Lunchtime Links 1-31

Jan 31, 2010 21:23 UTC

Paulson says Russia urged China to dump Fannie/Freddie holdings (McKee/Nicholson, Bloomberg)

Avatar breaks $2 billion worldwide box office mark (Box Office Mojo) Very impressive of course, though on an inflation-adjusted basis, Avatar ranks just 25th all time. Nothing will ever beat Gone with the Wind.

Volcker Op-Ed: How to reform the financial system (NYT) Unfortunately not a lot of additional detail over his proposed reform plan. But for those not already familiar with it, this does offer a helpful articulation of Volcker’s reform philosophy. Yves is happy Volcker has entered the fray, but believes he needs to go beyond his current thinking.

Frank says banks “recognize reality” by throwing support behind wind-down fund (Howell, Reuters) Am I alone in my fear that a wind-down fund will make matters worse? The idea that new “resolution authority” must be accompanied by a pool of funds to bail out systemic failures compounds moral hazard greatly. Even assuming that banks will be charged high enough insurance premiums to give the fund sufficient financial heft — how well has that worked with the Deposit Insurance Fund? — the very existence of this fund will provide an implicit guarantee to the creditors of the firms’ backed by it. The DIF already creates major moral hazard by removing all depositor incentives to worry about the health of their banks. Now an even larger slice of creditors would be insulated from risk.

PDF — TARP inspector general says program will cost less than expected, warns that little has changed (SIGTARP) In his latest quarterly report, Neil Barofsky acknowledges that TARP won’t cost as much as once expected. But he also warns that “even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car.” Section 3 of the report emphasizes that present government policy risks re-flating the housing bubble.

PDF – Treasury releases first quarterly PPIP report (Treasury) A breakdown of the the legacy securities program, which combined public and private capital in order to support the price of toxic assets. The use of non-recourse government leverage, plus Treasury’s equity investment, shifted principal risk on these assets to the public’s balance sheet. It took a while to get off the ground, and the program isn’t very large — less than $25 billion of investments. So far the funds are breaking even.

Justice, medieval style (Leeson, Boston.com) Interesting article, though the author offers little evidence to support his claim that trials by “ordeal” worked. (e.g. judging innocence/guilt based on whether the accused sank/floated when tied up and thrown in water.) ht reader Paul M.

New amateur video of Challenger disaster (LiveLeak)

Your brain on football (Time) Is brain trauma the rule more than the exception?

Awesome impressions (Funny Ordie) Comedian does DeNiro, Ahnold, Stallone and Morgan Freeman

Actor Rip Torn arrested drunk, armed in bank (Michaud, Reuters)

COMMENT

To my mind the whole Too Big To Fail issue is way too vague. We need to get specific about particular financial products, and specifically derivatives, that are the source of big danger.

It is tragic that derivatives have lost their biggest critic now that Goldman has purchased Buffett’s silence.

The big catastrophe ahead now involves interest rate swaps. The value of interest rate swaps is orders of magnitude bigger than credit default swaps and they have grown as tender towers to the sky in the gentlest of interest rate environments. Interest rates worldwide are forcibly held down by central banks while governments strain an the edge of the fiscal precipice. What will happen to with these massive towers if there is a real earthquake of upward moving interest rates?

What is worse, this earthquake is quite certainly coming. With the demographic shift across the developed world where aging boomers are followed by a much smaller generation in almost every developed nation, massive sources of the world’s savings will become massive sinks and interest rates will be forced upward. In short, there will be much fiercer claims for much more limited global savings. Interest rates, reflecting the supply and demand dynamics of savings, will be forced upward.

The tens of trillions or hundreds of trillions in interest rate swaps are predicated upon the idea that the inevitable can not happen.

Will we find that 2008 and 2009 were a walk in the park?

