GregT

In Defense of Meredith Whitney

Just to address one of Whitney's points that Shulman tout's without clarity. He said "Consumer credit continues to contract - credit lines are down $1.5 trillion."

We need to remember that these are credit "card" lines. Most credit card users come nowhere near their credit limits. The card companies have reduced credit limits as the economy has gone into recession. This is normal. Shulman tries to make it seem like 1.5 trillion has actually been removed from the economy.

Most of the time, analysts like Whitney who make one correct call like to parlay their fame into bigger and better things. She is now predicting the whole economy rather than just analyzing banks. We'll have to see if she continue to get things right or turns into a perma bear. Another person who predicted the downturn and made billions doing it (Paulson) is very bullish right now. We'll see who is right.

GDP Manipulation? You Should Consider Shorting the Market

It is certainly true that the US government plays a huge part in manipulating the economy and many aspects of consumer investing/purchasing. This has been the case for decades going back to before the Great Depression. It is also true that the amount of manipulation has increased over the years.

But the big question is not whether or not this manipulation exists, but when it might come home to roost. While US debt has increased dramatically in the last couple years and will continue to do so, it is unclear that the heavy debt will cause a major problem for the US economy or the markets in the near term - the next couple years. It is certainly unhealthy, but the markets care less about government balance sheets than they do about corporate profits. All indications are that corporate profits will be recovering - perhaps strongly. At least in the near term, it is likely that markets will remain positive. Short term technical pullbacks are certainly a possibility, but the market is likely to be higher in 1 to 2 years.

Is Wells Fargo Regretting Its Wachovia Acquisition?

A lot of claims are made in this article without any substantive points to back them up.

Before people like you call for the break up of the large banks by the government, you should consider that the government cannot and should not create rules and procedures for it's own convenience. The government wanted WFC to buy Wachovia so it would not have to absorb the costs of the cleanup. It forced BAC to buy MER to avoid a systemic collapse of our financial system. For the government to now turn around and require a breakup of the very mergers it supported/required would be completely wrongheaded and contradictory.

It becomes quite scary indeed when the government and supporters of heavy handed govnerment regulation like the author base public policy on what is most convenient at the time for the government rather than on fairness and common sense.

Big Banks: Still in Charge

The irony in this article suggesting that certain large banks like BofA should be split up to avoid the devastation their failure could cause is that it was the government "made" BofA complete it's takeover of Merrill Lynch in order to prevent a financial meltdown and would now be making BofA split itself up to avoid the potential for financial devastation.

We can't have it both ways. We can't use the healthy banks to buy the troubled banks when it is convenient and then turn around and say that the now combined bank is too large and must be split up.

Wells Fargo: Signs of Stress?

Unlike BAC's purchase of MER which was decided over a tumultuous weekend during which Lehman went under, WFC purchase of Wachovia was well thought out and weighed. Furthermore, any comparison between the two is not valid. MER was an investment bank with much more difficult to evaluate risks. Wachovia was mainly hampered by the Golden West purchase. The risks to Wachovia were much easier to evaluate and understand. In simple terms, BAC made the MER purchase quite blindly when buying the more complex to understand investment bank, while WFC exercised a fair amount of due dilligence in buying a relatively traditional banking operation.

Having said that, the main conclusion that WFC could be in for a dividend cut and problems in the future is certainly valid. In fact, California's announcement yesterday that 20,000 state workers will lose their jobs is certainly not good for WFC.