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HomeBloomberg’s Jonathan Weil Believes BofA and Citi Need More Capital
Posted by Larry Doyle on June 17th, 2011 3:41 PM |
Earlier this week, I inquired of BofA Shareholders, ‘How Long Can You Tread Water?’ and asked whether BofA may need more capital.
BofA’s CEO Brian Moynihan maintains that the institution does not. He stated as much earlier this month in a commentary in the Charlotte Observer,
Bank of America Corp. chief executive Brian Moynihan insisted Wednesday that his company won’t have to raise additional capital as it absorbs mortgage-related losses. (more…)
Jonathan Weil Reviews “The Truman Economy”
Posted by Larry Doyle on September 20th, 2010 7:13 AM |
What can we believe? Can we believe the economic reports put forth by our government? Can we believe the quarterly reports put forth by our financial institutions? Can we believe the price action in our markets? While “the market is the market,” has our country ever experienced a period in which there is such a massive disconnect between the real economy and what Uncle Sam has generated?
I am often reminded of the fabulous hit movie, The Truman Show, when thinking of our current economy and markets. How much of our economy is based on reality and what is merely staged? Bloomberg’s Jonathan Weil once again distinguishes himself in providing an “economic and market reality check” of our ‘Uncle Sam’ economy circa 2010. Weil writes, Zombie Banks Have Us Right Where They Want Us:
Two years after the collapse of Lehman Brothers and what rightfully should have been the death of American International Group, U.S. capital markets face a crucial question.
How long will it take before we see some semblance of robust free-market capitalism return, where the value of an asset is based on what bona fide market participants will pay for it, the cost to borrow money is based on a company’s fundamental financial strength rather than its ability to access a government safety net, and corporations are free to fail no matter what their size? (more…)
How Long Can Uncle Sam Rig the Game?
Posted by Larry Doyle on May 13th, 2010 5:32 PM |
Is the market rigged?
Actually, the question of whether our markets are rigged or not is becoming less and less a question and more widely accepted as fact. This reality is evidenced by the totally incredulous evidence that four major banks on Wall Street had perfect (not one negative trading day) first quarters.
Some may think this is good for our economy. I am not one of them. Why? (more…)
I’ll Gladly Pay You Tuesday…
Posted by Larry Doyle on December 3rd, 2009 9:26 AM |
Postponing losses in hopes that one can trade out of them is a game very rarely won. In similar fashion, not acknowledging losses in hopes that the situation improves and the loss is mitigated is also a recipe for disaster. All one needs to do is look eastward to Japan to realize that. Ultimately, a loss not only must be realized, but paid. “I’ll gladly pay you Tuesday for a hamburger today …” may be cute in cartoons, but in the real world that approach never works. That said, this ‘delay to pay’ is the exact approach being utilized by Uncle Sam and, in large measure, by private industry.
Bloomberg’s Jonathan Weil once again distinguishes himself and provides great insight on this dynamic in writing, Fudging Losses is Easy When the FDIC Does It Too:
No wonder so many banks are delaying their losses. The Federal Deposit Insurance Corp. keeps showing them how, by doing the same thing with its own.
Last week the FDIC, led by Chairman Sheila Bair since 2006, said its insurance fund’s liabilities exceeded assets by $8.2 billion as of Sept. 30. That marked the first time since 1992 that the industry-financed fund had shown a deficit. There’s plenty of reason to believe its financial health is much worse.
How much worse? (more…)
More Wall Street and Washington Incest
Posted by Larry Doyle on September 17th, 2009 1:15 PM |
The other day I saluted Judge Jed Rakoff for exposing the embedded hypocrisy and contrivance in the $33 million settlement paid by Bank of America to the SEC. Why don’t we have more judges with the courage and integrity to expose the incestuous nature of the Wall Street-Washington relationship? Great question. As an example of this incest, Bloomberg’s Jonathan Weil exposes the pathetic performance of Judge Robert Chatigny, from the U.S. District Court in Hartford, in his adjudication of a fraudulent accounting case brought by the SEC against General Electric. Weil writes, GE’s Fraud Case Could Use the Judge Gone Wild:
Finally a judge has dared say no to the once-venerable Securities and Exchange Commission and one of its cozy corporate settlements.