Posted by Dan Hess | Report as abusive

Bank failure Friday

Jan 30, 2010 08:35 UTC

#10

  • Failed bank: First National Bank of Georgia, Carrollton GA
  • Acquiring bank: Community & Southern Bank, Carrollton GA
  • Vitals: at 9/30/09, assets of $832.6m, deposits of $757.9m
  • Estimated DIF damage: $260.4m

#11

  • Failed bank: Florida Community Bank, Immokalee FL
  • Acquiring bank: Premier American Bank NA, Miami FL
  • Vitals: at 9/30/09, assets of $875.5m, depoists of $795.5m
  • Estimated DIF damage: $352.6m

#12

  • Failed bank: Marshall Bank NA, Hallock MN
  • Acquiring bank: United Valley Bank, Cavalier ND
  • Vitals: at 9/30/09, assets of $59.9m, deposits of $54.7m
  • Estimated DIF damage: $4.1m

#13

  • Failed bank: Community Bank & Trust, Cornelia GA
  • Acquiring bank: SCBT Bank NA, Orangeburg SC
  • Vitals: at 9/30/09, assets of $1.21 billion, deposits of $1.11 billion
  • Estimated DIF damage: $354.5m

#14

  • Failed bank: First Regional Bank, LA CA
  • Acquiring bank: First Citizens Bank & Trust, Raleigh NC
  • Vitals: assets of $2.18 billion, deposits of $1.87 billion
  • Estimated DIF damage: $825.5m

#15

  • Failed bank: American Marine Bank, Bainbridge Island WA
  • Acquiring bank: Columbia State Bank, Tacoma WA
  • Vitals: at 9/30/09, assets of $373.2m, deposits of $308.5m
  • Estimated DIF damage: $58.9 m

Spanish canary in the European coal mine

Jan 29, 2010 19:04 UTC

The quote of the day comes from Marc Chandler, currency strategist at Brown Brothers Harriman, who has graciously offered to let me reprint a note he sent today.

While Greece gets much of the news, Chandler argues that it’s in Spain where the policy dilemma is “most stark.”

Today Spain reported that its unemployment rate in Q4 rose to 18.8% from 17.9% in Q3.  The consensus was for a rise toward 18.5%.  The unemployment rate has doubled in the past two years.  As seems to be typical in  Europe, the unemployment [rate] is especially pronounced for young people. In Spain it’s 40%…

Cyclical forces and the €8 billion public works program pushed Spain’s deficit to around 11.2% of GDP last year according to the EC.  This is almost as large as Greece’s.  One key difference between the two in this context is that Spain’s debt to GDP is considerably lower than Greece, giving it perhaps greater chance to stabilize the debt/GDP ratios before they become ruinous.

In the face of such sobering news on the labor market today, Spain officials have felt compelled to indicate that they are considering increasing their efforts to cut the budget deficit quicker.  The government is contemplating proposals that will cut another €50 billion or 5% of GDP by 2013.

Rolfe here. Victor Mallet at FT has the news: Spain unveils radical austerity budget.

This illustrates the dilemma policy makers face.  The economy does not warrant an end to fiscal support yet.  The IMF has argued this.  The EC has argued this.  But the dramatic market response to Greece has been a siren call, seemingly forcing policy makers–not just in Spain, but Portugal earlier this week and Poland earlier today too–to mitigate the wrath of the bond vigilantes.

By appeasing the vigilantes, officials risk aggravating the economic downturn, which offsets some of the fiscal austerity and spurs social tensions.   [But] if the vigilantes’ concerns are not addressed in a satisfactory fashion, capital will strike, at least partially, and interest rates will rise…also exacerbating the economic downturn.

Many developed economies have borrowed so much, they can borrow no more. While borrowers love to hate their lender, they need him desperately if they’ve levered up their lifestyle past a point supported by their income.

Governments that rely too much on the bond market for funding should expect the market to turn against them eventually.

COMMENT

“Governments that rely too much on the bond market for funding should expect the market to turn against them eventually.”

If that’s the case, and I have no reason to not believe it is , then the sooner the better the bond vigilantes bring this extraordinary experiment in QE and fiscal stimulus, to say nothing of structural deficits, to an end. Everyday that goes by will make the inevitable financial realignment that much more difficult as the debt mountain grows ever taller.

