Posted by Larry Doyle on November 25th, 2013 9:38 AM |
What does that figure represent? The subsidy (aka competitive advantage) that accrues to our major banking institutions from favorable borrowing rates given their status as ‘too big to fail.’
Those tens of billions of dollars truly represent a nice, big head start for a handful of banks, and a withering assault on the precepts of free market capitalism for the rest of us.
As if $82 billion were not enough of a subsidy, let’s not forget that these banks pay you, as a depositor, virtually zero interest for the ‘privilege’ of holding your money there. Well, that may be changing. How so? How would you like to actually pay interest to the banks in order to keep your money in their institutions? Really? No way?
Yes way. (more…)
Posted by Larry Doyle on September 12th, 2013 9:09 AM |
Do you think there is a reason why bank balance sheets are so convoluted and opaque? Of course there is.
The lack of meaningful transparency allows the banks to continue to employ excessive degrees of leverage across a widely disparate array of businesses and with a paucity of competition all in the hope of generating outsized returns. But who do you think bears the ultimate risk?
They pursue these paths with the support of the Federal Reserve’s zero interest rate policy and a regulatory system that belies meaningful oversight despite those who might want us to believe that Dodd-Frank brought reform to the system.
Former FDIC chair Sheila Bair does not leave much to interpretation on these topics. (more…)
Posted by Larry Doyle on June 13th, 2011 9:03 AM |
What did the Lord say to Noah?
The same thing that Bank of America CEO Brian Moynihan might now be saying to his shareholders. That is, ‘how long can you tread water?’
Bank of America’s stock is down approximately 25% on the year and close to 35% over the last twelve months. While it has doubled from the Armageddon lows seen in 2008, the stock has fully retraced any moves higher since early 2009. (The graph of Bank of America below is sourced from Market Watch and covers the last three years).
What gives? Will Bank of America need to raise more capital? Will it need another lifeline from Uncle Sam?
Posted by Larry Doyle on November 10th, 2009 4:28 PM |
Having broached expectant difficulties in the Federal Home Loan Bank system last spring, I try to keep a close eye out for news of note on this largely unknown – but critically important – system of banks. To a large extent, the FHLBs have been flying under the radar despite some serious problems within their investment portfolios and loan books.
High five to KD for pointing out that the folks at FHLB-Seattle probably are not getting much sleep these days. Why is that? Insufficient capital will do it to you every time. As the American Banker offers, FHLB Seattle Still “Undercapitalized,” Regulator Says:
The Federal Housing Finance Agency said late Friday that the Federal Home Loan Bank of Seattle remains “undercapitalized” and will not be allowed to redeem or repurchase stock or pay dividends.
At the end of 2004, as the bank struggled with the size of its mortgage purchase program, it said members who wish to redeem their stock must wait five years before receiving their money.
But with that time period almost up, the Finance Agency said it would not allow the bank to begin redeeming stock, fearing it could lower its capital base. (more…)