Category Archives: banking

Is Your Money Safe at Citibank?

Posted on November 13, 2008 by Felix

The massive Wall Street rally this afternoon, and a statement in support of Citigroup’s chairman, didn’t help Citi, which closed down slightly on the day at $9.45 a share. Clearly the market is very worried about Citi’s future, and the … Continue reading →

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Citi Valuation Question

Posted on November 13, 2008 by Felix

A quick follow-up to the Citi post: Citigroup’s market capitalization, of $53 billion, is $73 billion below its book value, of $126 billion. Has any company ever traded more than $50 billion below book and survived?

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Citi’s Desperate Straits

Posted on November 13, 2008 by Felix

America, we have a problem. Citigroup is the largest bank in America, with a balance sheet of over $2 trillion — and it’s also the most dysfunctional. Since Vikram Pandit took over, Citi has lost not only $20 billion but … Continue reading →

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Great Moments in Journalism, Amex Edition

Posted on November 12, 2008 by Felix

The AP reports on today’s fall in Amex shares: American Express Co. shares plunged Wednesday after a report that the credit card issuer is seeking $3.5 billion in funds under the government’s plan to directly invest in financial firms… The … Continue reading →

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How Banks Need to Mollify the Public Sector

Posted on November 12, 2008 by Felix

I just got off the phone with ProPublica’s Dick Tofel; we talked quite a bit about the Goldman Sachs story they put out yesterday, but unfortunately they don’t seem inclined to say anything on the record. One thing which is … Continue reading →

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Who Would Bail Out Switzerland’s Banks?

Posted on November 11, 2008 by Felix

Richard Baldwin of VoxEU gives us a sneak preview of a new article by Jon Danielsson: In this crisis, the strength of a bank’s balance sheet is of little consequence. What matters is the explicit or implicit guarantee provided by … Continue reading →

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ProPublica’s Goldman Sachs Hatchet Job

Posted on November 11, 2008 by Felix

ProPublica is a non-profit investigative-journalism shop founded by Paul Steiger, the former managing editor of The Wall Street Journal. So you’d expect that when it moves into the world of finance, during a credit crisis which has thrown up its … Continue reading →

Posted in banking, journalism | 8 Comments

Goldman Sachs: Back in the Crosshairs

Posted on November 10, 2008 by Felix

What is going on over at Goldman Sachs, whose shares are down 10% or so today at $70 apiece? John Carney says that the market fears Goldman might be lining up yet another secondary equity offering — after raising $10 … Continue reading →

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Two Investment Bank Post-Mortems

Posted on November 9, 2008 by Felix

Jennifer Hughes deserves some kind of medal for her magnificent article on Lehman Europe’s insolvency in this weekend’s FT. Hughes’s piece clears up a large number of questions about UK law, the $8 billion taken from Lehman Europe by Lehman … Continue reading →

Posted in banking, journalism | 5 Comments

Bank Deposit Datapoint of the Day

Posted on November 7, 2008 by Felix

Robert Peston, yesterday, after the Bank of England rate cut: I’ve just had a call from an astonished individual who has several hundred million pounds that he puts on deposit in various banks. As of 10 minutes ago, a leading … Continue reading →

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Big Moves in Low-Priced Stocks

Posted on November 5, 2008 by Felix

I’ve been doing quite a good job of screening out stocks-are-up-stocks-are-down noise of late, which is a good thing, but allow me a small relapse in response to Jim Surowiecki, who talks today about what happened to Citigroup stock this … Continue reading →

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Why Bank of America has to Re-Hire Merrill’s Brokers

Posted on November 4, 2008 by Felix

I just had a very interesting conversation with a Merrill Lynch type who filled me in with much more information on the subject of those retention bonuses. The numbers: Bank of America wants Merrill’s most profitable brokers. Most brokers earn … Continue reading →

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Landsbanki Debt Settles at 1 Cent on the Dollar

