Subscribe to All American Investor via Email
Showing posts with label insolvency. Show all posts
Showing posts with label insolvency. Show all posts
Monday, March 09, 2009
Roubini Video on Insolvent, Zombie Banks
Nouriel Roubini,(aka Dr. Doom), proclaims that unless drastic action is taken soon, the world as we know it is about to come crashing down (Part One).
Friday, February 27, 2009
The Case For and Against Bank Nationalization
These paragraphs were extracted from Nouriel Roubini's GlobalEconoMonitor. The article contains a discussion of insolvency and the Pros and Cons of nationalization. Must reading for the well informed.
Follow us on Twitter
More from All American Investor
As an example, consider the poster child for the “freebie” programs, the Temporary Liquidity Guarantee Program, started in late November of 2008. For a cost of 0.75%, it allows banks to issue bonds backed by the government, i.e., essentially risk free. The banks have accessed this market 97 times for $190 billion!
The biggest pig at the trough - Bank of America 11 times for $35.5 billion. But close behind, JP Morgan at $30 billion, GE Capital $27 billion, Citigroup $24 billion, Morgan Stanley $19 billion, Goldman Sachs $19 billion and Wells Fargo $6 billion. A not so surprising correlation with their respective writedowns (including merged entities), Bank of America $96 billion, JP Morgan $75 billion, Citigroup $88 billion, Morgan Stanley $22 billion, Goldman Sachs $7 billion and Wells Fargo $115 billion.
In terms of helping us move forward out of the financial crisis, this program has many problems. It charges the same amount for each institution, so it hardly separates the solvent from the insolvent institutions. It charges a fee which is grossly below what these institutions could issue in the marketplace given their current balance sheets, distorting the system. Wasn’t this the Fannie Mae and Freddie Mac problem? And it makes it less likely to cleanse the system of the toxic assets because these institutions can continue their way out-of-the-money option and hope that the prices of the toxic assets increase. In effect, the access to this capital allows them to continue to make the original bet.
Subscribe to All American Investor via Email
Follow us on Twitter
 Bob DeMarco is a citizen journalist, blogger, and Caregiver. In addition to being an experienced writer he taught at the University of Georgia , managed on Wall Street at Bear Stearns, was CEO of IP Group, and is a mentor. Bob currently resides in Delray Beach, FL where he cares for his mother, Dorothy, who suffers from Alzheimer's disease. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. His content has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, BlogCritics, and a growing list of newspaper websites (15). Bob is actively seeking writing assignments and syndication. |
More from All American Investor
- Ray Dalio on the current state of affairs in the market
- Homebuyer Credit Won’t Stabilize Market, Analysts Say
- Roubini Predicts U.S. Losses May Reach $3.6 Trillion
- Six Errors on the Path to the Financial Crisis
- Who Caused the Financial Crisis?
- Option ARM--The Toxic Mortgage
- Debt Binge--The Perfect Financial Storm
Tuesday, January 20, 2009
Roubini Predicts U.S. Losses May Reach $3.6 Trillion
This is some sobering news.
One has to wonder, is this number to high or to low? The simple fact that a guy as bright as Roubini is using words like "the U.S. banking system is effectively insolvent" is bearish. I doubt the market has discounted news like this.
They continue to discuss "toxic" assets on CNBC with the hope that the U.S. government will buy them. Well this won't be like the savings and loan mess when the RTC was able to package and sell real estate. The number of outstanding credit default swaps dwarfs anything we have ever seen. And much of that paper is "phoney baloney paper" that had one use--create fee income and paint the books. Now analysts want us to back the same executives that received enormous bonuses and sold inflated stock for personal gains. Much of the enormous profits they reported came from phantom income derived from now "toxic assets".
“I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said at a conference in Dubai today. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.”
One has to wonder, is this number to high or to low? The simple fact that a guy as bright as Roubini is using words like "the U.S. banking system is effectively insolvent" is bearish. I doubt the market has discounted news like this.
They continue to discuss "toxic" assets on CNBC with the hope that the U.S. government will buy them. Well this won't be like the savings and loan mess when the RTC was able to package and sell real estate. The number of outstanding credit default swaps dwarfs anything we have ever seen. And much of that paper is "phoney baloney paper" that had one use--create fee income and paint the books. Now analysts want us to back the same executives that received enormous bonuses and sold inflated stock for personal gains. Much of the enormous profits they reported came from phantom income derived from now "toxic assets".
Roubini Predicts U.S. Losses May Reach $3.6 Trillion
Subscribe to All American Investor via Email
Subscribe to:
Posts (Atom)