- Robert W. Baird & Co. analyst David George on Tuesday upgraded shares of Wells Fargo & Co. to "Neutral" from "Underperform," citing the San Francisco-based bank's strong balance sheet. Though Wells Fargo is not completely sheltered from credit risks, George said, the bank will likely benefit from a "flight to quality," given its strong credit ratings, healthy capital position and willingness to lend in a difficult environment.
- "We believe the challenges in the credit markets and weak capital positions of competitors will continue to result in significant new business opportunities for Wells Fargo, and think the company will come out of the current credit cycle with an improved customer and employee base," George wrote in a note to clients.
If things continue to degrade in the credit markets, which I believe they will over time as housing prices "do not rebound" and the mother of all bailouts is found to be inadequate the U.S. will potentially turn to the nuclear option. Literally having the Federal Reserve (via FDIC) force feed capital into a chosen group of banks to expand their balance sheets exponentially - this will mean the "state" is choosing "winners and losers" (the old USSR has nothing on us!) but as we know, in desperate times, capitalism and free markets mean very little. I believe Wells Fargo will be one of those chosen for this ultimate solution. Lost in the fuss about this mother of all bailouts bill is a new provision for the Federal Reserve.- Even before the House stunned the world on Monday by rejecting the Bush administration’s bailout bill, the Fed was already resorting to the oldest action in its book: printing money. With money markets around the world seizing in fear, the Fed on Monday announced that it would provide an extra $150 billion through an emergency lending program for banks, and an additional $330 billion through so-called swap lines with foreign central banks to help money markets from Europe to Asia.
- It was an extraordinary display of financial power, and it reflected acute new anxiety at the Fed and central banks around the world that the crisis of confidence in American financial markets had metastasized to money markets everywhere.
- That was on top of the $230 billion the Fed borrowed last week so it could finance its previous efforts to prop up the American International Group and other institutions. But these are only the latest in a long series of jaw-dropping departures from normal policy that the Fed has undertaken this year as it seeks to inject vast amounts of capital into the financial system. And they are unlikely to be the last.
- Even if Congress refuses to pass the bailout measure, there is more money where that came from. The Treasury Department has already created a series of “supplemental” Treasury securities to finance the Fed’s activities, and there is no limit to how many more it can issue and sell.
- The central bank can expand its reserves at will, because it controls the money supply and can create more to buy things like Treasury securities and mortgage-backed securities. “We have a lot of money to play with,” said Kenneth Rogoff, an international economist at Harvard. “As long as foreigners have a lot of confidence in our ability to solve our problems, we can borrow the $1 trillion to $2 trillion we need to solve it.” But Mr. Rogoff cautioned that the real limitation for American policy makers is whether they can maintain the government’s long-term credibility. “The real constraint is not a bookkeeping one,” he said. “It is a sense of faith on the part of foreigners that the U.S. government will repay its debt. Our most precious asset is that credibility.” (I do believe sometime 20 years out the US will default on its debt and put us firmly in banana republic status - or are we there already? - 11 Trillion and counting on our debt load and we really have not even begun to scratch the surface on the Medicare issue. That's a problem for next decade and we won't address it until its a raging fire (i.e. "too late") as you can see with both our energy policy and our "credit" policy or our levee policy or our rebuilding bridges policy or name it and we don't do it until its broken policy)
- "These are desperate times, and you're going to pull out some desperate measures," said Richard Yamarone, chief economist at Argus Research. "They're going to try to stretch every imaginable solution and initiative they have to right this sinking ship. But I don't know what they have left. They've already exceeded anything I believed that they could do."
- House prices in 20 U.S. cities declined in July at the fastest pace on record, signaling the worst housing recession in a generation had yet to trough even before this month's credit crisis.
- The S&P/Case-Shiller home-price index dropped 16.3 percent from a year earlier, more than forecast, after a 15.9 percent decline in June. The gauge has fallen every month since January 2007, and year-over-year records began in 2001.
- Compared with a year earlier, all 20 areas showed a decrease in prices in July, led by a 30 percent drop in Las Vegas and a 29 percent decline in Phoenix. ``While some cities did show some marginal improvement over last month's data, there is still very little evidence of any particular region experiencing an absolute turnaround,'' David Blitzer, chairman of the index committee at S&P, said in a statement.
- Other reports show price declines continue. The National Association of Realtors said Sept. 24 that the median price of an existing home fell 9.5 percent in August from a year earlier, compared with an 8 percent drop in July. The following day, the Commerce Department said the median price of new homes fell 6.2 percent in August from a year earlier, following a 4.6 percent drop the prior month.
No position
