Banks
Europe on the Rocks Let’s begin our journey by pointing out a regulatory ‘anomaly’ which has allowed European banks to take on much more leverage than their American colleagues and which now makes them far more vulnerable.In Europe, unlike in the US, it is only risk-weighted assets whichmatter to the regulators, not the total leverage ratio. European bankscan therefore apply a lot more leverage than their US counterparties,provided they load their balance sheets with higher rated assets, and that is precisely what they have been doing. The Absolute Return Letter March 2009
US, UK, Eurozone Banks Face Collapse: Global Banking System Insolvent “With all the hype from various US dollar bears about the crisis with US banks, few on this side of the Atlantic are paying any attention to happenings in Europe. For those who look, a strong case can be made that European banks are as bad off if not much worse off than their US counterparts…. On the plate now is a meltdown possibility in US banks, UK banks, and Eurozone banks as the entire global banking system is insolvent. Conceivably a framework for a new transatlantic or even global currency could come out of such a meltdown. ” Mish’s Global Ecomomic Trend Analysis 2/21/09
Insolvent Banking System Eludes Government Containment “The world Central Governments are resorting to the nuclear option – printing money – in a last attempt to hold the financial system intact. Had they allowed selected major bankrupt institutions to fail, severe financial pain would have been inflicted on many. The strategy of attempting to save all bankrupt industries with printed money will result in worthless currencies worldwide, thereby guaranteeing financial ruin for all.” Mortgaged Future 1/20/09
The Real Truth behind the Citigroup Bank Nationalization “On Friday November 21 the world came within a hair’s breadth of the most colossal financial collapse in history according to bankers on the inside of events with whom we have contact. The trigger was the bank which only two years ago was America ‘s largest, Citigroup. The size of the US Government de facto nationalization of the $2 trillion banking institution is an indication of shocks yet to come in other major US and perhaps European banks thought to be ‘too big to fail.'” Geopolitics-Geoeconomics – Market Oracle 11/26/08
Keeping It Real (Estate): Don’t Ban Foreclosures! “By taking away their loss mitigation tool, or even by threatening to limit their ability to foreclose, banks will demand a higher return for the risk they undertake in lending. This means higher interest rates, tighter qualification requirements and home prices far lower than they are today.” Minyanville 10/23/08
Paulson Says Will Buy Bank Equity `Soon as We Can’ “Under the equity purchase program, the Treasury would not be involved in bank management, Paulson said. Equity purchases would take place alongside Treasury’s coming program of “broad” mortgage asset purchases, he said.” Bloomberg 10/10/08
FDIC: WaMu the ‘Largest Bank Failure Ever’
“The failure of Washington Mutual is not only the largest on record, it dwarfs the previous record set over 24 years ago when Continental Illinois was shut down. Washington Mutual had $307 billion in assets compared to Continental’s $40 billion (or $67.7 billion in 2008 dollars).” ABC News 9/25/08
It Could Get Much Worse – “Will it ever end? For more than a year, the financial system has struggled to function, stricken as it is with economic Ebola. Cash is the only cure, and banks have raised almost $400 billion. That’s not nearly enough, however, so the federal government has committed to various bailouts that will cost hundreds of billions over time. The most expensive yet – a new super-agency to buy bad debt – may eventually cost north of $1 trillion. ” Baltimore Sun 9/21/08
Is Purchasing $700 billion of Toxic Assets the Best Way to Recapitalize the Financial System? No! It is Rather a Disgrace and Rip-Off Benefitting only the Shareholders and Unsecured Creditors of Banks “Thus, the Treasury plan is a disgrace: a bailout of reckless bankers, lenders and investors that provides little direct debt relief to borrowers and financially stressed households and that will come at a very high cost to the US taxpayer. And the plan does nothing to resolve the severe stress in money markets and interbank markets that are now close to a systemic meltdown. It is pathetic that Congress did not consult any of the many professional economists that have presented – many on the RGE Monitor Finance blog forum – alternative plans that were more fair and efficient and less costly ways to resolve this crisis. This is again a case of privatizing the gains and socializing the losses; a bailout and socialism for the rich, the well-connected and Wall Street. And it is a scandal that even Congressional Democrats have fallen for this Treasury scam that does little to resolve the debt burden of millions of distressed home owners.” Nouriel Roubini’s Global EconoMonitor 9/28/08
Not a Single Canadian Bank Failed During the Great Depression – “The McFadden Act of 1927 specifically prohibited interstate branch banking in the U.S., and only allowed banks to open branches within the single state in which it was chartered. Therefore, U.S. banks were forced to be small and local, with an undiversified loan portfolio tied to the local economy of a single state, or a specific region of a single state. The strict regulatory framework of the McFadden Act created a delicate and fragile banking system that could not easily withstand the shock of the Great Depression. Exhibit A: 9,000 banks failed in the U.S. in the early 1930s.” Seeking Alpha 9/23/08
“Such a program would be designed to encourage the raising of new private capital to complement public capital,” Paulson said.
FinancialEndTimes.com 