Category Archives: banking

The Citi Exclusivity Agreement

Here is the exclusivity agreement upon which Citigroup is placing so many of its hopes; it was signed by executives from both Citi and Wachovia. If it holds up in court, Citi might just be able to walk away with … Continue reading

Posted in banking, M&A | Comments Off on The Citi Exclusivity Agreement

How Banks Hedge Counterparty Risk

Here’s the long post I promised yesterday on hedging counterparty risk. It’s by someone who wishes to remain anonymous, but who used to do this for a living at a very large bank. It’s also incredibly wonky, even without a … Continue reading

Posted in banking, derivatives | 7 Comments

Wells-Wachovia: Good for Everyone but Citi

Maybe Warren Buffett changed his mind? Wells Fargo has now snatched Wachovia out of the jaws of Citigroup. This deal is good for the US taxpayer, which no longer has to backstop the acquirer’s losses on the deal, and bad … Continue reading

Posted in banking | Comments Off on Wells-Wachovia: Good for Everyone but Citi

Is Transparency Always a Good Idea?

I’m not a fan of this proposal from Josh Rosner, via Gillian Tett: Joshua Rosner, a New York analyst, for example, has made the sensible suggestion that AIG should reveal the banks that have received credit protection as a condition … Continue reading

Posted in banking, derivatives | Comments Off on Is Transparency Always a Good Idea?

Goldman Sachs and the Regulatory Arbitrage Trade

Sam Jones has a great piece this morning on regulatory arbitrage under Basel II — which turns out to have been one of the big business lines of the doomed AIG Financial Products. Banks have to have a certain amount … Continue reading

Posted in banking, derivatives, insurance, regulation | Comments Off on Goldman Sachs and the Regulatory Arbitrage Trade

Did Buffett Kill the Wells Fargo-Wachovia Deal?

Why did the Wells Fargo deal to buy Wachovia fall through at the last minute? The WSJ reports that Wells Fargo CEO chairman Dick Kovacevich blamed perceived weaknesses in a surprising area of Wachovia’s loan portfolio: Wachovia’s advisers were surprised … Continue reading

Posted in banking, insurance, M&A | Comments Off on Did Buffett Kill the Wells Fargo-Wachovia Deal?

The Lloyds-HBOS Arbitrage

Robert Peston is on form this morning, writing about the proposed takeover of HBOS by Lloyds TSB: If you believe that the terms of the deal won’t and can’t be changed, the current HBOS share price is an opportunity to … Continue reading

Posted in banking, stocks | Comments Off on The Lloyds-HBOS Arbitrage

When Regulation Works

It’s rapidly become a cliché to describe the current crisis as one of a lack of regulatory oversight. But amidst all the recriminations about how the financial sector should have had much tougher regulation, there’s been precious little evidence that … Continue reading

Posted in banking, regulation | Comments Off on When Regulation Works

Charlotte’s Web

Did Vikram Pandit really just say what Heidi Moore says he said, on this morning’s conference call? The plan is to fold the U.S. retail bank into the Wachovia team. If I have this right, Citigroup might have bought Wachovia, … Continue reading

Posted in banking | Comments Off on Charlotte’s Web

TED: 348bp

There are some great comments on my blog entry from Friday about whether the TED spread really matters right now. With TED up to a whopping 348bp today, it’s worth addressing them. One thing which comes up repeatedly in the … Continue reading

Posted in banking, bonds and loans | Comments Off on TED: 348bp

How to Rescue a Bank

What’s the best way to rescue a failing bank? Bear Stearns got bought by JP Morgan with the help of a $29 billion Treasury backstop. Northern Rock was nationalized. Lehman Brothers was allowed to fail outright, enter bankruptcy, and eventually … Continue reading

Posted in bailouts, banking, regulation | Comments Off on How to Rescue a Bank

Does the TED Spread Really Matter?

I’m hardly the only person paying close attention to the TED spread right now. Here’s a few blog entries about it from today alone: 1 2 3 4 5 6 7 8 9 — there was even a joking fight … Continue reading

Posted in banking, bonds and loans | Comments Off on Does the TED Spread Really Matter?

Does Bankruptcy Save Jobs?

