Archive for the ‘Banking Institutions’ Category
Posted by Larry Doyle on August 26th, 2009 9:26 AM |
French President Nicolas Sarkozy
How is it that the country that is supposed to be the bastion of capitalism and free enterprise is taking serious direction on the topic of banker compensation from none other than French President Nicolas Sarkozy? The fact that Sarkozy is elevating the banker compensation topic prior to the G-20 meeting in Pittsburgh in September is a clear indication that the powers that be in Washington and on Wall Street have failed miserably on this topic.
There is NO doubt those on Wall Street would like to return to ‘business as usual’ as quickly as possible. Little do the Wall Street wizards appreciate that the ‘usual business’ brought our country to its knees. Let’s address the ultimate motivator, that is, compensation.
Wall Street’s initial response to potential increased oversight of the compensation process has been to increase salaries as an overall percentage of compensation. From a productivity standpoint, I view this maneuver as counterproductive. Increased salaries will increase fixed costs and actually serve as a disincentive. The fact is compensation needs to be viewed in its entirety, both salary and bonus. The entire process should not be gamed by firms to appease regulators.
Bloomberg highlights French President Sarkozy’s approach toward banker compensation in writing, Sarkozy Threat to Shun Banks on Pay Draws U.S. Alarm:
Aug. 26 (Bloomberg) — French President Nicolas Sarkozy’s plan to shun bankers who don’t accept pay limits was met with alarm by analysts and investors in the U.S., where Citigroup Inc. and six other bailed-out companies are being grilled by the government on how they compensate top-paid executives.
I am definitely not for strict government control of private enterprise compensation; however, if the boards of these private enterprises are not performing to protect the industry, the franchises, and the shareholders, then those boards need to be exposed. From my standpoint, the boards are a large part of the problem. Why? The boards are in the pocket of the senior executives. The senior executives have shown themselves to be excessively greedy and disinterested in protecting the industry and, in turn, our country.
Moving right along, I have always maintained that Wall Street banks must be obligated to fully align compensation with returns generated and risks remaining on the books. What do I mean? (more…)
Tags: Greatest motivator is compensation, Sarkozy addresses banker compensation, Sarkozy Threat to Shun Banks on pay Draws U.S. Alarm, Wall Street and Washington are selfish, Wall Street and Washington have failed to address compensation topic, Wall Street boards are in managment pocket, Wall Street boards are part of compensation problem, Wall Street bonuses, Wall Street business as ususal includes compensation, Wall Street compensation, Wall Street compensation should be more stock and longer vesting period, Wall Street has increased salaries as percentage of compensation, Wall Street needs more onerous compensation system, Wall Street needs to align risk and reward meaning compensation, Wall Street salaries and compensation, Wall Street's residual risks
Posted in Banking Institutions, General, Wall Street, Washington D.C. | 1 Comment »
Posted by Larry Doyle on August 21st, 2009 8:04 AM |
If a financial position is hidden, disguised, or in some manner unreported, does that mean it does not exist or is not impactful? Will the American taxpayer continue to bear the burden of unsafe and undisciplined lending and investment practices on behalf of our banking system without being able to demand truth and transparency? Make no mistake, these very practices have brought our economy and financial system to its knees and if the banking system continues to get its way, we will remain subject to the massive risks connected with them. Let’s navigate this corner of our economic landscape and see what the implications are going forward.
CFO Magazine highlights the growing pressure from within the banking industry to delay the implementation of accounting rules requiring banks to bring investment positions onto the balance sheet and raise sufficient capital to support them. In short, these accounting rules would strike at the nexus of the off-balance sheet vehicles which crippled many banks. CFO reports:
Bank regulators are set to discuss accounting standards next week, with an aim toward determining the potential affects that off-balance-sheet rules may have on some financial institutions. During the past year, bankers have fretted about new accounting rules that would force them to bring back on their balance sheets billions of dollars worth of assets — a move bankers have argued will throw regulatory capital ratios into chaos.
Bankers may fret, but taxpayers are picking up the tab on an ongoing basis. If these bankers really want to see ‘fretting,’ then they should start talking to the American public.
