Category Archives: Banking industry

"Banks defy Gordon Brown over new interest rate cut"

This article from the Times Online makes abundantly clear that UK banks do not plan to pass on any future base rate cuts by the Bank of England to customers. However it does not do a very good job of explaining why the bankers think they will not be sufficiently profitable if they add the […]

Has UBS Ruined Switzerland’s Standing as a Financial Haven?

Personally, I would lay more blame for any damage to the Swiss banking brand to the fear of the possible compromise of Switzerland’s standing as a tax haven. However, as we will discuss, the giant Swiss bank UBS has lost a lot of prvate banking clients over worries about the bank’s soundness, something completely contrary […]

Is Wall Street Pay Falling Far Enough?

The New York Times, writing from the industry town, in “Wall Street’s Pay Is Expected to Plummet,” tries to make the case that the calls for scalps deeper pay cuts are overdone: The first clues are emerging that Wall Street pay will plummet this year — but perhaps not enough to satisfy the financial industry’s […]

Improvement in Libor Overstates Credit Market Recovery

Although Asian markets opened up nicely on the Obama victory, Europe is focusing on credit market woes, and US futures are down at this hour. From Bloomberg: Credit markets are still creaking even after the biggest decline on record in the rate banks say they charge each other to borrow dollars. The London interbank offered […]

Small Business Administration Loans Suddenly Scarce

For those living abroad, Small Business Administration sponsors a variety of loan programs that are administered through banks. Despite the name, SBA loans are typically used by the larger end of small businesses, one that might be on the cusp of getting a conventional bank loan or might qualify but find the pricing unattractive. The […]

Surprisingly Superficial New York Times Article on Troubled Private Equity Deals

A story by Andrew Ross Sorkin and Michael de la Merced, “Debt Linked to Huge Buyouts Is Tightening the Economic Vise,” covers the fact that private equity deals, which as a matter of course feature high leverage, are starting to hit the wall as the economy sours. This is hardly surprising; it’s happened in past […]

Trade, Letter of Credit Woes Finally Go Mainstream

We have been writing for a few weeks that the credit crisis had engulfed letters of credit, a crucial instrument in international trade, particularly of commodities (ex oil) and other raw materials. With banks hesitating to extend credit to each other much beyond overnight (finally changing only by virtue of massive liquidity measures and recapitalizations), […]

On JP Morgan’s "Mass Mods" for Residential Mortgages

In a move the stock market greeted with considerable cheer, JP Morgan announced that it was widening its program to modify mortgages. From the New York Times: JPMorgan Chase became the latest big bank to pledge to cut monthly payments, by lowering interest rates and temporarily reducing loan balances for as many as 400,000 homeowners. […]

A Page From Japan’s Playbook? Bernanke Proposes "Floor" Under MBS Market

One of the widely criticized features of Japan’s approach to its post-bubble crisis was that its regulators tried for some time to avoid the recognition of bank losses. In a deflationary environment, it was not clear how this would lead to a better ending, since with a flagging economy and no inflation to reduce the […]

New Mortgage Recue Proposal to Kick Can Down the Road a Few Years

Before we debate the merits (more accurately, the lack thereof) of the latest trial balloon of a plan being floated to rescue overextended mortgage borrowers, we need to consider a few not sufficiently discussed facts: 1. The problem is that banks are not making loan modifications as they did in the past. That is turn […]

Cuomo Prepares to Embarrass Banks Over Top Level Pay

Banks have proven to be remarkably immune to condemnation over senior level pay. CEOs and top level producers seem to have an undimmed sense of entitlement, even though the nine banks receiving the first Treasury handouts equity purchases earned a collective $305 billion from 2004 to mid 2007, followed by $323 billion in writedowns. But […]

"Fears mount in Japan over complex yen products"

This Times Online story is frustratingly vague about the exact nature of these complicated and risky foreign exchange products sold to Japanese retail investors. While the size of the problem ($90 billion) may seem not all that bad in comparison, say, to subprime exposures, recall that these trades are likely to be unwound in a […]

JP Morgan Under Criminal Investigation for Jefferson County, Other Swaps

The agonies of Jefferson County, Alabama, which got itself into a too-clever-by-half funding arrangement that put the county on the verge of bankruptcy, have faded from the public eye. However, the type of transaction that caused so much woe, a swaption to supposedly lower financing costs, has been the subject of SEC and Justice Department […]