Rolfe Winkler

Bank capital buffers increase, still not high enough

February 11, 2010

Q4 TCE graphic

(To enlarge the chart above in a new window, click here.)

The superstructure of financial reform may be stalled in Congress, but at least regulators are forcing banks to raise capital. Since the nadir of the financial crisis in the fourth quarter of 2008, the Big Four have more than doubled their common equity, raising another $55 billion just in the fourth quarter.

Lunchtime Links 2-11

February 11, 2010

EU seals deal to help Greece, details murky (Grajewski/Toyer, Reuters) We need to know more about what help is being offered and what strings will be attached to it.

Lunchtime Links 2-10

February 10, 2010

How a new jobless era will transform America (Peck, Atlantic)

Bernanke testimony (Fed) Key line: “Also, before long, we expect to consider a modest increase in the spread between the discount rate and the target federal funds rate.” That’s not the same as raising the Fed Funds rate or the rate paid on excess reserves, but it’s the first time Bernanke has indicated policy may be tightened. Also, the balance sheet will be allowed to shrink on its own as mortgagees prepay.

Evening Links 2-8

February 8, 2010

Housing rebound in Canada spurs talk of new bubble (Dvorak, WSJ) Last week Paul Krugman toasted the sobriety of Canadian banks. Among other things, he said that low rates aren’t enough to cause a bubble since Canadian rates are low and, well, they don’t have a bubble. If this article is to be believed, Krugman didn’t look closely enough. Banks may use less leverage in Canada, but low rates are encouraging households to borrow big — debt to disposable income is a bubbly 1.42x. Key quote in this piece is near the bottom, where a real estate agent notes that rising prices mean rents are only barely covering mortgage payments for real estate investments. The best definition of a bubble is when debt service payments finally eclipse rents. Then buyers/lenders are betting on continued appreciation, which can only be driven by still-easier credit. Canadian real estate appears to be headed in that direction.

MBA dumps 1331 L

February 8, 2010

Readers of this blog dating back to its days on ML-Implode, may remember our exposé about former MBA CEO Jonathan Kempner’s misadventures at 1331 L St., NW, in Washington DC. The final chapter was written on Friday when…

Spiking Greek CDS

February 5, 2010

Funny how the market is just waking up to the Euro debt problem. Many have argued that debt levels are unsustainable, yet the IMF has adopted the neo-Keynesian line that governments can spend with impunity so long as unemployment is high. If there are unemployed workers in the economy, then conventional wage-push inflation — i.e. workers negotiating higher wages, which in turn drives up consumer prices — can’t happen. Or so the argument goes.

Bank failure Friday

February 5, 2010

Just one small bank this week it appears…

#16

    Failed bank: First American State Bank of Minnesota, Hancock MN Acquiring bank: Community Development Bank, Ogema MN Vitals: at 12/31/09, assets of $18.2 million, deposits of $16.3 million Estimated DIF damage: $3.1 million

Lunchtime Links 2-5

February 5, 2010

Euro debt fears roil global markets (Shah, WSJ) The U.S. is less worse than Euro economies, so Euro trouble causes flight to the dollar. Funny that we’re viewed as quality: When you factor in the debt of state and local governments, we’re in similar trouble….never mind unfunded liabilities for Medicare and SS.

Bank of New York pays full price for small gain

February 2, 2010

By Rolfe Winkler

Bank of New York Mellon is growing – at a price. The giant trust bank on Tuesday agreed to buy PNC Financial Services’ back-office operations for $2.3 billion. That works out to 23 times annualized fourth-quarter 2009 earnings. That is a heady multiple for only a marginal boost in market share.

Lunchtime Links 2-2

February 2, 2010

Homeownership rate falls to 2000 level (CR) At 67.2% it’s still way overstated. Home “ownership” is a misnomer in cases when the owner has withdrawn mortgage equity or when the price of the home has fallen below the principal value of the mortgage. A better measure of homeownership, I think, is just to look at total owner’s equity as a % of household real estate. The most recent Fed Flow of Funds report (page 104, line 50) puts the figure at just 37.6%

Lunchtime Links 2-1

February 1, 2010

President’s budget (gpoaccess.gov)

Barney Frank: The poor should rent, not own (Indiviglio, Atlantic)

Citigroup said to plan sale of private equity unit (Keoun/Keehner, Bloomberg) Citi cites raising cash to pay down debt as the reason to sell this unit. Of course this would also get Pandit some brownie points with Paul Volcker, who wants commercial banks out of private equity, hedge funds and proprietary trading…

Obama’s blowout budget

February 1, 2010

Now that the worst of the financial crisis is behind us, one would think the budget deficit might start to come down. Actually, no. Obama’s proposed budget sets a new deficit record — $1.6 trillion this year compared to $1.4 trillion last year.