Posted by sangellone | Report as abusive

Lunchtime Links 1-29

Jan 29, 2010 18:12 UTC

Kohn, Bair warn banks about interest rate risk at FDIC symposium (Wutkowski, Reuters) The Fed says rates will stay low for an “extended period.” But that doesn’t mean “forever” so the Fed, along with other bank regulators, have warned bankers to prepare their balance sheets for higher rates. The populist line that banks need to “lend more” to get the economy going is just foolish. Regulators know the score: banks that lend too much at these low rates, or are using too much cheap short-term funding, will be caught out when rates head back up. Text of Kohn’s speech here. PDF of Sheila Bair’s here. (Bair’s speech is shorter and less wonkish)

MS looking into legal action against ZeroHedge (Teri Buhl) Will they actually sue? Probably not. Still, ZH’s emphasis on quantity over quality means they too often lift the work of others. Blogs link to content all the time of course, but proper attribution is important. And ZH most certainly DOES NOT have permission to reprint research coming from Wall St. analysts.

Wall St. tries to put price on Volcker rule (Sanati, Dealbook) Goldman is said to be in the most trouble, since a larger piece of its business is driven by proprietary trading. But can’t they just give up the bank charter they got last year in order to avoid any new Volcker-rule regs?

Simon Johnson joins HuffPo (Felix) As part-time biz editor.

GDP grows 5.7% (Mutikani, Reuters) The guys at Variant Perception have been saying to expect blowout growth this year coming off a low number, but they warn that it’s all dependent on government largess, which is not sustainable. The market knows this. Stocks are flat on this news.

suk66h

Bank sues victim to avoid replacing stolen funds (Consumerist) Hackers got away with $800,000, but the bank can’t make it all up. So it’s pre-emptively suing the victim…

Are they AIG conspiracy theories really so nutty? (Reilly, Bloomberg) Geithner, Paulson and Bernanke have all said they had nothing to do with the decision to make a full pay out to AIG’s CDS counterparties. So who was in charge??

Bin Laden rebukes U.S. on climate change (Healy, NYT) No, really.

Bunch of phonies mourn JD Salinger (The Onion)

Dog saved after floating away on Baltic sea ice (Guardian)

Baby platypi…

baby platipy

Program note: Felix to interview Roubini

Jan 29, 2010 14:34 UTC

Reuters’ super-blogger Felix Salmon will be interviewing Nouriel Dr. Doom Roubini in Davos at 12:20 EST.

The broadcast can be seen here.

For users that are twitterers, you can send questions for Felix to ask Roubini via #askroubini.

Mine: Mr. Roubini, when was the last time you gave a sound bite to the press that didn’t include a letter of the alphabet to describe the economic cycle?

Or: Could the recession, in fact, be Q-shaped instead of W, L or U-shaped?

Splitting hairs on the Bernanke vote

Jan 28, 2010 22:20 UTC

In the Bernanke confirmation vote this afternoon, seven senators wanted to be seen opposing Bernanke but didn’t actually want to stop his confirmation. In other words, they wanted a campaign talking point, not an actual fight.

Simple maneuver: As with most business in the Senate, Bernanke’s confirmation only required 51 votes. But before getting to the final vote, the Senate must first vote to cut off debate. Cloture, it’s called.

Seven senators, including six Democrats, voted aye on cloture and then flipped to nay on the motion to confirm:

Six Dems: Barbara Boxer (Calif.), Al Franken (Minn.), Tom Harkin (Iowa), Kaufman (Del.), Sheldon Whitehouse (R.I.), and Byron Dorgan (N.D.)

One Rep: George LeMieux (Fla.)

COMMENT

Many Dems right now will vote for cloture on everything as a sign thats what people should do to get it to a majority, rather than super majority, vote.

This is what is holding up the health care bill, for example. It isn’t the vote, it is the cloture. So this particular instance isn’t about Bernanke – even though the vote concerned his re-confirmation – it is about health care.

Posted by MrE23 | Report as abusive

Gekko’s back

Jan 28, 2010 21:45 UTC

The trailer for Oliver Stone’s sequel to Wall Street.

Great cast too…in order of sheer coolness: obviously Douglas, toss up between Frank Langella and Eli Wallach, Josh Brolin, and Shia LaBeouf.

Love the cell phone bit.

Lunchtime Links 1-28

Jan 28, 2010 17:49 UTC

Bernanke didn’t have staff support on AIG bailout (Ed Harrison) Ed has a copy of a letter from Rep. Darrell Issa, in which he claims Fed staffers weren’t keen on bailing out AIG. He wants another subpoena.