Why are the bankers concerned about implementing these new accounting rules? They believe it will force them to raise new capital, dilute their stock value (which will most likely negatively impact their own personal wealth), and increase the potential of a takeover or some other form of business transfer, including potential liquidation. The bankers would prefer to continue to operate in an undercapitalized fashion while they ‘hope and pray’ for a turnaround in the housing market which is at the very core of their investment holdings and overall franchise. (more…)
Tags: bank regulators assessment of accounting practices, bank SPEs, bank stress tests and accounting practicess, banks accounting practices, banks hiding losses, banks need to raise more capital, banks want to maintain off balance sheet activities, CFO report on bank accounting, FAS 140 and FIN 46 (R), FAS 166 and FAS 167, In New Phase of Crisis Securities Sink Banks, transparency within bank accounting practices, will banks have to end off balance sheet activities
Posted in Banking Institutions, General | 10 Comments »
Posted by Larry Doyle on August 20th, 2009 8:54 AM |
Did our markets and economy look into the abyss during the 1st quarter of this year only to be saved by the policies and programs of Uncle Sam? Are we on the road to recovery or have we merely papered over the problems embedded in a host of our larger institutions?
Thomas Hoenig, president of the Federal Reserve Bank of Kansas City
The decision to effectively bail out certain financial institutions deemed ‘too big to fail’ was not unanimous amongst the Federal Reserve governors. The head of the Kansas City Fed, Thomas Hoenig, believes the Fed, Treasury, and other members of Uncle Sam’s family should have allowed more institutions to fail.
Hoenig addressed this topic last Spring in writing Too Big Has Failed. I resubmit his review simply because I do not believe the underlying issues have changed or been effectively addressed. What are these issues?
1. Losses must be identified and realized.
2. Management must be replaced.
Until both these steps are taken, true health can not return to the system.
Hoenig discounts the systemic risk argument put forth by government officials and believes we have chosen a path of slow recovery with an increased cost borne by the American taxpayer. The powers that be are effectively transferring the losses from the institutions to the public. (more…)
Tags: Allan Meltzer capitalism without failure is like religion without sin, Hoenig calls on bank management being replaced, Hoenig discounts systemic risk, Hoenig stirs Debate on Bank Failures as Fed Forum Convenes, identifying losses within the banking system, Thomas Hoenig of Kansas City Fed, Too Big Has Failed by Hoenig
Posted in Banking Institutions, General | 6 Comments »
Posted by Larry Doyle on August 13th, 2009 11:33 AM |
Should we add a little spice for flavoring to the low simmering stew represented by a number of banks’ books and records?
In the spirit of continuing our focus on increasingly delinquent and defaulted loans, I again reference leading Wall Street representatives as sources of information on this topic. Let’s take a whiff of the aroma coming off the stove.
1. The single best financial reporter on Wall Street, Jonathan Weil of Bloomberg, writes Next Bubble to Burst is Banks’ Big Loan Values:
Check out the footnotes to Regions Financial Corp’s latest quarterly report, and you’ll see a remarkable disclosure. There, in an easy-to-read chart, the company divulged that the loans on its books as of June 30 were worth $22.8 billion less than what its balance sheet said. The Birmingham, Alabama-based bank’s shareholder equity, by comparison, was just $18.7 billion.
So, if it weren’t for the inflated loan values, Regions’ equity would be less than zero. Meanwhile, the government continues to classify Regions as “well capitalized.”
What other banks are preparing this meal? Weil does yeoman work in highlighting the following:
>> Bank of America Corp. said its loans as of June 30 were worth $64.4 billion less than its balance sheet said. The difference represented 58 percent of the company’s Tier 1 common equity
>>Wells Fargo & Co. said the fair value of its loans was $34.3 billion less than their book value as of June 30. The bank’s Tier 1 common equity, by comparison, was $47.1 billion.
>>Suntrust Banks Inc. showed a $13.6 billion gap as of June 30, which exceeded its $11.1 billion of Tier 1 common equity.
>>Key Corp said its loans were worth $8.6 billion less than their book value; its Tier 1 common was just $7.1 billion.
In the spirit of full disclosure, not all banks are cooking their books; some have finished the cooking, dined, and washed the dishes under Uncle Sam’s guidance. Weil asserts:
The trend in banks’ loan values is not uniform. Twelve of the 24 companies in the KBW Bank Index, including Citigroup Inc., said their loans’ fair values were within 1 percent of their carrying amounts, more or less. Citigroup said the fair value of its loans was $601.3 billion, just $1.3 billion less than their book value. The gap had been $18.2 billion at the end of 2008.
