Category Archives: banking

USA: The Biggest Obstacle to Global Banking Regulation

Posted on October 18, 2008 by Felix

David Galbraith goes down the litany of problems with US banks which is familiar to any European in the US or, most likely, to anybody who even knows a European in the US. Most of it surrounds the ridiculous difficulty … Continue reading →

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Credit: No Easy Answers

Posted on October 17, 2008 by Felix

Robert Aliber has a peculiar op-ed in the FT, presenting a TARP plan "that should revive the market in mortgage-related securities, greatly enhance bank capital and earn several tens of billions of dollars for the US Treasury". It’s peculiar because … Continue reading →

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Why Banks Can Lend at Less Than 5%

Posted on October 16, 2008 by Felix

Sprizouse asks, in the comments: If the banks all got capital injections at 5% why do we expect LIBOR to fall? The banks have to make 5.01% on the money, just to make a profit. Why isn’t this troubling for … Continue reading →

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The Unintended Consequences of Deposit Insurance

Posted on October 15, 2008 by Felix

Alan Blinder and Glenn Hubbard make a good point today: Memo to Washington: Take a deep breath and ask, "What is the problem that unlimited deposit insurance is meant to solve?" It is not people lining up to take their … Continue reading →

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Will the Banks Lend?

Posted on October 14, 2008 by Felix

The NYT’s lead headline this afternoon is unambiguous: "Treasury Chief Says Banks Must Deploy New Capital". But in 2,300 words of reporting, reaching as far as a run on the Hungarian currency, this is the only mention of any requirement … Continue reading →

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Treasury’s Standardized Terms

Posted on October 14, 2008 by Felix

The details of Treasury’s recapitalization plan are out, and it’s more or less what I expected, but with a lower coupon. In fact it looks very much like Warren Buffett’s investment in Goldman Sachs, or MUFG’s investment in Morgan Stanley, … Continue reading →

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The Weakness of the Treasury’s New Bailout Plan

Posted on October 13, 2008 by Felix

The scorpion, it seems, is staying as true as he can to his nature. And although I’m the first to admit that this is no time to worry overmuch about moral hazard concerns, the slowly-emerging shape of Treasury’s plan to … Continue reading →

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Morgan Stanley: Not Out of the Woods

Posted on October 13, 2008 by Felix

Amidst all the enthusiasm about the Dow rising 5% in its opening minutes, it’s worth noting that Morgan Stanley stock is up a disappointing 60%. I’m serious. At $15 a share, Morgan Stanley is still trading at only half its … Continue reading →

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The Amazing Ballooning RBS Bailout

Posted on October 12, 2008 by Felix

Robert Peston/BBC, Saturday afternoon: I would expect Royal Bank to raise the capital it needs over the weekend. On paper its balance sheet looks okay. But its board has concluded it needs a further cushion of capital, perhaps as much … Continue reading →

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HBOS, RBS to be Nationalized

Posted on October 11, 2008 by Felix

Gordon Brown shows how it should be done: THE government will launch the biggest rescue of Britain’s high-street banks tomorrow when the UK’s four biggest institutions ask for a ߣ35 billion financial lifeline… The British bank rescue could leave the … Continue reading →

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The Coalition of the Ailing

Posted on October 10, 2008 by Felix

I know that yesterday’s blog entry on Morgan Stanley is doing the rounds, not least because I got a phone call from within Morgan Stanley telling me so. (They weren’t very happy about it, needless to say.) But I also … Continue reading →

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What Just Happened?