Remember all those pictures of dejected Lehman bankers walking out of their offices with cardboard boxes full of personal possessions? Well, it seems they might have acted rather prematurely. In fact, there seems to be a good chance that there … Continue reading

Posted in banking, bankruptcy | Comments Off on Does Bankruptcy Save Jobs?

Worrying About Large-Deposit Bank Runs

Dealbook gives us something new to worry about: In Washington Mutual’s case, customers withdrew $16.7 billion in cash from the thrift in the last nine days, according to the Office of Thrift Supervision. The majority of those that withdrew cash … Continue reading

Posted in banking | Comments Off on Worrying About Large-Deposit Bank Runs

When it Rains, it Pours

This is really, really bad. In a nutshell: the bailout package, which everybody thought was a done deal, has been undone by some combination of Republican recalcitrance and the heat of the presidential campaign. At the same time, WaMu’s gone … Continue reading

Posted in bailouts, banking, bonds and loans, economics, Politics | Comments Off on When it Rains, it Pours

Don’t Worry About the FDIC

Chris Whalen is quoted in a Bloomberg story today about the FDIC. But he’s no fan of the story, or any other story which implies that there’s any chance at all the FDIC could run out of money. He emails: … Continue reading

Posted in banking | Comments Off on Don’t Worry About the FDIC

Are The Credit Markets Still Healthy?

Robert Higgs has a long list of healthy-credit-market datapoints to support his contention that any talk of a frozen market is "hyperbole". Commercial and industrial loans of all commercial banks, which are reported monthly, have grown rapidly. The most recent … Continue reading

Posted in banking, bonds and loans | Comments Off on Are The Credit Markets Still Healthy?

News Doesn’t Move Markets, Goldman Sachs Edition

Above is a five-day chart of the Goldman Sachs share price. The first arrow shows what happened when Goldman announced it was becoming a bank holding company; the second arrow shows what happened when Berkshire Hathaway announced it was putting … Continue reading

Posted in banking, journalism, stocks | Comments Off on News Doesn’t Move Markets, Goldman Sachs Edition

The Goldman U-Turn

David Viniar, September 16: Bank deposits can basically be used to fund the business of the bank, what a bank does, largely not the capital markets businesses that we are in. And so I think the answer is there would … Continue reading

Posted in banking | Comments Off on The Goldman U-Turn

Did Lehman Brothers Steal $8 Billion?

My Lehman story from last week has finally been picked up by the WSJ: Lehman moved more than $8 billion between Lehman’s European headquarters in London and New York, where Lehman collects money from its global units and then disperses … Continue reading

Posted in banking, bankruptcy | Comments Off on Did Lehman Brothers Steal $8 Billion?

No More Investment Banks

If you had to point to one part of the financial markets which contributed the most systemic risk to the system, it would probably be the lightly-regulated investment banks. Not a problem any more: there aren’t any left!

Posted in banking, regulation | Comments Off on No More Investment Banks

The Curse of the Public Investment Banks

Jim Surowiecki is quite convincing when he blames Lehman’s demise on the fact that it was a public company: The perception of weakness exacerbates the reality of weakness. And although there are myriad measures of a company’s health, nothing looks … Continue reading

Posted in banking | Comments Off on The Curse of the Public Investment Banks

Citi, Rejuvenated

A sign of the times in a WSJ headline today: Citi, Looking Rejuvenated, Weighs a WaMu Takeover Bid Yes, "rejuvenated". Young, fresh-faced, carefree. Or, alternatively, just as haggard and battered as it ever was, but looking increasingly healthy in comparison … Continue reading

Posted in banking, M&A | Comments Off on Citi, Rejuvenated

Is Wachovia Too Small to Save Morgan Stanley?

Did I say that today’s liquidity injection should at least get us through the weekend? Well, by "us", clearly I didn’t mean "Morgan Stanley". It’s not trading at zero yet, but it’s getting very close, and if the stock continues … Continue reading

Posted in banking | Comments Off on Is Wachovia Too Small to Save Morgan Stanley?

A Lehman Story

It’s clear now that the European and Asian operations of Lehman Brothers will be liquidated and not sold as a going concern. Barclays clearly doesn’t want them, and at this point they’re like bread or fish: getting staler and less … Continue reading

Posted in banking, bankruptcy | Comments Off on A Lehman Story