Fed as chump or Fed as crony (Yves Smith) Long form thoughts about why Tim Geithner’s defense yesterday was troubling.

Bernanke seen winning second term (Felsenthal, Reuters)

FOMC statement, redacted (David Merkel) Picking apart the Fed’s FOMC Statement yesterday. The headline is that they still see rates staying low for an “extended period,” which is problematic language/policy in my opinion because it will lead to bank/investor complacency. Quantitative easing, i.e. printing electronic money to buy MBS and other paper, will end on schedule at the end of March. Look for it to pick up again in the future. To fight off deflation, the Fed will be forced into multiple rounds of quantitative easing….just like the Bank of Japan.

Bono invests in Yelp (Bits) Elevation Partners, the VC firm funded by U2′s lead singer (among others), is committing $100 million to the local search site. No word on the % stake the money will buy, but $75 million will be paid to existing shareholders to cash them out. Good deal for Yelp? We know that they turned down a $500m offer from Google recently. If Elevation is getting anything less than 20% of the company for this investment, it would value the company at greater than $500 million.

Prime Minister: Greece victim of “rumors” (Bloomberg) Yeah, uh huh. And Wall Street was unfairly maligned by short sellers worried about capital shortages in fall ’08.

Freddie delinquencies increase sharply (CR)

Divided SEC makes climate another “risk” (Scannell/Hughes, WSJ) Investors aren’t clamoring for this information in 10-Qs. The Republican commissioners have this one nailed: “a breathtaking waste” of the SEC’s time/resources and a foolish, misguided gesture to put the SEC’s imprimatur on an agenda about which it has zero expertise.

How to report the news (YouTube) Brilliant.

Academics fight rise of creationism at universities (Guardian) I had no idea this was a problem outside of the American bible belt.

VIDEO: Dump truck destroys pedestrian bridge in Turkey (Break) A guy on the bridge sees trouble coming but freezes…..doesn’t think to run back….

Jon Stewart on Obama’s war against bankers…

The Daily Show With Jon Stewart Mon – Thurs 11p / 10c
Obama Takes On Bankers
www.thedailyshow.com
Daily Show
Full Episodes
Political Humor Health Care Crisis
COMMENT

Scientists use the word “theory” in a different manner from its general usage. In general usage it often means a guess about how something works. But in science it is used to describe an explanation that is strongly supported by evidence – no guessing allowed. An explanation without sufficient rigorously tested evidence is called a hypothesis or conjecture. It takes a lot of proof for a hypothesis to be called a theory by the scientific community. For example, the notion that if you drop something it falls to the earth is called the Theory of Gravitation. Do you doubt that anything will drop if you let it go? Evolution is called a theory because scientists have the same level of confidence in it based on an abundance of evidence of many kinds. Biology simply cannot be explained without evolution.

As Judge Jones, the Republican and devoutly Christian judge who presided over the Dover School Board case asserted, creationism simply does not merit being considered side by side with the Theory of Evolution. It has no scientific basis at all. Creationists start from a need to believe in a literal interpretation of Genesis and they desperately seek evidence to support their ideas. The mainstream Christian faiths – Catholicism, Anglicanism, Methodism etc – long ago dispensed with a literal interpreation of Genesis and have no trouble embracing evolution.

Posted by Kate | Report as abusive

Geithner’s faulty apologia

Jan 28, 2010 00:16 UTC

Tim Geithner’s appearance in front of Congress today was another embarrassment, perhaps more for the people’s representatives than the Treasury Secretary. Still, Geithner offered a clumsy defense for paying out 100¢ on the dollar to AIG’s counterparties, which included more than Goldman Sachs.

What they lacked in knowledge and nuance, Congress made up for in volume and OUTRAGE. The worst moment I saw was the utterly bogus comparison by Rep. Stephen Lynch between AIG’s payout to Goldman (100¢ on the dollar!) and the bailout offer for Bear Stearns shareholders (only $2 per share). 100 is a bigger number than 2, you see.

Geithner was lucky to be doing battle with such an unprepared, unimpressive group.

