This is why publicly-funded deposit insurance should be banned. GMAC’s ad for high-yield bank CD…
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Rocky Mountain News shuts down (Rocky Mountain News) CEO of parent company Scripps told the staff of the decision himself: “I could say stupid things like ‘I know how you feel.’ I don’t. We are just deeply sorry. I hope you will accept that.” The paper was 150 years old.
Treasury and Citi announced their deal this morning by which the government and other preferred stockholders will convert their shares to common equity. No more money is being spent by the government, but shareholders are having their stakes cut to 26% and the government now gets a 36% ownership stake in the common. This solves nothing as the BIG PROBLEM is still on the asset side of the bank’s balance sheet. This does nothing to address that. (WSJ)
Two weeks ago I wrote “With Allstate You’re Not in Good Hands.” The company had convinced regulators to change capital adequacy requirements to allow, among other things, the inclusion of deferred tax assets as regulatory capital. I did some digging and, sure enough, Allstate’s story is not unusual. Lincoln National and Hartford also sought, and received, regulatory dispensation to include DTAs as capital.
Now that unemployment has kicked into a higher gear, more folks will be defaulting on mortgages, meaning house prices are likely to continue their slide in coming months. As they do, household and bank balance sheets will continue to deteriorate. Said another way, their leverage ratios will continue to increase as the falling value of their assets wipes out their equity.