If that wasn’t novel enough, this fellow first had the nerve to ask the SEC a bunch of questions about the way it does its business. Turns out, he got a lot of embarrassing answers about the government’s investigation of Bank of America Corp that the SEC hadn’t planned to tell the rest of us about.
This jurist gone wild, now a folk hero of sorts, is U.S. District Judge Jed Rakoff. But before we go further, let me tell you a quick story about another judge, this one at the U.S. District Court in Hartford, Connecticut.
His name is Robert Chatigny. On Aug. 4, he was assigned a settled complaint the SEC filed that day against General Electric Co. Under the deal, GE agreed to pay $50 million of its shareholders’ money to resolve the agency’s claims that it had committed accounting fraud. The SEC didn’t name any actual people as defendants. We don’t know if it ever will. Chatigny approved the agreement six days later, with no hearing and no questions asked. GE neither admitted nor denied the allegations.
That’s how SEC cases usually go. And just think how much more we the public — and certainly GE shareholders — deserve to know about this supposed fraud. Who at the company committed it? Why hasn’t the SEC sued them? Doesn’t the SEC know who they are? Why aren’t they paying fines out of their own pockets? And why wasn’t Chatigny asking these kinds of questions?
I tried calling Chatigny yesterday to ask him. His law clerk said he couldn’t be reached for comment.
Why do firms such as GE or BofA commit these frauds or promote shoddy business practices? Because it is worth it. How so? The returns generated far exceed the potential fines or penalties imposed, so the practices continue.
The fact that Judge Chatigny or those of his ilk do not truly hold companies and individuals to account gives a quasi-green light for firms to continue to push the envelope. Who pays? Shareholders and the public at large. What are the real costs? The erosion of integrity and principle in the pursuit of profit. Who benefits? Individuals within these corporations and those in Washington who conveniently look the other way as these frauds play out.
I commend Jonathan Weil for once again shedding light into another dark, dank, dismal corner of American finance. We need more judges like Jed Rakoff and we need more journalists like Jonathan Weil.
LD
Putting Perfume on a Pig!!
Posted by Larry Doyle on April 2nd, 2009 9:45 AM |
***Bumped up from original publication time of 7:30AM. The FASB has now just voted its approval of the change in mark-to-market accounting.
It is speculated that the FASB (Federal Accounting Standards Board) will today relax its rule known as the mark-to-market. This rule requires firms under the FASB’s purview to mark their assets to changing market prices on an ongoing basis. The institutions subject to this rule have been lobbying FASB and Congress for a change because the markets for these assets have imploded and in certain cases totally dried up.
What does the FASB plan to do? The FASB is going to cave to the lobbying pressure and will allow institutions to use their own internal models based upon cash flow analysis to price these assets. This change in the mark-to-market will not only allow institutions the flexibility to not mark down certain assets, but simultaneously mark up other assets.
The media only presents the impacted assets as “hard to value” or the dreaded “mortgage-backed securities” or “securitized assets”. In fact, many of these assets are very simple and plain vanilla. Let’s enter the world of the Federal Home Loan Banks.
The FHLB system consists of 12 regional banks and it provides liquidity (capital) for its respective members to operate. The FHLB system invests its own capital, primarily in plain vanilla conventional mortgages (Freddie Mac, Fannie Mae, Ginnie Mae) and Jumbo ARMS (adjustable rate mortgages) and fixed-rate pass-thrus. Certain banks within the FHLB system may have moved slightly off the plain vanilla path to purchase a small percentage of sub-prime assets, but that was much more the exception than the norm. (more…)
