fri, 01 Aug 2008 22:50:44 -0400
Can you imagine the Governor of Michigan suing Ford or the Governator of California suing Disney?

No one expected these auctions to fail, but hindsight is a wonderful thing.]]> http://seekingalpha.com/article/88554-large-banks-net-income-history?source=feed#comment-220007 220007 Fri, 01 Aug 2008 09:05:15 -0400 http://seekingalpha.com/article/87209-banking-sector-band-aids-just-won-t-do-it?source=feed#comment-216028 216028
Of course the shorts writing for Seeking Alpha will be thrilled.]]> Sun, 27 Jul 2008 19:56:14 -0400
Of course the shorts writing for Seeking Alpha will be thrilled.]]> http://seekingalpha.com/article/85864-earnings-season-fundamentally-flawed?source=feed#comment-209835 209835 With 100 million Citigroup shares traded daily between willing sellers and willing buyers, there should be plenty of credible commentators on both the bull and bear side. Yet Seeking Alpha only seems to publish bearish writers, many with stated short positions.
Is this site just a short-sellers' propaganda vehicle?
My own take on how to evaluate Citi, in which I am long, is that we need to examine Pandit's stated integrated banking model (Mexico) to see if it works there, than decide if that model can really be globaliized. We need to evaluate whether Citi is driving their toxic exposure down. We need to see if Citi is on track cutting costs. We need to watch the disposal of non-core assets (right assets?, good price?, on schedule?). Finally we need to decide if Citi will survive until home prices stabilize and the economy turns up (I am sure of it).
I am bullish on Citi two years out, but it's going to be a wild ride.
]]> Sun, 20 Jul 2008 11:41:41 -0400 With 100 million Citigroup shares traded daily between willing sellers and willing buyers, there should be plenty of credible commentators on both the bull and bear side. Yet Seeking Alpha only seems to publish bearish writers, many with stated short positions.
Is this site just a short-sellers' propaganda vehicle?
My own take on how to evaluate Citi, in which I am long, is that we need to examine Pandit's stated integrated banking model (Mexico) to see if it works there, than decide if that model can really be globaliized. We need to evaluate whether Citi is driving their toxic exposure down. We need to see if Citi is on track cutting costs. We need to watch the disposal of non-core assets (right assets?, good price?, on schedule?). Finally we need to decide if Citi will survive until home prices stabilize and the economy turns up (I am sure of it).
I am bullish on Citi two years out, but it's going to be a wild ride.
]]> http://seekingalpha.com/article/85219-is-the-sec-rumorgate-push-a-waste-of-time?source=feed#comment-207025 207025 Wed, 16 Jul 2008 13:24:45 -0400 http://seekingalpha.com/article/83663-fas-157-blackstone-and-its-banker-buddies-have-it-wrong?source=feed#comment-198193 198193
I believe that banks should be allowed to account for CDO's by treating them as portfolios of individual mortgages. Mortgages are valued as discounted cash flows, less reserves for expected losses.

If a portfolio is expected to foreclose half the mortgages (a high number even in Vegas), and the forclosure will return half the principal plus accrued interest of the loans (a number widely accepted), then the CDO is worth 75% of face value. Since a super senior tranche gets the first 85% of recoveries, that means the bank's piece is worth 88% of face value.

FAS 157 was created in response to a problem where Japanese banks were refusing to recognize losses on commercial real estate in the 1990's, leaving little lending power and stagnating their economy. US banks must reserve for expected losses, so there is no point in not foreclosing when a loan stops performing.

With CDO's characterized as "toxic", the market is not objective but emotional. Pricing CDO's based on a few bottom-fishing transactions simply drains reserves and requires equity dilution.

The rules for accounting for direct loans are well understood by everyone. They should be applied to the mortgages underlying CDO's.

BTW, leverage does not apply to super senior tranches. They were constructed and retained by the banks, not purchased on margin. If they were, the margin would have been called a year ago.]]> Thu, 03 Jul 2008 15:39:24 -0400
I believe that banks should be allowed to account for CDO's by treating them as portfolios of individual mortgages. Mortgages are valued as discounted cash flows, less reserves for expected losses.

If a portfolio is expected to foreclose half the mortgages (a high number even in Vegas), and the forclosure will return half the principal plus accrued interest of the loans (a number widely accepted), then the CDO is worth 75% of face value. Since a super senior tranche gets the first 85% of recoveries, that means the bank's piece is worth 88% of face value.

FAS 157 was created in response to a problem where Japanese banks were refusing to recognize losses on commercial real estate in the 1990's, leaving little lending power and stagnating their economy. US banks must reserve for expected losses, so there is no point in not foreclosing when a loan stops performing.

With CDO's characterized as "toxic", the market is not objective but emotional. Pricing CDO's based on a few bottom-fishing transactions simply drains reserves and requires equity dilution.

The rules for accounting for direct loans are well understood by everyone. They should be applied to the mortgages underlying CDO's.

BTW, leverage does not apply to super senior tranches. They were constructed and retained by the banks, not purchased on margin. If they were, the margin would have been called a year ago.]]> http://seekingalpha.com/article/83179-is-citi-s-vikram-pandit-a-robot?source=feed#comment-195697 195697 Mon, 30 Jun 2008 06:33:01 -0400