Posted on October 9, 2008 by Felix

I’ve long said that end-of-day market reports are silly, since the only thing reporters can normally say with any confidence is "the market moved and we don’t know why". But what we’re seeing right now isn’t moves so much as … Continue reading →

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The Last Days of Morgan Stanley

Posted on October 9, 2008 by Felix

If Morgan Stanley was in distress back in mid-September, it’s much worse today, trading as low as $12.50 a share: that’s just 40% of its stated book value. For all the denials coming out of the bank, clearly the market … Continue reading →

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Bank Soundness Datapoint of the Day

Posted on October 9, 2008 by Felix

This has got to sting, in New York and London: Canada has the world’s soundest banking system, closely followed by Sweden, Luxembourg and Australia, a survey by the World Economic Forum has found as financial crisis and bank failures shake … Continue reading →

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How Can We Bring Down Libor?

Posted on October 9, 2008 by Felix

When banks get nationalized, they become much safer, right? So what on earth is overnight Libor doing at 5.09%, and three-month Libor at 4.75%? The TED spread is a new record high, 413bp, making all its previous scary spikes look … Continue reading →

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US Bank Nationalizations: One Step Closer

Posted on October 9, 2008 by Felix

Yesterday, Justin Fox detected a possibly important shift in emphasis from Hank Paulson. Did anybody else notice that when Hank Paulson was describing in his press conference today what the Emergency Economic Stabilization Act enables Treasury to do, the first … Continue reading →

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The Duplicitous Sheila Bair

Posted on October 6, 2008 by Felix

After Wachovia agreed to be bought by Wells Fargo on Friday, the FDIC’s Sheila Bair put out a press release saying that her agency "stands behind its previously announced agreement with Citigroup". Except, it wasn’t quite as simple as that. … Continue reading →

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Why I’m Not Buying the Financials

Posted on October 6, 2008 by Felix

At 10am this morning, Evan Newmark stuck his neck out, with a blog entry entitled "Why I’m Buying the Financials". They were spiralling downwards nastily at the time, but obviously the piece had been written long before the market opened. … Continue reading →

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Where is Citi’s M&A Expertise?

Posted on October 6, 2008 by Felix

Bill Ackman made an interesting point at the Value Investing Congress today: Citi announced its deal with Wachovia on Monday September 29, at which point both boards had signed off on it. Given that all the specifics were in place, … Continue reading →

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Wachovia: Getting Messy

Posted on October 6, 2008 by Felix

The fight over Wachovia is getting messy. Court judgments are getting overruled; obscure provisions in the bailout legislation are taking on a crucial importance; the Fed is acting like King Solomon, splitting the baby between the West Coast and the … Continue reading →

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Lehman’s Lies

Posted on October 6, 2008 by Felix

The WSJ has a fantastic piece of reporting about Lehman’s failure this morning, which explains something I hadn’t understood until now. Yes, Lehman’s bankruptcy caused the credit crisis to get much worse. But the mechanism might well have been Lehman’s … Continue reading →

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How Much Will a Wells-Wachovia Deal Cost Taxpayers?

Posted on October 5, 2008 by Felix

Anybody following the fight between Citi and Wells Fargo has to read Binyamin Appelbaum’s front-page piece in the Washington Post on the tax assumptions behind the Wells Fargo offer. In touting the deal, Wells Fargo executives said they did not … Continue reading →

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Iceland: When Too Big To Fail Becomes Too Big To Rescue

Posted on October 3, 2008 by Felix

We know that credit ratings agencies made enormous errors over the past few years when it came to rating structured products. And of course it’s never easy to rate leveraged institutions, like banks, which are susceptible to runs. But what … Continue reading →

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Citi Examines its Carrots and Sticks

Posted on October 3, 2008 by Felix

I just got off the phone with Carl Tobias, a professor at Richmond School of Law; I asked him whether the exclusivity agreement between Citigroup and Wachovia was worth the paper it was written on. His take was that it’s … Continue reading →

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How Have Credit Unions Survived the Crisis?

Posted on October 3, 2008 by Felix

John Gapper has post up about "the enduring financial advantages of mutuality", talking about insurers, investment banks, and British building societies. The ones which went public got an immediate windfall upside, but also a longer-term downside: One effect was that … Continue reading →

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