Posted on November 4, 2008 by Felix

What happens to unsecured bondholders when a financial institution goes bust? A good place to start is to look at the settlement price in CDS auctions. Fannie and Freddie settled in the high 90s: yes, there was a credit event, … Continue reading →

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Financial Crisis: Not Hitting Brokers

Posted on November 3, 2008 by Felix

Just how parlous a state is Wall Street in right now? In one of the more encouraging signs I’ve seen of late, a fight is brewing at Merrill Lynch — over the size of the "retention bonuses" that Bank of … Continue reading →

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When Wall Street Takes Advantage of the Public Sector

Posted on November 3, 2008 by Felix

Andrew Clavell called it, back in February: Let’s assume you work at a Pennsylvania school board… The more complex the structured product, the more opportunity for agents to extract fees at your expense… If you claim you do know where … Continue reading →

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Liaquat Ahamed’s Lehman Question

Posted on November 2, 2008 by Felix

Add economic historian Liaquat Ahamed to the ranks of those, like Paul Krugman, who think that monetary policy has at this point done all that it can do, and that the next important step will have to be fiscal. I … Continue reading →

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When Banks Stop Underwriting

Posted on October 30, 2008 by Felix

Citigroup and Credit Suisse are so damaged by the financial crisis, it seems, that they’ve given up underwriting loans to their biggest and most valuable corporate clients, including Nestle and Nokia. Instead, they’re linking those loans to the companies’ CDS … Continue reading →

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Why Banks Should Lend Out Treasury’s Funds

Posted on October 29, 2008 by Felix

Paul Kedrosky has a peculiar argument today, saying that banks shouldn’t lend the money they’re getting from Treasury: Banks are looking at a changed world, one with deleveraging everything, consolidation happening apace, and defaults almost certain to rise rapidly over … Continue reading →

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Did the End of the Investment Banks Cause the Latest Sell-Off?

Posted on October 27, 2008 by Felix

Robert Peston thinks that much of the recent sell-off can be attributed to the decision by Goldman Sachs and Morgan Stanley to convert into banks: It was caused, to a large extent, by an exceptional and unprecedented shrinkage in the … Continue reading →

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How the Lehman Bailout Increased Moral Hazard

Posted on October 24, 2008 by Felix

David Schelicher emails with a provocative question, in the wake of my IM exchange with John Carney yesterday: what if letting Lehman fail actually increased the amount of moral hazard involved in lending to banks? "Moral hazard is based on … Continue reading →

Posted in bailouts, banking | 1 Comment

Germans Suffer from Exposure in Iceland

Posted on October 24, 2008 by Felix

Iceland has three banks. Between them they have $61 billion in liabilities, or about 12 times Iceland’s GDP — which clearly makes it impossible for the Icelandic government to bail them out. But who lent Iceland’s banks so much money? … Continue reading →

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The Credit Crunch Isn’t a Myth

Posted on October 22, 2008 by Felix

Joe Wiesenthal points to a new paper from the Minneapolis Fed which seems to show that bank lending’s quite healthy. A lot of bank lending is going up, say the authors, and therefore the banking system can’t be in as … Continue reading →

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The Global Crisis

Posted on October 21, 2008 by Felix

On Saturday, Brad Setser, following Peter Garnham, made the very important point that while the big countries’ central banks have each others’ backs, emerging-market countries are being left out in the cold. For all the talk about how the G-7 … Continue reading →

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The Return of Lending: Still Distant

Posted on October 21, 2008 by Felix

Andrew Ross Sorkin gets an astonishing, if anonymous, quote this morning: “It doesn’t matter how much Hank Paulson gives us,” said an influential senior official at a big bank that received money from the government, “no one is going to … Continue reading →

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Why the CDS Market Didn’t Fail

Posted on October 19, 2008 by Felix

Jane Baird has the latest on what Alea calls "the non-event of the year": the Lehman Brothers CDS settlement on Tuesday. The upshot is that there’s very little to worry about: the worst-case scenario is limited to the failure of … Continue reading →

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