Thankfully the first thing they did when we gave them our tax dollars is they spent $6 Billion to buy a stake in a Chinese bank. Of course they say it's not the "same money" ;)
- A government rescue plan has eased investors' concerns about Citigroup Inc, but mines lurking in the balance sheets of rivals including Bank of America Corp could still tempt short-sellers.
- The Charlotte, North Carolina-based bank further heightened its exposure to home loans by acquiring Countrywide Financial Corp, the largest U.S. independent mortgage lender and agreeing to buy Merrill Lynch & Co, which owns the world's largest retail brokerage.
- Before Monday's stock market rally, Bank of America shares had lost 52 percent in November alone, making them the second biggest decliner for the month in the KBW Banks index after Citigroup.
- Analysts at independent research company CreditSights forecast that in a scenario where the commercial and residential real estate markets really tank beyond banks' expectations, Bank of America would have a Tier-1 capital ratio of 7.15 percent. The minimum that regulators seek to consider a bank "well capitalized" is 6 percent, but any ratio near or below 7 percent tends to spook investors.
- Under the same assumptions, and before the government's latest investment, Citigroup would have a Tier-1 capital ratio of 8.64 percent
- The U.S. banking system is broadly undercapitalized, perhaps to the tune of more than $1 trillion, and the only investor that can bail it out is the U.S. government, analysts said.
- Bank of America, through its acquisition of Countrywide, has more than $250 billion in residential mortgages and while it has stopped offering some of the most toxic types of mortgages, chargeoffs in the portfolio are increasing.
- "The difference between Citi and the other three is that Citi clearly had more suspect management," said Mal Polley, chief investment officer at Stewart Capital Advisors in Pittsburgh. "They had not done enough to take the fat out of the system and right the ship," he added. But management at Bank of America and Wells Fargo, and even JPMorgan, widely regarded as the bank that has best survived the credit crisis to date, will need to allay investors' concerns about their capital position as financial conditions worsen.
- "I definitely think other companies will need this help," said Paul Miller, analyst at Friedman, Billings, Ramsey & Co in New York.
But for now we are hopeful Kool Aid drinkers since the government will fix all our problems. Until it is clear they cannot.
No position
3 comments:
Well.. At least unlike AIG, they didn't send their management to an upscale Spa on the taxpayer's dollar...
Did you catch Meredith Whitney today saying that all the banks will be lining up in front of Congress with their hands out again next year because they all still have garbage on their books.
jegan
Citi is building a $25M Japanese garden at their HQ and is spending $20M annual (maybe more? dont know exactly) for naming rights to the new NYC stadium. So it's all a matter of degree
Did you catch TraderMark say what Meredith Whitney just said a few days earlier? ;)
I'm trying to figure out what it takes to get some credibility around here - last I checked I've called much of this lol.
I guess without access to TV or a real firm, one has zilch credibility. ;)
TM.. I can see the Chinese garden. I think that's a great way to invest our children's future. After all, you do want the new bosses to feel comfortable when they arrive from Bejing! As to the stadium, all I can say is that the way these stadiums change hands, it would make more sense to just call it 'This Space For Rent Stadium' or 'Your name Goes Here Stadium'. Course, an acronym would be nice.
I missed your prior Meredith Whitney quote. Can't say that I really believe a lot of what she hands out, but I think it's pretty obvious that the cash we've given the banks so far is only enough to whet their appetites, or fund a stadium or Chinese garden.
As to credibility; I read you blog for the obscure info, the thought process and because it is credible. Do you really think you'd feel better being labeled an analyst, or a talking head? Can you imagine having to smile and say something inane just to fill the spaces between commercials? While you consider that, here's a quote:
From MarketFn.com Bill Kraft
We hear and see so much in the media devoted to whether the markets have found a bottom and where the bottom might be, but the truth is no one knows. Prediction is little but speculation and has no value. In his excellent recent book, Beat the Market, Charles Kirkpatrick quotes commentator and chief market strategist Barry Ritholtz as saying the SEC should require all analyst and pundit forecasts to publish the following caveat: "The undersigned states that he has no idea what's going to happen in the future, and hereby declares that this prediction is merely a wildly unsupported speculation."
As Mr. Kirkpatrick notes in referring to David Dreman's research which studied 78,695 earnings forecasts by analysts over a 20 year period from 1973 to 1993 only 1 in 170 forecasts were within 5% of any four consecutive quarter's actual earnings. Why do we continue to rely on such speculation?
I'm guessing you must have had a good day today.... That's worth something.
jegan
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