2. High five once again to 12th Street Capital for pointing out the state of the simmering undertaken by the Federal Home Loan Bank system. KD references an article from The American Banker: (more…)
Tags: 12th Street Capital, American banker report on Federal Home Loan Banks, are banks cooking the books, bank accounting, bank accounting games, bank books and records, bank cooking, bank of America loan valuations versus tangible common equity, banks cooking the books, Federal Home Loan Bank system earnings 2nd quarter 2009, FHLB benefits from accounting changes, government classifies Regions financial as well capitalized, impact of delinquent and defaulted loans on bank earnings, Japan's Lost Decade, Jonathan Weil of Bloomberg, KBW bank Index, Key Corp loan valuations versus common equity, net income at FHLBs, Next Bubble to Burst is Banks' Big Loan Values, Office of Finance for FHLB releases earning statement, regions Financial Corps financials and accounting, Regions Financial's loan valuaitons versus tangible common equity, Suntrust Banks loan valuations versus common equity, Wells fargo's loan valuations versus common equity, what is OTTI
Posted in Banking Institutions, General | 9 Comments »
Posted by Larry Doyle on August 12th, 2009 4:53 PM |
High five to Always Learning for pointing out that not unlike the disparity in the housing and mortgage markets, the banking industry is truly a tale of two systems. Those systems being institutions deemed ‘too big to fail’ and everybody else. I am increasingly concerned about this very prospect. Why?
The largest institutions are now married to Uncle Sam, whether either partner likes it or not. Certain of these marriages (Citi and BofA) are more formal while the balance are more ‘friends with benefits.’
What about the small fry banks struggling with loan books that continue to bleed money but without the capital market activities to generate the gift-like earnings supported by the totally accomodative Federal Reserve? What does the future hold for these institutions?
First and foremost, a significant number of these banks are burdened by rising delinquencies and defaults in their commercial, construction, corporate, and residential loan books. As Bloomberg highlights in writing, TARP Panel Says Smaller Banks May Need Fresh Capital:
Regional and some smaller U.S. banks may need $12 billion to $14 billion in additional capital to cope with troubled loans still on their books, the Congressional Oversight Panel said today in a monthly report.
The panel, which reports to lawmakers and was created to monitor the $700 billion Troubled Asset Relief Program, said the biggest U.S. banks appear prepared to handle more loan losses, particularly the 19 banks that regulators put through stress tests earlier this year. Banks with assets of $600 million to $100 billion may face bigger challenges, the panel said.
My gut instinct tells me that the $12-14 billion figure for banks beyond the top 19 is likely low. That said, where may these institutions raise this capital? One of three places: (more…)
Tags: are banks able to sell whole loans, banks married to Uncle Sam, banks too big to fail, Congressional Oversight Panel report on small banks, disparity in banking industry, Elizabeth Warren comments on smaller and regional banks, future of many small and regional banks, how will regulators manage greater risks in institutions deemed too large to fail, how will small banks raise capital, large banks versus small and regional banks, small banks without capital market activities, split in banking industry, struggles of small banks, TARP Panel Says Smaller Banks May Need Fresh Capital, what are smaller banks doing with whole loans, what happened to Legacy Loan Program, who woudl buy assets of smaller banks
Posted in Banking Institutions, General | 2 Comments »
Posted by Larry Doyle on July 17th, 2009 9:09 AM |
On Wall Street, information is everything!! Access to the information is invaluable. Why? Given the speed with which markets move, any early hint of developing news is priceless in terms of the ability to transact quickly and profitably.
Why is ‘high frequency program trading’ viewed with such skepticism? Select participants with advanced computer programs gain access to market flows prior to other participants and are able to act on it. That playing field is not level. I shared my disdain for this practice in writing, “Why High Frequency Program Trading Smells.”
What other battles are being waged by Wall Street firms looking to defend their turf at the expense of consumers and investors? Credit cards and credit derivatives. Which Wall Street firm has the greatest combined exposure to these businesses? None other than JP Morgan Chase.
