Category Archives: Banking industry

Bailout Inspector General to Warn That Public Private Partnership Open to Fraud

Checks and balances may not be completely dead in the US after all, but we need to see what transpires after the release of the report by Neil Barofsky, special inspector general for the TARP, which is out tomorrow. The New York Times appears to have gotten its hands on the whole report; the Financial […]

Read more...

Right Wing Turns on Elizabeth Warren, Congressional Oversight Panel Head

The move to clip the wings of TARP overseer Elizabeth Warren was predictiable. The fact that it took so long, and the angle is that she is anti industry (as opposed to anti industry bad behavior, a distinction that will hopefully be lost on the masses) and it took comparatively long to mount the salvo […]

Read more...

Nationalization in Denial?

As this blogger and others have noted, the bank rescue programs have been designed to work around constraints more than to fix the underlying problem, which is a lot of bad debt that needs to be restructured and renegotiated, including the debt of the banks themselves. Instead, the boundary conditions have included “No more Lehmans”, […]

Read more...

On Good and Bad Financial Innovation

James Kwak, discussing a recent Bernanke speech defending financial innovation and a Ryan Avent post parsing it, underscored Avent’s observation that Bernanke had trouble coming up with an example of the sort that the financial services had in mind these days (ie, novel products making use of derivatives and other risk slicing, dicing, and distribution […]

Read more...

Bank Stress Tests Now Officially a Garbage In, Garbage Out Exercise

We’ve had plenty of company in voicing doubts about the Treasury’s so-called stress tests of the 19 biggest banks. To quickly recap the main issues: The bank will run the tests themselves, using the same risk models that caused the mess. With only ten examiners on average per bank, and most of the banks having […]

Read more...

Citigroup Posts Potemkin Profits

The qualiity of Citigroup’s $1.6 billion first quarter earnings was so lousy that even the mainstream media took notice. And the bank’s stock traded down 9%. To give the highlights: $2.5 billion of revenues came from lower market value of its debt thanks to a fall in credit quality. That was a common pattern of […]

Read more...

Stiglitz: Bank Plan Destined to Fail, Doomed By White House/Wall Street Ties

Big name economists continue their attacks on the Obama bank rescue programs. Yesterday Willem Buiter, one of Europe’s most highly respected macroeconomists, continued his salvos, contending that the funding was woefully inadequate to recapitalize or otherwise prop up financial firms. The longer the US delays winding up sick banks, the more time wasted and good […]

Read more...

Willem Buiter: Treasury Will Have to Abandon Current Approach to Banks

Buiter, in a very good and lengthy post, addresses various issues related to banking, such as the question of “too big to fail” and the future, or more accurately, the lack thereof, of cross border banking. I recommend reading it in its entirety, and wanted to focus on his most controversial argument, but one where […]

Read more...

"Don’t set Goldman free, Mr Geithner"

John Gapper makes a fundamentally important point in his Financial Times comment today, that Goldman should not be permitted to wriggle free of TARP strictures by repaying the emergency backing of last November, at least not until Treasury has imposed structural reforms. Why? Whether Goldman formally has government funding or not, it has been designated […]

Read more...

US Decides to Disclose (Some) Results From Stress Tests

Now in fairness, the Administration is in uncharted waters in this economic crisis, and has launched a number of new programs to try to restore a measure of health. We’ve lambasted just about all the bank program as being based on the flawed premise that asset prices are temporarily distressed, rather than the recognition that […]

Read more...

Goldman CFO Viniar "Mystified" by Probes into Relationship with AIG

I suppose I should take anything said by Goldman in general, and its CFO David Viniar, with a fistful of salt. This is the man who during the October-November meltdown, attributed the poor performance to the fact that they were seeing “25 sigma events, several days in a row.” That show such manifest ignorance as […]

Read more...

John Dizard: Geithner’s and Citi’s Days Numbered

Now I will admit my headline overstates John Dizard’s current column in the Financial Times a hair, but only a hair. Dizard has a somewhat baroque way of presenting his messages, and the color can take the edge off his communiques. Nevertheless, he has cultivated contacts among central bankers as well as at the major […]

Read more...

Analyst: Wells Fargo to Show $120 Billion in Stress Test Losses

KBW, a firm specializing in bank stocks, expects Wells Fargo to show $120 billion in “stress test losses”, meaning losses under the assumption of a supposed worst case of recession through the first quarter of 2010 and unemployment reaching 12%. Note that the 12% figure (according to Bloomberg) was included in the analyst’s report;. This […]

Read more...

Guest Post: The Fake Recovery

Submitted by Edward Harrison of the site Credit Writedowns I last posted on “Credt Writedowns” on Thursday before the Easter Holidays in two posts very much at odds with one another. The overall thrust of the first post was that the financial services industry in the United States was due to gain from some very […]

Read more...