His defense, such as it was, amounted to the following:

Had the Fed imposed haircuts on AIG counterparties, it would have led to AIG’s credit rating being downgraded and the company (and consequently the economy) would have collapsed.

But AIG had already been downgraded, that’s why the government stepped in with a bailout. At that point the firm’s liabilities were taxpayer backed, so it strains credulity to say that extinguishing certain CDS it had written would cause systemic fallout in and of itself. Essentially what was happening here was unused insurance contracts were being extinguished. (Imagine a pro-rata refund from your insurer for a homeowner’s policy it wants to cancel…)

And there was precedent for this kind of negotiation. Eric Dinallo, former Commissioner of the NYS Dept. of Insurance and current candidate for Eliot Spitzer’s old job, had previously negotiated haircuts on CDS written by the monoline bond insurers. They were never forced into a taxpayer bailout. Did anyone at the Fed pick up the phone to consult Dinallo? Why not?

At the hearing, Geithner said he took “great pride” in his judgment to pay out 100¢ on the dollar to AIG counterparties because, he claims, it saved us from economic catastrophe.

No doubt the system was on the verge of collapse. But the biggest threat was undercapitalized banks. The payout to AIG counterparties was just a backdoor bailout for them. As Dan Alpert of Westwood Capital points out:

Every dollar of [haircut] would…amount to a dollar less of capital on bank balance sheets today (actually more, because in the interim the affected banks made money with that capital). If the discount was more than a little, some of the institutions would have required “front door” bailouts, or would have failed.

That’s why everyone is still so angry about this, and Goldman’s ridiculous claims that it would have been fine even absent the $12.9 billion it received from taxpayers via AIG. Sure, they’ve paid back TARP. But here’s another $12.9 billion of your money that’s helping to fund their bonus pool.

Jim Rickards offers a good closing thought on the matter:

What was actually done [in the AIG bailout] shows a breathtaking lack of imagination and legal skill on the part of the people involved.  The Fed and Treasury do have an obligation to save the system, but they have no obligation to save each and every member of the system.  That’s a big difference.  You may need to build a firewall but it’s important to build it in the right place.  Makes sense to protect the little guy but where was the national security interest in protecting Goldman? This is why I am just speechless when I hear Geithner testify that though he was utterly surrounded by ex-Goldman people they somehow had NO IMPACT on his judgment to save Goldman.  How blind and unaware can you be?

Not so blind that you can’t be Treasury Secretary…

COMMENT

It’s one thing to make a boneheaded decision. It’s another to repeatedly lie about it under oath. Time for Beavis to resign.

Posted by Fielding Mellish | Report as abusive

Morning Links 1-27

Jan 27, 2010 15:26 UTC

Note: Apologies for no links yesterday. Busy day writing columns!

SEC to vote on new money fund rules (Johnson, WSJ) Unfortunately, the SEC won’t do away with $1 NAVs, price fluctuations will be published on a 60 day lag. So investors will continue to treat money funds as cash equivalents, even though they aren’t, and the systemic risk they pose won’t really go away.

Fed weighs interest on reserves as new benchmark (Lanman, Bloomberg) This will be a key interest rate to watch whether or not the Fed makes it the benchmark. The expansion of the Fed’s balance sheet over the past year+ has stuffed banks full of excess reserves, reserves that banks will lend out if the economy — and loan demand — picks up. The Fed needs to keep those excess reserves sequestered in order to prevent inflation. To do so, it may have to pay higher rates. For a fuller explanation see this previous column.

Failed Senate vote on budget commission shows difficulty in cutting deficits (Faler, Bloomberg) So much for a fiscal commission based on the base-closing commission…

After three months, only 35 subscriptions to Newsday’s website (Koblin, NY Observer) Print subscribers get free online access. But this is still not a good showing for selling online only subscriptions. The NYT needn’t worry that it’s pick up will be this small when they put up their pay wall. I, for one, will pay for their content, as I pay for WSJ. I ‘d subscribe to FT too if their website wasn’t so slow…

Top English central banker supports splitting banks (Thomas, NYT) This should come as no surprise. A speech by Mr. King in October laid out his support for steps similar to those Obama just released.

