Commentaries

Now raising intellectual capital

from Rolfe Winkler:

Move your money

Arianna Huffington and Rob Johnson are organizing a big bank boycott. They want depositors to take their money out of Too-Big-To-Fail banks and put them in smaller, high quality banks.

They've launched a new website and have teamed up with Chris Whalen to give folks other options. Whalen's firm, Institutional Risk Analytics, has a proprietary system that grades banks using FDIC data. Enter your zip code and Whalen provides a list of high quality banks in your area.

It's a potentially powerful combination. Huffington has wide reach due to her media ubiquity and popular website. Johnson, once a portfolio manager for George Soros's Quantum Fund, is a successful veteran of high finance who's spoken out against the danger of derivatives and will head Soros' $50 million Institute for New Economic Thinking. Leveraging Whalen's data means the two can do more than simply ask folks to move their money. They can provide better options.

(You can read more about it in this column published at HuffPo.)

I applaud the effort and plan on taking them up on it. Some of my savings currently reside at a TBTF bank, earning nothing, and I plan to move the account shortly.

from Rolfe Winkler:

Big banks get reprieve from FDIC

Due to new accounting rules -- FAS 166 and 167 -- banks have to bring certain off balance sheet assets back onto their balance sheets starting next year. More assets, same capital = lower capital ratios. (More in this column about the individual impact on the large banks).

Anyway, the FDIC has agreed to give big banks a 6 month reprieve on raising new capital to buffer the new assets. From Ian Katz at Bloomberg:

Let the Fed regulate

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By John M. Berry

John M. Berry, who has covered the economy for four decades for the Washington Post and other publications, is a guest columnist.

Politics is trumping common sense in Congress as Republicans and Democrats keep heaping abuse on the Federal Reserve. As a result, they could end up adopting an unworkable, risky overhaul of financial market regulation. 

Barofsky audit a Fed, not Geithner, problem

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Sure, Timothy Geithner led the negotiations with AIG counterparties when he headed the New York Fed last year, but TARP special inspector Neil Barofsky’s audit is damning where it really hurts the Fed. It raises the question of whether the central bank is a tough enough regulator at a time when Senator Christopher Dodd is calling for the Fed to be stripped of such power over big banks.

Big Picture has posted the report in its entirety.

It’s one thing to be a bad regulator during the boom years when, let’s face it, there were bad regulators everywhere. But to shrink from tough negotiations with banks during the height of the crisis when those banks were already benefiting from billion of dollars in state aid will be harder to explain away, though the New York Fed has tried.

from Rolfe Winkler:

It’s good to be in finance

From WSJ: Wall Street on track to award record pay

Major U.S. banks and securities firms are on pace to pay their employees about $140 billion this year -- a record high that shows compensation is rebounding despite regulatory scrutiny of Wall Street's pay culture.

Workers at 23 top investment banks, hedge funds, asset managers and stock and commodities exchanges can expect to earn even more than they did in 2007, according to an analysis of securities filings for the first half of 2009 and revenue estimates through year end by The Wall Street Journal. Total compensation and benefits at the publicly traded firms analyzed by the Journal are on track to increase 20% from last year.

The commitments committee

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The bursting of the dot-com bubble pales in comparision to the financial crisis. In retrospect, it seems a comic-book lesson about the all-too-obvious consequences of irrational exuberance: What were they thinking?

Yet the Internet bubble was in many ways a warm-up for the much larger credit bubble. The common thread, Jonathan Knee, a senior managing director at Evercore Partners, writes in DealBook, is the enabling role played by financial institutions.

China might keep the weakest bank all to itself

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Faced with a backlash against foreign investors, Beijing may
be tempted to offer shares in the last of its big four banks to
a domestic audience.

That decision may reflect China’s new found confidence in
the wake of the credit crisis. But it also means Chinese investors
will retain full responsibility for the country’s weakest bank.

The other GSE problem

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It’s hard to keep all the U.S. housing agencies straight. Fannie Mae and Freddie Mac are still basket cases relying on government support, while the Federal Housing Administration and its partner, Ginnie Mae, are setting off alarm bells with their more aggressive efforts to support overstretched homeowners.

But the Federal Home Loan Banks, a government-sponsored
enterprise (GSE) that is the lesser-known cousin to Fannie and Freddie, is one to watch — particularly as small regional banks grapple with deteriorating loan portfolios and fewer financing alternatives.

Treasury line of credit should be Bair’s last option

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With the FDIC’s staring at an incredibly shrinking deposit insurance fund, it’s no wonder that Sheila Bair is out about talking about the regulators looking at options to replenish it. That includes tapping the $500 billion line of credit the agency has with the U.S. Treasury put in place for a rainy days.

Borrowing from Treasury should be avoided until it’s absolutely necessary since it is likely to give the banking lobby leverage to shirk higher fees now and in the future, as  Wrightson ICAP noted in a recent report earlier this month.

Push comes to shove in EU-Dutch bank spat

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EU-INTEL/Push is coming to shove in a stand-off between the European Commission and the Dutch government over the future of state-rescued banks. The outcome has implications for the whole of Europe.

Markets should watch Brussels’ actions on ING, ABN AMRO and Fortis Bank Nederland carefully because they will set a precedent for forthcoming decisions about British, German or Irish banks that could reshape the European banking landscape. They may also determine whether, and when, taxpayers can expect to recover their investments in the banking sector.

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