boisterousbob

Private-Jet Divas Miss Their Meeting with Obama

So some men were delayed at an airport because of fog. A different man at a different airport was not delayed. OK!

Given the squawking by this administration on saving the planet, maybe this should have been a video conference anyway.....

How Hard Is It to Transfer Credit Card Debt?

That depends on who has increased rates. If they have increased rates correctly for those customers who were ultimately going to default anyway, then they will drive some of them to other banks.

So I would suggest it depends on how successfully the rate increases have been targetted.


On Oct 27 09:51 AM Smalltownbanker wrote:

> Good customers go away, those who are struggling now can't move and
> will now default. Citi loses, customer loses. Taxpayer loses because
> we bailed out these morons.

How Hard Is It to Transfer Credit Card Debt?

They are following amex who did this 12 months ago. Amex even paid some customers to successfully close their accounts.

Regions Financial: Sitting on a $22.8 Billion Sink Hole?

This article seems to be an argument in favour of FAS157.

While I will follow this author hopefully forever for interesting content, I cannot take seriously the suggestion that following FAS157 results in more accurate valuations than the current system.

I have 1000 loans and 900 of them are performing. The remaining 100 non performing loans will likely result in a 50% loss. So I have to mark ALL the loans at 50% because the market is not willing to buy them off me for more?

Being able to mark assets at any value you like should be criminal. Actually it is!

But following FAS157 is so dumb that it too should be criminal. Unless of course, it automatically follows, that if 10% of my loans fail to perform then by definition so will EVERY SINGLE ONE of the others.

Regions Financial: Sitting on a $22.8 Billion Sink Hole?

Tom, would BoA not benefit from increasing faith and confidence in banks in general?

Perhaps BoA's interests are best served by raising their estimates on as many financial entities as they can get away with...


On Aug 14 08:51 AM Tom Armistead wrote:

> Seems like Bank of America missed this article too, they raised RF
> to a buy with a target of 7.

Wall Street Allowed to Grade Itself in Stress-Test Sham

"brought in this spring to rescue the U.S. financial crime syndicate from seeing their shares take another plunge below previous lows."

You mean, introduced in November 2007 and restored to the previous model in April 2009.

I take a different view. I think the temporary change to the accounting rules via FAS157, which was reversed in April, was a significant contributor to the meltdown in the financial sector.

I am not suggesting there were no other problems, of course there were. However, reminding you of context, banks had existed successfully on a fractional reserve model since the late 1600's with accounting rules more similar to those we now have.

Bank Liabilities: Why the Discussion Isn't Explicit

I did as one commenter suggested and read FASB157 on mark to market. It is indeed short and simple.

Commentators seem to agree we like the transparency mark to market provides, while recognizing that it is today having an unusually harsh negative impact.

I have a question about a modification to mark to market.

Two pertinent concepts in FAS157 seem to be:

(1) 'the exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability in the market'

and

(2) "A fair value measurement should include an adjustment for risk if market participants would include one in pricing the related asset or liability"

Does the statement for including risk assessment allow for the "risk" that the asset will go up in value (probably not the intention when it was written) as well as down?

To illustrate, people are buying houses today and will buy more tomorrow. Most of them will be pricing in the "risk" that the house *will* eventually appreciate in value again. Which of course it will eventually (I would remind people, that prices of assets DO go UP as well as DOWN).

Should then mark to market allow banks to include explicit risk assessments that, if held for the length of period they expect to hold them, the value of an asset will rise.

Taking foreclosed houses, should banks be allowed to explicitly value a property on their books, for example, at some 5 or 10 year average rather than the market value TODAY? This could be an actuarially constructed value based upon history and "reasonable expectations".

I know that this does not deal with the issue of a bank being wound up tomorrow, but maybe if we didn't have the requirement to mark an immediate value in this way many banks would not BE wound up tomorrow. And this new risk is frankly not so different from other risks we take when investing in common stocks, such as will management screw up or will a competitors new product put them out of business.

I am no accountant, just trying to pose what seems to me a common sense question.

On Mar 06 09:40 PM citetez wrote:

> Get rid of mark to market and magically solve the problem.

Derivatives and Bank Collapse - The Scam That Went Largely Unreported

There is an important assumption not adequately dealt with in the article you reference.

The assumption is that premiums charged for CDS's adequately represent the amount of risk transferred.

Remember, these are the same banks that could not even safely extend something as simple as a retail mortgage!

If risk is not reflected in premium, then the uncollateralised risk in the system has increased every time a CDS was sold.

While agreeing that the notional value of the CDS is not all at risk, if the premium inadequately reflected the notional risk by only 10% then the figures in the article imply unrealized interconnected losses of around $1trillion. And the author only cites 4 banks!

Assuming that each CDS was "resold" 3 times, this still represents a roughly $330 billion potential loss for the 4 banks, which is enough to wipe out the remaining common equity in all of them.

I am not confident that my analysis is complete, but I think there are still big questions here. Are you REALLY confident that this market is not in at least as big of a mess as plain vanilla mortgages?

On Feb 01 09:35 PM Ronald Pires wrote:

> I don't have any problem with the general thrust of your article,
> but tossing around notional amounts of derivatives is pretty much
> useless (and potentially quite misleading) as a measure of the ultimate
> exposure (potental losses) in the market. See "Everything You Wanted
> to Know about Credit Default Swaps--but Were Never Told" by Peter
> J. Wallison for a good explanation of this.
>
> www.rgemonitor.com/glo...

Deciphering the Issue of Tangible Common Equity

Thanks so much for this, it is beginning to shed some light !!!!!

I am going to ask a noob question, but I suspect I am not the only one who doesn't understand.

I am confused about the adequacy ratio. You state convincingly that if a company has $100 in assets and $90 in debt, then a greater than 10% reduction in assets would cause an inability to repay all debt. This makes sense. But I note the use of the word assets.

After using the word assets in explaining the adequacy ratio, you then switch to using the word collateral and discuss different types of collateral including but not limited to common shares.

You then discuss which types of collateral, including common shares, could be included in the capital adequacy ratio.

I cannot make the connection and am completely confused. The company cannot take the market value of its common shares and use that to pay down debt or meet any obligations. It has already sold those shares, generally years ago, and cannot use them to pay a debtor. Further, the share price only represents the market opinion of value including current and future prospects of the firm. In this sense, it is not a 'real value' at all, certainly not cash or anything that can be used to satisfy obligations. Put another way the market could decide tomorrow that the company is worthless (or worse) and the share price collapse to zero. There would be no 'collateral' left to even discuss.

Is the implication that a higher share price helps a bank meet it's obligations and hence improve its adequacy ratio? If so, how?

I probably should just go read a book, but any help understanding these concepts from anyone would be gratefully received as I doubt I am the only one not yet fully educated.