Roubini: Greece is bankrupt (Khan, CNBC) Thank you, Captain Obvious. ;)

Obama aims to ax moon mission (Block/Matthews, O.S.) There’s no constituency for budget cuts, so Obama deserves support from budget hawks for moves like this. We all like the moon I’m sure. But I like things like veterans benefits much more.

Iraqi government spends $85m on dowsing rods sold as “bomb detectors” (Hawley/Jones, BBC) Those not familiar with dowsing rods, see Wikipedia.

Wait, how much snow? (YouTube) No. He didn’t.

Wow…

COMMENT

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Hayek vs. Keynes Rap Anthem

Jan 26, 2010 05:30 UTC

Two economic giants in a freestyle face-off. An instant classic… (ht Rej)

COMMENT

Finally! A ‘rap’ song I enjoyed listening to.

Posted by sangellone | Report as abusive

Why not Baby Banks?

Jan 25, 2010 20:01 UTC

The President is right to target firm size if he wants to insure no financial firm can cause a system failure. Yet despite clear evidence that banks are already too big, Obama’s proposal won’t cut them down. It would only limit future growth by acquisition.

Specifics are being worked out, but what is clear is that Paul Volcker’s “size” proposal will limit future growth by acquisition only. It won’t force existing firms to shrink nor limit their ability to grow organically.

But if Obama wants to end the too-big-to-fail paradigm, if he wants to eliminate the possibility that one firm’s failure could cause a cascading financial collapse, he needs to engineer a system with more circuit breakers. Shrinking banks is crucial.

Like the power grid, the financial system is huge, dynamically complex and interconnected. A single point of failure can cause a cascading collapse. In 2003, some overgrown trees in Ohio were enough to cause a blackout that hit 55 million from Ontario to New York. In 2008, the failure of any one of a handful of financial firms could have plunged the economy into Depression.

True, size isn’t the only factor contributing to systemic risk. Yet despite thousands of bank failures during the savings and loan crisis, there was never a risk of systemic collapse because no bank was large enough to crash the system.

Another counter-argument is that gross balance sheet size isn’t by itself an indicator of risk. Certainly some balance sheets are riskier than others, but there remain 10 to 20 in the United States, of varying risk profiles, that are systemically dangerous.

Some argue that shrinking big banks would eliminate efficiencies. While size may have first order benefits, recent events show these are outweighed by second order bailout costs.

Nor do we need large banks to finance large deals. Big loans can be handled via syndication.

No doubt it would be tough to break up big banks, but we’ve done something similar before. Standard Oil and AT&T were split into Baby Oils and Baby Bells. Why not figure out a way to split too-big-to-fail financials into Baby Banks?

COMMENT

too sensible and simple ! and for added measure , lets just establish a naational limit on leverage at all banks to say 10×1 . Then they can’t start growing on steroids again .

but then Obama can’t whip up anti-bank sentiment among the looney left and there is no way that Congress gets to milk this idea for money ( ie no new taxes ) so it’ll never see the light of day .

Posted by divvy trader | Report as abusive

Existing home sales plunge

Jan 25, 2010 15:36 UTC

When it looked like the First Time Homebuyer Tax Credit was going to expire, folks rushed to buy. The result was merely to pull forward demand, similar to the dynamic that played out with Cash4Clunkers.

From Reuters’ Stephen Culp:

ruz55h

Here’s the report from the National Association of Realtors. They try to put a positive spin on the plunge by noting that prices rose. First American CoreLogic reported last week, however, that prices are again heading down.

COMMENT

“are asleep? Oh!” fiddle with the fire of the stick in the hands fling, maple carefully approached the night huddled under the full moon mulberries and Los dance.

Morning Links 1-25

Jan 25, 2010 14:25 UTC

Tishman gives up Stuyvesant Town (Wei/Spector, WSJ) Way underwater was this deal: the price tag was $5.4 billion, but the property is thought to be worth only $1.8 billion now. Tishman put up only $112 million of equity. Lenders and investors get wiped out. Good. By the way, if underwater investors can walk away, there’s little reason underwater homeowners should feel a moral obligation to keep paying their own overpriced mortgages….