The Financial Times highlights how JP Morgan Chief Hits at Credit Card Rules:
Jamie Dimon, chief executive of JP Morgan Chase, on Thursday hit out at strict rules on US credit cards, saying they would cost the bank’s lossmaking card unit up to $700m next year.
While Mr. Dimon is railing on new legislation aimed to protect consumer interests in the credit card space, he conveniently avoids mentioning how both JP Morgan Chase and Bank of America are already implementing procedures to skirt that legislation. How might these financial behemoths do that? Shift from fixed rate credit cards to variable rate. I exposed this maneuver a few weeks back in writing, “Banks Build Better Mousetrap.”
Dimon continues his defense of JP Morgan’s franchise:
He singled out the credit card provisions, which from February (2010..LD’s edit) will constrain lenders’ ability to raise rates for risky borrowers, and rules that propose to move most derivatives trading on to exchanges as two contentious areas.
The tough stance by JPMorgan reflects Wall Street’s new-found confidence in lobbying regulators and the government. After keeping a low profile during the crisis, many of the banks that repaid the bail-out funds are becoming more aggressive in Washington.
In regard to derivatives activity, JP Morgan has a dominant position in the market. Why? Their strong capital position, enormous balance sheet, and strong credit rating make them an attractive counterparty for customers. Make no mistake, JP Morgan has a license to ‘print’ money, and a lot of it, across the entire derivatives platform.
While Washington will tout how they are increasing regulation of the derivatives space, this business is truly multi-pronged. There are plain vanilla derivatives in more highly liquid sectors of the market. These ‘standardized’ derivatives will most certainly move to an exchange to create total transparency. Value added for customers will be minimal only because these markets are already fairly well defined and exposed. JP Morgan and other Wall Street firms will cede this ‘standardized’ space while they fight tooth and nail to maintain their enormously advantageous position in the area of ‘customized’ derivatives.
There is little to no transparency in the world of customized derivatives and as a result the bid-ask spreads are very wide. Cha-ching, cha-ching. Jamie and his friends on Wall Street are working extremely hard to keep it this way.
In their defense, it is likely not functionally feasible to move many customized derivatives to an exchange. What should regulators compel them to do? JP Morgan and every other financial firm on Wall Street should have to report every derivatives transaction to a system known as TRACE, which stands for Trade Reporting and Compliance Engine. This system currently only covers transactions within the cash markets and not derivatives. What does that mean for investors? No transparency and price discovery for investors in the customized derivatives space. As such, Jamie and friends can keep those bid-ask spreads nice and wide and ring up huge profits in the process.
I won’t make many friends on Wall Street, and perhaps lose some of my current friends, but TRACE should be implemented across all product lines. For those involved in the markets, please access the TRACE system to gain a wealth of pricing data while keeping your brokers and financial planners honest!!
LD
Tags: access to information on Wall Street, Bank of America credit card business, Bank of America variable rate credit cards, CDS business on Wall Street, credit card business, credit card industry, credit card legislation, does high frequency program trading add liquidity, high frequency program trading, how does high frequency program trading work, how does JP Morgan make money in derivatives, how does TRACE work, how is information hoarded on Wall Street, information is everything, is high frequency program trading front-running, is information evenly distributed on Wall Street, is Wall Street a level playing field, Jamie Dimon comments on credit cards, Jamie Dimon comments on derivatives, Jamie Dimon defending JP Morgan's franchise, Jamie Dimon fights back, Jamie Dimon flexes muscle, Jamie Dimon hits at credit card rules, Jamie Dimon speaks about derivatives regulation, JP Morgan CDS franchise, JP Morgan Chief Hits at Credit Card Rules, JP Morgan credit card business, JP Morgan derivatives franchise, JP Morgan's business, JP Morgan's strengths, lack of transparency on Wall Street, plain vanilla derivatives versus customized derivatives, price discovery within derivatives, proposed Wall Street regulations, standardized derivatives versus customized derivatives, TRACE brings price discovery, Trade reporting and Compliance Engine, tranparency within derivatives, variable rate credit cards, Wall Street CDS franchise, Wall Street defends turf, Wall Street derivatives business, Wall Street lack of transparency, Wall Street lobbying continues, Wall Street lobbying on derivatives front, Wall Street reforms in derivatives, what financial products does TRACE cover, what is TRACE, where can I access price information on financial products, why is JP Morgan so strong, will new Wall Street regulations bring transparency
Posted in Bank of America, Banking Institutions, Credit Card companies, General, Jamie Dimon, JP Morgan, regulation | 2 Comments »
Posted by Larry Doyle on July 14th, 2009 8:09 AM |
A number of major financial institutions are reporting 2nd quarter earnings this week. Actually, to say these institutions are truly reporting earnings would be a misnomer. To a large extent, these institutions are releasing managed earnings reports. What does that mean? Let’s navigate this ever important sector of our economic landscape.
