greedcanbgood

Enough with the Buffett Critics

You know, I'm not a big fan of Buffett but you make some great points. I love this comment from strawdog, "Buffett is an opportunist and yes his primary concern is to himself and his shareholders." Isn't that a good trait for a CEO? Lest we forget that BH is not a non-profit organization. It's shareholders are counting on them to do well. Lets not also forget that one of his biggest positions (USB) didn't want or need the TARP finds and were among the very first to pay it back.

If the Fed and the Treasury needed his image, then so be it. Much of the market today is based on preception. You can argue whether not that that's a good thing but it's much bigger than Buffett himself.

U.S. Bancorp: 'Best Bank in U.S.'?

Amen Reverend! True enough, they've slipped past many of the pitfalls in the markets these past 2 years. I think they deserve some kudos. Very little sub-prime, not too leveraged on CDS (though we don't know for sure) and pretty steady performance.

DIY Stress Test 2: Final Spreadsheet

Moon - You're kidding, right?

So the banks lend money, get chewed out in front of the likes of Barney Frank for making the wrong loans to the wrong people. Then the government gives them more money to lend, which they do. This time however, they tighten up underwriting and become more prudent and YOU think they should be "shamed"? What a crock. I have news for you, we can't lend our way out of this.

One thing I do agree with you however is the derrivatives positions - that's the REAL 800lb. gorilla.

Why Are Banks Paying Back Loans They Can't Afford?

Painfully aware - I concur that the difference between investment and commercial banks has become more blurred. That said, while most of the investment banks are now running under commercial charters it does not change (in the immediate term) their current business model and thus they remain starkly "different" from thier legacy commercial bank peers.

I'm quite familiar with off balance sheet instruments and yet not ALL credit default swap contracts or any of the other instruments you cited are, by defintion, "toxic." The problem here is that "toxic assets" is the latest and greatest buzz word that exists without definition. I do agree with you however in that the more these instruments are "pyramided" with one another the more difficult it is to asses their realitive value - and risk. Yet, that alone does not make them "toxic". If you are as familiar with these as you seem to be, you would know that they also exist as simple transactions.

Why Are Banks Paying Back Loans They Can't Afford?

You are WAY off-base TBill. Investment banks are different than commercial banks. Do you have a 401(k) plan with your employer? I bet you've got some bank stocks in that portfolio. At the end of the day, the corporation exists for the benefit of its shareholders.

Why Are Banks Paying Back Loans They Can't Afford?

Old Trader,

"How about "difficult, if not impossible to value/and or in danger of becoming non-performing" for a definition of a "toxic asset"?"

Again, you have to define these factors. In it's purest form, "value" could be defined as that which someone is willing to pay for a given asset at a given point in time. By this definition, an asset worth $1 today could be worth $1000 tomorrow. You might as well get into penny stocks. It doesn't work.

What about "danger of becoming non-performing"? How does one define this attribute? Admittedly, a simplified example could be a mortgage. Presume that a consumer has a $750k mortgage on a home that has now plumetted in value to $400k. They are underwater by $350k yet they have a job with good income, good credit and solid assets, even some that are liquid. What is their propensity to become "non-performing" on their mortgage? Most people would say that assuming all of those factors remain, the probability is quite low. That said, commercial banks are seeing these loans move immediately into default/voluntary reposession without warning. Why? Because the individual decides to go buy another home at $400k (start over at or near the bottom) and sacrifices the hit on their credit bureau for 7 years or so because they don't believe that their existing home will recover in value as much as their new home will appreciate. How can this be predicted?

My point here is that people need to be more responsible and define their interpretation of these latest "buzz words" (i.e. credit markets, toxic assets, etc.) if they choose to use them to make an argument.

Why Are Banks Paying Back Loans They Can't Afford?

So what do you define as a “toxic” asset? I find this just the most recent in a sea of buzz words that people like to use to make a point. Is it defaults on commercial loans? Consumer loans? Credit default swaps? Something else? In addition, nobody ever makes a distinction between commercial banks and investment banks – they simply get factored in together.

Commercial banks have already significantly increased loan loss reserves and they don’t do so on a whim. Good commercial banks (and there are many more that are good than are not), large and small, employ rigorous analysis and modeling so that they can effectively weather any storm. They will be fine. This is the market at work and the market CAN learn. The best way for it to do so efficiently is to have the government keep it’s fingers out of it.

Repaying TARP and the Myth Behind 'Taxpayer' Money

VERY well put...enough said! =)

Dividend Cuts: Who's Next?

Philipmax - you had me until the last paragraph. Part of the problem is people in general, the legislators and the media not taking the time to 1 - Learn the difference between an investment bank and a commerical bank and 2 - not taking the time to learn about finance in a commercial bank. Banks like USB, PNC and BB&T (perhaps even WFC) should NOT be lumped in with the likes of Citi, Bear, Morgan Stanley and others.

USB, PNC and BB&T have been especially prudent in their lendind and credit portfolios and while certainly they are experiencing an increase in losses they are occurring at a fraction of most other financial institutions. They say that a rising tide raises all ships and it appears that the converse is true. That said, not ALL the ships should be scuttled.