mopacman

What an FDIC in the Red Means for U.S. Banks

At the end of the day, all the turmoil in politics and banking is about how to distribute $5T of decreased value across the US from when the housing money buble burst.

7 Steps Towards Real Free Market Capitalism

Some really good ideas here. However, I cannot see Ayn Rand saying break up the TBTF companies. She would just excoriate the concept of TBTF and say "let them fail."

An End to 'Too Big to Fail'

While I may appreciate the political value of such a proposal, students of financial history will note that it is much easier (meaning, actually possible) to step in and shore up the anchors of a financial system than it is to save thousands of companies when there is systemic panic.

Senator Dodd Is Trying to Save Lenders from Themselves

Some very good thoughts raised. We have a healthy and natural tension at work here.

Just as the economy needs (sic) a return of liquidity in commercial and consumer spending we hit a tight credit cycle.

Banks are losing money on consumer portfolios. So in hindsight, they should have charged more and further restricted underwriting.

Now prudent institutions are doing what they should have done all along and are raising rates and fees. They are doing so typically in a risk-based fashion, and certainly in concert with higher asset-backed costs of funds. They are also being more thoughtful in underwriting. It is about time.

But at the same time these institutions are told to shed assets and prop up capital and returns by regulators, the politicians are going the other way and constraining pricing.

What we keep learning is that the more limitations that are placed on institutions, the more likely the "good credits" will have to subsidize the "less good credits" and at the same time, the more challenging it will be for those with unproven credit to get credit at all. But perhaps that sort of thinking doesnt get votes.

Key Citi Exec Leaves for MasterCard: TARP Strikes Again

Well said

Taxpayers Contributing to Record Bank Profits and Other Frustrating Economic Developments

I loved your article. How nice life would be if the world was that simple. Some things to consider.

1. Banks hold very little of the mortgages originated. Most are sold to third party investors (e.g., yes, those silly securitization markets). In addition, banks are under pressure from regulators to shore up assets, liquidity (decrease the amount of short term liabilities such as deposits that are funding long term assets such as mortgages).

2. Asset managers are afraid to put money to work, too. What if they buy mortgage backed paper and unemployment goes to 18%??? They would join the ranks of the unemployed.

3. There would be little "toxic" assets if the "historical norm" pricing was high enough to sustain the risk (defaults) involved. Perhaps we are seeing prices revert to a more appropriate and thoughtful level (albeit overreach due to newfound investor fear).

But never fear - markets have short memories. I suggest you read "House of Morgan" or "Ascent of Money" to understand that fear will abate and be replaced by greed and the great spending consumer machine revs up and outpaces income once again (unless, in geological terms, this is the "big one").

Banker CEOs Lied to Congress

HUH? Options granted at 30 when stock is at $2 are worthless. Proxies greatly understate stock option grants in rising stock markets, but this is not one of them. In this instance the reverse is true.

Even stock that vested earlier this year (with taxes withheld at that time) have lost significant value. And losses are capped from a tax standpoint.

I guess stating "CEO's lied" makes good headline. But it never fails - statistics never lie - but liars use statistics.