In simplistic fashion, earnings are revenues less expenses. While financial analysts may want us to take reported earnings on face value, there is a lot more to it than that. What are the quality of the earnings? Are revenues increasing or decreasing? Are expenses increasing or decreasing? Are net margins of profitability increasing or decreasing? Are earnings a function of a growth in revenues or more a reduction in expenses?
In regard to a financial institution’s earnings, the greatest expense is typically compensation and benefits. On Wall Street, the expense associated with personnel usually runs between 50-55% of overall expenses.
On the revenue side of the ledger, earnings are broken down by division. How much revenue is produced from fee-generating business units and is repeatable versus how much is generated from volatile trading businesses and is thus more risky. Fee generating revenue is considered to be of higher quality. As such, the market attaches a higher multiple to the earnings from those business units.
In my opinion, the most opaque component of earnings and income statements revolves around valuations of assets held on the financial institution’s books. This component of an earnings statement is truly where the financial wizards on Wall Street get most creative. The assets to which I refer are:
1. Securities positions, that is, the variety of different bonds, stocks, and derivatives held by the institutions. While plenty of these assets are very liquid, easily evaluated, and thus easily marked, others are much less so. For a wealth of toxic assets (different types of mortgage assets, CDOs, and the like), these institutions were blessed by the FASB (Federal Accounting Standards Board) to mark them at levels which they deem appropriate versus where the assets may actually be trading in the marketplace. In the process, these institutions are sitting on hundreds of billions of embedded, yet unrealized, losses. How and when may those losses be recognized? When the underlying loans backing these securities default. Let’s move to that aspect of ‘managed earnings.’ (more…)
Tags: 2nd quarter bank earnings, are banks assets marked appropriately, are banks reserving enough against bad loans, bank earnings are managed, bank reserves against bad loans, banks are front end loading earnings, banks have underreserved, can earnings reports be trusted, components of earnings reports for banks, earnings quality for banks, embedded losses on banks books, fee generating businesses for banks, financial charade by banks, financial earnings reports more managed than real, how are earnings reports generated, how are reserves set aside by banks, how are securities marked on a banks books, how do banks make money, how do banks value assets on books, levels of defaults on bank loans, levels of delinquencies on bank loans, levels of foreclosures on bank loans, managed earnings versus real earnings, multiples attached to business units of banks, quality of bank earnings, relaxation of mark to market, should we take bank earnings on face value, trading revenue businesses for banks, what do bank earnings cover, what is a multiple for earnings, what is behind bank earnings, what level of reserves do banks set aside, when are embedded losses recognized by banks, where do banks make money
Posted in bank earnings, Banking Institutions, General | No Comments »
Posted by Larry Doyle on July 9th, 2009 7:54 AM |
Is there truly any reason to trust financial institutions these days?
Developments within the credit card space have exposed the true colors of these institutions . . . not that there was ever any doubt. Recall how consumer outrage at rapidly rising interest rates on credit cards pressured Washington to rein in the usurious business practices of the financial industry.
New legislation was badly needed as banks clearly utilized abusive business practices. The Wall Street Journal highlighted these developments in writing on May 21st, Credit-Card Fees Curbed:
“Credit cards are a tremendously valuable and useful tool for consumers, providing them with relief during critical moments,” said Senate Banking Committee Chairman Christopher Dodd. “This is a very important industry….We just want it to work better.”
The legislation marked a major defeat for the credit-card industry, as lawmakers complained that consumers are being hit with tricks and traps on their cards.
Well, while the legislators were in the front room having the photo ops, the bankers were in the back room building a new and better mousetrap, at least from their perspective.