SEC mulled national security status for AIG details (Goldstein, Reuters) “U.S. securities regulators originally treated the New York Federal Reserve’s bid to keep secret many of the details of the American International Group bailout like a request to protect matters of national security…”

Avatar to surpass Titanic as top box office draw of all time (Box Office Mojo) Inflation in the price of movie tickets plus the fact that many are paying $16 to watch Avatar in 3D, mean the comparison isn’t totally fair. But whatever. James Cameron has directed the two best grossing movies of all time. And Avatar is poised to go well over $2 billion…in less than two months!

BOJ open to extending loans, bond buying (Hidaka/Otsuma, Bloomberg) The Japanese central bank has engaged in various rounds of quantitative easing since the late ’90s I believe. Yet they’re still unable to keep deflation at bay. There are those that say this is proof that QE doesn’t necessarily lead to inflation. The bet being made by guys like David Einhorn is that eventually the debt load overwhelms the Japanese economy causing the yen to collapse. Indeed, the inflation that people fear here in the U.S. isn’t so much the old wage-push variety. Rather it’s a sudden loss of confidence in the dollar when it becomes clear the U.S. can’t pay its bills.

Bernanke confirmation looks set (Gelsi, Marketwatch) When Barbara Boxer and Russ Feingold pulled their support last Friday, it appeared Ben Bernanke might not get Senate confirmation for a second term. Now he look safe.

Fannie, Freddie should be eliminated, Frank says (Timiraos/Crittenden, WSJ) Unlikely this means Barney Frank will stop rolling the dice to subsidize housing with the public purse.

Leviathan stirs again (Economist) The return of big government the world over. This is not a good thing. Federal government is probably the least efficient allocator of resources in the economy. Not that we need smaller government overall, we just need smaller federal government. States and localities govern more efficiently. The federal government should be shrunk dramatically and the power/tax base of state and local gov’ts should expand.

Right-wing flame war (Dee, NYT) The story of Charles Johnson and his blog Little Green Footballs.

Newspapers are failing because their articles are too long (Kinsley, Atlantic) Shameless self-promotion: Reuters BreakingViews tells you what you need to know about financial news in 350 words or less!

2010: The year of the renter? (Toy, NYT) This story is NY specific. But I must say it’s good to live in the Hudson Yards area of Manhattan. Some of the best deals on apts in NYC at the moment as there’s way too much inventory around here….

Will NY soda tax drive some to drink? (CityRoom) This is a pretty stupid argument from soda bottlers who are opposed to new taxes on their product. Beer and soda aren’t exactly perfect substitutes…

Cat vs. Bear

Bank failure Friday

Jan 23, 2010 00:11 UTC

Two billion-plus failures tonight….

By the way….Adam from BearishNews reminds us that the FDIC opened a temporary midwest satellite office to help with asset sales and bank closings.

#5

  • Failed bank: Premier American Bank, Miami FL
  • Acquiring bank: Premier American Bank Natl Assoc., Miami FL
  • Vitals: as of 9/30/09, assets of $350.9 million, deposits of $326.3 million
  • Estimated DIF damage: $85 million

#6

  • Failed bank: Bank of Leeton, Leeton MO
  • Acquiring bank: Sunflower Bank Natl Assoc., Salina KS
  • Vitals: as of 12/31/09, assets of $20.1m, deposits of $20.4m
  • Estimated DIF damage: $8.1 million

#7

  • Failed bank: Charter Bank, Santa Fe NM
  • Acquiring bank: Charter Bank, Albuquerque NM
  • Vitals: as of 9/30/09, assets of $1.2 billion, deposits of $851.5m
  • Estimated DIF damage: $201.9 million

#8

  • Failed bank: Evergreen Bank, Seattle WA
  • Acquiring bank: Umpqua Bank, Roseburg OR
  • Vitals: as of 9/30/09, assets of $488.5m, deposits of $439.4m
  • Estimated DIF damage: $64.2m

#9

  • Failed bank: Columbia River Bank, The Dalles OR
  • Acquiring bank: Columbia State Bank, Tacoma WA
  • Vitals: as of 9/30/09, assets of $1.1 billion, deposits of $1.0 billion
  • Estimated DIF damage: $172.5 million
COMMENT

I guess Obama’s policy of reining in on banks is just on time. Time to have some controls to avoid anymore dangers of systemic failures.

  •