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Posts Tagged ‘Banking Institutions’

Time to Reinstitute Glass-Steagall

Posted by Larry Doyle on December 3rd, 2009 3:16 PM |

A car needs gas to run. An engine needs steam. A factory needs power. The fact is without a steady source of energy nothing can operate. Welcome to the Uncle Sam economy circa 2009.

You may be thinking, wait a second LD . . . the Federal Reserve is flushing the system with liquidity. Money is easy and it is propping the markets. While availability of credit may be tight, the demand for credit is also weak. So what am I talking about?

Thanks to RM for providing the FDIC Third Quarter 2009 Banking Profile (a link to the full document is provided at the end of this commentary). For those who care to rip apart the inner workings of our banking system, this report is the owner’s manual. The report highlights the following:

> Industry Posts Net Profit of $2.8 Billion
> Increased Revenues, Lower Securities Losses Offset Higher Loan-Loss Provisions
> Net Interest Margins Improve at Most Institutions
> Troubled Loans Continue to Rise, But Rate of Growth Slows
> Loan balances Decline by 2.8% in the Quarter

Based on this overview, it would appear that the banking industry is slowly recovering. In aggregate, perhaps that may be the case. But what doesn’t this report tell us? (more…)

Summers and Jarrett Provide Hints of What Is To Come

Posted by Larry Doyle on April 27th, 2009 8:57 AM |

Larry Summers threw some cold water on the economy yesterday morning in stating his belief the economy will continue to decline for some time to come. Specifically,

“I expect the economy will continue to decline,” with “sharp declines in employment for quite some time this year,” Summers said today on “Fox News Sunday.”

Is Summers positioning the administration for a forecast more in line with IMF projections than the Congressional Budget Office? Recall that the IMF believes the U.S. economy will have flat to only slightly positive growth in 2010 with a double digit unemployment rate. Those projections are decidedly weaker than projections previously employed by the administration.

Is Summers starting to manage expectations downward given what he sees on the horizon? I believe so.

Furthermore, Valerie Jarrett, senior economic advisor, offered hints of administration plans for our banking system this weekend, in stating:

“Whether management changes occur, whether banks are asked to raise more capital, all of that’s going to come forth in the coming week,” Jarrett said on CNN’s “State of the Union” program today.

My instincts tell me that an advisor in Jarrett’s position releases that statement in preparation for exactly those moves. Will this be Vikram Pandit’s last week at Citigroup? Will Ken Lewis be forced out at Bank of America? I think the odds for either of those moves – if not both – just increased.

Management of any organization, including the White House, needs to maintain credibility by providing a reasonably accurate flow of information. The Sunday morning talk shows provide a forum and I think Summers and Jarrett provided solid hints at what is to come from the White House in the days and months ahead. Bloomberg provides a full summary of these points and others, Summers Says U.S. Economy to Decline ‘For Some Time.’

LD

“White House Ties to Wall Street Doom Bank Rescue”

Posted by Larry Doyle on April 17th, 2009 6:37 AM |

None other than Nobel Prize winner Joseph Stiglitz of Columbia University provided a direct shot across Washington’s and Wall Street’s bow today. As I read Bloomberg’s Stiglitz Says White House Ties to Wall Street Doom Bank Rescue, the little voice in my head kept repeating, ” he’s right” or “I agree.” I am reluctant to copy and paste entire articles, but this one is so important that I feel compelled and will add commentary or links as warranted. 

The Obama administration’s plan to fix the U.S. banking system is destined to fail because the programs have been designed to help Wall Street rather than create a viable financial system, Nobel Prize-winning economist Joseph Stiglitz said.

“All the ingredients they have so far are weak, and there are several missing ingredients,” Stiglitz said in an interview. The people who designed the plans are “either in the pocket of the banks or they’re incompetent.”

The Troubled Asset Relief Program, or TARP, isn’t large enough to recapitalize the banking system, and the administration hasn’t been direct in addressing that shortfall, he said. Stiglitz said there are conflicts of interest at the White House because some of Obama’s advisers have close ties to Wall Street.

Seems as if Stiglitz would agree with How Wall Street Bought Washington.

“We don’t have enough money, they don’t want to go back to Congress, and they don’t want to do it in an open way and they don’t want to get control” of the banks, a set of constraints that will guarantee failure, Stiglitz said.

The return to taxpayers from the TARP is as low as 25 cents on the dollar, he said. “The bank restructuring has been an absolute mess.” (more…)

Goldman Sachs Tells Uncle Sam Go Away!!

Posted by Larry Doyle on March 25th, 2009 9:46 AM |

Like it or not, Goldman Sachs is widely considered to be the preeminent risk manager in the world. I would never blanketly endorse Goldman Sachs nor every one of their transactions or employees. Anything but. I am sure Goldman, like every institution in every industry, has some bad apples who will and have made some bad, if not outright illegal, moves. If so, the proper regulatory authorities should address, investigate, and if need be prosecute. I am here to write on a different topic. Goldman Sachs does not want Uncle Sam as a business partner. Whether Goldman wanted government money last Fall via the TARP (Troubled Asset Recovery Program) or not, the firm very clearly wants to return those funds soon.

Goldman Sachs is currently working with government officials to return $10 billion in TARP funds by late April. The firm will look to make this return after the U.S. Treasury completes its first round of bank stress tests. Other smaller banking institutions are looking to do the same. (more…)






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