The Los Angeles Times sheds light on how Credit Card Firms Try End Run Around New Federal Rules:
Banks are quietly changing the terms of millions of credit card accounts as they brace for a tough new law that will limit rate hikes.
The law would restrict interest rate increases unless a credit card has a variable rate. So at least two major lenders are switching their cards with fixed rates to — you guessed it — variable rates.
“It’s completely unfair,” said Linda Sherry, a spokeswoman for Consumer Action. “It’s an end run around the intent of the new law.”
That law is the Credit Card Accountability, Responsibility and Disclosure Act, which President Obama affixed with his signature in May. Its various provisions will be phased in between next month and February.
Who are these two major lenders? Bank of America and JP Morgan Chase. Given the size of their operations, watch every other credit card issuer set the same trap. (more…)
Tags: Bank America changing credit card business practices, banks are rising rates on credit cards, can I trust financial institutions, Credit Card Accountability, Credit Card Firms Try End Run, credit card industry, credit card legislation, credit cards, credit cards changing approach, credit cards changing business practice, credit cards changing to variable rates, Credit-Card Fees Curbed, JP Morgan Chase changing credit card business practice, Linda Sherry, Los Angeles Times article on credit cards, responsibility and Disclosure Act, rising interest rates on credit cards, Senator Chris Dodd speaks on credit cards, spokeswoman for Consumer Action, usury, variable rates on credit cards, Victoria Afonina, why are credit card rates increasing
Posted in Bank of America, Banking Institutions, Credit Card companies, General, JP Morgan | 6 Comments »
Posted by Larry Doyle on July 7th, 2009 5:15 PM |
Is the charade played out on Wall Street and in Washington anything more than the equivalent of a dinnertime show at a casino complex?
Politicians and bankers work the stage while the media maitre’d pretends to care how you really feel. Ultimately, the curtain goes down, the lights go on and you’re stuck with a bill that leaves you aghast.
Welcome to the Brave New World of the Uncle Sam economy 2009.
Today Bloomberg releases news that Delinquencies on U.S. Home-Equity Loans Reach Record:
Late payments on home-equity loans rose to a record in the first quarter as 18 straight months of job losses and a slumping economy left more borrowers unable to pay their debts, the American Bankers Association reported.
The ABA is not exactly timely with this news in regard to home equity lines of credit; Sense on Cents shared similar color on May 20th in “Bank Stress Tests: Vigorous or Sham? Let’s Review HELOC Losses”:
For those not aware, Turbo-Tim Geithner’s Bank Stress Test utilized an assumed cumulative loss on this product of 6-8% in the base case. The most adverse scenario assumed cumulative losses on HELOCs of 8-11%.
What did our 12th Street Capital friends learn in their analysis? KD writes:
What I find very interesting here is comparing the Cumulative Loss numbers on these deals versus the Government’s assumption of losses in the stress test. As a reminder, our friends in D.C. assumed in a More Adverse Scenario that Helocs on bank balance sheets would generate losses of 8% to 11%. Now I know their numbers represent the projections going forward for the next two years, but when you take a look at numerous ‘06 and ‘07 deals already ringing up losses north of 20% I find it hard to reconcile. I think the Treasury has a very rosy picture of the loss curve going forward.
This brings us to the topic of losses within the banking system and the integrity of the Bank Stress Tests. The Wall Street banks were more than happy to “put on a show” with Secretary Geithner leading the orchestra and the FASB in a supporting role given their relaxation of the mark-to-market. Now we get to revisit the fact that banks are still sitting on hundreds of billions in embedded losses. (more…)
Tags: ABA report on loan delinquencies, American Bankers Association report on loan delinquencies, assumed HELOC losses in Bank Stress Tests, Bank Stress Tests Major Sham, banks need $300 billion, banks will lose more money, Brave New World of Uncle Sam Economy, charade on Wall Street and Washington, Delinquencies on U.S. Home Equity Loans Reach Record, Deutsche Bank report on bank losses, FASB relaxation of mark to market, FDIC comment on Bank Stress Tests, HELOC losses, how much more money do banks need, Kevin Doyle of 12th Street Capital, managed earnings for banks, normalized profits for banks, politicians and bankers are showmen, relationship Wall Street and Washington, U.S. Lenders May Have to Raise $300 Billion, Wall Street Washington show, what are normalized profits
Posted in Bank Stress Test, Banking Institutions, Economy, General, markets, Wall Street, Washington D.C. | 3 Comments »
Posted by Larry Doyle on June 19th, 2009 7:28 AM |
“That’s the way we’ve always done it!!”
How often have you heard a person answer in that fashion when asked why something is done a certain way? A lot, I’m sure. Why? Change is stressful. Adjusting to change is perhaps even more stressful.
As we are forced to adjust to the Brave New World of the Uncle Sam Economy, we will certainly witness many individuals, business units, and industries resist change. I’m seeing them all around me. Let me share a few with you:
1. FINRA: at a time when our economy is screaming for increased transparency and accountability, this Wall Street self-regulatory organization has not yet released its 2008 Annual Report. Why? I view it as unacceptable.
The facts, figures, and transactions for 2008 are in the books. A mere accounting should be simple and straightforward. With the exception of Bloomberg, do you even hear of FINRA from major media outlets?
Rest assured, I will review the FINRA Annual Report thoroughly, with particular focus on their investment activities, and question them as need be. At some point, perhaps, the mainstream media may want to engage them as well.
2. Wall Street: why do banks so badly want to pay back TARP funds? The primary reason is compensation. In fact, in recently speaking with a number of colleagues on the street, banks are again paying “guaranteed” contracts to recruit personnel. Certain of these banks remain flush with government funds.
What propels banks to do this? Because they can, meaning there is no transparency or accountability. Additionally, they do not want to “cede turf” to startup firms which can offer opportunity but no guarantees. In layman’s terms, the large banks are flexing their muscles to impede smaller organizations from gaining a foothold in their ‘hood.’ Fair and open competition is one thing, but using taxpayer funds to pay guaranteed contracts is an entirely different issue.
3. Banking: why do banking industry execs feel compelled to maintain the perks of prior years? Ego. The Wall Street Journal highlights CEOs of Bailed-Out Banks Flew to Resorts on Firm’s Jets.
Business is business and executives, whether working at firms flush with government aid or not, need to compete. That said, if the executives are at firms still in receipt of government assistance . . . “back of the bus, pal.”
LD
Tags: back of the bus, Bankers on corporate jets, bankers using corporate jets, banks with government assistance, business as usual, business as usual on wall street, compensation on Wall Street, FINRA, FINRA 2008 Annual Report, lack of accountability on Wall Street, lack of transparency at Finra, lack of transparency on Wall Street, mr. banker, Uncle Sam economy, Wall street guaranteed bonuses, Wall Street guaranteed contracts, Wall Street guarantees, where is finra's 2008 annual report
Posted in Banking Institutions, FINRA, General, Wall Street | 1 Comment »
RSS Feed
Twitter
Facebook
Email
Home
Is ‘Too Big to Fail’ Our Worst, Best, and Only Option?
Posted by Larry Doyle on August 12th, 2009 4:53 PM |
The largest institutions are now married to Uncle Sam, whether either partner likes it or not. Certain of these marriages (Citi and BofA) are more formal while the balance are more ‘friends with benefits.’
What about the small fry banks struggling with loan books that continue to bleed money but without the capital market activities to generate the gift-like earnings supported by the totally accomodative Federal Reserve? What does the future hold for these institutions?
First and foremost, a significant number of these banks are burdened by rising delinquencies and defaults in their commercial, construction, corporate, and residential loan books. As Bloomberg highlights in writing, TARP Panel Says Smaller Banks May Need Fresh Capital:
My gut instinct tells me that the $12-14 billion figure for banks beyond the top 19 is likely low. That said, where may these institutions raise this capital? One of three places: (more…)
Tags: are banks able to sell whole loans, banks married to Uncle Sam, banks too big to fail, Congressional Oversight Panel report on small banks, disparity in banking industry, Elizabeth Warren comments on smaller and regional banks, future of many small and regional banks, how will regulators manage greater risks in institutions deemed too large to fail, how will small banks raise capital, large banks versus small and regional banks, small banks without capital market activities, split in banking industry, struggles of small banks, TARP Panel Says Smaller Banks May Need Fresh Capital, what are smaller banks doing with whole loans, what happened to Legacy Loan Program, who woudl buy assets of smaller banks
Posted in Banking Institutions, General | 2 Comments »